Thursday 26th September – ES_F Review

Good morning,

Very interesting day yesterday, particularly in the long term context of this market. There were attempts made to take the market lower during B period, when we explored the long term gap in the market by only a few ticks before rejecting out trapping the shorts. This was followed by a slow grind to the upside on the back of much firmer internals. Profile rules tell us, that if we get rejection at the bottom of the profile, then our target is to the upper end of the profile (above 3,000 anyway). This is a very bullish signal, as the 2960 level was defended very strongly. Once again, as a collective, we’re coming in today with quite a long bias, so it’s worth keeping ourselves in check during A & B period to see how the overnight orderflow corrects. The general consensus is that, with it being month end and quarter end, the market gets back above 3,000 sooner rather than later, although with some potential shenanigans along the way.

Overnight, our inventory in the ES is mixed, with no clear leaning towards long or short, but we’re looking to open inside of yesterday’s range and value. What we need to take from yesterday’s profile, is the single prints in J period which can be treated like a gap in the market, as it’s giving us two distributions. 2975-77 turned over a lot of volume yesterday, so we can make the assumption that this represented agreement between buyers & sellers. There’s the probability that we build out value between 2980-90 today, with perhaps seeing the market rip to the upside late in the day. Today we’ll look to see how the market responds in the single prints between 80.50-81, as those single prints are also inside the single prints from Tuesday which adds another dimension. Exploration below the 2978 level, and if it attracts sellers, targets yesterday’s 1/2 back at 2972.75, followed by the T+2 close at 2971.75, and then VAL at 2968.75. To the upside we need to treat J, K, L, M & N periods should be treated as price exploration, so we’ll look to fill out value in that area to support a move higher. There are still single prints on Tuesday’s profile to be filled in, between 89.75-94, and 95.50-96.50. This area in the profile may see value being built over the course of the day.

Finally, as we’ve mentioned all this week, for trades to contribute to month end for large institutional players, they need to settle today (T+2 rules). If you put yourself in the shoes of an institutional trader, you’ll want to make sure you protect any buying you did on this week’s dip, and try to close this as high as possible. This is where we try and look for ‘other time-frame’ participants. A strong delta, with a weak tick, will tell us they are buying on the bid. The opening prints should tell us who is in the room and we can adjust out trade strategy accordingly.

Thanks again, and happy trading.