Notice: To view this week’s big picture outlook, click here.
What Happened: Ahead of a busy earnings season, U.S. index futures balanced within Friday’s range.
What Does It Mean: Despite Monday’s session opening well off of Friday’s regular trade high, aggressive sellers quickly disappeared. Instead, participants recovered Friday’s value before finding responsive sellers near the high-volume concentration at $3,809.25 in the S&P 500.
Noting: High-volume concentrations develop after markets spend a lot of time facilitating trade within one area. The prices in this area are valuable and offer favorable entry and exit.
What To Expect: Tuesday’s regular session (9:30 AM – 4:00 PM ET) will likely open in prior-balance and -range, suggesting no immediate directional opportunity.
Few major dynamics to note:
- For numerous sessions, profile structures denoted the presence of short-covering, the result of old, weak-handed business emotionally buying to cover short positions, causing swift movement followed by a stalled advance, or two-sided intraday trade.
- The week ending January 8 established a v-pattern recovery, a price sequence that ought to be followed by further price discovery, as high as the 100% price projection, which happens to be near the multi-month upside breakout target at $4,000.
- Last week’s long-liquidation and subsequent recovery left the market with minimal excess (i.e., a proper end to discovery) at the highs. The absence of excess, in the case of a high, suggests not enough conviction; in such case participants will liquidate (i.e., back off the high) and strengthen the market, before following through.
Given the above dynamics, the go/no-go level for upside in the S&P 500 is the $3,810.50 regular trade high. The go/no-go level for downside is the regular trade low at $3,775.25. In a failure to break either go/no-go level, the normal course of action would be responsive trade.
Levels Of Interest: $3,810.50 regular trade high and $3,775.25 regular trade low.