Starting a general futures thread since I didn’t see one besides the one @SuckyMayor posted and I didn’t want to overrun his.
I know a few of us trade futures so I wanted to provide an overall market outlook and any pertinent info. Posted an image below with some input.
Ive seen these charts online before, posted by JJ, its Sierra Charts or something right? I’m glad we have Future focused traders in here who can give insight into market structure, I’ll be reading these, thanks!
Yea! He has pretty good insight and thought to share. Hope it helps some of us.
Looks like futures decided to go down last night. We touched the December 2022 balance range (3857-3910) this morning and now are rotating back up.
As one trader simply put:
"This market will be rotational for some time. We have seen this before; news cycle markets do not inspire confidence of size traders. Also, the end of quarter is when smart money protects what they made the last 3 months and risk down. We must manage our expectations accordingly and trade from a defensive position.’
“We have all seen this before a FED meeting, the supply shuts off and the shorts are used to hold the market up while size longs liquidate into new initiating buyers who see price stability and come in. Traders got short yesterday again going into the close and the resulting price action in Globex reflects this.”
Quick end of day update: 3-22-23
We filled that gap and rotated back to Monday’s cost basis before the gap up. And now we have longs trapped above that as an area of supply. Tomorrow, we have a huge trading range, ~120 pts, from
3968-4080.
Probable Outcomes:
1 - We will liquidate further as sellers get more aggressive
2 - We trap new shorts that initiated from today’s end of day liquidation and rotate back up.
Looks like scenario two played out; poor shorts got trapped where the yellow arrow and purple arrow are and helped bid the market up to the supply where there are trapped longs.
Purple arrow shorts just covered hence the temporary move up. Let’s see if more trapped longs come out and can take us to the 3995-4005 range and test that 3995 support from the move up this morning, if it breaks look to test the previous day’s low of 3966
All the overnight trading session is above the close. Shorts are trapped under again and will be looking to cover. Looks like we opened on a gap today, meaning there is a lack of supply and market is being held up by shorts. Careful out there, it being month end and quarter end, things can get froggy.
Good explanation on how shorts get trapped.
Another gap from overnight (ON) trading above yesterday’s close. In RTH, if we can’t break the ON low of 4076 then watch out going short.
A reminder that the rally the past few days has been fueled by month/quarter end window dressing and trapped shorts. When we get to an area of support e.g., a gap, shorts are the first to buy. This type of buying is not sustainable since most of the buyers are shorts. Problem is we don’t know how long it lasts so trade with caution and manage your risk accordingly.
I edited the above post for clarification, realized it didn’t make sense.
To your question, the rally wasn’t short covering but rather month end product markup; it got shorts trapped and now hold the market up as they are the bid to cover.
