The ES opened within the lower distribution of the previous day’s 1% selloff range, with the opening period high failing to trade above the prior close and overnight session high at 2342.00.

Price traded below Tuesday’s low and back up through it during the opening 30 minute period, and after trading lower again in B and C periods, price reentered the previous range, accelerating higher in C period and correcting the 100% short overnight inventory.

The early mechanical nature of trade Wednesday provided clues as to who was in control – the opening period (A period) high of the bar was exactly at the previous close/overnight high, the second period high (B period) was exactly at the prior low of day at 2338.00.

In C period, after the release of the crude oil inventory report, the market short covered through the B period high and reentered the previous day’s range, again trading exactly to the prior close/overnight high, leaving it an early poor high, then retraced and bounced exactly off the prior day’s low. The short covering continued in D period as price traded to within one tick of the point of control from Tuesday before reversing.

Price looked below the prior pit range low again in H period but was quickly rejected, rallying back to the wide point of control at 2340.75 which by then had developed to 6 TPO’s. Price tried to rally late in the final two periods but the point of control, now 9 TPO’s wide at 2341.25, kept price contained inside Tuesday’s lower distribution balance.

During Thursday’s pit session the point of control at 2341.25 could provide either support or resistance, depending on which side of it the market opens. Acceptance above the POC and Wednesday’s close could easily see price test Wednesday’s high at 2348.75. Acceptance above the high might then see price try to test Tuesday’s lower distribution high at 2357.25. If the market goes into short covering mode the next higher references are the single print from Tuesday at 2361.75 and excess single prints above.

Wednesday’s pit session was balanced, therefore balance trading rules could apply if price opens in range – look above or below balance and accelerate, look above/below and fail, or remain in balance in or near Wednesday’s range. Price acceptance below Wednesday’s low could potentially see price accelerate as the market has poor structure below. More serious selling could potentially see price try to test the top of an unfilled gap from February 13th at 2315.50, and the bottom of the gap (gap fill) at 2312.75.

If the market gaps open either higher or lower, monitor volume to see if price can reenter Wednesday’s range or continue in the direction of the gap.

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