Debrief · 1 June 2022 · A double distribution down to the gap from the 27th

OvernightIf anything, yesterday's ON session showed us that longs remain comfortable and shorts are unwilling to press the auction lower. The ON session was in complete balance inside the prior day's TPO value area (H: 4156.75, L: 4123.25). Going into the RTH session, we want to look for signs of continued acceptance, or a willingness to at least test the outer edges of balance, where, given enough force, the auction may trend to find balance elsewhere. There's no guarantee that a market in balance stays in balance, and looking for clues is key. My balance trading rules apply here.

The openThe handover into the RTH session was a simple affair, and the thinking should be: can a move away from balance be sustained, balance from both the prior ON session and the prior RTH session? What are the signs, and more importantly, what are the signs of failure? We opened @4154.25, just below the important reference point of last week's settlement (pwkSettle) @4156 and just inside the prior day's value area high (VAH). An initial break above the ON high looked good for longs, but a shallow PB (pull-back) consolidation failed, only improving on the opening swing high by a single point, to 4165. This was a good first clue. Once we reverted through the open and back into prior value, shorts took control of the auction. Notice the chop zone below pwkSettle: an open reject reverse that failed to hold above pwkSettle.

Mid-sessionOnce sellers broke through this choppy container, the PA cleaned up, with a single PB to a Stalk Zone (SZ) @4132. The auction continued lower to find support at the predesignated areas: 4100 and, more importantly, the small gap (4070-4079) left behind by the auction on the 27th. This was an important area of support, flagged as an OU (over and under) level for the HTF auction. Buyers want to defend this gap to keep control of the general auction, despite losing the daily OTFU (one-time framing up).

Into the closeThe auction failed to break materially through the gap low, as passive buyers absorbed sellers' liquidity and weaker sellers were pushed back to just below Tuesday's VPOC (volume point of control) @4130. This has left a lower distribution high @4128, a key area to watch into today. There are multiple singles, and sellers will want to maintain them to continue to OTFD; the singles marker high is at 4141.5.

The bigger pictureThe auction is now in a 3-day balance, not counting Monday's session (treated as ON, as it was a holiday). I'm looking to see if sellers can break through Wednesday's lows @4171, and if buyers can push sellers back through the singles left on yesterday's TPO chart, with 4100 acting as a short-term OU. We have weakened structure below, given the huge short-covering rally, and multiple NVPOCs from the last two weeks as potential targets.

On the profile review: the rally into the holiday, up to 4202; holiday buyers' regret; poor structure repaired; and the prior gap from the 27th, 79-73.

Double distribution. 3-day balance, OTFD daily (4165) and weekly OTFU (3872), new month balance.

It's not a 'b' distribution. Can you say why?

Price action reviewThe session in nine steps:

1. Open with a gap above the prior close: can the auction maintain the gap, and thus be bullish?
2. Reject below the prior day's highs, a double top: a bearish clue.
3. Chop zone below the open.
4. A clean PA move away from the chop to close the gap: bear clue 2. A nice PB back to the prior close.
5. Chop zone as buyers try to hold on to the century. PB to the prior zipper.
6. The gap from the 27th closed: passive buyers.
7. Weak hands forced out.
8. Hold below the prior close: important.
9. Closed weak.

ON updateThe auction is balanced and holding inside yesterday's lower distribution, looking for continued balance or change. Nothing new to report.

ON: H 4124 | L 4083 | VWAP 4103 | VPOC 4100 | RANGE 41

Live journalOK, I'm walking away early today: it's half term and I need a break. No trades today in ES. On the stream today I talked about footprint and walked through today's PA. It's a great tool. I'll write up the footprint PA for you to review, but check out the live stream from the US open. If anybody wants me to do a footprint run-through, we can do it on Tuesday.

Just to wrap up: at 14.50, an open rejection of the prior close @99 and a quick move to the prior gap from the 27th of May. Buyers and sellers are battling it out in this key OU area, mentioned in the weekly review.