The last day of February ended with a massive short covering rally. As impressive as it was creating a very large 50pt spike, I warned of what needed to happen:
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.
London attempted to rally above going into NY open on Monday but once the session opened, it was immediately sold. The spike base 5920.50 was soon after tested from underneath and continued the sell into close. Tuesday and Wednesday were balanced session with Wednesday being an inside day. The key play on Thursday was either a look below/above fail of the edge to play back towards the halfback or look for continuation. The key level to long was July 2024’s high and was indeed the case which led us into NFP.
The initial reaction on NFP was mixed but later failed to hold causing further liquidation down into SPX’s July 2024 high. This area for ES was the September FOMC event candle low. An excess was placed into the Aug 2024 balance and we rallied the remainder of the day.
Friday’s low was nearly 8% down from ATH. This low is massively important for buyers to hold. They say that lows do not happen on Friday but could this be the one? Although the potential is there, I do lean that this was Not the low but rather we will end up making a lower swing high which will lead to a new low. Nonetheless, I will remain optimistic and am position long for a swing to 5850, 5950.
Seasonality, although not 100% correct or precise, does lend that a low is near or at least a basing of one. We’ve already reached the extreme low for March’s expected move and with the break of January’s low, sellers have the opportunity to keep the pressure on as they continue to have lower highs and lower lows. They are in control. Buyers must protect Friday’s low and build above 5720.
Live Chart: https://www.tradingview.com/chart/f8EEzTyy/
Buyers have a lot they need to do. This has not been some ordinary dip and have taken out the lows of the prior five months. Their first order of business is to take out a prior day’s high. They did that on Monday and it led to nothing but a bearish engulfing day. 2) The January low (5809) and February low (5848) are key reclaims. 3) Buyers will need to begin building value higher (for example have Monday’s value area higher than Thursday/Friday).
If we trade higher, there are a number of areas that could fail allowing sellers to creep back in. A failure of 5820-29 has the potential as a look above and fail and could result back down to 5770-75, 5762, 5721. Further up, 5832-50 could be an issue, but I would think 5869-76 would be the better opportunity for sellers to try for a look above and fail being the 2 day balance highs. Then just above that area are two single prints that are still open 5875.75-5882.50 and 5884-5897.25. If we happen to get acceptance higher, major zone to watch will be the whole 5917-36 area. This is a wide range but includes the 5917-22 zone, the spike base from Feb 28 and a LVN from last week.
If we trade lower and hold 5720 and 5733-45 then that would be attractive for new supported longs. Anything lower will be concerning. We need to be very aware of a large and rapid liquidation below 5666. But there are a few spots to where late sellers could get trapped. 1) 5651 – Aug 2024 Balance VAH and 5642-30 which includes the ESU24-Z24 contract roll gap and the balance -150% extension.