Monday 30th September – ES_F Review

Morning Traders,

Friday was a really difficult day in SG towers, after failing to spot a trend day down was fully underway whilst continually trying to get long and fade the move, which is always a mistake. This is the psychological aspect of trading at play which can really cloud a traders judgement when looking objectively at a market. K period on Friday saw a full close of the gap from August, which traded it to a tick before retracing in L & M periods. As we’ve been saying on this blog for a few weeks now, closing that gap is really good news for this market, as it means any leg higher is based on good structure. As usual, we’re always at the mercy of a tweet from the U.S. government about China or the yield curve, which can often throw all the hard work we do on structure out the window, but unfortunately, these are the times we live in.

Overnight, inventory is 100% net long and we’re slated to open inside of Friday’s range and Friday’s value area. The key message in play today is month end, so anything could happen. Once the market opens we’ll look for what sort of conviction we have in a move higher back towards 3,000 or a retest of the lows from Friday. A break of the overnight low at 2964.50 opens the door to trade back towards the gap close of 2946.25 where a couple of single prints still reside. We expect that inventory has already corrected itself, which increases the probability of a drive higher on good internals. If we open and drive upwards, and reverse back through the open, it’s a bearish signal which targets the top of the gap at least.

However, if we fail to trade back through the open, we can consider it an open drive, and follow a ‘go-with’ approach to trade. To the upside, a key area will be 2980-82 as it’s acted as good support recently, so we can anticipate that support will turn to resistance so a good wave of order flow will be need to drive higher.

How we close out today will give an indication of how this market is poised as we move into the final quarter of the year. We still believe there are no serious sellers in this market at this point in time, which should support a move back towards 3,000 in the coming days.

Good luck, and happy trading!