ES short covers from overnight selloff

With overnight inventory 100% short and a 10 and a half point gap lower opening, early volatility in the ES led to short covering in the ES. After trading lower to just a tick above the overnight low in the first 30 minute period, price rallied to close the gap from Friday, finding acceptance back inside the prior week’s 3 1/2 day trading range.

Value had risen with price on Monday but remained lower on the day and could not even get back to overlapping to higher value, although price did find acceptance back in the previous week’s trading range.

Price one timeframed higher until I period when the developing point of control turned 4 wide at 2335.00 after the short covering rally slowed below the prior session’s value area low. The POC migrated higher to 2337.00 where it ended the session at 9 TPO’s wide.

The “rally” was very mechanical:

short covering rally, split view, very nechanical market profile chart

  • A period’s 2318.00 low was just one tick from the overnight low
  • B period pullback low just above halfback
  • C period high just 2 ticks below filling the gap
  • D period low just one tick below the A period (initial balance) high, closing the single print
  • E period low exactly at Friday’s low, 2331.75
  • F period low exactly at D’s high, closing the single print

After the one timeframing higher stopped, the J period low bounced from three ticks off the previous low, keeping price inside Friday’s range for the remainder of the session.

Although a strong rally off the overnight low, forcing the weaker hands overnight shorts to cover, the very mechanical buying at obvious levels suggests some if not all of these levels can be revisited.

By end of day the profile formed a double distribution. Price acceptance below the J period pullback low at 2332.50 and single print at 2331.25 puts price back into the lower distribution. Acceptance in that balance has the chance to retest the mechanical buying levels from Monday and possibly fill in the excess single prints from the buying tail below 2323.50. Further potential downside targets were outlined in previous posts.

short-covering-double-distribution

Failure to find acceptance back below the upper distribution keeps price in the prior trading range between the 2331.75 low and 2357.25, the high of the March 21st selloff’s lower distribution. When price re-enters a prior established balance, to either side, the potential exists to trade back to the opposite end of the balance.

Monday’s 9 TPO wide point of control 2337.50, two ticks below the pit session close at 2338.00, could provide early support or resistance, being cognizant that mechanical buying at the L/M/N lows were off that level. If the market opens within the upper distribution it might be best to let it “shake out” and provide clues as to which direction it wants to go.

(the above post and all posts on es-traders.com is an interpretation of market generated information using the Market Profile, and the information contained within is to be used for informational purposes only and not to be construed as investment or trading advice. Please read our disclaimer

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ES Remains in Range After TrumpCare Bill Pulled

After a no-vote on the repeal of ObamaCare in the US House of Representatives on Friday the ES stayed in its 2 1/2 day trading range, just briefly looking below it late before short covering into the close

Split-view Market Profile charts on March 23rd and 24th:

The ES opened near the center of the recent trading range and traded at a sluggish pace early as traders still waited for the House to vote on the repeal of ObamaCare and replacement with TrumpCare. Price grinded higher exactly to Thursday’s rally high at 2352.00 in C period, trading a few ticks above it in D period to the level the market broke down from on Thursday.

A sharp spike lower in F period ran the stops below the near matching C/D/E lows, but with no continuation the market bounced back to the developing 6 TPO wide point of control at 2348.50, widening to 8 TPO’s by H period.

After trading lower in I and J, the market broke sharply again in K and L periods, looking below the prior day’s low at 2338.25. But with the combination of low volume (NYSE daily volume was under 2.98 billion), slowing pace, a weak L period high and a wide point of control above price failed to break out of the range and continue lower, and quickly short covered in the final 30 minute trading period almost all the way back to the magnetic point of control.

Depending on where price opens on Monday, Friday’s late rally high at 2347.25 could be an important early trading reference. Opening below and not violating the rally high could infer the late rally was just short covering and Friday’s prevailing down trend is still in tact, increasing the odds of a retest of the weekly low at 2331.75. If a breakout to the downside occurs potential lower targets are the unfilled gap from February 10 at 2312.75 and the emotional 2300.00 price level.

Price acceptance above the rally high and wide point of control from Friday could easily see price test Friday’s high at 2352.75 and attempt to repair the poor high from Wednesday at 2356.00, and Tuesday’s lower distribution high at 2357.25. Higher references include the single print at 2361.75 and the long string of excess single prints above the anomaly at 2364.50.

(the above post and all posts on es-traders.com is an interpretation of market generated information using the Market Profile, and the information contained within is to be used for informational purposes only and not to be construed as investment or trading advice. Please read our disclaimer

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