Market Profile on Steroids

October 9, 2020 08:52 AM
Trump tweet reversal
Weaker USD is powering markets
A tailwind for Treasury yields
Stock Market Update for Traders


Thursday's Close

E-mini S&P 500 Futures (December):  Settled at 3437.50, up 30.75

E-mini Nasdaq-100 Futures (December): Settled at 11,539, up 69.0

Once again, it's all about the stimulus. Markets are anticipating fiscal measures from Washington to complement the Federal Reserve doubling its balance sheet in the last year. The White House expressed its willingness to negotiate a comprehensive Covid-19 aid package in a reversal of President Trump’s tweets earlier this week. For all intents and purposes, it seems the President has figured out how trading algorithms work; if he creates a market event but quickly rescues it, algorithms will take the tape higher than it was prior to the event itself. This is market profile theory 101, but on steroids with algorithms; in the end, he is creating demand at levels the market had become exhausted simply by whipsawing it.

Although U.S. Treasury Secretary Steven Mnuchin and House Speaker Nancy Pelosi spoke on Thursday and will continue talks, there is a layer of uncertainty. Regardless, the market knows fiscal stimulus measures are coming, whether before the election, or after. 

Also powering markets higher is a weaker U.S. dollar. The dollar has been the sacrificial lamb for the global economic recovery and hopes of added stimulus have buried the greenback this week. The Dollar Index is down 0.5% this morning and powering risk-assets. Gold held support yesterday afternoon and began lifting into the close in what was the first sign of an ensuing wave of dollar weakness. Also, remember, China has been on holiday all week and reopened last night. Gold was the first to surge last night upon China buying and the Chinese yuan followed closely behind. The yuan is at the highest level since April 2019. Gold still faces major 3-star resistance at 1933-1937, a level in which we plan to trade against until it proves it will break out above. 

The economic calendar is light today, but next Tuesday we look to September U.S. CPI data. Inflation is beginning to show up. Last week, the Core PCE Index for August, the Fed’s preferred inflation indicator came in at 1.6% as it moves closer to the Fed’s 2.0% target. More than anything, we think this will be a tailwind for Treasury yields to rise in the coming month.

Interested in our technical perspective? Please sign up to have Blue Line Futures technical outlook, actionable bias and proprietary levels emailed to you each day.



About the Author

Blue Line Futures, is a leading futures and commodities brokerage firm offering discounted personalized service and futures and commodity research.