Debrief · 10 June 2022 · No buyers after CPI: a b-profile liquidation into the lows

The openPost CPI data, there were no buyers to be found into the open at 3950.57. The RTH session opened with a gigantic gap to the previous settle at 4016.

Given the large liquidation moves from the previous day and the move post CPI, buyers were hoping for some relief. ON inventory was short, very short! Remember, we can expect some adjustment if ON inventory is overly short, so we were looking for a reaction on the open: an adjustment back towards prior value.

Mid-sessionWith all eyes on the open, a brief and tepid attempt to adjust higher failed at 3959.5, and the proverbial sharks then entered the fray to finish off the kill: a straight line down to the prior month's HVN, the 3900 area.

An emotional long-liquidation b-profile. Some stubborn support was found at the 3900 area and held there, forming a ledge, before being briefly breached to a low of 3898.75.

The closeKey info: some short covering into the weekend created a JDAPBH (Jim Dalton afternoon pull-back high) of 3944 before we sold off into the close. Closing very weak, on the day's lows at 3898.75. Look at how we closed super weak into a b profile following a long liquidation session. The candlesticks show important PA into the close: a clue.

B-profile, liquidation, liquidation continuation day.

The weekly picture post CPIThe auction has broken down and is now OTFD on the weekly, after failing to hold an 8-day balance. Notice how the RTH auction was contained below the prior week's open, 4170, by a single point! Long positions were forced to liquidate below 8 days of balance, and the ECB's hawkish stance was the trigger.

I filmed yesterday's CPI release live: look at the gaps early on from the release.

And we are off! The live journal for Monday 13.06.2022.

07.30Open auction out of range, with buyers and sellers testing either side of the ON distribution's low node, 3823-3798 (see the chart). I don't see buyers rushing to load up down here. Observing 3823-3798.

09.30We've finally seen the break from 3798. Notice the stepping lower highs off the open into the break, as sellers seek liquidity.

1036 CTStalking a short at 3786, the VWAP and session mid. I've already taken a couple of losses trying to get short, on small size.

1039Taking a scale-out around 68 was not a bad idea if you jumped on that short at VWAP: 20 points to take some risk off. The auction is starting to rotate, so you want to be finding the edges of small balance areas to focus your order entries.

What gave me some confidence in the trade was the confluence with the mid and my prepped levels at 3786. Seeing volume increase into VWAP is a good sign too.

1230 CTRecognise balance and trade balance. The top clues from the day that the balance playbook was in play:

• An early auction dominated by short continuation, which halts at a key reference point illustrated in the ON prep: the 3850 area.
• Buyers squeeze late shorts all the way up to the open auction area, but fail to get above the opening high. Sellers then push back to the IB low, but not below it (50 lots trade 0.25 points below the IB).
• A reversal back up the day's range, slicing through the mid to test the other side of the range.

Trading the balance profileTrade location at the VAL: the potential entry area. Step 1: can we break above the prior local high? Step 2: impulse after the break. Step 3: hold at the top of the impulse. Target the other side of balance!

Notice that in balance VWAP has no effect: it was sliced through. Check out my VWAP guide, How to trade VWAP, for a reminder of when not to trade.

CPIThe data and correlations on release:

• US Core CPI YoY actual 6.0% (forecast 5.9%, previous 6.2%)
• US CPI YoY actual 8.6% (forecast 8.3%, previous 8.3%)
• US Core CPI MoM actual 0.6% (forecast 0.5%, previous 0.6%)

FinancialJuice reported:

• ECB's Kazimir: I see a clear need for a 50 bps rate hike in September.
• 175 basis points of Fed hikes seen by September, with at least one 75 basis-point move.
• ECB depo rate seen at 0.75% in October, implying 2 half-point hikes.
• 125 basis points of ECB hikes priced by October puts two 50 basis-point hikes in play.
• Iran: a nuclear deal is still possible and within reach.

Overnight: big ON movesAn ON gap from the prior low/close (see the important chart), and no attempt by buyers to lift from the Sunday re-open. The auction sliced through all the major references until it found a temporary bottom at the century figure, 3800. I don't normally focus on the ON internals, but in this case, given the higher volume and obvious HTF participation, I will.

A big ON gap and go, driving us into the unknown. I just merge a few prior profiles together to help me understand: here, the overlapping balance area from December 2020 to the end of March 2021. The primary auction has the most important info for day trading, but the past gives us important clues.

A large gap from the prior low, 3898-3878.5. No attempt to close the gap, and the move continues lower: an ON gap and go, a multi-distribution trend, with large volume and negative delta aggression.

I will treat the ON distribution as a multi-trend auction type, and each break lower will define the outer edges of the smaller trading zones I will focus on.

ON inventory is short! Very short, and it will be interesting to see whether we get a better reaction or readjustment off the open than we did on Friday post ECB. A failure to see a positive reaction will give sellers more confidence to dive lower.

Open plan 13.06.2022Observing the ON low at 3798, the LVNs in today's ON session at 3823 and 3859, and ultimately the ON open and high at 3878.5. I want to see whether buyers find value on the open; if they do, price should not hang around too long.

The question I am asking myself: will we see an ON inventory adjustment, and how strong is it? If it's weak, we will likely continue lower. 3787 and 3750 are the HTF levels I am observing.

Please watch the pre-open YouTube video, where I explain how I merge prior monthly profiles to find my references for today's session. Important stuff. Also review the weekly analysis: you will need it every day!