Our Lean

Our Lean

The problem with the current state of affairs is the on-again, off-again Iran agreement. There are just too many sticking points. The deal was reached 90 minutes before Trump’s deadline, Israel was never consulted, and with negotiations set to start this coming Saturday, Trump is getting cold feet.

Like I said yesterday, the whole thing is very helter-skelter.

Only 4 ships were allowed to pass through the Strait of Hormuz yesterday — the fewest in April — and Iran is saying it will limit the number of ships crossing to 12 a day. Before the conflict began, the average was over 130 ships a day.

The Game Of Chess

Our lean: Despite the breakdown in negotiations, I think the ES can go higher, but if oil starts going up sharply, the rallies will fail. While not in my AI levels, I think 6880 to 6930 will act as a large cluster of resistance. I think traders overestimate the ceasefire. If the ES gaps higher, I want to sell the early rallies and buy the pullbacks, and if the ES gaps down, I want to buy the early weakness.

Here’s the full ES Claude price ladder with market profile levels integrated. A few things to note:

Price Level Explanation

6990.37 3 std dev resistance Price is 3 standard deviations above the mean — statistically extreme territory. Less than 0.3% of closes occur above this band; strong mean-reversion pressure expected.

6969.42 Pivot 2nd resistance Second resistance level derived from the prior session’s high, low, and close. Traders watch this as a ceiling where sellers may step in aggressively.

6959.79 2 std dev resistance Two standard deviations above the mean (~95% of price action falls below). A common Bollinger Band upper boundary — extended but not extreme.

6919.95 1 std dev resistance One standard deviation above the mean. First meaningful overhead resistance in the standard deviation framework; price often pauses or reverses here.

6903.00 1-month high The highest price reached over the past month. Key reference for bulls — a clean break above signals a new monthly trend leg; rejection signals distribution.

6896.58 Pivot 1st resistance First resistance pivot calculated from the prior session. The most commonly watched pivot level by day traders — often acts as a magnet or reversal point.

6875.28 Target price Analyst consensus or model-derived price target. Represents fair value or an upside objective; price approaching this level may see profit-taking.

6847.25 Session high (ETH) The highest price traded during the overnight extended-hours (ETH) session. Sets the upper boundary of overnight range; breaks above attract momentum buyers.

6823.75 Previous close Yesterday’s closing price. A key reference — trading above it is broadly bullish, below it bearish. Gaps from this level often fill during the session.

6823.00 High Today’s intraday high so far. Acts as immediate resistance; a sustained break above opens the door to the next level cluster.

6813.25 ETH mid / MP mid The midpoint of the overnight ETH session range. Also the Market Profile midpoint. Price acceptance above or below here indicates directional bias for the session.

6812.89 38.2% ret 13-wk high A Fibonacci retracement level — 38.2% of the move down from the 13-week high. Shallow retracements to this level are typical in strong uptrends.

6812.50 VAH — value area high The upper boundary of the Market Profile value area — the top of the range where 70% of yesterday’s volume traded. Price above VAH suggests buyers in control; a return back inside is bearish.

6811.50 POC — point of control The price level with the highest volume traded in the prior session. The market’s “fairest price” — acts as a magnet. Price tends to rotate around POC during low-volatility periods.

6810.75 Latest price Current market price. Sitting inside the value area right on the POC, signaling a balanced, indecisive market. Directional conviction requires acceptance outside the value area.

6803.50 VAL — value area low The lower boundary of the value area (70% volume range). Price below VAL puts sellers in control. A bounce off VAL is common; a break below signals potential trend continuation lower.

6780.00 Session low (ETH) The lowest price reached in the overnight session. Sets the floor of the overnight range. A break below this level can trigger stops and accelerate selling.

6774.42 Pivot point The base pivot calculated from prior session high, low, and close. The fulcrum of the pivot framework — trading above is bullish, below is bearish bias for the session.

6767.08 Price crosses 40-day MA The 40-day moving average line itself. A major trend filter — sustained trade above is bullish, below is bearish. Watch for confirmed closes rather than intraday stabs.

6755.50 Price crosses 18-day MA stalls The 18-day MA, a short-to-medium trend gauge. A stall here means the recent move may be losing conviction before this key moving average.

6748.45 Stochastic at 80% The price level where the 14-3 day raw stochastic oscillator reads 80% — overbought territory. Signals momentum may be exhausted on the upside.

6727.55 1 std dev support One standard deviation below the mean. First meaningful downside support; price often bounces here in a healthy trend before continuing higher.

6725.13 50% ret 13-wk high/low The midpoint of the 13-week price range — a key Fibonacci 50% retracement. Often acts as strong support or resistance; a magnet for mean-reversion traders.

6701.58 Pivot 1st support First support pivot from the prior session. Day traders watch this closely as a level where buyers are expected to defend and potential long entries emerge.

6699.05 Stochastic at 70% Price where the stochastic reads 70% — approaching overbought. Less extreme than 80% but still signals caution for new long entries.

6694.48 RSI at 50% The price level corresponding to a 14-day RSI of 50 — the momentum neutral line. Above 50 RSI = bullish momentum; below = bearish. A key inflection zone.

6693.00 38.2% ret 4-wk high Fibonacci 38.2% retracement from the 4-week high. Shallow pullbacks to this level within an uptrend suggest underlying strength.

6687.71 2 std dev support Two standard deviations below the mean. A statistically significant support zone; price is stretched to the downside. Strong buying interest typically emerges here.

6657.13 3 std dev support Three standard deviations below the mean — extreme oversold territory. Rare to reach; when it does, sharp mean-reversion bounces are common.

6637.36 38.2% ret 13-wk low Fibonacci 38.2% retracement measured from the 13-week low. A potential support for a broader recovery — holds this level in downtrends before new lows.

6628.13 50% ret 4-wk high/low The 50% midpoint of the 4-week range. A balanced level between buyers and sellers over the past month; often acts as a decision point for intermediate-term traders.

Market Profile zone: The value area spans just 9 points — from VAL at 6803.50 to VAH at 6812.50 — with the POC at 6811.50 (red). The current price of 6810.75 is sitting right inside the value area, essentially on top of the POC, which is a tight, indecisive condition.

Key context:

WSJ: Hedge Funds Short Squeeze Adds Fuel to Cease-Fire Stock Rally

Hedge funds in the last few weeks have been ramping up short positions. Goldman Sachs’ prime brokerage unit found that, in March, hedge funds’ short sales outpaced long buys 7.6 to 1 — the fastest pace of global net selling in 13 years.

Dan @ GTC Traders

It is a ‘Too-Late Ceasefire’ … The Damage Is Done

( Full Disclosure, at the moment, we run a portfolio with many long and short positions. Our Equity Fixed Income Hybrid Core holds 18 risk assets, with a hedge wherein those risk assets delta’s are beta-weighted to the SPY, and holds a 0.50 hedge to those assets. Our Long-Short Valuation Book, is net short the indices. And our Short Term Trading Account, has deltas that are long the 10 year (hedged), short the S&P, long 5 year instruments, and short instruments with 30 year exposure )

Let’s start with a simple premise.

Let’s assume the Strait is open today. Fully open. No risk, no delays, no insurance complications, no hesitation from shipowners. Just normal flow of traffic through the strait of Hormuz … as if nothing had happened.

Even in that world … with that hypothetical premise? It’s already too late, in that a massive amount of damage has been done.

Because the system we are dealing with is not instantaneous. It is path dependent. And most importantly, it is time dependent. And we’re going to stress once again … time … is the problem.

Roughly 20 million barrels per day move through that corridor under normal conditions. That is not a number you simply “replace” because a ceasefire headline crosses. That flow was disrupted. And once disrupted, the clock starts. Tankers that did not move are still not where they need to be. Cargoes that did not load are still not in transit. Deliveries that were supposed to arrive simply do not exist in the system.

So even if everything normalized this very second, you are still dealing with a supply chain that has already been emptied.

Think through the mechanics. A barrel that needs to reach Asia does not step onto the transporter pad on the U.S.S. Enterprise to be teleported to it’s destination.

No.  It loads, it sails, it queues, it unloads, it gets refined, and then it moves through product channels. That is a 30 to 45 day process under ideal conditions. So imagine that 30 to 45 days window with no ships are sailing. And while that is happening, inventories are being drawn down.

The floating storage that once acted as a buffer is gone. Strategic inventories built for this purpose have been tapped and balances are fragmented.

This is where most people make the error. They look at marginal improvement and assume resolution. A few ships get through, a headline crosses, a ceasefire is announced … and the conclusion is drawn that the problem is over.

No.

The problem is cumulative.

If you remove supply from a system for a period of time, you do not just replace that supply by restarting the flow. You must replace what was lost. That requires sustained surplus over time, not a short burst of normalization.

Now layer in something very simple. In normal conditions, roughly 135 ships cross that corridor daily. Recently? Three. At that rate, clearing roughly 800 vessels currently backed up takes 267 days. The ceasefire is for two weeks. The math does not reconcile. And that assumes everything works perfectly starting today … which it does not.

Behavior does not normalize overnight. Participants do not suddenly act as if nothing happened. Risk remains embedded in the system.

Which brings us back to the core point.

“Actually, not what’s taking place today … but what’s already taken place …”

What has already taken place is a break in the chain. And once that chain is broken, time compounds the problem. Inventories draw down, supply chains stretch, prices adjust, and behavior changes. You are no longer solving for equilibrium at time T. You are solving for equilibrium at T plus the time required to rebuild what was lost.

And that is where the market is making a critical error right now. It is pricing the headline. It is not pricing the mechanics.

Which is why you are seeing rallies in risk assets on the back of “peace” headlines. Hope. Relief. What we would simply call complacency.

We have seen this before. Fed Put. Fiscal stimulus. “There will always be a fix …” Now it has a new label. TACO. Same underlying belief … just a different wrapper. That things will just work out.

But markets are not narratives. They are systems. And systems break when the underlying mechanics fail.

So no, we are not buyers of this rally. To be sure, as more headlines hit and more discussions take place, you will get more upside bursts driven by positioning and short covering. That is fine. But none of that changes the underlying condition.

The damage has already been done. And more importantly … it is still being done.

Because despite the ‘Ceasefire’ … and despite headlines? The Strait is not open. The system is not functioning in the way it once did. Those sea-lanes are empty. And the clock is still running.

So we come back to the same conclusion.

Not what’s taking place today … but what has already taken place.

Until next time, stay safe and trade well.

BTS Levels:

ESM2026

The bull/bear line for the ES is at 6794.25. This is the key level that must be reclaimed and held for bullish continuation. Acceptance above this level shifts momentum back in favor of buyers.

Currently, ES is trading around 6797.00, attempting to hold just above the bull/bear line after a sharp overnight push higher. This puts price in a fragile bullish posture, but follow-through is required to confirm strength.

On the upside, immediate resistance comes in at 6832.75, followed by 6867.50. These levels define the upper range target for today. If buyers can sustain acceptance above 6794.25, a rotation into these levels is likely. A break and hold above 6867.50 opens the door for continuation toward 6936.25.

On the downside, failure back below 6794.25 would shift momentum back to neutral-to-bearish. Initial support sits at 6721.00, which is the lower range target for today. A break below this level exposes 6689.00 and then 6652.25. Continued weakness below there could extend toward 6589.00.

Overall, price is at a decision point around 6794.25. Holding above keeps the path of least resistance higher, while rejection back below signals a failed breakout and potential rotation back into the prior range.

NQM2026

The bull/bear line for the NQ is at 24967.00. This is the key pivot for today. Holding above this level keeps the market in a bullish posture, while acceptance below it would shift momentum back to the downside.

NQ is currently trading around 24990.50, slightly above the bull/bear line, indicating early strength following the recent push higher. As long as price holds above 24967.00, buyers remain in control and dips into this level can be viewed as potential support.

On the upside, the first resistance comes in near 25046.25, followed by 25312.50, which is the upper range target for today. A sustained move above 25046.25 opens the door for continuation into 25312.50. Acceptance above the upper range target would signal expansion and continuation of the bullish trend.

On the downside, if price loses 24967.00, expect a rotation lower toward 24621.50, which is the lower range target. Additional support sits at 24514.00 and then 24355.00, with deeper downside risk extending to 24296.50 and 24185.25 if selling accelerates. A break below 24621.50 would confirm weakness and shift control back to sellers.

Overall, the market is attempting to transition back to bullish above 24967.00. Holding above this level favors continuation higher, while losing it puts the market back into a rotational or bearish environment..

Macro Focus: Markets centered on the fragile US-Iran ceasefire and partial reopening of the Strait of Hormuz, with rising uncertainty around enforcement and shipping flow restrictions.

Geopolitics:

Oil / Shipping Watch:

Data Catalyst (Today):