Updated: Nov 3, 2021
Good evening, Traders. I hope everyone had a great weekend and spent some time away from the trading screens. I cannot promise I will have the time to do this every week, but I thought I'd take a few moments to share what I'm looking at for the week ahead on ES since I will be away from the trading desk quite a bit during the coming days.
From a Volume Profile perspective, ES actually had quite a balanced auction last week, filling out the low volume area created by the bullish face-rippers of the recent past. While the FinTwit bears are probably covered in Gold Bond after feverishly masturbating to Rising Wedge Death Charts all weekend, last week's price action wasn't overly bearish when we take a moment to zoom out. Could that change in the week ahead? Absolutely.
I think it's good practice to note where the significant Delta by Price levels are from a longer-term perspective. Despite the noise of this histogram, we can see 4475 and 4395 remain important, signifying likely areas of institutional iceberging. While not shown on the chart, 4400 is an obvious area to watch from a Volume by Price/Options Positioning perspective. Remember, there's a lotta idiots participating in the market place and math is hard, so they tend to favor the big round numbers.
Given the amount of bloated tech stocks stuffed into both, we can't talk about ES without talking about NQ. I have a weird habit of tracking overlapping 30min Opening Ranges (more on that some other time), so tomorrow's RTH Opening Range is important to me to gain clues about whether there's more downside ahead or if we'll continue trading in the most recent range. Truthfully, I don't care which way it goes because I think we're in for some beautiful volatility either way based on NQ's VbP chart: If we dip lower, that low volume area below us (15200 area) will likely be a battleground for buyers/sellers, resulting in some sort of glorious trend day afterward (a bearish trend day would be fun, we rarely get those anymore). While we saw some interesting, albeit short-lived, displacement between ES and NQ last week I'm hesitant to read into it too much due to contract roll and OpEx. Long story short: If you trade ES you've obviously gotta watch NQ due to the weighting, so my eyes will be on the NQ Opening Range tomorrow.
Finally, from a Support & Resistance perspective, ES has lost the major support line that's held since the Covid Crash (See above. Chart is of SPX because my ES chart has a million lines on it, but the main S/R Line is the same.).
Given how many times we've interacted with this major S/R Line, the farther we travel away the more concerned I'd become. The POC on the above chart (showing the last month) is still way above us: If the buyers are going to defend their longer-term positioning I'd speculate that they'd probably start doing it soon. If they don't, then prepare to be bombarded with TA on the VIX from the FinTwit morons. I don't have any fancy parallel lines for you on the above chart at the current price because this is somewhat unchartered territory. Truth be told, even though Friday was OpEx, that was kind of a turbo bearish close in my opinion...first of its kind in a while. Please note 4375 on your charts for a likely reaction area: As of last week there were still ~1200 lots sitting on the bid side of the Limit Order Book. Will be watching to see if the order returns in the morning. If it does, I'd be more hesitant to BTFD ~4395 with that size sitting 20pts lower...you all follow me on Twitter...we've seen how this tends to play out once we get somewhat close to these large areas of liquidity. This week will be very important for gauging future directional sentiment. The question I'm looking to have answered through this week's price action is whether or not the Bull's desire for another leg up outweighs some of the potential systemic risks manifesting overseas (*cough* Evergrande *cough*). Regardless, if we do see more downside it'll be fun watching CNBC play "Pin the Tail on the Dumbass" as they seek to find headlines to explain the market: Will they go with "Taper Concerns"? Delta Variant? Evergrande? Oil? Elon drunk tweeting again? So many choices. So little time. Cheers,