Debrief · 23 August 2024 · Jackson Hole: balance holds and buyers trend into a strong close

ThursdayThursday's high was 5665. Thursday was a liquidation day following a PMI liquidity event, and Thursday's lows failed to take out Monday's low and the June highs. Thursday's liquidation set up a very balanced profile into the J Hole event.

OvernightThe overnight auction failed to progress lower, finding a bid into the close and continuing higher: ON short covering. Typically, that's not a strong signal for a continuation lower after yesterday's engulfing day. The overnight held below the weekly mid into what was set to be an exciting session at Jackson Hole.

The openAn RTH gap to the settle and prior value, 5600. An initial dip into the ON LVN on the open as long ON inventory adjusted. From 0830CT, the live journal was on the Convergent feed.

IB and PowellPost the Powell release, buyers failed to take out Thursday's engulfing high, 5665.5: a big clue. Buyers initially held the developing IB mid but failed to retake the developing high, which held into the close. At the pHI, longs liquidated and delta turned negative, but buyers looked to hold the IB low and delta began to reverse.

The lowsThe low came in at Thursday's balance low high. A look at the PA at the lows: footprints break down what you see from within the candle.

• The IB low not holding.
• A zipper, then a push and fail into the upper zipper.
• Absorption lows below the prior zipper.
• A reversal above large negative delta.
• An order clash and reversal into the lows.
• Pockets of buyers showing up at key lower levels.
• Bid exhaustion into the IB mid.

The closeA detailed look at the PA: notice how the early RVOL dies down into the close, and the chances of a breakout diminish with it. A strong close, as a single IB break lower failed to yield a close below the IB mid and buyers continued the trend into the close. Volumes dropped into the close. Bonds also closed near their upper levels.

Day typeA Friday balance, inside day: an inside variation day with a close at the opposite extreme. The profile finished balanced in a balanced week, as aggressive buying and selling from the prior RTH session's POC and tail highs contained activity after the much-anticipated Jackson Hole event: buyers and sellers responding to the pHI and POC levels, tail highs into tail highs, and tail lows into the POC/VPOC. Nice tapering by sellers from the high and the lows. The auction failed to break from the prior bearish engulfing day and the weekly balance, and post Powell, volumes dropped off into the close.

Profile review and pre-market planSo let's explore what the bears need to protect to keep momentum on their side, and what they need to achieve to send the bulls scampering. Of course, these are just my opinions, loosely held, but it pays to have an idea.

Let's begin where we left off: yesterday's lows at 5882, trading into the June monthly highs of 5885 and 5578. That's obvious to some, but less obviously, we're trading into a prior-week and composite low volume node (LVN). For the bears to take control, I'd want us to trade below last week's cash close. Psychologically, that's a big step, if the bears can take it and hold it.

Now this week's profile. It's very balanced, with a high at 5665 and a low at 5573, set in Monday's session, that has held. The weekly mid is 5619, which coincides with yesterday's mid of 5624. Reflect on the symmetry of the profile and the obvious balance, with equal tails of about 5 points at the high and the low. This week's profile looks very balanced, normal, into Jackson Hole: this is typical before large events.

So we're in balance. What about volume? Despite large moves higher and lower, Thursday's volumes have stayed relatively low, not exceeding 65% of daily relative volume (RVOL). Daily volume was under 900k, with the exception of Thursday's liquidation, which saw about 1.1M trades. That signals a short-term adjustment to the 12-session move higher since we traded at 5120 on August 5th. Sometimes a market needs to "break before it can go higher", when inventory gets too long.

All the evidence, then, is that the market is in balance above a key level, with the overnight holding below the weekly mid into Jackson Hole.

Buyers need to regain a hold above the weekly/daily mid, 5620/25. Sellers need to break below last week's CS and Monday's lows, 5573/5578.

If sellers can hold inside yesterday's lower profile, with 34 singles marking its upper boundary, I think we can wipe out all the buy side for a move into June's range through 5778. That's one thing I'm looking for. Second, a hold above the pMVAH at 5634 sets us up to have another go higher. Yesterday's value is all the way down at 5600, and any PB into that area may find a bid as yesterday's shorts get a chance to cover.

Notable tweetsWhat is the distinction between a reversal and a pullback? Pullbacks and reversals both involve price moving away from its highs or lows, but pullbacks are short-term and reversals are long-term. The pullbacks yesterday referenced some key levels to take trades from.