Daily Digest 10/19/2022
The two-day equity rally came to an end. The 10-year yield hit the highest level since 2008. New US home construction fell in September.
Market Overview
Equities failed to make it three straight green days as every index fell. The Russell performed the worst while the Dow held up the best, only losing 0.33%. Energy XLE 0.00%↑ and communications XLC 0.00%↑ were the only S&P sectors that were up. Real estate XLRE 0.00%↑ fell the most.
US Treasuries all reached yields not seen in a long time. The 2-year closed at 4.56%. The 10-year T-note closed at 4.138%. The 3-month T-bill hit an intraday high of 3.98% and continued to flatten the yield curve against the 10-year. While the 2-year and 10-year yield curve has been inverted for months, many believe the 3-month and 10-year yield curve inversion is a more accurate recession indicator.
The US Dollar index $DXY climbed 0.81% to 112.90.
US single-family starts and permits drop to lowest level since 2020.
Ben Carlson has a good read on the opportunity this bear market presents to a variety of investors.
The market environment this year has resulted in much less day trading from retail investors.
Here are some of today’s closing prices.
E-mini S&P 500 Top-Down Analysis
Below are the monthly (5-years), weekly (2-years) and daily (6-months) charts for ES.
M/M: ES is OTFD as it failed to take out the prior month’s high and has traded and closed below the prior month’s low.
W/W: If ES can remain above 3502, it will be OTFU on a weekly basis.
D/D: ES fell and took out the prior day’s low. The last two sessions have been in balance. 3820 is a key overhead level to get over if this rally off of last week’s low is to continue.
E-mini S&P 500 Metrics
Recent History and Performance
Technicals
E-mini S&P 500 Volume/Market Profile
ES Composite Volume Profile (5 days)
Here is a chart of the past five sessions with a composite ETH Volume Profile:
ES ETH/RTH Split Volume Profile (5 days)
Here is a chart of the past five sessions with a daily ETH/RTH split Volume Profile:
ES ETH/RTH Split Market/Volume Profile (today)
Profile Description: D-shaped profile where most of the volume was in the middle part of the range.
Here’s a TPO chart of today’s session with ETH/RTH split Market/Volume Profile:
ES Market/Volume Profile Levels
RTH Weak High/Low: 3740.75 (high)
RTH Single Prints: n/a
RTH Excess: 3676.75 to 3682.25
RTH Gap: n/a
Session Recap
Electronic Trading Hours (ETH)
Globex Session:
Wholesale was long at the prior day’s close. The ONO was above the prior day’s value area but inside of the HOD. Inventory during Globex was long initially, about 42% of the time, but corrected short. There wasn’t enough demand to get above the prior day’s HOD. ON buyers faded and the auction fell down into the prior day’s value area. Supply was able to push the auction beneath the VAL but a bid at 3701.75 kept ES from falling underneath the LOD. There was overhead supply whose offers held the auction down throughout the ON session. VPOC in Globex was 3710.
Range: 72.50
Regular Trading Hours (RTH)
US Session:
The RTH open was inside of the prior day’s value area and above the T+2 high. Buyers were able to lift the offer at the open. However, they lacked follow-through and couldn’t push ES above VWAP. ES fell and took out the ONL by a couple of ticks. At 3700.50, supply shut off as a bid was still present in this area. Buyers lifted the auction 40-points and above VWAP during B-period. At 3740.75, demand just shut off resulting in a weak high. That is two TPO-periods within 1-tick of either a high or low for the session. Supply steadily pushed ES lower in search of a bid. Over the next 6-TPO periods, ES fell about 70-points to get below the prior day’s LOD. At 3676.75, supply dried up as the bid showed up. Buyers lifted ES nearly 50-handles off the low. However, ES couldn’t remain above VWAP as buyers couldn’t raise the offer past 3721.25. Wholesalers backfilled demand to end RTH at 3710.25. It was a rotational day as ES fell in search of the bid. Wholesalers were able to scoop up inventory underneath VWAP for most of the session. Overhead supply from the prior day’s trapped longs had suppressed ES throughout RTH.
Range: 64