Debrief · 3 January 2023 · FOMC minutes day: yields fall into the main event

A periodFollowing a wild Globex session to start the year, the auction was opening at 3881, a 20-point gap to the prior close at 3861. Having traded as high as 3906.75 in Globex, and with the overriding bullish directional bias from Europe, there was a high chance of a test of the overnight highs early in the session. The opening swing low at 3872 was just below a pre-open swing low, 3870. This initial failure to test and close the gap resulted in a choppy auction: a stop run through 3890 to trade as high as 3901.5.

Sellers were lurking just below a tight zipper created overnight and the 15/12 nVPOC @3904, which has remained untouched in the RTH session. Buyers were now in trouble: the auction quickly rotated back through all the major reference points, taking out last year's close at 3861. You had to be ready!! The failure to take out the ON high set longs on the back foot.

B to G periodThe auction continued one time frame lower, traversing last week's VA range until finding a low on the SB level, 3814, noted in today's prep.

H to M periodSome shorts covering into the close, to settle at 3845 (last week's pivot mid and my short-bias LIS). Despite today's large rotations, value remains largely unchanged.

Day typeB profile long liquidation: an outside day, engulfing. The auction failed back inside last week's range and closed the 20-point gap.

H: 3902 | L: 3815 | VPOC 3846 | MID 3859 | VWAP 3845 | SETTLE 3845

Price action reviewTuesday in four notes:

1. You had to be ready!! Failure to take out the ON high sets longs on the back foot.
2. Consolidate, then sweep back inside last week's range.
3. This push up to the pwk settle was a clean setup.
4. The retest of the IB low gave you quick scales.

Absorption highs, non-XS. Late-session buyers held above the IB low into the settle, 3843. The ON trade was a swing-trading dream.

ON updateOvernight price action so far has tested back down to the 3638 lower distribution pivots highlighted in yesterday's price action review, then a slow and steady grind higher, taking out the 3861 reference to form an overnight high at 3866. ON inventory adjustment higher: a continuation of the moves we saw into yesterday's close.

ON: H 3866 | L 3838 | VPOC 3860 | MID 3852 | VWAP 3853

Monitoring: ON LOD | 3854 | ON HOD 3866.

PlanTrading an engulfing day, I look to see how the market responds to references located inside VA and at the upper or lower distribution extremes. In the case of today, the LIS is the 3860 area: short below, long above. I'm not really looking for conviction trades unless we see some obvious liquidity drive on news events. I will be waiting for FOMC. Scalp trades.

FOMC minutes tonight, so I'll be expecting light trading into the main event. We'll be looking for clues that support the Fed's more hawkish stance on interest rates, as signalled by the higher moves in the dot plots. Especially now that inflation pressures are beginning to ease, not just in the US but in Europe too.

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.