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.


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 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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