Covering Bitcoin, ES, NG and WTI Crude. Not the shit show US Presidential debate.
The outlook for this week focuses on Friday's NFP data. As mentioned in last week's post, it is hard to imagine anything that can shock these markets to the downside other than a large geo political/ macro catalyst. Launch of ICBMs or Nukes from Russia to target US? Iran brought into direct conflict with Israel via an Israeli invasion of Lebanon? Extremely bad data out of China on manufacturing activity?
On the more reasonable and likely side of things- An extreme reading higher in initial jobless figures or a large miss on NFP while worrying, would be bought after any initial weakness, as either of these two events would force the Fed to come closer to the cuts table.
Last week we took a look at ES potentially having a re-acceleration and this it certainly did. There were nice pullbacks to buy on the W-PVAL- Weekly prior value area low. See chart below.
We also had a look at WTI Oil. As reported here last week this did indeed hold well over QPVAH however without a retest to pick up more buyers. As with ES, The W-PVAL $80.30 was the place to pick up some contracts and hold for the auction up to W-PVAH $81.53. A nice $1230.00 per single contract traded. Chart also below.
Highlights this week as per the calendar below. Wednesday will be a half day for markets for Independence day on Thursday. No trade Thursday. Then the highlight of the week, NFP Friday.
Lets kick off this weeks report with some crypto. I've been recently reading Broken Money by Lyn Alden. A great read, an easier listen. Having small kids, its easier for me to steal time reading time via audio books. Despite me preferring to read an actual book. In keeping in the money ie. currency theme, next I plan to read The Price of Time by Edward Chancellor. Listen to Edward having a chat with Howard Marks here.
I have been doing some consulting with a new crypto exchange recently and it has me all hyped up on crypto. I’m an advocate and in the last 10 years was part of a crypto firm helping universities to decentralise their data on a private blockchain as a service. So I feel that I have a pretty deep understanding of the technical side, but its always good to step back and look at the bigger picture to see the future. This is why I am reading broken money. Anyways, Bitcoin. Let's dive in.
BTC Q24 Futures. (August expiry)
We can see that selling has come in to start the auction down from the Prior Quarters Value area high. Q-PVAH $66085 around 20th June. You can see the doji candle on the chart.
Also on the daily view, we can see there has been good resistance from the Q-1 Currently $62330. Last Monday was a 8.74% day from high to low. Closing down 7.59% on the day. This tells me that the sellers on this Q-Auction mean business. I've outlined potential movement on the daily bar chart. Buyers may want to bring us back up to Q-VWAP, However I doubt it is feasible UNTIL we try and reload buyers at the Y-VWAP $59920.
With this level of dissonance on the daily, I would then revert to the 30 min normally. So in this case, I'm showing you the monthly VWAP on 60 min bars. You can see we are grossly imbalanced down this month. Look at how much the market respected the Monthly VWAP after Monday's selling.
So with that in mind, should we want to retest the MPVAL $62,995, I think sellers will reload here and drive us lower. Please also pay attention to the large historical support and resistance levels.
The Trade I like a potential pullback to resistance at the Q-1 Short $62,330.
ES U24 Futures(September expiry)
Given the way markets are backstopped firmly by a Fed cut, it is easy to buy dips and not sell rips at the moment. With large data on the way Friday, we can look to trade on the breakout. I have plotted the value area created by the last week on ES. You can also see that I would be motivated to wait for the breakout and then buy a pullback to the high of the area. In some cases, the pullback can go deeper than the top of the breakout area, so normally we would utilise the daily vwap and/ or prior days value high low to monitor this pullback for buying or leaving alone.
See below for how I would trade this also.
CL Q24 (August expiry) WTI Oil
From the lows of the 3rd June, 24 days, we have rallied 14.13% or $10 and 24cent. The OPEC+ Announcement was truly oversold and not correctly understood. Hopefully I did a good enough job at the time to get it across that the material oil coming back on markets in October will not actually be that much.
If we look at such a move, the market really has had a great rally to the Y+ 1 $82.38. It is only reasonable to think that we need to pull back from highs to some normalised pricing. This could be as shallow as the Q-VWAP $80.67 Or as deep as M-PVAL $75.10. To gauge this, we can bring in some lookback data observing the last 30 years of how the Q contract moved. See below. Over the last 30 years, we have seen 6 days of selling from July 1st inclusive. This tells me that I would rather be selling pops this week than buying dips. Simple!
So if we look for shorts rather than longs, we can observe where the market slips a support, the look to sell and subsequent pullbacks. HOWEVER, Should we get more material news that Israel is set to or indeed does invade Lebanon, then this script gets flipped on its head .ie we are buying dips.
Im not going to publish a 30min chart with a weekly vwap as I think the price action should only be interpreted from the daily bar chart. We should build our outlook from there.
NG Q24 (August expiry)
Ohhh Natty. You are goosed! I have rolled the contract since last weeks analysis. But you can clearly see that the Weekly PVAL was the spot to be selling your gas last week. $2.863. The market is grossly imbalanced down now.
If we look at the daily, I am firmly looking for Natty to trade down to its Y-VWAP $2.293 with Q-VWAP down there also. But where is the risk? Where am I getting in? How much risk? Well, I think we should get off to a good selling start Monday when the pitt session oipens 14:00hrs GMT. On the 30min bar chart as above, I have looked at a few spots where we could get into such shorts. Thursday storage data will be put off until Friday due to Thanksgiving. I dont think you will need to wait till friday to short this.
Here is a chart on how the Nat Gas Q contract has traded over the last 30 years. Selling ahoy!
Okay, thats it.
Be patient. There is a large part of you and your brain that knows how to trade and when to get into a trade and when to wait. Dont screw over this part of you by giving in to impulse. Wait! No pre market trading. Nor over trading. You know what that feels like and how powerful it is. And above all trade your fucking edge.
Phil Helmuth, 17 world poker play world series bracelets, one of the best. He only plays 12% of the hands he is dealt. Let that sink in.
Trading is waiting, Waiting is trading.
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