Notice: To view this week’s big picture outlook, click here.
What Happened: U.S. stock index futures auctioned higher ahead of releases on retail sales, industrial production, and a Federal Reserve policy meeting.
What Does It Mean: Alongside positive news concerning vaccines, stimulus, and improved economic data, U.S. index futures recovered from their most recent swing low.
As stated yesterday, given the speed and distance of the S&P 500’s recovery since March 4, the potential for balance, or two-sided trade is high as participants look for more information to base their next move on.
In support of this thesis are market liquidity metrics which suggested (1) buying pressure was leveling out and/or (2) buyers were absorbing resting liquidity (opportunistic selling or selling into strength), while speculative options activity appeared muted.
What To Expect: Tuesday’s regular session (9:30 AM – 4:00 PM ET) will likely open just outside of prior-range, suggesting the potential for immediate directional opportunity.
During Monday’s trade, participants rallied the S&P 500 into the close, leaving another end-of-day spike.
More On Spikes: Spike’s mark the beginning of a break from value. Spikes higher (lower) are validated by trade at or above (below) the spike base (i.e., the origin of the spike).
For today, participants can trade from the following frameworks.
In the best case, the S&P 500 finds acceptance (i.e., resolves higher or sideways), above the $3,947.74 spike base. In the worst case, the S&P 500 finds acceptance (i.e., resolves lower or sideways) below the $3,947.74 spike base.
In case of higher prices, participants may look to auction as high as the $3,947.25 price extension, a typical recovery target.
In case of lower prices, participants would look for responses at the $3,931.00 Virgin Point Of Control (VPOC) and $3,898.25 high-volume area (HVNode).
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. More On POCs: POCs (like HVNodes described above) are valuable as they denote areas where two-sided trade was most prevalent. Participants will respond to future tests of value as they offer favorable entry and exit.
Levels Of Interest: $3,947.74 spike base.