Weekend Report for Monday, November 13
From last weekend’s Report:
Now, after the incredible ramp of last week, the indices are likely to become more two-sided. At this juncture I am expecting to see a series of higher highs and lows that include deeper retracements (even if only intraday) than we saw last week.
There are three distinct, immutable phases of Auction Market Development:
- Step One: A “distribution” (in the legacy Market Profile nomenclature). Less confusing – a trend.
- Step Two: A “stopping price” – the point at which an equilibrium develops among buyers and sellers.
- Step Three: Range development.
Where a lot of “Market Profile” traders get it wrong is believing there will be an imminent deep retracement established in the trend phase of development. It seldom occurs so conveniently.
What is far more predictable (and useful from a trading perspective) is understanding that strong trends in the market can, and usually do, “correct” through time.
Time regulates price.
So, while it is extremely difficult and unwise to trade for a big retracement following several days of strong momentum (up or down), one can expect with a high probability that relentless 4-7 day trends will become more two-sided. That is where we are, and have been for the past week.
The next truly significant upper level in the SPX is 4607, the late July high. It will be interesting to see how much follow-through to Friday’s ramp we see early in the week.
Upper KRA: 4607
Lower KRA: 4352-4317
SPX – Intermediate-term Auction
Potential Auction paths…
I find this chart to be the most useful from a trading perspective of anything else I use when the SPX is trending up strongly. Breadth will consistently form short-term lows in the band highlighted below in the panel containing breadth.
Tops are trickier, but seldom from until there is a divergence between new rally highs and breadth.
The initial signal a top of relative significance is in place occurs when price takes out a previous higher low to the downside.
In spite of a tiny bit of two-sided trade prior to Friday’s ramp, the NDX remains extraordinarily vertical. Some retracement/Balance is overdue.
Upper KRA: 15932
Lower KRA: 15233-15170
The RUT is as confounding as ever.
Upper KRA: 1770
Lower KRA: 1685-1670
Upper KRA: 35680
Lower KRA: 33891-33765
The current position of the 5-day MA of NYSE advancing issues suggests higher highs in the SPX before any significant retracement occurs.
US 10-yr Notes
No change: The US Dollar has been a persistent, two-sided grind higher since the end of July. My guess (emphasis guess) is to favor shorts against the recent high.
Gold traded into an important short-term KRA. Ideally it will hold under a bullish scenario.
Crude appears to be in an intermediate-term downtrend.