read this before tomorrow's open - Sunday Brief

Hey traders. Hope you’re all enjoying the weekend.

We’re back again with our Big Sunday Brief before another week of trading ahead.

This week of news includes unemployment claims, core PCE, and Powell speaking so we’ve got our hands full again.

Let’s get into it…

Impact Snapshot

• New Home Sales - (Tue.)

• Unemployment Claims - (Thu.)

• Final GDP q/q - (Thu.)

• Pending Home Sales - (Thu.)

• Fed Chair Powell Speaks - (Thu.)

• Core PCE - (Fri.)

• Consumer Sentiment - (Fri.)

Market Evaluation

Investors sold U.S. stocks at a pace not seen in over nine months in the past week. 

EPFR Global data show global equity funds had outflows of $16.9 billion in the week through September 20, the fastest pace in 9 months.

The main catalyst behind the decline was the Federal Reserve's indication that interest rates will be higher for longer.

To add fuel to this downside, The U.S. federal government signaled the potentioal of heading into a shutdown.

Another key catalyst was a surge in Treasury yields, as traders sold-off bonds on the Fed's higher for longer signal.

Next week we will be paying attention on Thursday as a series of economical reports as well as Fed Powell’s speech will give further insights into the health of the markets.

Markets Breakdown

Friday’s closing weakness was a further indication that the market has not yet established a balanced area between traders.

Our morning brief on X, gave key insights into the-most important level zones of the session as price rotated back and forth between them with perfect reactions.

For the purposes of education, we drew on this chart some key concepts when it comes to observation between levels and what they actually mean for price.

These types of acceptances, rejections and balance is what the market is doing all day long, moving between a short-term balance into imbalance, seeking it’s next balance “pocket” to start ranging.

This behavior happens all day long, in every single time frame. 

Taking these concepts and seeing them in action on Friday’s session can further visualize the above statement.

Price failed to find acceptance and rejected twice from the first target area we wanted to see a “flip as support” at 4389.

After a clear establish of this area as support, the next target would be the upside area of interest at 4398 which was the top of this range.

The update we made on X here, spoke for the need of “more strength” from the bulls in order to overcome the selling limit walls above 4398 and target the next upside area.

This was due to the aggression from sellers that buyers failed to absorb at the key area they established as support.

Failure to hold above 4389 was seeing a big drop towards the pivot at 4365.

But why would we put the next target on ES, -0.55% or 100pts lower from one level to the other?

Simple, this whole move to the downside was an imbalance.

Market is not looking to do “business” in these levels and everyone that tried to buy anywhere around this drop got liquidated.

You can view the levels as magnets.

They attract price and give reversals and reactions as they move from one balanced area to the other.

After the price fell down to the pivot, we observe the ability for buyers to defend this area target, again, the resistance at 4389.

Any level that is broken will always switch to the opposite of S/R of what it previously was.

Again, whoever tried to sell the market while the bounce from the pivot occurred, got absolutely destroyed as you can see.

The market didn’t stop anywhere in this “imbalanced” pocket and the perfect rejection happened at 4389.

The market yet again pulled back after this rejection and broke another support which in return will be seen as “acceptance” to the level bellow which will now act as resistance on the upside.

There are many variations for Acceptance, Rejection, Balance and its always a situational thing but these drawings are on their simplest form, the most common ones.

The Week Ahead

Last Sunday’s weekly report highlighted the most important scenario that bulls had to prevent which was to hold above 4480s. 

Taking into account the above, you can observe how the market fully continued a downside towards the lower areas with the bottom not yet established.

The week ahead will see a similar scenario playing out if the buyers fail to stop the downside continuation.

The most important level of this range will be 4300.

Failure to hold 4300 will place the market back to a 13 Month range.

Bulls must hold above 4355 for the highest probability of an attempt of finding acceptance back to the range above towards 4420-4480.

ES

The areas of interest we will be looking heading to next week:

• Upside Levels: 4420/4480

• Downside Levels: 4355/4300

That wraps up today’s big Sunday brief.

Happy trading out there this week!

-The QuantVue Team