Today’s trading session was characterized by muted overnight activity, followed by a measured decline in the morning session, ultimately leading to a tight consolidation phase in the afternoon. The market began a new cycle following an exceptionally strong previous cycle, which extended 255.92% beyond the 20-cycle average. Early selling pressure was evident, with downside targets being swiftly met across key indices.
Key Market Developments
- Initial Decline & Cycle Fulfillment:
- The ES (S&P 500) and NQ (Nasdaq 100) both triggered Opening Range Shorts, with targets quickly achieved.
- The Cycle Day 1 projected average decline @ES (5667) @NQ (19703) was fulfilled for both indices, suggesting early downside momentum was in line with historical cycle behavior.
- Consolidation Phase:
- After an active morning session, price action balanced out between 5665 – 5680, with 5680 acting as resistance.
- Afternoon trading remained tight, hovering around key levels, with volume confirming target zones.
- Crude Oil Activity:
- Crude Oil (CL) saw successful Opening Range Shorts, reaching multiple downside targets, confirming a continuation of intraday selling momentum.
- Market-on-Close (MOC) Data & FOMC Outlook:
- The session wrapped up with a $745M MOC buy imbalance, which was relatively small (“mice nutz”).
- Key event ahead: The FOMC meeting and press conference on Wednesday, with the FedWatch Tool currently pricing in a 98% probability of no rate change (4.25% – 4.50%).
Educational Takeaway – Understanding Market Cycles & Liquidity Dynamics
-
Cycle Awareness Enhances Trade Planning:
- Recognizing the transition into a new cycle can help traders anticipate volatility shifts.
- A previous Super Cycle exceeding 250% of its average range suggests potential exhaustion and the need for mean reversion or consolidation.
-
Volume Confirms Market Structure:
- PTGDavid’s observation that “Volume Validates Target Zones” reinforces the idea that key support/resistance levels gain significance when accompanied by strong volume.
- Traders should monitor whether price is accepted or rejected at key levels, as this dictates the next directional move.
-
Liquidity and Market-on-Close (MOC) Orders:
- The small MOC imbalance suggests no significant institutional positioning ahead of the FOMC.
- Understanding MOC imbalances can provide insight into end-of-day liquidity flows and possible market direction into the next session.
With the FOMC meeting approaching, expect lower conviction trading until new policy signals provide clarity. As always, risk management remains key in uncertain environments.