Thursday expansion on PCE data

Trading notes for 2026-01-22

By Sean Weldon

TL;DR

Identified a long bias after overnight Asian action showed accumulation rather than redistribution, with the market returning to healthy mitigation ranges. Entered long debit spreads anticipating a Thursday expansion day around PCE data, which delivered the expected volatility and rally from discount levels.

Market Context

The market displayed a familiar technical structure overnight following the Asian open. After rallying from Tuesday's low and taking out previous weekly lows, price action returned into what appeared to be a healthy mitigation range. The key observation was increasing volume during this consolidation phase, which suggested accumulation by buyers rather than redistribution - a critical distinction that shaped my directional bias.

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This was Thursday with high-impact PCE news on the calendar, setting up expectations for a larger than normal trading range. The combination of technical setup and fundamental catalyst created an ideal environment for an expansion play.

Thesis & Plan

My thesis centered around the volume profile suggesting genuine accumulation rather than distribution. The market had successfully:

The plan was to establish a long bias and wait for a viable entry point. I specifically looked for price action that would push back to the weekly open to mitigate any imbalances created during the London expansion phase.

Entries & Exits

The entry setup materialized with excellent price action as the market pushed back toward the weekly open, providing the mitigation level I was looking for.

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I entered long debit spread positions, positioning for the anticipated expansion day. The timing aligned well with the 11:30 London close, as we began seeing the rally back up toward highs.

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Risk Management

Given the high-impact news environment, I chose debit spreads as my vehicle rather than outright directional positions. This approach provided:

The position sizing was appropriate for a Thursday news day, acknowledging that volatility could work both for and against the position initially.

What Worked

The technical read proved accurate on multiple fronts:

Volume Analysis: Correctly identifying accumulation versus redistribution based on volume patterns during the consolidation phase was crucial to establishing the right directional bias.

News Day Strategy: Understanding how markets typically behave around high-impact data releases paid off. The PCE news created exactly the type of manipulation I expected - a drop past equilibrium into discount territory where passive buy orders were waiting.

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Entry Timing: Waiting for the push back to weekly open for mitigation provided an excellent risk-reward entry point that aligned with the broader bullish thesis.

Expansion Day Recognition: Correctly anticipating a larger than normal range on Thursday with high-impact news allowed me to hold positions through initial volatility rather than getting shaken out.

What Didn't

The setup and execution went largely according to plan. The main challenge was managing the initial volatility around the 10:00 PCE release, where the market dropped past equilibrium before finding support at discount levels. However, this was anticipated behavior rather than a flaw in the analysis.

Lessons Learned

Volume Tells the Story: The distinction between accumulation and redistribution based on volume patterns remains one of the most reliable indicators for directional bias. When consolidation shows increasing volume, it often signals preparation for continuation rather than reversal.

News Day Playbook: High-impact news days follow predictable patterns:

Patience with Mitigation: Waiting for proper mitigation levels (weekly open in this case) rather than chasing entries provides better risk-reward and higher probability setups.

Expansion Day Psychology: On days with significant news, markets often need larger ranges to satisfy both sides. Having conviction to hold through initial adverse moves is crucial when the technical setup supports the thesis.

Structure Recognition: Familiar technical patterns that have worked before often repeat. The overnight Asian structure provided a reliable template that translated into actionable trades during the London and New York sessions.

This trade reinforced the importance of combining technical analysis with fundamental awareness, particularly around scheduled data releases. The key was having a clear thesis based on volume and price action, then executing with appropriate risk management tools for the volatility environment.