The overnight session put out a nice bid into the heart of the European session and then the US participation began to seep in which has been net short from the overnight highs. The body of the overnight profile is contained within the range of yesterday’s RTH profile which witnessed very thin volume through liquidation of sorts which occurred off the open down to about 3673.25 and therefore that price point becomes a magnet either for acceleration to the upside if the PCE data is flat or to the downside if the data comes in hot like the CPI from earlier in the month. Futures appear to be in opposing moves as there are participants trying to push things to the upside with the end of a tumultuous month in the market while the overall trend remains to the downside. Bond pricing which created the lopsided trade earlier this week continued to rise, sending yields lower. The yield on 10-year T-Note dropped 0.051% to 3.696% from Thursday, while the yield on equivalent U.K. debt declined 0.058% to 4.066%. Friday’s more upbeat mood could be short-lived like a repeat of yesterday as risks to economic growth remain high alongside Fed continued tightening of credit markets. Trading is also likely to be influenced by portfolio rebalancing among investors as the third quarter and month end, according to analysts. The gap today appear irrelevant after the squeeze in the ON session was sold into. The chance of an early trade does exist today if one is to remain trend biased it would be pointing to the short side.

Ideas for trade positioning for the intraday market participant 

• The long trade will need to find support at 3651.50 area today failing which there is no long trade. If that price point holds, use a 5 point stop and we could see 3686 as a potential profit target.
• The short trade activates on a test of 3679.25 if the PCE data results in a squeeze back up, use that price point preferably as a limit order short on the way down while using 3686 as a stop and looking for 3645 area as a profit target. Ironically, I do not see us being able to take out yesterday’s lows today but I may be wrong if the trend prevails. 
• The Fed relies on PCE data and that usually gets out during the month-end and for all good reasons, that day is today so expect some volatility at 8:30 am when those figures are out. Besides that the calendar of economic events is full today with Personal income, Chicago PMI, Final revisions to UoM’s Consumer sentiment and with a whole lot of continuing Fed speech with Brainard before the open followed by Bowman at 11 am and Williams after the close. 

Key Levels (ESZ22) 

Support & Resistance for the intraday (YMZ22)(NQZ22)(IWM)(SPY) 

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