From Shutdown Relief to AI Anxiety — Two Narratives Driving ESMarket Theme
The week began on a strong footing, driven by a bullish Sunday reopen in ES after news broke that the 43-day government shutdown was set to end, following the Senate’s late-night support for a potential agreement on November 9th. This relief catalyst created early upside momentum, pushing the index toward all-time highs (ATHs).
However, the tone shifted mid-week. The rally lost steam as markets refocused on a growing concern: the sustainability of current Tech and AI valuations. Investors are becoming more sensitive to the possibility of overstretched AI-related capital expenditure and an emerging bubble narrative, especially with heavyweight earnings and forward-guidance looming. This led to a rotation out of high-beta tech and into safer or less-extended sectors.
On the macro front, Fed speakers adopted a more cautious—if not outright hawkish—tone, emphasizing that a December rate cut is far from assured. The recent government shutdown created a backlog in key economic data releases, leaving policymakers and traders alike without clear visibility into the true state of the economy. The lack of data has amplified uncertainty and reduced the market’s conviction around the timing of any potential policy easing.
In short:
The market is caught between two opposing forces:
The optimistic narrative (shutdown resolved, path to ATHs, resilience in U.S. growth), and
The risk narrative (valuation excess, policy uncertainty, narrowing breadth).
This push-pull dynamic has resulted in compression rather than continuation, with a heavy focus on clarity from upcoming data and major earnings.
What is the Market Doing?
Last week formed an inside week, with the entire range trading within the prior week’s range and settling close to the previous week’s close. This signals indecision and balance, as neither buyers nor sellers had the conviction to push the market into expansion.
Current price action shows the market compressing between:
6875 — previous week’s VPOC / 27 Oct weekly VAL
6740— 13 Oct weekly VAH / 10 Nov weekly volume ledge
These levels are well-defined and respected. The upward trendline continues to hold, with multiple strong rejections signaling responsive buyers stepping in to bid prices back up.
The battle is now between buyers attempting to defend 6740 area which is also confluent with the daily trendline support, and sellers leaning on the overhead resistance close to 6875.
What to Expect in the Coming Week
The key line in the sand (LIS) this week:
→ 6755.25 — Previous week's settlement
Bullish Scenario
If 6755 holds as support, expect buyers to attempt a push toward:
6874.50 — previous week's VPOC
6905.5— weekly 1-SD volatility high
Anticipate responsive sellers in this area.
However, if price breaks above 6874.50 with pace and volume and accepts above it, the path opens for a retest of the ATHs as momentum players and trapped shorts fuel continuation.
Bearish Scenario
If the market accepts below 6755 and fails to reclaim it on any pullback:
First downside target: 6660 — 13 Oct weekly VAL
If buyers fail to respond there, expect an acceleration lower from long liquidation toward:
6605— weekly 1-SD volatility low
6504 — previous month's low (deeper target)
This scenario strengthens if the trendline breaks and sellers begin stepping down aggressively.
Neutral / Compression Scenario
If the market remains trapped between 6875 and 6740 with no breakout supported by pace and volume:
Expect two-way rotational trade
Continued compression and balance within the well-defined range
A buildup of energy that may resolve later in the week with data, earnings or fundamental catalysts
Conclusion
As we start the new week, ES remains tightly coiled between well-defined levels, with the market waiting for clarity from data, earnings, and policy signals. Whether we break from compression or continue to balance, the key will be how buyers and sellers respond around 6755 and whether there are new fundamental catalysts.
As always, I’d love to hear your view on the markets and ES this week? — Drop it below — and give it a boost so more of the community can join the conversation.
Glossary Index for all technical terms used:
VAH (Value Area High)
VAL (Value Area Low)
VPOC (Volume Point of Control)
SD (Standard Deviation)
