ES Trade Idea and Upcoming NFP Report

ES1!

• What has the market done?
ES futures are lagging compared to tech heavy index NQ futures. ES futures are still below yearly open. Yearly open has been a strong area of resistance since the rally of April 6th Lows in futures complex.


• What is it trying to do?
ES futures are in consolidation mode, building value higher. VPOC has shifted higher since the gap up from May 11th open. VPOC and 0.786 fib level provide a base for a continuation higher.


• How good of a job is it doing?
Markets seem to be slowing its rally. After such a strong rebound, participants are wary of any pull-backs. Although a strong trend higher, consolidation or a pullback is not illogical at these levels.


• What is more likely to happen from here?


o Scenario 1: Hold steady and NFP provides needed boost for markets to get across yearly open resistance and climb higher.


o Scenario 2: A mixed NFP report may point towards further consolidation. Key level 5873 as support on move lower before reverting higher.


o Scenario 3: A hawkish NFP report that signals higher for longer rates, may be interpreted by market participants as less monetary stimulus and dwindling rate cut bets for this year. We anticipate a sell-off towards 0.618 fib level in this scenario, moving to the lower edge of micro composite volume profile.

In all the above scenarios, there is a clear LIS at yearly open. Other key levels are defined cleanly on the higher time frame. Important thing for traders to note here is to trade what you see and not what you think. Having an alignment between fundamentals and technicals is sound but the markets do what they do, and price moves where it should. Painting narrative to any move may sound fancy but it gets less important at intraday time frames in our opinion. Hence why we view all this considering auction markets and volume profile.


Glossary:
ES - emini-S&P 500 Futures

NQ - emini-NASDAQ 100 Futures

VPOC - Volume Point of Control: The most traded price by volume in a given range. Represents acceptance or consensus

NFP - Non-Farm Payroll: Released by the US Department of Labor around the 1st Friday of every month. It reports on Unemployment, Productivity and other key metrics. Key economic release

LIS - Line In the Sand: A key zone that might tip buyers or sellers to act to cover risk and might change the overall bias of our analysis