Daily Digest 10/21/2022
Risk assets rallied to finish the week green. The 2-year and 10-year T-notes slipped. The US Dollar index fell for the week.
Market Overview
Equities ended the week in a strong way. Every index finished up on a weekly basis and gained more than 2%. The Dow led the way by jumping nearly 2.5%. The S&P had its best week since June. Every S&P sector was green on the day with materials XLB 0.00%↑ and financials XLF 0.00%↑ acting as headliners.
The 2-year Treasury note fell down 2.88% to close just under 4.5%. The 10-year note lost 1.1 bps to close at 4.2%, despite hitting a new intraday high of 4.33%.
The US Dollar index fell 0.86% to end the week at 111.87.
Report says that the Federal Reserve might debate a 50 bps rate hike for their December meeting.
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: ES ended the week strong and was up more than 4.5%. ES spent the past 4-weeks in a large balance zone from 3502 to 3820.
D/D: ES had an outside up day today. ES traded below the previous day’s low. It also traded and closed above the previous day’s high.
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: Tall profile with several high volume nodes from top to bottom.
📈 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: n/a
RTH Single Prints: 3754.75 to 3759.75
RTH Excess: 3655.5 to 3677.75; 3772 to 3773.25
RTH Gap: n/a
Session Recap
Electronic Trading Hours (ETH)
Globex Session:
Wholesale was short at the prior day’s close. The overnight open was inside of the prior day’s value area. Inventory in the overnight session was 100% short. The auction whipsawed in a 25-point range for many hours going into London’s open. There was a double bottom at 3655.50 then inventory went long from there. Buyers couldn’t lift the offer above 3679.75. In the latter half of London’s opening hour, overnight supply gained steam and was able to break the double bottom. Supply moved ES below the prior day’s low and T+2 low. When ES’ price reached 3641.50, 2 standard deviations below VWAP, things got exciting. Supply shut off and there was a huge 40-point stop run to the upside. ES moved the entire overnight range. The overnight high was taken out and supply absorbed any and all buyers at 3689.25, nearly 3 standard deviations above VWAP. From there, ES reversed back down towards VWAP and the prior day’s low.
📓 Noteworthy: Overhead supply had kept the auction short for nearly the entire session. The volatility towards the end of the session leading into RTH was most likely due to SPX options expiration, according to some on FinTwit. Large traders may have seen some bids and used that liquidity to sell their positions over VWAP. As such, supply shut off and the offer was easily raised by buyers. News that the Fed was open to debating the size of the rate hike for their December meeting also played a part in the turnaround. Technically, the rally started from a retest of the 50% retracement from last Thursday’s intraday low to Tuesday’s intraday high. See the chart below.
Range: 47.75
Regular Trading Hours (RTH)
US Session:
The US open was inside of the prior day’s value area and below the T+2 low. Shorts tried to move the auction underneath the prior day’s low and T+2 low at the open. There was a bid at 3655.50 and from there supply shut off. Buyers lifted ES 80-handles in A and B-period. At 3727.25, demand faded as supply was encountered and wholesale backfilled to find the bid. Supply was absorbed as the bid appeared at 3677.75. From there, ES trended up on lack of supply and covered 100-handles. Buyers were able to take out the high from the prior two sessions. ES remained +2 standard deviations above VWAP as the auction made new session highs for the remainder of RTH.
📓 Noteworthy: At the beginning of RTH, when shorts couldn’t retest the 50% retracement level, or 10-day midpoint, it was an early sign of no supply. Buyers optimistically came in and took the offers. Wholesalers that accumulated the past few sessions from 3692 and below, cut off their supply. As longs lifted the offer they were able to distribute above VWAP for the entire RTH session. If longs can clear 3780 early next week, the 3820 level is the next area to get over.
Range: 117.75