Mid February, caution was given about similarities to February 2020 and February seasonality. February 19, just so happen was the top with a failed breakout of balance followed by a liquidation on Friday OPEX. Following that liquidation, we continued down Monday; however, on Tuesday a decent size excess from a look below and fail of our multi-week balance 5952.5-6163 was made and provided a higher low re-test on Wednesday. Sadly, a lower high was yet again made on Thursday causing another liquidation break down below balance.
After an entire week with sellers in full control, Friday’s close saw a massive (cover) rally making an end of day spike of ~50pts. Spike Base: 5920.50, Top: 5971.25
In roughly one week we had dropped 300 points on ES and nearly 1800 on NQ. Add together being extremely oversold, positioning extremely short, Friday flows, and end of month flows and you got a massive squeeze. In my opinion, Friday was a short liquidation and a mechanical move. I would be very cautious assuming that we see bullish continuation out the gate as there are numerous cards stacked against buyers until higher levels are reclaimed and supported. For now, we need new buyers to come in and demonstrate at least a willingness to buy dips and put in a higher low.
I have been somewhat following a Feb 2020 OPEX playbook and what now will be March seasonality. I remain cautious but will keep an open mind for upside continuation into at least Monday and possibly Tuesday and will remain with caution and assume this is a counter trend rally until proven otherwise. What will give the buy button peace of mind and dreams of ATH? 6060+.
Live Chart: https://www.tradingview.com/chart/f8EEzTyy/
Will use Friday’s range as a guide for the rest of the week for a number of reasons. Friday’s high was able to move back into balance and close at last week’s POC. In addition, it was last week’s VWAP and 5966-71 zone. Friday’s low is the 50% balance extension, August swing low VWAP and 5842-49 zone. With typical Friday ranges of late, we have around 123pts to work with on buyers to put in a higher low; however, nearly half of that is above Friday’s value.
For buyers, there are a few areas where they need to enter and where I would like to see a higher low inked out.
- 5932-36 – Tues and Thur lows. Was a key level to reclaim after Thursday’s liquidation. Would be a first area but may not be the best initially.
- 5917-5922 – Friday’s Spike base (5920.50). Good opportunity as this zone has been important in the past.
- 5908-02 – Friday’s VAH and 50% retracement
Of course, we could have continuation at Sunday’s open and if that’s the case we have 5990-95 Feb high vwap, 6004-8 major high timeframe pivot and Feb 50% retracement, 6023-28 YTD VWAP just below, and 6039-48 last week’s VAH and Monday afternoon resistance.
In either case of higher first or a higher low, 5932-36 is important this week as it’s last week’s VAL and showed buyers popping in on Tuesday and Thursday. Holding this level can see rotation back towards 5990-95 and the rest above. What will have me with more than one foot out the door will be continued selling pressure below 5908-02 and lower highs below 5932-36. This will surely see Friday’s low taken out. And if that’s the case, the balance -100% extension is on deck as a major target – low 5740’s with a pit stop or potential look below and fail at January’s low 5809 but may end up being around ES 5781 to align with SPY 575.35 / SPX 5773.31.