A Study of Perceived Value - MES
I'm looking at MES on multiple time frames and I believe the 2hr chart gives some outstanding detail and clarity on what has been going on in the markets as of late.
Using the fixed range volume profile tool and studying consolidation periods we can see that the perception of value has clearly dropped through the end of August and into September.
While I will not speculate on what may or may not have affected the drop and the recent rally, I will say that it appears as though MES has broken out of recent value and the high of it's range at 4019.25. This breakout point has yet to have been retested as a level of support.
A Fibonacci retracement with extensions taken from the high of the range to the low of the range (shown in black) shows prices interacting with the 'golden zone' between the 1.382 and 1.618 - finding resistance squarely on the 1.5 extension.
A second Fibonacci retracement taken from the high of the earlier consolidation area to the most recent current range low shows that price has interacted with a 0.618 retracement.
Together, this is strong confluence of resistance. Another element that suggests a local top (or potential reversal into the prior dominant down trend) would be the indecisive candle. We could use the high and low of the indecisive candle as a potential trigger to enter either long or short positions, respectively and a multi-timeframe approach to either entry could lead to spectacular reward to risk ratios for traders.
The overall picture looks relatively bearish long-term to me. Value has been established at a lower high and lower low than previously and price has retraced back to where it should. There is validation in both Fibonacci techniques that suggest a local top is in. This could lead to a retest of the 4019.25 level near term. If held as support, long positions at that level could lead to very profitable day and swing trades.
We should also note that the POC and value area of the earlier range has not been tested. As a result I intend to look for prices around 4140.00 as a potential target for long trades or a potential entry for shorts. This is, of course, if prices continue upwards in an uptrend.
Overall I'd say that I am leaning bearish on the S&P500 - at least until higher lows are established and resistance is used as support. Such is not the case on the the 2 hour time frame currently. I will say, however, that entering short without a trigger in this current environment seems unwise in my personal opinion. It's a good time for me to watch, understand value and the perception of value, and wait for an actionable trigger that would confirm bullishness or bearishness prior to entering a trade.
Patience pays.
Good luck everyone and Happy Trading!
Using the fixed range volume profile tool and studying consolidation periods we can see that the perception of value has clearly dropped through the end of August and into September.
While I will not speculate on what may or may not have affected the drop and the recent rally, I will say that it appears as though MES has broken out of recent value and the high of it's range at 4019.25. This breakout point has yet to have been retested as a level of support.
A Fibonacci retracement with extensions taken from the high of the range to the low of the range (shown in black) shows prices interacting with the 'golden zone' between the 1.382 and 1.618 - finding resistance squarely on the 1.5 extension.
A second Fibonacci retracement taken from the high of the earlier consolidation area to the most recent current range low shows that price has interacted with a 0.618 retracement.
Together, this is strong confluence of resistance. Another element that suggests a local top (or potential reversal into the prior dominant down trend) would be the indecisive candle. We could use the high and low of the indecisive candle as a potential trigger to enter either long or short positions, respectively and a multi-timeframe approach to either entry could lead to spectacular reward to risk ratios for traders.
The overall picture looks relatively bearish long-term to me. Value has been established at a lower high and lower low than previously and price has retraced back to where it should. There is validation in both Fibonacci techniques that suggest a local top is in. This could lead to a retest of the 4019.25 level near term. If held as support, long positions at that level could lead to very profitable day and swing trades.
We should also note that the POC and value area of the earlier range has not been tested. As a result I intend to look for prices around 4140.00 as a potential target for long trades or a potential entry for shorts. This is, of course, if prices continue upwards in an uptrend.
Overall I'd say that I am leaning bearish on the S&P500 - at least until higher lows are established and resistance is used as support. Such is not the case on the the 2 hour time frame currently. I will say, however, that entering short without a trigger in this current environment seems unwise in my personal opinion. It's a good time for me to watch, understand value and the perception of value, and wait for an actionable trigger that would confirm bullishness or bearishness prior to entering a trade.
Patience pays.
Good luck everyone and Happy Trading!