Tag: Balance

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Market Commentary For 2/4/2021

Notice: To view this week’s big picture outlook, click here.

What Happened: U.S. stock index futures balanced in prior-range, as evidenced by a lack of directional resolve.

What Does It Mean: After a rapid de-grossing and v-pattern recovery, stock indexes are nearing an important hurdle.

In particular, the S&P 500 has to contend with a transition into long-gamma.

Gamma is the sensitivity of an option to changes in underlying price. Dealers that take the other side of option trades hedge their exposure to risk by buying and selling the underlying.

When dealers are short-gamma, they hedge by buying into strength and selling into weakness. When dealers are long-gamma, they hedge by selling into strength and buying into weakness. The former exacerbates volatility. The latter calms volatility.

Adding: Here’s a good explanation I wrote regarding the derivative market’s impact on the equity market.

Graphic 1: SpotGamma suggests S&P 500 nearing “Long-Gamma” territory.

Further, given the aforementioned 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 $4,000.00 in the S&P 500, market participants ought to also pay attention to divergences popping up across different indices.

To be more specific, Wednesday’s regular trade in the Nasdaq-100 showed weakness relative to the S&P 500. In the end, participants established a neutral-center day on S&P 500 and neutral-extreme down day in the Nasdaq-100.

On a neutral-center day, participants test both extremes before closing an index in range, suggesting minimal confidence and balance. On a neutral-extreme day, participants test both extremes before closing at on extreme, suggesting increased confidence and imbalance.

The profile shape in the S&P 500 confirms balance while in the Nasdaq-100 it’s likely that participants were “too” long and had poor location.

What To Expect: Thursday’s regular session (9:30 AM – 4:00 PM ET) will likely open inside of prior-balance and -range, suggesting limited directional opportunity and high volatility.

Currently, the S&P 500 is rotating at the $3,842.00 high-volume area (HVNode).

As stated, HVNodes can be thought of as building blocks — they also denote areas of supply and demand. In this case, $3,842.00 can be thought of as an area of supply. The primary strategy is to respond to probes into these supply (i.e., selling responsively) and demand (i.e., buying responsively) areas as they offer favorable entry and exit.

In the coming session, participants will want to pay attention to Tuesday’s overnight high ($3,483.50) and Monday’s regular-trade low ($3,799.00). The reason being, between those two references is a developing balance area. Balance-areas make it easy to spot change in the market (i.e., the transition from two-time frame trade, or balance, to one-time frame trade, or trend).

Added Note: There is a low historical probability that overnight rally-highs end the upside discovery process.

From an order flow perspective, the absence of aggressive buying suggests more of the same — balance or downside to repair poor structures left in the wake of short-covering and initiative buying in the day’s prior.

In the simplest way, high-volume areas can be thought of as building blocks. 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. 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 value for favorable entry or exit.

For today, the following frameworks ought to be applied.

In the best case, the market will initiate above, or find acceptance at (in the form of rotational trade) the $3,842.00 HVNode. In the worst case, responsive sellers appear and restart the downside discovery process. Any break that finds increased involvement below the $3,799.00 regular-trade low, would favor continuation as low as the $3,727.75 HVNode.

The go/no-go for upside is the $3,843.50 overnight-trade high (ONH). The go/no-go for downside is $3,799.00 regular-trade low (RTH Low). Anything in-between portends responsive, non-directional trade.

A break above the ONH, participants may see discovery as high as $3,880.00, a balance-area projection (i.e., typical balance-break target). A break below the RTH Low, participants may see prices as low as $3,750.00, another balance-area projection.

Levels Of Interest: $3,843.50 ONH, $3,799.00 RTH Low.

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Market Commentary For 2/3/2021

Notice: To view this week’s big picture outlook, click here.

What Happened: After strong earnings from Amazon.com Inc (NASDAQ: AMZN) and Alphabet Inc (NASDAQ: GOOGL), alongside stimulus optimism, market participants traded responsively in Tuesday’s regular trading range, suggesting an acceptance of higher prices.

What Does It Mean: Late last week, market’s were in a good position for downside discovery. Since then however, conditions have changed markedly.

Further, given the retracement, the S&P 500, in particular, is in a position to digest the recent advance. In other words, two-sided trade that repairs some of the poor structures (as evidenced by low-volume areas) left in the wake of initiative buying would be the most positive outcome.

In the simplest way, high-volume areas can be thought of as building blocks. 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. 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 value for favorable entry or exit.

What To Expect: Wednesday’s regular session (9:30 AM – 4:00 PM ET) will likely open inside of prior-balance and -range, suggesting limited potential for directional opportunity and high volatility.

Currently, the S&P 500 is rotating at the $3,842.00 high-volume area (HVNode).

As stated, HVNodes can be thought of as building blocks — they also denote areas of supply and demand. In this case, $3,842.00 can be thought of as an area of supply. The primary strategy is to respond to probes into these supply (i.e., selling responsively) and demand (i.e., buying responsively) areas as they offer favorable entry and exit.

Important to add is the presence of divergent speculative flows (Graphic 1) and the decline in a proxy for buying derived from short sales (i.e., liquidity provision on the market making side), per Graphic 2.

Graphic 1: Speculative derivatives activity for February 2, 2021.
Graphic 2: DIX by SqueezeMetrics suggests divergence between price and buying intact.

Given that the market will likely open in-range, participants should look to whether the advance holds (i.e., a market will transition from up and down, to sideways trade). Holding the gap would suggest initiative buyers are in control, near-term. Auctioning below Tuesday’s regular-trade low ($3,799.00) would be the most negative outcome.

In the best case, the market will initiate above, or find acceptance at (in the form of rotational trade) the $3,842.00 HVNode. In the worst case, responsive sellers appear and restart the downside discovery process. Any break that finds increased involvement below the $3,799.00 regular-trade low, would favor continuation as low as the $3,727.75 HVNode.

The go/no-go for upside is the $3,843.50 overnight-trade high. The go/no-go for downside is $3,799.00 regular-trade low. Anything in-between portends responsive, non-directional trade.

Levels Of Interest: $3,843.50 ONH, $3,799.00 regular-trade low.

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Market Commentary For 1/26/2021

Notice: To view this week’s big picture outlook, click here.

What Happened: After a brief liquidation during Monday’s session, U.S. index futures traded flat overnight, with the S&P 500 rotating within an 8-session balance-area.

What Does It Mean: During Monday’s regular trade in the S&P 500, market participants were unable to break through to new highs; profile structures denoted a market that wasn’t paying longs that were late to the party.

Further, the Monday morning liquidation cleared the inventory of those participants that bought too much, repairing some poor structures left in the wake of last week’s upside discovery.

Given that the $3,824.25 balance-area high (BAH) was rejected, upside conviction remains intact (graphics 1 and 2 confirm this).

As a result, attention is drawn to the $3,852.50 ledge which has attracted responsive sellers numerous times over the past 8-sessions.

Graphic 1: Order flow in the SPDR S&P 500 ETF Trust (NYSE: SPY), the largest ETF that tracks the S&P 500
Graphic 2: Speculative derivatives activity for Monday, January 25

What To Expect: Tuesday’s regular session (9:30 AM – 4:00 PM ET) will likely open inside of prior-balance and -range, suggesting higher volatility and limited directional opportunity.

As stated earlier, participants have to contend with the $3,852.50 ledge. In today’s session, (1) a lack of upside continuation increases confidence among responsive sellers to transact below the ledge or (2) the level cracks, and initiative buying surfaces. In the latter case, the best outcome would include a test of the $3,859.75 overnight all-time high (there is a low probability that overnight all-time highs end the upside discovery process) and $3,884.75 price projection, or double the width of the balance-area, the typical target on a balance-area breakout.

The go/no-go for upside is the $3,852.50 ledge. The go/no-go for downside is $3.821.50 overnight low.

Levels Of Interest: $3,852.50 ledge, $3.821.50 overnight low.

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Market Commentary For The Week Ahead: ‘Follow The Flow’

Key Takeaways:

What Happened: After prices were advertised below balance in the week prior, responsive buyers in the S&P 500 began a rally that found acceptance back inside a larger balance-area, near the $3,800 high-open interest strike.

Thereafter, initiative buyers extended the S&P 500’s rally, breaking the index above its $3,824.25 balance-area high (BAH), before establishing acceptance near the $3,850.00 price extension, an upside target, and auctioning back into range, repairing poor structures left in the wake of discovery.

What Does It Mean: In light of a failed breakdown in the week prior, U.S. stock indexes were best positioned for further downside discovery. However, after what appears to be aggressive buying in response to prices below value, it was clear that was not the case.

This leads to the following question: why did selling stop on January 15? One answer, aside from a positive start to the earnings season and prospects for further stimulus, may be OPEX, the January 15 option expiry. On expiration days, delta and gamma exposures change — depending on how derivatives exposure is removed or rolled — which causes dealers to adjust hedges.

According to SpotGamma, the January 15 expiry “resulted in a ~50% reduction in single stock gamma … [which] creates volatility because, as large options positions expire[], are closed and/or rolled, dealers have large hedges they need to adjust. There is a trove of data to suggest that the bulk of single stock call activity is long calls, and based on that we believe dealers (who are short calls vs long stock) therefore have long stock positions to sell.”

Put more simply, the price action may have been attributable to the sale of long stock that hedged expiring short derivatives exposure above the market (i.e., call side).

Per the SpotGamma S&P 500 dealer hedging graphic for the January 15 expiry below, “The black line was the mark on Thursday evening, with the red line being the forecasted position on Tuesday. This red line being substantially lower than the black suggests that dealers had to reduce delta exposure as a result of expiration. Note there is a larger shift at overhead prices suggesting this was a ‘call heavy’ expiration.”

Graphic 1: SpotGamma S&P 500 dealer hedging graphic for the January 15 options expiry

After the VIX (i.e., CBOE’s Volatility Index) expiry on January 20, alongside the inauguration of President Joe Biden, the prospects for a rally improved as “event premium in IV dries up … [and] put values drop, which allows dealers (who are short puts) to buy back short hedges … [fueling] a quick rally up to the 3850SPX/385SPY level (green arrow).”

Graphic 2: SpotGamma S&P 500 Gamma Levels

Adding, the number of put options sold to open exceeded the number bought to open, per SpotGamma, suggesting increased confidence in higher prices as market participants look to options for income, and not insurance.

Historically, the returns after such developments are mixed — more often the appearance of strong initiative buying surfaces (e.g., August and January 2020) before a liquidation helps correct excess inventory, and bring sense back into the market.

Graphic 3: SpotGamma plots opening option positions.

What To Expect: During Friday’s session in the S&P 500, responsive buying surfaced after a test of the $3,818.25 High-Volume Node (HVNode), above the $3,813.50 ledge (below which is a pocket of low-volume).

In the simplest way, high-volume areas can be thought of as building blocks. 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 value for favorable entry or exit.

After the S&P 500 found acceptance above the $3,813.50 ledge and $3,824.25 BAH, it encountered responsive selling near the $3,840.75 HVNode, the site of a downtrend line. Since the selling transpired at a visual level, market participants know that technically-driven, short-term traders in control. In other words, institutions (e.g, funds) tend not to transact at exact technical levels.

Given the aforementioned dynamics, participants will come into Monday’s session knowing the following:

  1. The S&P 500’s higher-time frame breakout remains intact, per graphics 7, 8, and 9.
  2. Late last year, JPMorgan Chase & Co. (NYSE: JPM) strategist Marko Kolanovic suggested equities would rally with the S&P 500 auctioning as high as $4,000 on the basis of low rates, improved fundamentals, buybacks, as well as systematic and hedge fund strategies. Since then, Kolanovic downgraded growth and expressed the limited potential for further upside.
  3. The earnings of heavily weighted index constituents suggests participants discount improved speculative flows and delta (e.g., presence of committed buying or selling as measured by volume delta). Please see graphics 4, 5, and 6.
Graphic 4: Supportive order flow in the SPDR S&P 500 ETF Trust (NYSE: SPY), the largest ETF that tracks the S&P 500, on January 20 trend day.
Graphic 5: Supportive order flow in the SPDR S&P 500 ETF Trust (NYSE: SPY), the largest ETF that tracks the S&P 500, on January 22.
Graphic 6: Speculative derivatives activity for the week ending January 23, 2021.
Graphic 7: Daily candlestick chart of the cash S&P 500 Index

Given the above dynamics, the following frameworks apply for next week’s trade.

In the best case, the S&P 500 takes back Friday’s liquidation and auctions above the $3,840.75 HVNode. Expectations thereafter include continued balance or initiative buying to take out the $3,859.75 overnight all-time high (there is a low probability that overnight all-time highs end the upside discovery process). Thereafter buying continues as high as the $3,884.75 price projection, or double the width of the balance-area, the typical target on a balance-area breakout.

In the worst case, any break that finds increased involvement (i.e., supportive flows and delta) below $3,824.25 BAH, would favor continuation as low as the $3,763.75 BAL.

Graphic 8: Profile overlays on a 15-minute candlestick chart of the Micro E-mini S&P 500 Futures

Conclusions: Despite broad-market indices being in a longer-term uptrend, the odds of substantial upside resolve are low. Participants ought to look for favorable areas to transact, such as those high-volume areas in the S&P 500 featured in graphic 8.

All in all, the risk and reward dynamics, at these price levels, are poor.

Graphic 9: 4-hour profile chart of the Micro E-mini S&P 500 Futures

Levels Of Interest: $3,884.75, $3,859.75, $3,840.75 HVNode, $3,824.25 BAH, $3,763.75 BAL.

Cover photo by Jayant Kulkarni from Pexels.

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Market Commentary For 1/22/2021

Notice: To view this week’s big picture outlook, click here.

What Happened: Alongside news of disappointing economic data and new pandemic restrictions, U.S. index futures auctioned back into prior balance.

What Does It Mean: Initiative buyers extended the S&P 500’s rally, breaking the index above its $3,824.25 balance-area high (BAH). After establishing acceptance (i.e., high-volume area, or HVNode) near the $3,850.00 price extension, an upside target, U.S. index futures auctioned back into range, repairing poor structures left in the wake of prior discovery.

In the simplest way, high-volume areas can be thought of as building blocks. 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. 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 value for favorable entry or exit.

What To Expect: Friday’s regular session (9:30 AM – 4:00 PM ET) will likely open outside of the prior day’s balance and range. The S&P 500, in particular, may open below the $3,824.25 BAH. Doing so, while not soliciting a response from responsive buyers, would negate the earlier rally, and put in play the $3,763.75 balance-area low (BAL).

Few dynamics to note: (1) poor structure in prior sessions, as evidenced by the low-volume areas (LVNodes) in the graphic above, is being repaired, (2) a new overnight all-time high (i.e., historically, there is a low probability that overnight all-time highs end the upside discovery process), (3) a break that finds acceptance outside of a larger balance-area portends continuation up to the 100% price projection, or double the width of the balance-area, (4) trading back into to the consolidation, thereby invalidating the break-out, would portend a move to the other end of balance, or the $3,763.75 BAL, (5) big picture uptrend remains intact.

Moreover, in light of the above dynamics, the normal course of action is responsive trade. However, any break that finds increased involvement (i.e., supportive flows and delta) below $3,824.25 BAH, would favor continuation as low as the $3,763.75 BAL.

In the best case, if responsive buying was to defend the BAH, then participants ought to target the $3,850.00 high-volume concentration.

Levels Of Interest: $3,824.25 BAH, $3,850.00 HVNode, $3,763.75 BAL.

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Market Commentary For 1/20/2021

Notice: To view this week’s big picture outlook, click here.

What Happened: Ahead of President elect-Joe Biden’s inauguration, U.S. index futures auctioned higher overnight.

What Does It Mean: After prices were advertised below balance in the week prior, responsive buyers in the S&P 500 began a rally that found acceptance back inside a larger balance-area, near the $3,800 high-open interest strike.

Given the failed breakdown, odds favor a return to the high-end of balance, the $3,824.25 balance-area high (BAH).

Noting: In most cases, a break-out from balance is usually the start of a short-term auction. Therefore, placing trades in the direction of the break is the normal course of action. Trading back into the consolidation, thereby invalidating the break-out, would portend a move to the other end of balance.

What To Expect: Wednesday’s regular session (9:30 AM – 4:00 PM ET) will open inside of a larger balance-area.

Participants can expect higher volatility. As a result, focus should be directed to price levels that, if broken, would denote a change in tone, as well as the following dynamics:

  1. All broad-market indices are in an uptrend, evidenced by higher prices and value. The recent pause is healthy; consolidation after trend allows prices to converge with value, forming high-volume areas. The prices in this area are valuable and offer favorable entry and exit.
  2. The minimal excess rally high at $3,824.25 remains intact. Excess forms after an auction has traveled too far in a particular direction, and portends a sustained reversal. The absence of excess, in the case of a high, suggests not enough conviction; in such case participants will (1) liquidate (i.e., back off the high) and strengthen the market, before (2) following through.
  3. 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.
  4. Increased capital was not committed into yesterday’s highs, evidenced by a divergent delta (i.e., the difference between buying and selling pressure), as can be viewed by the order flow graphic 1.
  5. A proxy for buying derived from short sales (i.e., liquidity provision on the market making side) declined, as can be viewed by graphic 2.
Graphic 1: Divergent delta in the SPDR S&P 500 ETF Trust (NYSE: SPY), the largest ETF that tracks the S&P 500
Graphic 2: DIX by Squeeze Metrics suggests divergence between price and buying

Moreover, in light of the above dynamics, any break that finds increased involvement (i.e., supportive flows and delta) above $3,807.25 or below $3,793.75, in the S&P 500, would favor continuation.

Levels Of Interest: $3,824.25 BAH, as well as the $3,807.25 and $3,793.75 high-volume nodes (HVNode).

Bonus: Despite all broad-market indices being in an uptrend, evidenced by higher prices and value, cracks are forming under the surface.

Simply put, the risk and reward dynamics, at these price levels, are poor.

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Market Commentary For 1/19/2021

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What Happened: U.S. index futures auctioned back into prior balance.

What Does It Mean: Last week, U.S. index futures broke balance and auctioned lower. After aggressive buyers responded to prices below value, pressure disappeared, and the S&P 500 further confirmed the balance-break.

Over the extended weekend, however, market participants negated the end-of-week selling activity by auctioning back into balance.

What To Expect: Tuesday’s regular session (9:30 AM – 4:00 PM ET) will likely open on a gap, inside of prior-balance and -range, suggesting the potential for a volatile session.

In the best case, given that the open will be inside of a larger balance area ($3,824.25-$3,763.75), participants can expect continued balance or initiative buying to take out the $3,824.25 balance-area high (BAH). The go/no-go level for further upside is the $3,796.50 overnight high (ONH). Trading through this high would mean that participants overcame responsive selling at the $3,794.25 high-volume area (HVNode).

In the worst case, if the S&P 500 were to roll past its $3,763.75 balance-area low (BAL), expectations thereafter include a test of the low-volume node (LVNode) near $3,732.75. A break of the LVNode would portend a response near the $3,703.25 balance-break projection.

Levels Of Interest: $3,763.75 BAL, $3,796.50 ONH, $3,824.25 BAH.

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Market Commentary For 1/15/2021

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What Happened: As earnings season kicks into gear, alongside a resurgence in COVID-19 across Europe, U.S. index futures auctioned into the developing balance-area low.

What Does It Mean: The S&P 500, after consolidating near the $3,800 high-open interest strike, is testing the extremes of balance, the bracket of overlapping value areas in the days prior, as participants position themselves for directional resolve.

What To Expect: Friday’s regular session (9:30 AM – 4:00 PM ET) will likely open outside of prior-balance and -range, suggesting the potential for immediate directional opportunity.

Given that the open will still be inside of a larger balance area ($3,824.25-$3,763.75), participants must monitor for responsive buying below value.

Re-entry into value (i.e., a cross through the $3,787.50 LVNode) portends continuation, at least until the $3,793.25 high-volume area, the market’s most recent perception of value.

Excess (e.g., buying tail) may denote an end to downside discovery. The absence of excess, or multiple periods of trade below value, may signal a shift in conviction. In such case, participants would monitor for supportive flows and delta (i.e., committed selling) on a break of the $3,763.75 balance low. If price is accepted (i.e., more than one-half hour of trade) below the balance area, then participants ought to trade in the direction of the new activity. Trading back into the consolidation, thereby invalidating the break-out, would portend a move to the other end of balance.

Noting: (1) The multi-month upside breakout targeting prices as high as $4,000 remains intact and (2) end-of-day positioning was accompanied by aggressive buying into the lows. If the market was to sell hard, aggressive buying would have not been present.

Pictured: Divergent delta in the SPDR S&P 500 ETF Trust (NYSE: SPY), the largest ETF that tracks the S&P 500

Levels Of Interest: $3,824.25 regular trade high, the $3,763.75 balance low, as well as the $3,787.50 LVNode.

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Market Commentary For 1/14/2021

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What Happened: Market participants further digested higher prices, as evidenced by U.S. index futures balancing within prior range.

What Does It Mean: For ten sessions in a row, the S&P 500 has consolidated near the $3,800 high-open interest strike.

What To Expect: Thursday’s regular session (9:30 AM – 4:00 PM ET) will likely open in prior-balance and -range, suggesting no immediate directional opportunity, again.

Given the open inside of a developing balance area, participants can expect higher volatility. As a result, focus should be directed to price levels that, if broken, would denote a change in tone, as well as the following dynamics:

  1. The failure to resolve directionally points to the absence of larger, other time frame participants (i.e., institutions that don’t transact at technical levels). Still, all broad-market indices are in an uptrend, evidenced by higher prices and value. This recent pause is healthy; consolidation after trend allows prices to converge with value, forming high-volume areas. The prices in this area are valuable and offer favorable entry and exit.
  2. The minimal excess rally high at $3,824.25 remains intact. Excess forms after an auction has traveled too far in a particular direction and portends a sustained reversal. The absence of excess, in the case of a high, suggests not enough conviction; in such case participants will (1) liquidate (i.e., back off the high) and strengthen the market, before (2) following through. Participants have already accomplished the first reaction.
  3. The pinch and subsequent recovery of the volume-weighted average price, anchored from the Sunday evening open, suggests further upside resolve as the average participant, from the anchoring point, holds a profitable position.
  4. 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.
  5. Unsupportive speculative flows and delta (e.g., commitment of buying or selling), as can be viewed by the order flow graphic below.
Pictured: Divergent delta in the SPDR S&P 500 ETF Trust (NYSE: SPY), the largest ETF that tracks the S&P 500

Moreover, in light of the above dynamics, the normal course of action is responsive trade. However, any break that finds increased involvement (i.e., supportive flows and delta) above $3,824.25 or below $3,763.75, in the S&P 500, would favor continuation.

Noting: In most cases, a break-out from balance is usually the start of a short-term auction. Therefore, placing trades in the direction of the break is the normal course of action. Trading back into the consolidation, thereby invalidating the break-out, would portend a move to the other end of balance.

Levels Of Interest: $3,824.25 regular trade high and $3,763.75 balance low.

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Market Commentary For 1/13/2021

Notice: To view this week’s big picture outlook, click here.

What Happened: Alongside calls for added stimulus and political uncertainty, market participants digested higher prices, as evidenced by U.S. index futures balancing within prior range.

What Does It Mean: After a v-pattern recovery, the S&P 500 is consolidating near the $3,800 high-open interest strike. Assuming continuation, this dynamic will cease as soon as buyers become aggressive and derivatives exposure is rolled up in price and out in time.

Noting: Consolidation after trend allows prices to converge with value, forming high-volume areas. The prices in this area are valuable and offer favorable entry and exit.

What To Expect: Wednesday’s regular session (9:30 AM – 4:00 PM ET) will likely open in prior-balance and -range, suggesting no immediate directional opportunity.

Given (1) the developing balance area, (2) poor structure beneath the market, (3) divergence between broad market indices and sectors, and (4) a v-pattern recovery, the following applies in today’s trade.

In a failure to break from balance, the normal course of action would be responsive trade. However, a break that finds increased involvement above $3,824.25 or below $3,763.75 in the S&P 500 would favor continuation.

Noting: In most cases, a break-out from balance is usually the start of a short-term auction. Therefore, placing trades in the direction of the break is the normal course of action. Trading back into the consolidation, thereby invalidating the break-out, would portend a move to the other end of balance.

Levels Of Interest: $3,824.25 regular trade high and $3,763.75 balance low.

Bonus: The S&P 500 balance-break targeting prices as high as $4,000 remains intact.

Pictured: Daily candlestick chart of the cash S&P 500 Index