Tag Archives: short covering rally

Gap & Rally at Open Leaves Lower Excess, Three Distributions in ES Market Profile Daily Chart




Ignoring the nearly 100% long overnight inventory, the ES rallied at the open Tuesday morning, trading higher nearly 10 points from the wide overnight point of control to a tick below the POC from the 8/17 selloff range at 2442.50 in the opening period.

NYSE first half hour value was somewhat low (292k vs 276k Monday) compared to the 9.5 point opening drive higher, which left a long line of unfilled single prints suggesting the move could have been attributed mainly to short covering following the prior week selloff. End of day NYSE total volume was relatively light, at just 2.66 billion.

Single prints are a form of excess. An elongated string of excess single prints made early in the day will often see price return to fill in at least some of them in. But Tuesday’s opening period single prints were created following a 3.5 point gap open higher. Gaps are also a form of excess which, when combined, can be a more potent sign of strength. By the end of B period (the second 30 minute period) there were still 7 points of unfilled excess single prints (10 points including the gap).

On the day, price stopped one-timeframing higher one time in I period, not uncommon for a trend day, although the point of control had widened to 6 TPO’s in J period.

triple distribution trend day
triple distribution trend day higher

Price closed near the midpoint of the monthly range, which at least temporarily reduced the odds of seeing an end to the monthly one timeframing higher.

On Wednesday, looking at each distribution as a separate balance area, balance rules could apply – look above or below a balance and either accelerate or fail, or remain in balance. If price returns into a prior distribution the opposite end of that balance is the potential destination.

If price opens above Tuesday’s range or finds acceptance above Tuesday’s high, the upper end of the distribution from 8/17 at 2459.75 and excess single prints above are the first potential targets, followed by the three anomalies in the 8/16 profile and the matching daily highs (8/9, 8/16) at 2474.00

If price opens in or reenters Tuesday’s upper distribution from above, the low of that distribution at 2449.50 – which matches the low of the 8/17 upper distribution – and the single print 2448.75, is potential short term support.

Opening inside of the lower or middle distribution is not as positive and implies that Tuesday’s price action was mainly short covering, there would be good odds of a balancing day, potentially testing Tuesday’s lower excess.

ES daily bar chart through 8-22-17
ES daily bar chart through 8-22-17

(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. DO NOT BASE ANY INVESTMENT DECISION UPON ANY MATERIALS FOUND ON THIS WEBSITE. We are not registered as a securities broker-dealer or an investment adviser either with the U.S. Securities and Exchange Commission (the “SEC”) or with any state securities regulatory authority. We are neither licensed nor qualified to provide investment advice. Please read our disclaimer)




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Short Covering Rally off September Low

With overnight inventory 100% short from the previous close, the ES gap opened lower on Thursday, extending the overnight selloff from Wednesday’s balance and trading through the 2111 September low.

B period put in an early intraday low of 2107.75 before the short covering began.

es-short-covering-off-september-lows

Although trade was directionally lower from the pit session opening bell, NYSE volume was not especially high, and the selling left a long line of single prints in the opening A period. Historically long strings of single prints are at least partially filled in before the end of the trading session in which they’re created.

Although the release of the 10:30 ET crude oil inventory report drove price down again in the eminis, the ES bounced off the September low in D period and rallied with crude as the oil futures reversed. After B period the market one timeframed higher for most of the trading session.

The short covering rally filled the gap in I period, trading through Wednesday’s low and previous close by a few ticks, but did not reach the very prominent point of control at 2134.25.

Depending on the open, an early focus for Friday could be the late pullback low at 2123.75. Acceptance above that reference could keep pressure on the shorts, if price trades above Thursday’s high at 2132.25 the daily one timeframing lower will have stopped.

retest-september-lows

But value was lower on the day and the market is one timeframing lower on the daily chart. failure to trade above Thursday’s high at 2132.25 would keep the one timeframing in tact. The market wouldn’t have to make a new low to continue one timeframing lower.

Acceptance below 2123.25 could see the market repair some of the multiple anomalies left from Thursday’s short covering rally.

The monthly chart is now one timeframing lower, and if the weekly chart closes below 2136.00 it will be an outside week, both negative. Another retest of the September low probably will not yield the same result.

(the above post and every post 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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