*disclaimer: Not financial advice. This is my personal trade plan only. I am not qualified or licensed to advise anyone on their specific positions or trades, I am sharing my personal opinions only. Never make financial decisions based on any information on this site or any associated platforms. Always consult a professional for investment related advice and do your due diligence*
Good afternoon! Today’s price action regressed to a dull chop following a glimmer of volatility yesterday. Markets remain at a pivotal spot from which I expect to see short term expansion. The divergence between $ES and $NQ is an increasingly frustrating and important issue. Today’s update will be focused on the two different stories being told by the indices and ask the question “which one is lying?”…
Macro Context:
- The macro context is unchanged and does not play a major role in today’s discussion.
What Story is $ES Telling?
- On the daily, $ES is still pointing north – generally speaking. In fact, the only thing $ES and $NQ can agree on right now is that there is likely unfinished business above. How price gets there remains up for debate… Is the ((x)) wave complete? Or will it evolve even further?
- $ES told a rather bearish story with today’s action. Price sliced lower at the open and made a weak attempt at a recovery throughout the rest of the day. As you’ll see shortly, $ES was much weaker than $NQ. While bulls managed to reclaim about 20 points off the low, there was no enthusiasm in the move. Heading into 5m supply and the 0.5-0.786fib zone, I cannot say I am convinced today’s low will hold.
- Assuming today’s low gets swept, price would fall below the “danger level” discussed yesterday (4112). Below that level I see two scenarios in play… Either price will find a quick and strong rally from the fibs below, saving the bulls once again… or buyers will finally be exhausted as price grinds back towards 4050.
- The situation falls into the less than actionable “it could go up or it could go down” category. It is difficult to pick a clear winner here. Bulls have had every opportunity to make their move, but have been unable to do so. The next move will depend on the reaction from the fib zone and whether or not $NQ can maintain its strength.
What Story is $NQ Telling?
- As with $ES, $NQ is pointing higher in the broader sense. However, $NQ appears much more willing to go directly higher while $ES takes its time.
- An analogy that may or may not make any sense:
$NQ told $ES “we’re leaving for the party at 5pm sharp”. It is now 5:15pm and $ES can’t decide which shoes to wear. The question is – does $ES catch up and join $NQ in the car, or does $NQ give up and go back inside the house?
- While $ES painted a bearish picture today, $NQ tried its best to hold things together. It wasn’t pretty, but bulls managed to produce a move out of 10m demand. If this move is going to survive, there needs to be acceleration higher overnight – otherwise it becomes likely that $NQ will join $ES in sweeping today’s low.
- If today’s low is indeed swept, $NQ and $ES would be in a similar position – They will both be at a key spot that bulls need to produce a strong rally from.
- If $NQ sweeps today’s low but holds demand and produces a reversal, all is well in the bull camp.
- If $NQ breaks today’s low and fails to hold 13,260 – or produces a weak reversal – the bearish alt will likely take over.
Which One Is Lying?
- $ES is telling a story of weakness, $NQ is doing everything it can to drag price higher…. Which is correct?
- I’m not sure yet, but I believe $NQ will decide the fate of both. If $NQ can hold demand and find a strong move up, I expect $ES to eventually catch up and join the move higher. However, any mis-step from $NQ would allow $ES to drag the bear alts into the lead
Game Plan:
- Heading into tomorrow, I must give bulls a slight edge. Technically, neither $ES nor $NQ broke the danger levels today. If price can accelerate through the weekly highs, buyers will remain in control.
- If today’s lows get swept as I suspect, my focus will be entirely on the reaction that follows. Bulls would have to prove themselves with a reversal. They need the reversal to be strong and swift as time will be against them. From there, I will assess and react accordingly.
- As a reminder, markets are still in a corrective and rangebound environment. The overwhelming majority of my focus is on low timeframe/intraday entries in line with the short/mid term counts & trend. I am not trying to swing positions in this environment. My goal is to find low timeframe entries, lock in profits and let runners go towards the broader targets. Stay patient, stay nimble and keep risk management as the top priority.