Week review · w/c 8 August 2022 · A balanced week, one time frame up, into CPI
A balanced distribution week, one time frame up: Monday failed above Friday's highs, Tuesday's test of Friday's lows found buyers, and the higher high at 4170 was only 1 tick above the ECB week high. Post Fed and jobs data the auction is holding inside an area of prior balance, so balance rules apply between 4170 and 4080.5 into CPI.
H 4170 | L 4080.5 | VPOC 4121 | SETTLE 4142
The week in brief
Trading balance: the auction is trading inside an area of prior balance (June 5th). Balanced distribution week, balance rules apply. Weekly one time frame up.
Post Fed and jobs data, the auction is holding inside the area of prior balance. Inflation data to come.
Stronger-than-expected jobs data raised the possibility of more aggressive Federal Reserve tightening, and US equity markets ended Friday's session mixed. The Nasdaq gained 2.2 per cent for the week, while the S&P 500 rose 0.4 per cent and the Dow fell 0.1 per cent.
Treasuries had a sharp sell-off on Friday on the possibility of bigger interest rate rises from the Fed; the yield on the 10-year Treasury note ended the week at 2.83 per cent. Meanwhile, with US crude stocks unexpectedly increasing and OPEC and its partners deciding to raise production by 100,000 barrels per day, oil prices plummeted this week to their lowest level since early February.
Day by day
- Friday (prior week): Friday's buyer imbalance.
- Monday: Monday's auction opens with a large gap to the prior close, but fails above Friday's highs. Sellers take control to test the other side of balance.
- Tuesday: a test of the prior Friday lows. Buyers respond, and the auction reverses inside balance.
- Wednesday: opens mid-range of balance, inside Tuesday's range. Buyers eventually drive the auction to test the highs from the week of June 5th.
- Thursday: a very low range balance into key NFP data.
- Friday: emotional selling post NFP data leaves the auction with a huge gap on the open. Buyers respond (see gap rules) to close the gap to the prior close, but the auction then fails back to form a higher low.
The week on the weekly profile
- Monday's auction broke the prior week's high, 4144, early on, but the auction failed to attract bigger TF players and price failed to move higher in a significant way. The auction then reverses to test the other side of balance.
- The auction trades to the other side of the prior week's upper distribution low: the lower end of balance. Buyers are responsive at the lows, leaving a small tail. The auction reverses and finally breaks out of balance to make a higher high.
- The higher high, 4170, is only 1 tick above the prior ECB week high, 4169.75 (June 5th).
- Jobs data was a blowout beat, raising fears of a tighter Fed. Longs liquidate, but the auction is well supported inside the weekly value area low (VAL), the 4100 area.
The weekly structure
WeeklyBalanced distribution week: balance rules apply. Weekly one time frame up. A 2-way auction inside balance, and balance rules should be applied. Looking for change!
On the weekly profile
- Another non-excess high at 4188: stops located above.
- 1st week of June: longs liquidate after the hawkish ECB meeting. Pre-ECB balance lows at 4078. Another balanced week helped fuel the long liquidation move the following week.
- Bullard talks of Fed rate cuts next year: the auction reverses off the lows.
- Weekly P distribution: shorts cover.
- Multi-distribution week: the upper node is isolated by the singles marker at 4081.
- Below it, an area of low liquidity: an LVN.
- Above, the singles from the 1st week of May weekly auction, and the HVN at 4250.
MonthlyMonthly balanced distribution, monthly one time frame up. H 4170, L 4080, VPOC 4121.
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.
Levels for next week
Balanced profile, balance rules apply: H 4170, L 4080.5, VPOC 4121, SETTLE 4142.
Monitoring: H 4170, L 4080.5.
Monthly: H 4170, L 4080, VPOC 4121.
The rest of my levels are marked on the weekly review, above and below.
Data ahead
Key takeaways
- AIG, BioNTech, Sysco, Wynn Resorts, Norwegian Cruise Line, Hyatt Hotels, Disney, Fox Corporation and many other companies report earnings this week.
- The Bureau of Labor Statistics (BLS) releases the July Consumer Price Index (CPI), the latest reading on US consumer inflation, on Wednesday.
- On Thursday the Producer Price Index (PPI), which tracks inflation from the perspective of manufacturers and retailers, is released.
- The Michigan Consumer Sentiment Index (MCSI), an essential measure of consumer confidence, gives its preliminary August score on Friday.
Monday 8 August
- Dominion Energy (D), AIG (AIG), BioNTech (BNTX), Tyson Foods (TSN), Barrick Gold (GOLD), Palantir Technologies (PLTR), News Corporation (NWS), Novavax (NVAX), Acadia Pharmaceuticals (ACAD) and Primerica (PRI) report earnings.
- Consumer Inflation Expectations (July).
Tuesday 9 August
- Emerson Electric (EMR), Sysco (SYY), Welltower (WELL), Roblox (RBLX), Coinbase (COIN), Warner Music Group (WMG), XP (XP), Hyatt Hotels (H), Wynn Resorts (WYNN), Ralph Lauren (RL), Planet Fitness (PLNT), IAC/InterActiveCorp (IAC), H&R Block (HRB), Norwegian Cruise Line (NCLH) and iRobot Corp. (IRBT) report earnings.
- NFIB Business Optimism Index (July).
- IBD/TIPP Economic Optimism Index (Aug).
Wednesday 10 August
- Disney (DIS), Manulife Financial (MFC), Fox Corporation (FOXA), Wendy's (WEN), Bumble (BMBL) and Pan American Silver (PAAS) report earnings.
- Consumer Price Index (CPI) Inflation Rate (July).
- Wholesale Inventories (June).
Thursday 11 August
- Brookfield Asset Management (BAM), Baidu (BIDU), Illumina (ILMN), Rivian Automotive (RIVN), Aegon (AEG) and Dillard's (DDS) report earnings.
- Producer Price Index (PPI) Inflation Rate (July).
Friday 12 August
- Broadridge Financial Solutions (BR) and Spectrum Brands (SPB) report earnings.
- Import and Export Prices (July).
- Michigan Consumer Sentiment Index, preliminary reading (Aug).
- UK GDP Growth Rate, preliminary estimate (Q2 2022).
Key lessons
Trade well and prosper.
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