The Great Disconnect
Hey team. We’re heading into one of the most volatile weeks in a while, with a mix of major corporate earnings and critical economic reports set to test the markets ahead of the U.S. election.
Let’s re-cap Friday’s session, what we were looking early in the overnight and how things played out afterward.
Impact Snapshot
Consumer Confidence - Tuesday
JOLTS Job Openings - Tuesday
U.S. Q3 GDP - Wednesday
ADP Non-Farm Payrolls - Wednesday
PCE Inflation - Thursday
Unemployment Claims - Thursday
Non-Farm Payrolls - Friday
Unemployment Rate - Friday
Key Earnings: GOOGL 0.00%↑ MSFT 0.00%↑ AAPL 0.00%↑ META 0.00%↑ AMZN 0.00%↑ AMD 0.00%↑ V 0.00%↑ UBER 0.00%↑ INTC 0.00%↑
Macro Viewpoint
Wall Street experienced a volatile week, with the three major indexes showing notably different performances from one another.
The S&P 500 recorded three consecutive declines from Monday to Wednesday, marking its first three-day losing streak since early September, as investors analysed quarterly earnings reports.
In addition, a bond sell-off, fuelled by shifting expectations around Federal Reserve rate cuts, added further pressure on equities.
Earnings season kicks into high gear next week, with investors set to review financial reports from five of the "Magnificent 7" firms.
The economic calendar is packed, featuring the advance estimate of U.S. Q3 GDP on Wednesday, followed by the Federal Reserve's preferred inflation measure—the Personal Consumption Expenditures (PCE) Price Index—on Thursday. Rounding out the week, the October jobs report will be released on Friday.
These key indicators lead into a crucial first week of November, featuring the culmination of the 2024 presidential election and the Fed's second-to-last monetary policy committee meeting of the year.
Following Value Relative to Price
One of the advantages of understanding that futures markets are just like any other auction is the perception of the fairest price and value.
The fairest price is where the market participants, in this case buyers and sellers, agree on these prices to conduct business. If we define where value is then we can trade around that value and discover opportunities.
The video above is a replay of the October 25, 2024, session. The attached references and context were shared in our market report at 8:00 a.m. ET before the US open.
The two main concepts of this video are:
Understanding that the market has destinations and objectives.
How value and the fairest price (POC) play a role in discovering opportunities.
Our main focus to the upside was the gap fill and how acceptance above the flip zone would lead to a one-way trip move towards the 5900.
This completed our bullish scenario for the day, reaching our destination. It’s important to recognise when not to overextend a position once a target is achieved.
After reaching the 5900s, the market saw a rejection, leading to range-bound activity between that level and the flip zone for three hours, accumulating both time and volume in this area.
The market then broke from this range, resulting in a 40-point drop with our pivot at 5835 as the target destination As price disconnected from value, a long opportunity emerged, presenting a trade back toward the value area.
Where is the value relative to the current price? Is the POC migrating lower or not?
If the fair price that market participants have agreed upon is higher—even if the price is currently 40 points away—the market will likely attempt to re-test that area and move back within it, giving you more confidence for reversal plays from key pivots like this example on Friday.
