Monday 16th September – ES_F Review

Morning Traders,

Hope you all had a nice weekend, and are ready to go for another week on the ES! We conducted our review of last week this morning and have some potential outcomes for this week which we’ll share over the next few days, especially in the context of the FOMC meeting on Wednesday night (GMT). Last night we saw significant volatility in the markets after the spike higher in Crude which brought some of the equities down overnight during the Globex session. Even in watching the price action overnight, there’s some good MGI which we can take in to today’s session which may dictate what direction things are going to go.

Our inventory overnight is 100% net short from Friday’s close, but it’s worth noting that European equities haven’t sold off, and the sellers in the ES couldn’t take this lower, printing an overnight low of 2983.50 on the December (Z) contract. All of the subsequent TPO’s that followed the printing of the low, we mostly could not take out the low that preceded it. Today we’re looking for the gap from Friday’s close to fill, there will be some shorts that may need to cover which may result in some violent spikes to the upside – our recommendation would be for new traders to watch the market unfold during A & B periods before making any decisions.

There are some single prints highlighted in the pink boxes below which we think will come into play today and may represent some good long opportunities if the internals support it.

Our first thing to look out for today is closing of the gap, and whether or not we fail to close it. Failure to close it, targets further downside to fill out some of last Tuesday’s & Wednesday’s range. Given we’re looking to open in and around the 3,000 level we may see some noise as we trade through it, so keep that in mind when setting profit targets and stop losses. We want to see natural sellers in the market in order to send the ES down, so the opening prints should tell us who is in the market. All the hallmarks of the overnight inventory tell us that sellers were very weak, and that recent inventory got too long and there was a much needed flush-down correction.

Personally speaking, given we had a news driven move overnight, I’d like to see how the opening order flow trades before making any decisions. Taking out the overnight low is bearish and we’ll look for short trades. Trading through the overnight high and T+2 low (3002.75) should present good opportunities to the upside.

We’ll post updates on Twitter over the course of the day.

Good luck & happy trading!