Is There a Shift Taking Place?
Fed’s Two-Day Meeting Starts Today
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Our View
As expected, volume dropped and despite the gap up and drop, it was a very choppy day. I had a conversation with HandelStats on Sunday afternoon and I told him I thought we could rally, but I had no idea the ES would rally so much. I figured it was going to be a quieter, low-volume chop and it was. Handel has been on fire lately, and his levels are below in the Lean.
Today is day one of the Fed’s two-day meeting.
According to the CME’s Fed Funds outlook, there is a 99% probability that rates are left unchanged. When Powell speaks on Wednesday, it will be about how much and when they will lower interests.
I don’t pretend to be an economist, but for the first time since late last year, prices at the pump are now higher on a year-over-year basis and are on a trend that looks fairly solid. Have you looked at chart of crude oil — /CL — lately?
It’s not good for consumers heading into the spring and it’s a problem for the White House and Fed officials who are hoping to say inflation is over. I have news for you, it’s not over, in fact, it’s far from over. Just look at what $150.00 gets you at your local grocery store. Food prices are increasing, not going down in price. Like Jannet Yellen recently said, rates are never going back to Covid-19 levels.
Our Lean
I had thought the lower volume could help the ES go higher, but had no idea when I wrote the lean that the ES would be 45 higher on the open. This just goes to show you that anything can happen. Yes, some big tech names pushed the Nasdaq higher, but the big gap up and small rally above used up all its buying power and then it rolled over.
There seems to be a shift happening, although today and tomorrow (the Fed days) can have bullish tendencies. My guess is the Fed says that they are targeting its first rate reduction in June and I say boo to that. How can the Fed lower when inflation is so prevalent?
Our Lean: Yesterday’s drop after the 4:00 cash close set the tone on Globex last night and this morning. After a 20-week rally, the ES and NQ have been under constant selling. While I like buying the dips, it’s starting to look like the trade is turning to selling every rally. It’s 8:30 am ET and the ES just traded down to 5186. I can’t rule out buying a flush but @HandelStat’s work has been stellar and says the ES gets under 5179. I do have to point out that the Fed decision days tend to be bullish based on how this is going right now — but the rallies are not holding.
From HandelStats (and remember our limited time offer)
$ES trade and hourly close below 5203.25 is a negative and targets 5193.75. Hourly close below there targets -1sd 5182.30, then 5179.50. Trade below there targets lower with the ultimate target of 5113. See attached chart for other upside and downside levels.
MrTopStep Levels:
MiM and Daily Recap
One never knows what the ES is going to do next and this morning was one of those days. That’s as the ES traded up to 5225.75 on Globex just before the open and traded at 5225.50 on the open. The sharply higher open was tied to anticipation of Nvidia CEO Jensen Huang unveiling his company’s latest chips at the SAP Center Center in San Jose event, (one analyst dubbed the “AI Woodstock”).
After the open, the ES traded 5224.75, rallied up to 5233.75 at 9:36, and that’s when NVDA started going offered. That led the ES down to 5222.50, before it bounced back up to a new high at 5240.25 at 10:30 and slowly sold off down to a 5219.00 double bottom at 1:07. Yes, there were some small bump up, but the gap up and rally after the open led to price action that was all sideways to down. After the low, the ES rallied up to 5227.50, dropped down to a new low at 5217.75 at 1:45, bounced back up to 5229.00 at 3:40, and then NVDA dumped and the ES sold off 12.5 points down to 5216.75 at 3:43.
The ES traded 5221.75 as the 3:30 cash imbalance showed $174 million to buy and traded 5215.25 on the 4:00 cash close. After 4:00 the ES traded up to 5226.50 and sold off down to 5210.25 at 4:59 and settled at 5214.75 on the 5:00 futures close, up 31.5 points of + 0.61%, the NQ settled at 18,231.25, up 167.25 points or +0.93%, CLK4 settled at $82.21, up $1.63 or +2.02%, the 10 Yr note (ZNM4) settled at 109’300, down 0.045% or -0.13%, gold (GCJ4) settled at 2,163.90 or +0.11% and Bitcoin settled at $67,530, down 1,635 or -2.36% on the day.
In the end, the ES and NQ used up a lot of buying power on the big gap up and morning rally. In terms of the ES’s overall tone, it acted firm. In terms of the ES’s overall trade, volume was steady: 230k ES traded on Globex and traded 1.1 million on the day session for a total of 1.330 million contracts traded.
Technical Edge
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NYSE Breadth: 50% Upside Volume
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Nasdaq Breadth: 54% Upside Volume
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Advance/Decline: 51% Advance
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VIX: ~14.50
Guest Post
The profile placed to draw from the previous EIA crude oil inventory that took place on March 13th to where we had a reported decline of 1.536M barrels of the week that ended March 8th.
(1-3 below are annotated on the chart above):
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What can be seen since then has been a very aggressive P-shaped profile with excess yet to be established to halt the progress of buyers and closing out the Monday session near those highs.
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Should we begin to see some drift lower through Tuesday into Wednesday’s report there should ideally be those defending section 2 as having two significant nodes to keep prices from header lower.
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Releasing an increase of inventories and news to back that report with regards to less demand leaves us a portion of this aggressive profile to be targeted and filled.
Economic Calendar
For a more complete Economic Calendar see: https://mrtopstep.com/economic-calendar/
Disclaimer: Charts and analysis are for discussion and education purposes only. I am not a financial advisor, do not give financial advice and am not recommending the buying or selling of any security.
Remember: Not all setups will trigger. Not all setups will be profitable. Not all setups should be taken. These are simply the setups that I have put together for years on my own and what I watch as part of my own “game plan” coming into each day. Good luck!
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