Market Analysis - 02.12.2020

Today, we're changing up the format to provide strictly trade impacting information. We will focus on support and resistance levels provide by auction market theory and volume profile data. We will use this theory and information to determine the most likely direction/conviction of the market and who is in control. We will also continue to take into account gamma exposure (GEX) levels in both $CL an $ES, as this does play a roll in determining the upper and lower bounds of each contract's movement.

 

OUR APPROACH TO KEY LEVELS


We determine key levels in the market by looking at high volume nodes from the volume profile as well as looking for strong rejection areas in price. These are our key reference levels throughout the day and are always updated daily. When the market has not moved much, like $CL in the past few days, reference levels will most likely be the same. We use a daily volume profile overlay upon price as well as a OPT EXP volume profile set in the expansion area to the right of price on our charts. To determine these support and resistance levels, we first look at the 20d 1h chart to see the longer term high volume nodes of the expansion profile. This time frame works best for day trading, in our opinion, to determine where big swings/reversals are likely to occur, thus providing the best risk to reward opportunities. Next, we move down to the 10d 30m chart to the high volume nodes there. We mark each high volume node with a price level line. Once these levels have been noted for both the 20d and 10d, we are ready to be patient and look for price to touch these levels. Once price approaches these levels, we look at price action and #OptionVolume to determine trade entries.

 

CRUDE OIL


Key Support Levels:

50.52

50.15

50 - GEX

49.67


Key Resistance Levels:

50.74

50.96

51.28

51.45

52 - GEX

 

S&P 500


Key Support Levels:

3362

3352.50

3343

3336.25

3326.50

3304

3300 - GEX


Key Resistance Levels:

3370.75

3400 - GEX


With $ES at all time highs, there is no previous volume profile data above the current high (3374.50). As such, look to five dollar increments as resistance to the downside, (i.e. 3375, 3380, 3385, etc.).

 

FINAL THOUGHTS


Crude oil futures are moving slowly upward, but the positioning of the fairest value (POC) was lower yesterday than the previous day. This indicates continued weakness in price action and likely another range bound day today. Crude oil inventories are today at 10:30 AM EST, so be aware of the large impact this has on the contract. We advise waiting until after the inventories are announced and then trading the likely reversal that occurs after the initial exuberance in one direction.


S&P 500 futures are moving steadily to the upside, with new higher POCs over the past three days. This demonstrates continued upward pressure as buyers remain in control. Watch for range extensions to the upside. If there is aggressive buying pressure, we could see new ATHs again today.


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