open me before Monday - big Sunday brief

Howdy traders.

Hope you all had a nice weekend away from the charts (besides your crypto junkies), and are ready for another week of trading!

We’ve got a pretty stacked lineup of events this week with PMI, Powell speaking, Payrolls on Wed, and Unemployment rate on Friday.

We reveal how we’re trading all of it in today’s BIG Sunday brief.

Let’s dive in…

Impact Snapshot

  • Manufacturing PMI - (Mon.)

  • Fed Chair Powell Speaks - (Mon.)

  • Jolts Job Openings - (Tues.)

  • ADP Payrolls - (Wed.)

  • ISM Services PMI - (Wed.)

  • Jobless Claims - (Thurs.)

  • Nonfarm Payrolls - (Fri.)

  • Unemployment Rate - (Fri.)

Market Evaluation

Stocks just had their worst month of the year with two consecutive down months.

The September jobs report highlights the week of economic data after a last minute deal saved the US from a government shutdown which was the highlight of the week.

The Senate passed a last-minute spending bill Saturday night averting a government shutdown that would have triggered a calamitous domino effect on the American public and economy.

The bill allows the government to stay open for 45 days, giving the House and Senate more time to finish their funding legislation.

The fear of the government shutdown as well as the “higher-for-longer” interest rates were the highlights of the month’s close as the U.S. market awaits further market-generated information to begin it’s next directional move.

Markets Breakdown

The Friday’s overnight upside momentum was shut down at the RTH open after traders re-evaluated the bigger picture.

Our morning brief that we posted before the RTH open, gave insights into what came to be a full gap closure to the overnight inventory session and downside continuation bellow it. Read it here.

Understanding the imbalances that occur in the overnight market before the equity market open is possibly one of the most important things to prepare for the open.

U.S. opened with an upside gap of over 0.70% relatively to the previous close.

To be able to understand what actually is going on, the pit session that runs between 9:30am - 4:15pm on ES, had over x5 times the amount of volume relatively to the whole overnight sessions of both Asia and Europe before the US open.

What that means is that the market got carried away without asking for the opinion of those that trade size. There is no continuation and rally without volume.

PCE inflation which is the FOMC’s favorite indicator was positive. The market initially rallied but was unable to hold on the gain after the open.

We’ve posted the report 3 hours prior to PCE outcome and we were still seeing the same exact thing despite it being positive or not. Many times, these type of “news” rob traders from the opportunity to observe the market at a bigger picture.

Market rejected at the exact level we pointed out as an upside resistance towards 4370 at the open and continued it’s downside towards the pivot.

Did anything change despite of this mini-rally the market did after the “positive” report? It didn’t.

If market had any meaningful strength towards the upside, we would want to see a flip of this resistance, which was placed at the POC of the previous 3-day range which would see acceptance inside the upside range. Instead it lead to an aggressive rejection

Our downside pivot was placed around where the settlement close was at 4337. Market pulled back towards the level and saw two bounces at the exact same level.

If the market had ANY strength to the upside, an aggressive bounce from the exact same level wouldn’t have happened. 

After seeing this, we made an update on twitter, pointing out this “double bottom”, in reality, was a poor low that we would need at least few ticks lower to complete which would place it bellow the main support of this range. 

General rule - Every time you poke a point of reference, that reference becomes weaker and weaker. If the market was really that strong/weak it shouldn’t be able to get back to this level and re-test it over and over again without going higher/lower by at least a couple of ticks to print an excess.

Market found continuation towards the downside level of 4314 where it started consolidating at the bottom of this new range and targeting the support-turned-resistance at 4337. Here is last update we’ve made.

The Week Ahead

The most important observation for the month ahead is acceptance into the previous range balance or continuation towards the lower range.

Right now, price is ranging between two key distribution areas after a bounce off of the 200-day SMA and the yearly vWAP and is not likely to continue spending much time in this area for an extended period of time.

Acceptance to either of the ranges, flavors rotation towards the other end of the distribution.

ES

Going into the week ahead we will observe:

  • Upside Levels: 4390/4420/4470

  • Downside Levels: 4280/4252/4218

That’s all we got for you in this one.

We’ll see you Tuesday!

P.S. — if you haven’t checked it out, we recently published a video showing a CLEAN +$3,240 day using our QuantVue Pro indicators. Check it out here: