Per yesterday’s hypothesis, we saw a gap fade at the beginning of the day that was bought back up by bullish momentum, fulfilling the abandoned baby doji thesis with a 2% day.
The debt ceiling is still at an impasse and apparently, I accidentally bought a T-bill two days ago.
If talks are inconclusive by power hour tomorrow, I see the potential for a large downside with the three-day holiday pushing results to the ever-closer deadline.
Futures Analysis
ES
The day opened with a steep attempt at a gap fade, with much indecision in the 4140s. There were many attempts to break through the 4140 buy wall, which ultimately became unsuccessful, before breaking to the upside around 9:30 CST. Afterward, there was one final retest down to 4140, before rocketing up for the remainder of the day.
From the order flow, we can see in addition to the bottom wall of 4140, there were several key zones that bulls and bears fought over throughout the day, particularly 4165, 4160, and 4155. Towards the end of the day, bulls fought to break through 4170, but ultimately failed, dropping back down to 4160.
On the daily, we see a continuation of a wedge that could become a descending triangle. Continuing on the bearish sentiment, we can notice an unfilled gap from 5/3 that is due to be filled. The setup could coincide with the 6/1 original deadline set by Yellen for default (although this date has been pushed back). A break out of the triangle and into the gap fill could lead to a large macro downtrend to 3600.
That being said, there is still room for maybe one more pump to retest resistance before breaking down. Considering the fact that tomorrow is an options-expiry day into a holiday weekend, profit-taking will likely lead to either an immediate dump through the day, breaking out of the channel, or an early retest of resistance before dumping through power hour into a breakout.
NQ
We established new highs today at 14031.5, once again touching resistance.
Although the descending triangle isn’t present here, prices are at the top of the trendline. Paired with the same catalysts as the S&P, it appears a bear thesis for tomorrow is likely, perhaps into 13706 demand.
From volume, we saw the prevailing importance of 5/23’s 13850 supply zone, as well as the establishment of two new zones, straddling 13975. A plausible scenario is a drop into 13875 demand early on, followed by a waffle of indecision and a final leg and attempt down to the 13750 zone. From a Fibonacci Retracement perspective, a reasonable price target could be in the 13900 area.
Index Analysis
QQQ
Although the abandoned baby played out, it put us in an interesting spot. The gap-up formed another potential abandoned baby, this time favoring bears. We were able to break above 337, but a retest should be on the cards transforming it back into supply.