S&P Futures Update for Jan 19, 2015

So far the Jan monthly range is within Dec'14 range. Although, the weekly trend is down we had somewhat of a reversal Friday. The 2 pictures below illustrate a classic balance breakout failure which occurred on Friday. I wanted to address this first before moving on to what I will be watching for Monday. Coming into Friday, the market had sold off to 1970.25  i.e The breakout occurred in the Globex session. However, when the pit session opened Friday, we had a high confidence opening with an Open Drive. When E period came back to test the 2 day balance lows at 1981.25 and reversed - the shorts were trapped. We then 1-timeframed up for 8 periods until M period. Entering a trade later i.e. towards the end of the Initial Balance (1st hour) or in F period was very advantageous because you had several points confirming a breakout failure:

1. the 2 periods prior to the pit session open - could not stay below 1981.25 - 2 day balance low
2. High confidence opening - open drive
3. Early pit session low (D period) could not take out 2 day balance lows
4. IB range was within 2 day Balance
5. F period fails to get back within the o/n range - i.e. could not get below o/n high

So - connecting the dots was key to trading on the long side Friday.



 

Since the market failed to break below the balance lows at 1981.25, the odds of testing the other end of this balance (1961-62 level) have increased substantially. Friday's Value was overlapping to higher and we settled on the highs. Coming into Monday I see a 3 day balance within a 10 day balance range - see chart below. If we break above the Thursday/Friday high in the overnight session prior to the opening on Monday coupled with higher Value on Monday - it will provide further confidence that we are headed to the 2061-62 area. The key references for Monday are the 3 day balance highs at 2016 and Friday's pull back low at 1999.50. Acceptance below the 1999-2000 is negative and will bring the 3 day balance lows back into focus.