Tag Archives: spike

ES Sells Off, Monthly One Time Framing Higher Ends

The ES gapped open lower on Friday and sold off more than 55 points from its previous close, one time framing lower in every 30 minute period but one.

september-9th-es-selloff

Will this wide price range now become a new trading range where two-sided trade can take place, or will the eminis continue lower in search of balance? While ES futures volume was split between the back and front month contracts in rollover, NYSE volume was moderately higher at 4.2 billion compared to the size of the downward price move.

Usually there is no point of control on trend days where the market is one time framing lower for most of the session, but the market tried to find balance late on Friday in I through M periods, forming a five TPO wide POC at 2138.50 but broke lower in M period. If the ES pit session opens Monday morning within Friday’s large trading range, the late day spike base at 2134.00 could be an important trading reference.

Opening and trading above 2134.00 would suggest the spike was rejected, leaving a buying tail, while opening below the spike base would suggest price has not auctioned low enough to cut off the selling, and price is still looking for two-sided trade. Opening within the spike suggests price is accepted and the downward break remains intact, and two-sided trade can take place.

On the larger timeframe charts, the ES has now stopped one timeframing higher on the monthly chart, and the weekly bar printed as an outside week. Both very negative.

(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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Single prints revisited, rally into close

wide-point-of-control-and-rally-into-close

After an open-test-drive to fill the gap early Tuesday, the ES spent most of the day filling in some of the excess single prints from the previous two trading sessions, but price did not get acceptance back into Friday’s range until the K period rally took out the earlier poor high from B period.

If the ES opens Wednesday within Tuesday’s range the base of the late day spike at 2018.25 could be an early day trading reference, if more serious money was involved versus just short term short covering that level should hold. But the mechanical price level at the L and M period lows suggest short term traders buying at that level. Tuesday’s trading range could be looked at as a double distribution, with two separate balance areas.

Tuesday also left another prominent point of control at 2012.25, near the May monthly low. Very wide points of control, or the “fairest price”, are often revisited in future trading sessions.

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“short in the hole” short covering rally

market profile TPO chart short covering

The bulk of trading from Wednesday was at 2072, forming a very wide point of control (POC), or “the fairest price to do business”.

Going into Thursday’s trading session, overnight inventory was almost 100% short, gapping 10 points lower on the open.

After the open, short term and momentum day traders piled on and sold the market lower, driving price down through the unfilled gap from 5/25, to 2040.75 (three ticks above the very prominent “naked” point of control).

Traders that sold and held Wednesday’s late day spike and those that sold into Thursday’s gap down and drive lower were getting “short in the hole” from the very wide POC at 2072.

The next clues to expect a possible short covering rally was the long line of single prints in the opening 30 minute market profile period. With moderately low NYSE first half hour volume at just 412k, if there were more serious longer term sellers involved it should be on much higher volume for the distance traveled.

Price first rallied 14 points off the low in C & D periods, developing an early 4 TPO wide point of control at 2046.50 which was revisited “to the tick” in F period (making it 5 wide). Short covering rallied price from there, raising the developing POC to 2058.25, and one timeframing higher eventually taking it back to within just 2 ticks from Wednesday’s wide POC.

On strong, emotional short covering rallies price can trade through normal trading references, and doesn’t stop until the short covering is complete, drawing in more momentum type traders and not letting the shorts out. Thursday’s rally, while briefly pausing at the Spike from Wednesday at 2068.50, penetrated the reference and formed a late distribution above it.

Depending on where Friday opens, will the base of Wednesday’s spike, lower end of Thursday’s upper late distribution at 2068.50, now become support? Or will sellers clean up the messy TPO anomalies below and test lower references.

Thursday left a poor high at 2071.50 with only a single tick of excess. Poor highs and lows are usually revisited, or “repaired”.

Friday is Quadruple Witching and could be a volatile trading session.

(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. Please read our disclaimer

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