Monthly Archives: February 2012

1) Long and intermediate trends: monthly and weekly price action remains strong to the upside. We are quickly approaching the May 2008 reference level at 1387. For more see Monday’s prep.

2) Short term trend: the market continues to advertise price higher and develop a new value area above the current one. See the chart below for reference VPOC levels and buy/sell zones.

ES short term trend Feb 29 (click to enlarge)

3) Market Profile: the profile continues to show strength mixed with developing confidence. This is evident by a sequence of higher POCs and VPOCs. That said, yesterday’s profile shows some anomalies and an attempt to form a ‘p’ pattern indicating absence of buyers above 1371.75. Overnight inventory is long and already made new highs. I’d still be careful trading this week given the number of important economic releases.

ES market profile Feb 29

Scenarios for today: price is near yesterday’s close so the market could open either above or below it. I will look for weakness at either buy/sell zone for a value reversal trade. We could see a balanced day today given the overnight ‘b’ patter and yesterday’s pit session ‘p’ pattern.

Today’s scheduled events:

- 5:25am ET – European 3-yr LTRO
- 8:30am ET – Prelim GDP q/q
- 9:45am ET – Chicago PMI – 10am ET – Bernanke testifies
- 10:30am ET – Crude Oil Inventories
- 2pm ET – Beige Book
- 8pm ET – Chinese PMI

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1) Long and intermediate trends: macro trends remains up with strength. Price continues to make new highs. The May 2008 remains the next reference level.

ES long term trend Feb 28

2) Short term trend: here are my trading levels for today:

ES short term trend Feb 28 (click to enlarge)

3) Market Profile: yesterday’s market gaped lower and one-timeframed higher finding balance between 1366 and 1368.50. Yesterday’s profile had a better structure which shows some confidence coming back to the market. Overnight inventory is slightly long.

ES market profile Feb 28

Scenarios for today:

1. Market continues to show strength. Overnight inventory is long so we may have a gap close followed by a continuation to the upside. The key piece of information in this scenario is that the market was not able to find buyers above 1370.50 during yesterday’s pit session, however it DID find them in the overnight session. This is a continued show of strength in the uptrend
2. Gap is closed and traversed. We could see it repair the single and double prints from yesterday. The Thursday’s lows are a key reference level. Once those lows are broken I will look for buy zones 2 and 3 to fade the move

Today’s scheduled events:

- 8:30am ET – Core Durable Goods Orders and Durable Goods Orders m/m
- 9am ET – S&P/CS Composite-20 HPI y/y
- 10am ET – CB Consumer Confidence and FOMC Member Duke Speaks

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1) Long term trend: macro trend is up with a strong angle. The next reference level remains the May 2008 high at 1387. Remember GDP and ISM numbers will be out this week so we could see weak action until later in the week.

ES long term trend Feb 27

2) Intermediate trend: similarly to the monthly trend the weekly charts shows strong uptrend with little sign of weakness. We crossed above the May 2011 high at 1356.50 and last week saw a pullback to this level. I have started to see rumours and news about the overbought state of the market however price action remains bullish. For now, just a heads-up for a potential rotation. As noted before any major negative exogenous event such as a large debt default in Europe could end this uptrend.

ES intermediate trend Feb 27

3) Short term trend: price continues to find acceptance above value and we saw a lower high last week compared to the previous week. The 1345.75 VPOC remains an important reference area for pullbacks and potential reversals to the downside. Here are my trading levels for today:

ES short term trend Feb 27 (click to enlarge)

4) Market Profile: as noted in Friday’s prep the Thursday profile showed poor structure and that was also the case for the Friday profile. Price is having a hard time defining a clear balanced area and/or prominent POC levels. This demonstrates low confidence in the market so be careful trading this week, especially given important economic releases on Thursday and Friday.

ES market profile Feb 27

Scenarios for today: plan to manage stops tightly in a weakly structured market

1. Overnight inventory is short. I would expect an attempt to fill at least 50% of the gap before continuing the downtrend. Look for weakness above the 50% line to enter short
2. Given the weak structure I would look at any of the buy/sell zones to fade the price movement

Today’s scheduled events: Pending Home Sales m/m at 10am ET.

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