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Assessments / Blog


2018-12-29
ES #F Late Supply to close down


In our last assessment we cautioned: “Supply and Demand Volatility eased. The $VIX dropped below 30. Unless Volatility picks up again, we expect to see smaller daily price ranges”. Friday’s price range were only 50.25-points (less than 50% compared to the previous days 101.75-points). Contracting price ranges are ideal for selling options like Bear Call spreads! There were excellent opportunities on Thursday and Friday in the ES for the 2540/2545 Bull Call spreads for Friday expiration and 2545/2550 Monday (31st) expiration bringing in premiums of up to $1.30 per spread (or $65.00 credit per spread). Our Friday spreads worked out perfectly , expiring worthless (retaining the credit), with Monday expiration ahead.

After price rallied to a high of 2523.00 it closed at 2488.00, 7.00-points down from the previous close. Demand dominated most of the session, but a late wave of Supply during the last hour or so, caused price to lose ground, and Demand ended to be on top, but lost most of its strength. This is an anomaly as Demand at the end of the day was at the same level as the previous day, but price closed down 7.00-points, compared to the previous day’s gain of 24.00-points on the same Demand level!

We are still in Selling pressure territory, and although nearing Buying pressure territory, the Demand on Friday was unable to move into Buying pressure territory. Average Supply/Demand Volatility was strongly Bullish for the day, but moved into the climax zone (below 50) and look to be stretched too far, if compared to other readings and signals.

Resistance to the upside is identified at 2508.00, 2521.75, 2542.50 and 2583.00.

We mentioned previously that it is unlikely that the rally to the upside can be sustained (unless Buying pressure develops), and Friday's price action confirmed this assessment. Indeed, a very interesting trading day unfolded, although not as action packed as the recent days we used to see the previous week or so.

Our assessment is that a good possibility exists, for another move down early next week. If the 2474.75 level is taken out a move lower into the 2431.00 to 2390.50 area is possible.

End of the day Signals December the 28th:   

S & D Dashboard Algorithm is Bullish but the Daily Signals are mixed

Average Supply/Demand Volatility reached the climax zone (Below 50) and is stretched, watch for weakness when Volatility increase again

Caution:

Mixed signals and lower Volatility, may do the unexpected! Volatility may suddenly increase again?

 

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Click here for example of reversal trade taken in Feeder Cattle that can be found on this page.

 

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