Heads Up For Important Potential Turning Point

Next Sunday, during the free webinar I'll go a bit into how I assess the type of levels that are mentioned below. But for now, I wanted to give everyone a heads up that in the coming few days the US equities markets may see a significant reversal. A reversal that could last some time. I stress "MAY". All good traders understand and know that accurate predictions are IMPOSSIBLE. We simply look for a confluence of clues to suggest future probably behavior.

 In my approach, those clues are gleaned from an understanding of market logic, how pure-price supply and demand effect market participants, and what sequences in the ensuing order flow confirm my hypothesis. Note the weekly chart of the emini SP500 below. The zone marked Weekly Supply is an area where a strong imbalance between buyers and sellers was present. I also note that there is no weekly demand zone present. That implies that should price turn anywhere near this supply zone that it could fall a long ways.

On the daily chart, there are two key observations to point out. First, you can see a Daily Supply zone which coincides with the weekly zone. This type of pattern sets up what is sometimes call Time Compression Effect. This simply means that a multiplicity of different time-frame traders are likely to be taking the same actions, all at the same time. Being that price movement ultimately is driven by liquidity squeezes, if time compression is in play on such long time-frames, don't be surprised to see some strong, if not violent moves.

On the other hand, I also prepare for what might happen should the market continue to rally. This is especially important due to the green shaded areas on the daily chart. These areas are hurdles the market would need to break through in order for a fall to proceed. If, per chance, one or more of those daily hurdles actually has such a high imbalance of buyers present that it overwhelms the selling, I need to be prepared. At the webinar next Sunday, we'll get into how I assess these levels a bit. Until then, good trading to all of you!