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In this article, we examine the significant weekly order flow and market structure developments driving XLE price action.
As noted in last week’s XLE Weekly, the primary expectation for this week’s auction was for price discovery higher. This week’s primary expectation did play out as key supply, 59s-59.50s, failed as resistance, driving price higher to 61.80s. Sell excess formed there as buyers trapped, developing balance, 61.80s-59.71s, ahead of Friday’s close, settling at 61.08s.
NinjaTrader
09–13 September 2019:
This week’s auction saw a gap higher open develop in Monday’s auction as last Friday’s late buyers held the auction. Price discovery higher developed in Monday’s trade, achieving a stopping point, 60.35s, where selling interest emerged, developing narrow balance into Monday’s close where buying interest emerged, 60.17s-60.25s. Monday’s late buyers held the auction as a gap higher open developed in Tuesday’s trade, achieving the weekly stopping point high, 61.80s. Sell excess developed there as balance ensued, 61.80s-60.71s, into Tuesday’s close.
This week’s stopping point high was challenged early in Wednesday’s auction as buyers trapped, 61.60s/61.48s, amidst selling interest. Minor rotation lower developed through the rest of Wednesday’s trade as buying interest emerged, 60.99s, into Wednesday’s close. A sell-side break developed early in Thursday’s auction, driving price lower in retracement, achieving a stopping point, 59.71s. Structural buy excess developed there as sellers trapped, 60.10s, halting the sell-side pullback sequence. Price discovery higher ensued into Friday’s auction, achieving a stopping point, 61.40s, as balance developed, 59.71s-61.40s, ahead of Friday’s close, settling at 61.08s.
This week’s auction saw buy-side continuation, driving price higher to 61.80s within key supply overhead. Within the larger context, this week’s buy-side phase developed following the larger corrective phase from 64.66s into 2019’s major support area, 55.60s-53.30s, where a structural low, 55.55s, has formed.
Looking ahead, the focus into next week will center upon response to near-term key supply cluster, 61.80s-60.65s. Sell-side failure to drive price lower from this supply will target key supply clusters above, 61.80s-62.30s/63.60s-63.90s, respectively. Alternatively, buy-side failure to drive price higher from this supply will target key demand clusters below, 59.40s-58.65s/57.75s-57s, respectively. From a structural perspective, the highest probability path for next week remains buy-side, barring buy-side failure near 60s.
It is worth noting that sentiment based on the S&P Energy Sector Bullish Percent Index showed an aggressive move higher following the summer’s decline and subsequent pause. Stocks more broadly, as viewed via the NYSE, have also seen rising bullish sentiment. Asymmetric opportunity develops when the market exhibits extreme bullish or bearish sentiment with structural confirmation. Currently, conditions favor a modestly bullish bias as bullish sentiment rises from a neutral posture.
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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