Week review · w/c 13 June 2022 · The floodgates open after eight days of balance
After eight days of balance the floodgates finally opened after the ECB, and CPI forced sellers down to May's HVN at 3900 to find buyers. Here is the month and week review, the levels both ways into a hawkish FOMC and BoE, and Sunday's update after a big ON gap into the unknown.
WK HIGH 4168.25 | WK LOW 3895.25 | CLOSE 3899 · 24-hour session
The week in brief
What an end to the weekAfter an 8-day period of balance, the floodgates finally opened after Thursday's post-ECB open. Participants well anticipated this liquidation, but the timing of the short was tricky, as buyers resolutely tried to fight off the high probability of stops lurking below 4071. It was an event to stick around for, but many traders had given up, as the PA was super tricky early on. The break lower happened in J period, into the close.
The auction after the ECB and CPI was emotional, and sellers were forced lower, to May's HVN at 3900, to find buyers. The spike and the gaps are an excellent example of the price action that can come from a long period of balance into a big event or two.
Day by day
The balanceEight days of balance, and 2-way trade inside it.
Thursday: ECBLong positions are forced to liquidate below eight days of balance. The ECB's hawkish stance was the trigger. Look where the auction ended post ECB: 4016, the prior month's VPOC. The post-ECB auction closes at the lows into CPI, with no strong buyers found into the CPI data. Does the auction need to go lower?
Friday: CPIPost CPI, there were no buyers to be found on the open, and the auction accelerated in emotional fashion to form a long liquidation b-profile. Look where the auction found a strong barrier post CPI: at the prior month's HVN, 3900.
The weekly structure
OTFD daily and weekly, strong imbalance | monthly balance.
- Monitoring 3898 (continuation) and 3944 (start of repair).
- Poor structure left behind 3944-4067: an emotional few days post balance breakout. Possible repair 3944-4067.
April's lows have been acting as an over/under line in May and June. The month's lows at 3898 are non-excess, with absorption there. The year lows at 3808.75 are non-excess too, and they are the key HTF target.
Levels for next week
DownsideI will be watching the Friday lows at 3898/3900 for a continuation to test the HTF (higher time frame) target and the yearly lows at 3808. The Sunday open will be particularly interesting, to see whether BTFD traders are still interested into an increasingly hawkish FOMC and BoE next week. Should the lows break, I will be looking for a continuation down to 3876, 3854, 3832 and 3809.
UpsideBuyers will want to end the OTFD on the daily, and they need to get over a few hurdles first: 3944, the spike base from Friday's auction, and 3959.5. Then they have the task of filling in the gap, first to 4016 and then to 4067, with a pit stop at 4046 along the way.
UpdateThe Sunday overnight update, after large gaps to the prior lows. A big ON gap and go, driving us into the unknown. I just merged a few prior profiles together to help me understand: a monthly profile merge to find some clues, Dec 2020 to the end of March 2021, an overlapping balance area. The primary auction has the most important info for daytrading, but the past gives us important clues. My levels from the update are marked above and below.
Data ahead
HighlightsFOMC, BoE and BoJ meetings, plus US and China May data. From IHS Markit / S&P Global:
Central bank meetings are in focus, with the US Fed, the Bank of England and the Bank of Japan all due to update their monetary policy decisions. In the data docket, US retail sales, industrial production and PPI will be watched midway into the second quarter, as will China's retail sales and industrial output figures. In the UK, April GDP and the monthly labour market report will be eagerly awaited.
Following this week's US CPI release, the Fed's FOMC meeting is the highlight. Market sentiment remains weak amid concerns over stubborn inflation and the impact of high prices on growth, with recent US PMI data pointing to slowing business activity amid rising prices and softer demand. A 50 basis point hike appears to be a foregone conclusion according to the CME FedWatch tool, so the Fed's rhetoric and projections will be eagerly followed for the path forward and the impact on growth forecasts.
Events calendarSource: Investopedia.
- Monday, June 13: Oracle (ORCL) reports earnings; Federal Reserve speech by Lael Brainard; Consumer Inflation Expectations (May).
- Tuesday, June 14: Day 1 of the June FOMC meeting; Producer Price Inflation (PPI) (May); IBD/TIPP Economic Optimism Index (June).
- Wednesday, June 15: Day 2 of the June FOMC meeting and the interest rate decision; NY Empire State Manufacturing Index (June); NAHB Housing Market Index (June); Retail Sales (May).
- Thursday, June 16: Adobe (ADBE) and Kroger (KR) report earnings; Housing Starts (May); Building Permits (May).
- Friday, June 17: Industrial Production (May); Manufacturing Production (May); Conference Board Leading Index (May).
Weekend readingInto the FOMC (Danske Bank) and FOMC Preview (ING Think).
Key lessons
Trade well and prosper.
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