With overnight inventory almost 100% long, the ES gapped open higher Monday. Market participants also got long off the open, there was no early correction to long overnight inventory.
Price repaired the 9/15 poor high at 2144.25 in A period, traded 2 points above it and the overnight high in B period but fell short of filling in the single print at 2147.50 from the 9/12 short covering rally. B traded lower and bounced exactly from the half back level, hinting that it was not strong buying in the market but more short/day timeframe traders.
Although value was developing higher on the day and a five TPO wide POC was developing at 2142.75, the pace of the session was very slow and volume was lower than the previous day. Carrying forward Monday’s wide POC at 2128.75 and poor low at 2123.00, long short term inventory combined with developing poor structure from the C/D/E bar lows suggested a liquidation break was possible.
When F period failed to trade above the E period high the market broke, trading through the C/D/E lows, probably hitting stops. Momentum traders piled on driving price lower, initially bouncing two ticks from Monday’s gap fill but trading through it in G period, forming a lower distribution.
Price reenterd the previous day’s range for a second time in H period accelerating lower through the previous close, overnight low and one point through Monday’s prominent POC, one timeframing lower in F, G, H and I periods before rallying/short covering off the low and Monday’s prominent POC.
K period closed the upper distribution, but the market sold again from the K/L high, exactly at the opening print, and closed back within the previous range.
Value ended the session overlapping to higher, but the POC migrated lower from an earlier five TPO wide 2142.75 to six wide at 2133.75.
Because the K/L period highs were exactly at the opening price, that level could be considered a weak reference and could have good odds of being tested on Tuesday (value did not end lower). But considering the market closed within the previous range after a gap higher opening, and the point of control migrated lower during the trading session, there are also good odds the market will test lower. Failure to find acceptance above Monday’s close and point of control could bring lower references in play, like Monday’s poor low at 2123.00 and beyond, as noted in Sunday’s Market Profile post.
If price is accepted above Monday’s close/POC, monitor developing value and one timeframing for continuation.
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