Volatility Ahead of End of Quarter

A 38+ point selloff from the open on Thursday, with the ES trading lower to a new monthly low at 2402.25.

ES 38 point selloff market profile chart

Thursday’s selling at the open left a questionable high, matching exactly the previous regular hour trading session high, which was also a poor high because it had no excess. Selling was also mechanical at the B/C period high at 2433.50, exactly at the low of Wednesday’s upper distribution.

ES - split view profile of 38 point selloff from opening
ES – split view market profile chart of 38 point selloff from opening

An important Market Profile trading reference for Friday could be the late M period rally high at 2422.50. Acceptance above that level targets Thursday’s single print and upper distribution at 2426.00. Filling in and trading above 2426.00 potentially tests Thursday’s excess A period single prints, and possibly even the opposite extreme of the distribution, the poor and matching highs at 2440.50.

Failure to find acceptance above the 2422.25 late rally high keeps the downward tone from Thursday in tact, potentially retesting the low from Thursday and the psychological 2400.00 price level.

Because Thursday’s 38 point selloff was followed up by a 20 point recovery, the profile ended the regular session as another double distribution. Therefore, if the market opens within Thursday’s lower distribution on Friday, balance rules could apply in regards to the distributions. Potential trading scenarios could include:

– Look above or below the lower distribution and either accelerate higher/lower, finding acceptance and developing value in the direction of the breakout.

– Look above or below the lower range and fail, returning back into the balance and targeting the opposite end.

– Remain in balance.

Another notable market profile trading references for Friday could be at Thursday’s L, M, & N bar lows at 2416.00/.25/.50, each just one tick apart. The mechanical buying off the previous bar’s low, probably by shorter timeframe traders, could temp larger traders to probe for stops below that level.

The one timeframing higher on the weekly chart had stopped on Tuesday. When the monthly higher one timeframing ends, it could be a sign of more significant change occurring in the market. With just one trading day left in the month, closing near the low of the month’s range on Friday increases the odds of the monthly one timeframing higher coming to an end.

(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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