Week review · w/c 25 July 2022 · A 'P' week, rejected at the 4016 gap level, into FOMC and big tech
Earnings lifted ES into a 'P' week that held outside the prior five-week balance, before Friday's pull-back from the 4016 gap level. Here is the day-by-day read, the weekly and monthly structure with my levels, and a week ahead of FOMC, Q2 GDP and the biggest names in tech.
H 4016.25 | L 3820 | VPOC 3935 | MID 3920 | VWAP 3940 | SETTLE 3965
The week in brief
'P' distribution weekA weekly P-profile: price action maintained outside the prior 5-week balance area, 3639-3950. Daily and weekly auction OTFU, inside month OTFD.
Despite a large pull-back on Friday from the 4016 ES futures gap level, US equity markets rebounded this week, with ES posting sizeable gains on stronger-than-expected corporate earnings. The S&P 500 gained 2.6 per cent and the Nasdaq 3.3 per cent.
US Treasuries rose as investors sought safe-haven assets amid growing fears of a recession and further tightening by the world's central banks. The 10-year US Treasury note yield fell 13 basis points (bps) on Friday, ending the week at 2.78 per cent. Oil ended the week lower, having risen earlier in the week before falling on lower domestic demand for gasoline. West Texas Intermediate (WTI) crude ended Friday's session just under $95 a barrel.
Day by day
MondayMonday's session sees a large gap to the Friday close evaporate, but crucially hold above Friday's low. The gap remains unclosed.
TuesdayTuesday sees buyers maintain the gap to the prior close and squeeze shorts above Monday's high.
WednesdayBuyers continue to push the auction higher and consolidate Tuesday's gains.
ThursdayThursday's early dip sees the auction close above the IB. Buyers maintain momentum.
FridayAn early closing of the gap from 10th June, but sellers take control of the auction, back into Thursday's lows, before recovering to close inside value.
The weekly structure
Weekly reviewThe prior large gap, carried over from the week of June 5th (the ECB long liquidation), is now filled. The poor structure within the gap is now repaired, and longs will be looking to backtest the singles above. Buyers will be looking to backtest and hold the singles, and sellers will want to defend this important area.
Quite some recovery so far: can we auction even higher? The auction is still below the 100MA at 4123, but now above the 50MA at 3918. Buyers will be targeting the 100MA.
- 3926 supports the majority of the week's PA. Look for stops below.
- The spike lower fails to penetrate the HVN from the prior week. Support found retesting the gap, 3800-3820.
- Inside week breakout failure.
- Crucial for longs that the gap 3920-3924 is maintained.
Why look at the weekly and monthly?Using the composite profiles gives me a lot of clarity in understanding the market. Understanding the story and the basic mechanics of what is going on simplifies almost every other aspect of my trading, especially timing.
By identifying areas of balance and acceptance in the auction I have a natural edge: I can identify value and the pivots of change. In balance I look to fade the extremes. When activity leaves an area of acceptance, I monitor the strength and conviction of the move, using volume and value as my guide. As a general rule, if a move is genuine, volume and value will move away from prior acceptance to a new area.
MonthlyInteresting: the monthly VPOC has remained at 3856. Monthly multi-distribution. The monthly chart marks the 2-way trade in the May and June distributions, the spikes, the non-excess low and the key HTF target.
3-month profile referencesApril to current.
Levels for next week
'P' distribution week: H 4016.25, L 3820, VPOC 3935, MID 3920, VWAP 3940, SETTLE 3965.
Monitoring: 4016, the high | 3920, the upper distribution low, MID and daily singles.
Monthly, multi-distribution: H 4016, L 3723, VPOC 3856.
The rest of my levels are marked on the weekly review, above and below.
Data ahead
Key takeaways
- Earnings season enters its busiest week, with big tech firms including Apple, Amazon, Microsoft, Google parent Alphabet and Facebook parent Meta Platforms scheduled to report.
- Federal Reserve policymakers gather for the two-day July meeting of the Federal Open Market Committee (FOMC) on Tuesday and Wednesday; Fed officials are widely expected to raise rates by at least 75 basis points (bps).
- The advance estimate of second-quarter US GDP growth is released on Thursday, providing valuable clues as to whether the US economy is headed for a recession.
- More updates on the housing market are expected, with the Case-Shiller National Home Price Index tracking price gains in May, along with new and pending home sales for June.
Monday 25 July
- Newmont Corp. (NEM), Ryanair (RYAAY) and Whirlpool (WHR) report earnings.
- Chicago Fed National Activity Index (June).
- Dallas Fed Manufacturing Index (July).
Tuesday 26 July
On Tuesday the earnings spotlight is on Microsoft and Alphabet, the parent company of Google, as the two tech giants report their second-quarter earnings. Meta Platforms, the parent company of Facebook, reports on Wednesday, followed by Apple and Amazon on Thursday. Upbeat earnings are expected from Alphabet, driven by surging revenue from its cloud computing business. Microsoft's earnings will also be of particular interest after the company reported increased first-quarter revenue from its business productivity and cloud computing segments.
- Microsoft (MSFT), Alphabet (GOOG), Visa (V), Coca-Cola Company (KO), McDonald's (MCD), United Parcel Service (UPS), Texas Instruments (TXN), Raytheon (RTX), Mondelez International (MDLZ), Chubb Limited (CB), 3M (MMM), Stryker (SYK), General Electric (GE), UBS (UBS), Moody's (MCO), Centene (CNC), General Motors (GM), Kimberly-Clark (KMB), Chipotle (CMG), MSCI Inc. (MSCI) and Enphase Energy (ENPH) report earnings.
- Day 1 of the July FOMC policy meeting.
- S&P Case-Shiller National Home Price Index (May).
- Freddie Mac National House Price Index (May).
- New Home Sales (June).
- CB Consumer Confidence (July).
- Richmond Fed Manufacturing Index (July).
Wednesday 27 July
- Meta Platforms (META), Qualcomm (QCOM), T-Mobile (TMUS), Bristol-Myers Squibb (BMY), Boeing (BA), ADP (ADP), CME Group (CME), Sherwin-Williams (SHW), Humana (HUM), General Dynamics (GD), Norfolk Southern (NSC), Ford (F), Shopify (SHOP), Kraft Heinz (KHC), O'Reilly Automotive (ORLY), Banco Santander (SAN), Cognizant (CTSH), Lloyds Banking Group (LYG), Barclays (BCS), Hilton (HLT), Suncor Energy (SU), Hess Corporation (HES), Canon (CAJ), Duke Realty (DRE), Spotify (SPOT), Garmin (GRMN), Deutsche Bank (DB), Etsy (ETSY) and Morningstar (MORN) report earnings.
- Day 2 of the July FOMC policy meeting; interest rate decision.
- Retail and Wholesale Inventories (June).
- Durable Goods Orders (June).
- Goods Trade Balance (June).
- Pending Home Sales (June).
Thursday 28 July
On Thursday the Bureau of Economic Analysis (BEA) releases the advance estimate of second-quarter US gross domestic product (GDP) growth, showing whether the US economy expanded or contracted during the second quarter.
- Apple (AAPL), Amazon (AMZN), Mastercard (MA), Pfizer (PFE), Merck (MRK), Thermo Fisher (TMO), Comcast (CMCSA), Intel (INTC), Linde (LIN), Sanofi (SNY), Honeywell (HON), American Tower (AMT), Altria (MO), Northrop Grumman (NOC), Canadian Pacific Railway (CP), Edwards Lifesciences (EW), Keurig Dr Pepper (KDP), Hershey (HSY), Valero Energy (VLO), Stellantis (STLA), Xcel Energy (XEL), T. Rowe Price Group (TROW), Sirius XM (SIRI), Southwest Airlines (LUV), Willis Towers Watson (WTW), Roku (ROKU) and First Solar (FSLR) report earnings.
- US Real GDP Growth Rate, advance estimate (Q2 2022).
- Real Consumer Spending (Q2 2022).
- Kansas Fed Composite Index (July).
Friday 29 July
- ExxonMobil (XOM), Procter & Gamble (PG), Chevron (CVX), AbbVie (ABBV), AstraZeneca (AZN), Sony (SONY), Charter Communications (CHTR), Enbridge (ENB), Colgate-Palmolive (CL), Takeda Pharmaceuticals (TAK), Phillips 66 (PSX) and CBOE Global Markets (CBOE) report earnings.
- Personal Income and Spending (June).
- Personal Consumption Expenditures (PCE) Price Index (June).
- Chicago Purchasing Managers' Index (PMI) (July).
- Michigan Consumer Sentiment Index, final reading (July).
Source: Investopedia.
Weekend reading: the Fed's July policy meetingOn Tuesday and Wednesday next week, US Federal Reserve officials gather for the two-day July meeting of the Federal Open Market Committee (FOMC). The central bank is widely expected to raise its benchmark federal funds rate by a minimum of 75 basis points (bps) to tame persistently high inflation. Since March the Fed has raised its benchmark rate by a cumulative 150 basis points, to a current range of 1.5 to 1.75%, most recently with a 75 bp hike at its June meeting. Fed policymakers now project a year-end fed funds rate of 3.25 to 3.5%, with an additional hike expected in September.
Further reading: Bloomberg on Powell being seen slowing the Fed's hikes after 75 basis points next week, and ING Think on the Fed being on track for another 75bp hike.
Key lessons
Trade well and prosper.
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