While the trading day on 11/22 was decent, this is the first one in recent memory that hasn't sucked. We finally got some post-holiday volatility.
This is the picture before the open this morning:
What I observed was:
* 11/21 high is 4555
* 11/22 low, twice during the day, is 4555
* 11/27 low, twice in the morning and again in the afternoon, is 4555
Monday 11/27 traded almost entirely below the distribution's VPOC of 4565, with multiple failed attempts to hold above it. So, it was not surprising that this morning we opened lower, finally.
Despite the fact that algos trade the market, ultimately a human decides to put capital at risk somewhere along the chain. Humans = emotions, and if fintwit is any indication, traders are begging for a correction. 10% in 3 weeks, with no pullback whatsoever, is just too much for the crowd to bear, generally speaking.
So, when we opened at 4555 and didn't immediately rally, the excitement was palpable when we didn't immediately rally, but instead drifted down to 4550. There was most definitely selling. Problem was, that selling was met with a pretty decent buying contingent. We were a bit up and down, and then at 10am something interesting happened. We got the CB confidence number. It beat at 102 (consensus 100-101). ES saw some buying flows. At that same time, FOMC governor Christopher Waller gave a speech, and the text was released at 10am too. Among the notables in the speech text:
The flow was fairly mixed, but a few minutes later we drifted back to the 10am "SOC" (scene of crime) at 4550.75. That was the make or break point (IMO, at the time). We pushed back up and settled in a 4554 - 4556 range. To me, this was very bullish. If you were expecting a sell below 4555, then pushing back up to that area and rotating was not what you wanted to see. NQ was weak but was bouncing off Monday's lows. Dow was looking good and drifting higher.
The trade here is that with everyone so stoked about the possibility of a selloff, if it didn't happen, you could smell a squeeze on the horizon. Well, the catalyst for the squeeze came when Waller, a very hawkish FOMC member, said at 10:38:
Excuse me? "Lower the policy rate"? From a hawk? Who's a voting member through the end of 2025? That was it. We saw a bout of buying that I haven't seen in a while. "Just get in" (though you could do so strategically) is the order of the day when a hawkish member says for the first time in a rate *hiking* cycle anything resembling the phrase "rate cut."
Anyway, interestingly, we got a sell all the way back down to 4552. It was a total wash out. The early shorts were squeezed, and those emotionally driven by the thought of a rate cut got mowed down on the lunch time washout. Then another quick fake lower. Then two more to 4554 after some buying. Support isn't supposed to hold this many times. But when you look at how it traded there, these were all quick washouts that were bought almost immediately.
It will be interesting to see whether we drift lower and make another go at 4555. If we do, it almost certainly will cause a cascade of selling. But so far, it hasn't, which leads me to believe that if we can just get used to life above 4565 for a day, we may just see a huge rally. No one wants it, few are calling for it, and it is exactly what would defy expectations after such a huge push up already. As you can see, there's a big of a bulge on the lower half of the profile after today. This by itself isn't bullish. But the fact that we opened and tried to go lower in the morning, and then tried multiple times this afternoon to get back out of the 4555-4570 tractor beam and failed, leads me to believe that we have a good shot at rallying from here. If we do, it might take form as a grind, or it could be a bit violent, since we have been in this tight range for over a week.
As for taking that trade this morning, the shaded areas on the charts above were all drawn either last week or last night. The soft …