Debrief · 10 October 2022 · Open test drive fails and another RTH island forms

OvernightSunday's and Monday's EU ETH session saw sellers take early control of the auction and probe below the lows of Friday's elevator liquidation move. Short traders initiating at these lower prices were held at the prior week's spike base, 3617 (noted in the weekly research).

Late shorts (and ON traders tend to be weak) were then squeezed higher into the open, where we saw a late stop above Friday's settlement, 3651, to open at 3663: opening above the prior day's RTH close, but inside its range.

The openThe opening trade was located in the upper area of Friday's double distribution liquidation day. Buyers looking to regain some control of the short-term auction would first need to clear the first major hurdle: trade and hold above the DD pivot at 3666-3670, where the auction had left a series of singles. This was the key observation zone detailed in my trading plan.

The open had the feel of last Monday's squeeze, when ON trading tried to go lower only to be squeezed back into range into the open. That produced a very aggressive short squeeze on a 'no bad news is good news' theme.

Open test driveAnyway, the 3663 open tested up to 3665.5 before sellers began to push the auction down to test the prior settlement. This was a key marker, and buyers failed to show up. The open test high found sellers waiting to take control of the auction at Friday's lower distribution highs.

Mid-sessionSellers took control of the auction from this point and pushed price back to Friday's lows at 3632. An impulsive push back up to retest the prior settlement at 3651 (a PB to test the settle and the open range mid) then gave sellers the fuel to auction back down to 3632, with initiative selling through Friday's lows, take the ON low of 3617 and push on down to 3600, the century figure.

At this point sellers were in complete control, until a driven reversal, following a small reversal in bond yields and DXY, forced shorts to cover: buyers responded at lower prices. The pull-back never managed to take the key reference at 3651 and only pushed as high as 3647: a failure to trade above the settle. The auction stayed in balance until the close as the day's energy fizzled out.

The closeA close in the day's balance, with value now lower. We were left with a normal distribution day but, significantly, another RTH island, where we see no overlapping value: a 3-day balance island, with no overlapping value with the prior balance. Value is migrating lower, and OTFD. Island day.

Day typeNormal variation: IB break to one side and an extension of x2 the IB. Mid 3863. A normal variation day, leaving a tail either side of the overnight range.

OTFD on the daily, weekly and monthly. Weeeeee!

The profile reviewThe 9-23 to 10-3 balance, with multiple spike highs, responsive sellers at the highs and the 3596 balance lows; the 3-day balance island above it; and the auction now filling in the prior poor structure, under last week's settle at 3651.