After the S&P emini Globex session traded to another new all time high at 2367.50 early Thursday in the overnight Globex trading session, the U.S. pit session gapped open above Wednesday’s high, just below the new Globex high. It was the fifth higher gap open in February, four unfilled gaps remain below the market.
Price did not take out the overnight session high and traded lower from the opening bell, filling the gap, and reentering the previous two day trading range. The two day balance high at 2365.00 became resistance.
When price looks outside a balance and fails, and reenters the balance, the opposite end of the balance is potentially the destination trade. Price traded lower for the first four periods, mechanically bouncing from just one tick above the two day balance low at 2352.75 in D period. By trading below Wednesday’s low, the market stopped one timeframing lower on the daily chart. The question now is, did the one timeframing lower on the daily chart just allow short term inventory to come back into balance, or is it a sign of more significant change to come?
Thursday’s low can now be considered a weak low, since it is almost exactly at Tuesday’s low. With apparently no longer timeframe players in the market, short term and day timeframe traders are controlling the market, buying and selling off exacting references. The rally off the D period low can probably be attributed to short covering, the rally stopped exactly at the two day balance high at 2265.00.
The two day trading range has now extended into a three day balance, balance trading rules still apply for Friday: look above or below and continue higher/lower, look above or below and fail, or stay within the range. Depending on where price is at Friday’s open, Thursday’s point of control at 2362.00 could be short term support or resistance. Price acceptance above the POC and Thursday’s high could see price test Thursday’s pit session all time high at 2366.75, and the new Globex all time high at 2367.50.
Failure to find acceptance above 2362.00 could lead to a test of the weak two day balance low at 2252.75, and potentially lower price targets as noted in Tuesday’s market profile report.