Thursday 19th September – ES_F Review

Morning traders,

Muted day yesterday until FOMC at 7pm (GMT) followed by Fed Chair, Jerome Powell’s speech on monetary policy for the next 12 months. Off the back of the 0.25 rate cut, the market sold off heavily in J & K period, but from watching the price action, there appeared to be significant buying on the bid between 2985-2987 – buying on the bid is passive and is often done by much larger players in the market. The comforting part of the sell-off saw us fill in some single prints from Wednesday 11th September which were unfilled until last night.

At this point, it’s worth taking a pause and looking at the overall big picture of what’s going on in the ES_F at the moment. We’ve recently broke out of the large balance range when we broke above 2945, and there is a still a gap to be filled down there, which is MGI we carry forward. If you look at the graphic below, I’ve highlighted a purple box – the significance of this purple box is that we’re currently filling out that large vacuum that existed above 2945. This is normal for a healthy functioning market.

So getting back to our shorter time-frame, last night we had a heavy sell-off but there was almost zero attempts at continuation to the downside, we couldn’t even get past a very structural level of 2980. If there were big sellers in the market, we’d have smashed through that level in a heart-beat, and knowing this is vital MGI we carry forward when we come into the market today. What has happened, is that we’ve probed into the lower end of our current range and experienced rejection, so the target is now the top end of the range, and the probability of that happening is now skewed in our favour. M period last night saw a really high tick, and only a mad-man would have gone short and tried to fade the rally. I’ve highlighted the single prints from M period last night on the chart below, as I believe these prices will be relevant today as to whether we get acceptance or rejection.

Overnight, our inventory is almost 80% net-short, so we can expect some sort of a correction off the open as inventory corrects itself during A & B period today. We’re slated to open higher outside of range and outside of yesterday’s value, and we’re also inside the value area of the 2-day range from Thursday 12th & Friday 13th. Once inventory corrects, we’ll expect to see if the market is going to accept price in that range.

Key levels will be reaction of price at the overnight high, if we get significant rejection, the 3,000 level comes back into play from the downside. Ultimately, with FOMC now out of the way, the path is clear for traders to decide which direction they want to take this market.

Good luck and stay safe out there.