Debrief · 20 July 2022 · Sellers can't take out the ON low, and the auction stays OTFU into the ECB

OvernightEarly ON saw a continuation of the auction higher. It tested the prior settlement at 3938.75, found support, and buyers then drove higher early in the Asian session. Price briefly traded above some key references, mainly the June 10th 3959 rejection high, left over from the last ECB meeting and the liquidation that followed it. I find it quite marvellous that six weeks on we find ourselves back in this area, just before another critical ECB meeting on Thursday.

The ON high was set at 3964.25, but the auction tumbled lower into the EU session on negative news from the Russian war front. (I will always highlight that fundamentals drive a market, but technicals are the map that gets you from A to B.) What was striking, given the negative news, was the lack of selling and the ability of buyers to absorb supply at the singles markers left over from the previous day's RTH auction, between 3920 and 3924. The low was set at 3921, and the auction handed over into the RTH open at 3938.5, a two-point gap higher from the prior close.

The openThe RTH session opened against a backdrop of declining EU equities, and a test of the ON low was inevitable. Remember the importance of this level: it was the 2-week high, broken only yesterday. The initial test was labouring and unconvincing, and only managed to get as far as 3924.5.

Key info: sellers could not take out the ON low despite the negative backdrop. Any trade through the open would offer significant clues and should be considered bullish.

There was a drive through the open, immediately taking out the IB high.

Mid-sessionOnce through the IB, what was interesting was the shallow pull-back. It failed even to test the IB, only making it as far back as the local LVN at 3960.

The buying imbalance continued until the auction tested the ON high at 3964, where it paused briefly to consolidate before making a further push into the mid-opening gap of the 10th June auction, registering a daily high of 3977. A lack of aggression at the highs: not a very excessy high.

Into the closeThe supply taps reopened at these highs, and the auction drove down to find support at the IB mid, 3938, which will act as an important reference for tomorrow's auction. The day ended at 3962.5. There is plenty of poor structure below, following Tuesday's multi-distribution trend day.

Day typeNormal variation day, Mid 3863. Daily and weekly auction OTFU.

Take noteDay traders, it's essential to maintain a bias given the market-generated information. The auction has been OTFU, and even Tuesday's Apple reversal failed to end OTFU, by a single point. Poor news in the EU emphasised the auction's strength, as it held yesterday's singles markers above the prior two-week highs of 3922 in the ON session. All clues, but you need to be observing objectively and without bias.