Notice: To view this week’s big picture outlook, click here.
What Happened: After the Senate’s passage of a $1.9 trillion COVID-19 relief package, overnight, bond yields rose and U.S. stock index futures fell.
What Does It Mean: U.S. stock index futures ended last week mixed after non-farm payrolls grew by 379,000, versus a consensus of ~180,000, improvement in sales and manufacturing data, as well as news that COVID-19 coronavirus vaccinations were accelerating.
Further, on Friday, after an attempt by market participants to resolve lower, via a break of consolidation, stock indexes made a vicious rebound as near-term downside discovery reached its limit, based on market liquidity metrics and the inventory positioning of participants.
What To Expect: Monday’s regular session (9:30 AM – 4:00 PM ET) will likely open inside of prior-range, suggesting a limited potential for immediate directional opportunity.
During Friday’s trade, the best case outcome occurred, evidenced by a failure to breach the $3,720.50 minimal excess low and upside range expansion.
More On Excess: A proper end to price discovery; the market travels too far while advertising prices. Responsive, other-timeframe (OTF) participants aggressively enter the market, leaving tails or gaps which denote unfair prices.
For today, participants can trade from the following frameworks.
In the best case, the S&P 500 either (1) remains rotational — trading responsively between the $3,861.25 low-volume area (LVNode) and $3,762.25 high-volume area (HVNode) — or (2) auctions higher, past the $3,861.25 LVNode, putting in play the $3,892.75 HVNode.
In the worst case, the S&P 500 auctions lower, through the $3,784.25 LVNode, which may portend a test of the $3,762.25 HVNode. Thereafter, if lower than $3,762.25, participants can target a repair of the $3,720.50 minimal excess low.
More On Volume Areas: A structurally sound market will build on past areas of high-volume. Should the market trend for long periods of time, it will lack sound structure (identified as a low-volume area which denotes directional conviction and ought to offer support on any test). If participants were to auction and find acceptance into areas of prior low-volume, then future discovery ought to be volatile and quick as participants look to areas of high-volume for favorable entry or exit.
Levels Of Interest: $3,861.25 LVNode.