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Futures in a tight range overnight until CPI data this morning opened the door to a strong move higher. As of now, even with a +16 gap we are still slated to open within range and thus gap rules are not in play. Overnight inventory is very balanced and we are currently close to the ONH.
Let’s start with structure. Yesterday’s high was poor and is in need of repair. The initial backing away from the poor high already happened in late day trade yesterday. Carry forward both of these dynamics.
It’s important to note that the trendline resistance in both the /ES and the /NQ is just ahead and could be tested today. It’s noteworthy that if you look at the same chart in the SPX, the line was actually broken on yesterday’s rally although was not able to close above. Should either of the futures close a daily bar above the trendline, it will put the bear case seriously into question and open the door to a revisit of the all time highs.
- Current prices are trading very close to the volume POC which is in the middle of yesterday’s VA. That gives little indication as to how traders will act around the open especially with overnight inventory quite balanced. Higher odds trades will develop later rather than earlier.
- The poor high is in play and has potential for repair. Target this high on strength and also position for a breakout higher to repair the structure. Monitor for continuation.
- The ONL is very close to the RTH Low. Consider that a weak low should it be revisited. Only a test there would have potential to change the tone.
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