Some reflections from last week:
- Fairly typical Holiday week. Relative volume diminished as the week went on. Equities didn’t make a lot of ground, but they didn’t seed a lot of ground either.
- The shortened session on Friday saw some liquidation, but nothing of note.
- Auctions are now focused on month-end games.
- Relative volume remains a challenge. Implied volatility is also constricted.
Some insights for the coming week:
- Equities begin the week in a balanced posture. This makes the 5D the key reference. Given where we’ve come from, we expect buyers to continue to hold court above the 5D.
- ES holding above 4535, which is the Q3 VPOC, and needed hold for auction to push to 4650. 2023 VPOC remains at ~4250. Carry that forward.
- After the holiday, I lean on the last full RTH session for structural market profile references and the composite volume profile for inventory references. This can make it prudent for developing traders to stay on the sidelines until we are later into the session on Monday and more structure is in place.
- With dampened RVOl and Implied Volatility, we remain at risk for liquidation, but the missing piece is a catalyst. For the coming week, GDP and JPow at the end of the week are the best “scheduled” catalysts
- We’ve likely seen most of the “Santa Rally” at this point. We can continue to see higher prices into year-end, but not with the same velocity as November.
Here’s the outlook:
VIX Curve: Maximum complacency for the end of the year, even more after the Holiday week. We are likely to get some hedging, but at this point, like the summer, we can continue in a period of extended complacency as we are now at a place where we have escaped most of the macro headwinds and many participants want to kick-selling to 2024. Why sell in 2023 and pay taxes, when you can sell in 2024?
Upcoming Development Lab:
Most developing traders we encounter are decent at finding “triggers” that pull them into auction activity. What many lack is a way to identify likely targets for their trades. It’s our conviction that if you don’t have a target…you don’t have a trade. So, we’re hosting a lab to walk through examples for finding auction targets:
Stay up to date with us via our Twitter posts this week.
Define your risk and trade well!