$ES_F : 1515-1522 : Market Recap

1522 New High. Small Short Set-up in play.

ES at key resistance point. Rally target from 1266 met.

It has become a familiar one way street this trading lately. Markets open, dip a bit, grind higher all day and establish a new high in a dull narrow range trading day. Well today was slightly different. The volume was generally low but still there was a burst of activity at key points indicating something bigger at play. May be longs taking profit, may be trend is changing. So far no confirmation but there is a warning flag.

I came in the day bullish as per this trade plan. Overnight markets were pointing higher and made new high at 1520. After opening with small gap up, the resulting dip was did not fill gap and instead made a low at 1517.25 and markets quickly made to the expected day session high at 1522 without any fills on long side. I was not prepared to fade the 1522 level on short side without a confirmed short set-up so mainly I ended up twiddling thumbs. However the rally started failing at 1522 and by mid day, markets dropped quickly to 1514.75 giving long positions in expected support zone. Now if the trade were to act as per script, I was expecting a slow grind follow through on the upside like a typical day. Indeed that was the case and markets visited the VWAP at 1518 allowing stops to be moved to break even and 50% profit opportunity. However at this point I noted a failure/stall in the rally and I exited remaining positions at 1517, noting a trend change which I mentioned in this comment.

This short set-up which I noted was a small time frame set-up but it was significant given ES is at key target levels and the expected day session high was already in place. I was not prepared to short the market on these small counter trend set-up but at the same time I was not willing to be long. So best was to wait and watch if the set-up plays out. The target for this short set-up was 1513 which was eventually met to the tick. Today most of the trading activity was at fading the VWAP which gives me a suspicion that may be trend is changing.

So what do I see now? The important thing is that the long set-up is not broken yet hence there is no case for going all in short at this moment. But there is a warning that possibly 1522 is the top we have seen. It will all depend upon follow through tomorrow. If the bears can take the market to 1511 and hold it below 1519 for a day, I would possibly start looking for a short position. Meanwhile we remain technically in another measured move long potentially looking for 1525 as next target.

I have put in a SPY hedge as balance in my stock portfolio. After earning for CSCO I have added to the long position in after hour dip.

Day session range was 9 pt gap and overall range has been 9, with both high and low made during the day session which is sign of an active market.