Notice: To view this week’s big picture outlook, click here.
What Happened: U.S. stock index futures liquidated as investors weighed the implications of rising yields ahead of outcomes on a U.S. Federal Reserve policy meeting.
What Does It Mean: Heading into Wednesday’s session, which ought to be volatile as participants position themselves in response to new economic projections, responsive trade is the course of action.
This notion is supported by market liquidity metrics, which suggest buying pressure is leveling out, and options activity, which points to a build in interest at the $4,000 S&P 500 level, ahead of Friday’s monthly option expiration (OPEX).
More On Option Expiration (OPEX): Option expiries mark an end to pinning (i.e, the theory that market makers and institutions short options move stocks to the point where the greatest dollar value of contracts will expire worthless) and the reduction dealer gamma exposure.
SPY Market Liquidity 
QQQ Market Liquidity 
IWM Market Liquidity 
SpotGamma Distribution
What To Expect: Wednesday’s regular session (9:30 AM – 4:00 PM ET) will likely open just outside of prior-range and -value, suggesting a limited potential for immediate directional opportunity.
During Tuesday’s trade, participants established minimal excess at a new all-time rally-high before auctioning the S&P 500 below its $3,947.75 spike base, negating the bullishness of Monday’s end-of-day trade.
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). 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 finds acceptance (i.e., resolves higher or sideways), above the $3,931.00 Virgin Point of Control (VPOC). In the worst case, the S&P 500 finds acceptance (i.e., resolves lower or sideways) below the $3,931.00 VPOC.
In case of higher prices, participants may look to auction as high as the $3,948.00 VPOC and $3,970.75 rally-high. In case of lower prices, participants can look to the $3,904.25 low-volume area (LVNode) for a response.
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: $3,931.00 VPOC.
