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In this article, we examine the significant weekly order flow and market structure developments driving XLF’s price action.
As noted in last week’s XLF Weekly, the highest probability path for this week was for price discovery lower within the context of an unsecured low at 25.92s. This primary expectation did not play out as a pullback early in this week’s auction to 26.41s formed a higher low. Price discovery higher then developed to 27.68s through key supply ahead of Friday’s close, settling at 27.44s.
NinjaTrader
03-06 September 2019
This week’s auction saw a gap lower open in Tuesday’s auction as Friday’s late sellers held the auction. Price discovery lower developed, achieving the weekly stopping point low, 26.41s. Structural buy excess developed there, driving price higher, achieving a stopping point, 26.65s, into Tuesday’s close. Buying interest emerged, 26.59s-26.64s, into Tuesday’s close. Tuesday’s late buyers held the auction as a gap higher open developed in Wednesday’s trade. Price discovery higher developed to 26.95s within key supply as buying interest emerged again, 26.91s, into Wednesday’s close.
Wednesday’s late buyers held the auction as a gap higher open developed in Thursday’s trade as price discovery higher continued, achieving the weekly stopping point high, 27.68s. Buyers trapped, 27.67s-27.57s, halting the buy-side sequence. Price discovery lower developed into Friday’s auction to 27.34s. Structural buy excess developed there, developing balance, 27.34s-27.55s, ahead of Friday’s close, settling at 27.44s.
NinjaTrader
This week’s auction saw a pullback early week to 26.40s and formed a structural buy excess amidst a higher low. Price discovery higher then ensued to 27.68s as key supply overhead failed. Within the broader context, the higher low development, breach of key resistance, 27s, and bullish sentiment decline halt implies potential for further price discovery higher.
Looking ahead, the focus into next week’s auction will center upon market response to this week’s buy-side breakout area, 27.10s-26.90s, for confirmation/negation of the breakout. Sell-side failure to drive price lower back through this area will result in price discovery higher to challenge key supply overhead, 28.20s-28.70s/29.50s-30.35s, respectively. Alternatively, buy-side failure at this area will target key demand clusters below, 26.20s-25.90s/25.60s-25.10s, respectively. The highest probability path near-term based on market structure is for price discovery higher. The larger intermediate-term bias (3-6 month) is now sell-side following the failure at 28.14s.
It is worth noting that sentiment based on the S&P Financial Sector Bullish Percent Index now reflects a pause in the decline of bullish sentiment. Stocks more broadly, as viewed via the NYSE, are also now seeing a similar pause. Asymmetric opportunity develops when the market exhibits extreme bullish or bearish sentiment with structural confirmation. Both the broad market and financials sentiment have paused but not yet reached bearish extreme. This implies that while a low may be in place, sentiment conditions will likely worsen before a structural low can develop.
StockCharts
The market structure, order flow, and sentiment posture will provide the empirical evidence needed to observe where asymmetric opportunity resides.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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