Welcome to this week’s midweek review. Today we analyze the market structure leading into the highly anticipated Federal Open Market Committee (FOMC) interest rate decision.
Spotting Equal Highs (ES & NQ)
Over the last two sessions, both ES and NQ have printed clean relative equal highs (EQH) at the top of their hourly ranges. This represents a massive pool of buy-stop liquidity resting just above current price. Historically, high-impact news like FOMC acts as the engine to sweep these pools.
Pre-News SMT Divergence
At the European session close today, we noticed a subtle bearish SMT Divergence forming at the local hourly highs:
- NQ: Made a new local high.
- ES: Failed to exceed its local high, printing a lower high.
This divergence suggests that the upside momentum was weakening on ES, hinting that the pre-news rally might be a bull trap. We expect a deep corrective sweep down to clean the sell-side liquidity at the daily lows before the actual FOMC rate release drives price to clear the premium equal highs.
