Weeks Review| Prep W/C Jan 03 2023

Weeks Review| Prep W/C Jan 03 2023

January 1, 2023 0 By The Balanced Trader

Last Weeks Summary

Weeks Summary

U.S. stocks ended the day lower on Friday in a blunt end to the year, dashing hopes of a late Santa rally. Declines prevalent in the tech-heavy NQ 100 index and former market darling Tesla (TSLA) have been the most significant falls. Tesla came to the end of a terrible month in which it lost about 40% of its worth. Bond Yields continue to rise.

Events this week include the US Federal Reserve’s latest rate-meeting minutes and Friday’s first NFP print for 2023, with the latest US jobs data covering December.

A market overview into Year End

Events Calendar:

Week Ahead

The economic schedule for the upcoming week begins slowly before ramping up significantly by the week’s end. Monday will see the majority of traders absent from their desks. The real economic data won’t start until Wednesday, when traders will receive important reports like the US ISM Manufacturing PMI survey and the FOMC’s December meeting minutes. The most recent Eurozone PPI reading and the US ADP Employment report will be released on Thursday. Several high-impact reports will be released on Friday, including the Eurozone Flash CPI release, US and Canadian jobs reports, and the US ISM Services PMI reading. These statistics ought to give a clear picture of how the largest economies in North America and Europe are doing as we approach the beginning of the year when many analysts anticipate a sharp slowdown in growth.

Events Calendar:

Monday

  • Eurozone Final Manufacturing PMIs

Tuesday

  • Japan Final Manufacturing PMI
  • Chinese Caixin Manufacturing PMI
  • German Preliminary CPI
  • Swiss Manufacturing PMI
  • German Unemployment Report
  • UK Final Manufacturing PMI
  • Canadian Final Manufacturing PMI
  • US Final Manufacturing PMI

Wednesday

  • Swiss CPI (Dec)
  • Eurozone Final Services PMIs
  • US ISM Manufacturing PMI
  • US JOLTS Jobs Openings
  • FOMC Meeting Minutes

Thursday

  • Chinese Caixin Services PMI
  • Eurozone PPI (Nov)
  • ADP Employment Report
  • US Initial Unemployment Claims
  • US Final Services PMI

Friday

  • Chinese Trade Balance
  • German Factory Orders and Retail Sales
  • Swiss Retail Sales
  • UK Construction PMI
  • Eurozone Flash CPI Estimate
  • Canadian Employment Report
  • US Non-Farm Payrolls Report
  • Canadian Ivey PMI
  • US ISM Services PMI

Free Resources:

https://twitter.com/yuseftrades/status/1605688259660718093?s=20&t=sfpIMAWDLIfm2DbVZ4a06A

Here is one more from me. It’s a daily live journal template. Simple but very effective evernote> copy paste /share do as you wish. I promise to change and improvement if you consistently carry this simple task.

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Weekly Review

Review week’s RTH before I look at the profiles. Can you see where price action and reversals can you identify where the price becomes stuck–look at the overlapping profiles. Does this help? Look at last week’s references. Look at the shape of the daily profiles.

Weeks Price Action Review

Why look at the Weekly and Monthly?

Using the composite profiles gives me a lot of clarity in understanding the market. Understanding the story and the basic mechanics of what is going on simplifies almost every other aspect of my trading, especially timing.

I have a natural edge by identifying areas of balance/ acceptance in the auction. I can identify value and the pivots of change. In balance, I look to fade the extremes. When activity leaves an area of acceptance, I monitor for strength and conviction of the move. For this, I use volume and value as a guide. As a general rule, if a move is genuine, volume and value will move in away from prior acceptance to a new area.

BIGGER PICTURE- YEAR ENDED IN BALANCE

Monthly Profiles are in balance, weekly profiles OTFD but we had a notable inside week in what was a shortened finale due to Xmas. December saw an early month breakout above November highs 4116 into the important inflation CPI data gave an opportunity for sellers to respond. The December auction then traversed Novembers range lower where it spent the majority of its time. Shorts have been consolidating in the monthly lower distribution and will need affirmation soon into the new year. The Monthly non excess lows at 3789 sets a road map to take out November lows and the OCT NVPOC where have accumulated a cHVN @ 3722. A hold below this significant low sets the scene for a retest of Oct VAL 3639 and last years lows 3534.

December spent its finally two weeks in lower balance of a notable Double Distribution (DD) if shorts fail to break below December lows I would expect an early test of 3965 (monthly PIVOT). Sellers need to defend this midpoint or at least frustrate buyers. A sweep through the monthly cave structure to retake and hold the upper distribution HVN and cHVN @3992 early in the month would not be a surprise given New year capital allocations tend to be active early in the year and January tends to be a positive month ( See last 5 years below). Question? Are participants confident QT( Quantative Tightening), the effects of higher borrowing cost on business and consumers, a war in Ukraine and ongoing China covid issues. FOMC minutes early in the week as well as NFP. No need to rush to conclusions as well as CPI the following week.

Trading an Inside day, week or month.

There are many nuances to trading an inside candle or daily profile structure and often yield a good risk reward trading setup. The most important thing to observe are the extremes of such structures. Once a breakout occurs I tend to be very conscious to pace, volume and participation.

When in balance you would expect POC, VWAPs, MIDs to be easily traversed and VA extremes to see responsive behaviour. Often we can identify potential initiative moves by observing PA at these key levels. I am not a fan of trading INSIDE OUT when in balance but obvious failures or fast rejections of these key areas can be telling.

There is a high potential for fake outs, but a breakout followed by a PB (hold against a prior key area of interest) is a safer way to initiate this trade.

Watch out for false breakouts. A false break out tends to happen when consolidating markets initiate away from balance that draws in other smaller time frame traders and stops. This gives opportunity to opposite HTF traders to use this liquidity to execute larger orders forcing the late entrants to exit and creating an accelerated reversal move (on higher volume). These moves have a high probability to test the other extremity of balance.

Finally the best moves away from balance are where we have multiple days of tight overlapping balance where buyers and sellers have accepted value. A move away from longstanding consensus (often happens wen the market is awaiting new info into major news events or year end). We just so happen to have been consolidating for the last few weeks into YE 2022.

Questions I often ask;

Are higher prices drawing in HTF participation and therefore is the imbalance move from balance likely to sustain.

Where are areas that buy or sell side imbalances likely to find support resistance and how are those areas interreacted with. What is the pace of the auction?

Are we leaving behind singles and LVN?

Are PB aggressively contested and quickly revert or is the move consolidating or even struggling?

All moves start from balance start in balance and end in excess, although sometimes that excess can manifest as exhaustion. How can we identify these characteristics so that we can better reduce risk and lock in profits.

Have a look at what happened to the move out of 2021 YE balance. Images posted below weekly and monthly profiles- Jan false breakout higher.

Monthly Profile-In Balance
ZOOM into the weekly

5-Year Weekly, Monthly Yearly Returns and What happened last year?

HNY 2022-FALSE BREAK OF YEAR-END WEEK BALANCE, AND WE NEVER LOOKED BACK

The first week averaged 4.8%.

All images can be found on my Twitter feed in high resolution. Please let me know if you have issues much appreciated.