Debrief · 2022-08-29

Debrief · 29 August 2022 · Post-Powell Jackson Hole: the gap fills, then buyers fail

By The Balanced Trader2022-08-29

After the long liquidation post Powell, Sunday reopened with a large gap lower. Buyers closed the gap to the prior close and did nothing else: the auction couldn't hold inside Friday's range, closed below its POC, and the non-excess lows look vulnerable again.

Gap filledClose below POCNon-excess lowsLiquidation

HIGH 4064 | LOW 4006.75 | CLOSE 4031.25 · 24-hour session

ES daily candle chart into 29 August 2022, with the journal's key numbers marked

The session

ContextBalance into Powell, and this area was also very well traded in early August, prior to the melt-up. Anyone long above is looking for an exit. Trapped longs and a failed break out of balance, then the imbalance: long liquidation post Powell. There is a weekly unfilled gap above.

OvernightFriday's post-settle auction continued to probe lower for liquidity, but there were no bids; the session ended 17 points below settle. A clue for Sunday? The Sunday reopen saw the auction reopen with a large gap to the downside. The auction will remain imbalanced until it finds liquidity.

RTHThe gap to the prior close filled, but the auction was unable to hold inside Friday's session range and closed below its POC. The RTH auction failed to maintain activity inside the prior week's range! Liquidity was found at a prior composite HVN that had been previously marked out.

The closeThere is little to get excited about for longs. Buyers failed miserably to accomplish anything other than closing the gap. The lows look vulnerable again.

ES daily market profiles from 19 to 29 August, with the pre-Powell balance area boxed, the long liquidation post Powell, the Sunday gap lower and my notes on the failed RTH auction — Post Powell: the RTH auction failed to maintain activity inside the prior week's range.

Levels into the next session

Non-excess lows look vulnerable. 4081 was such an important level. It broke on Friday and unleashed a ferocious liquidation, stemming from wrong-footed positioning for the whole month of August. The areas marked on the chart above were important for buyers to regain today, and they failed miserably. We potentially have plenty of juice left!

Above4081

Key lessons

LessonWatching from the sidelines is so easy. Risk first!

LessonWatch the post-settle trade. Friday's post-settle auction continued to probe lower for liquidity with no bids and ended 17 points below settle: a clue for Sunday's gap lower.

LessonAn imbalanced auction will remain imbalanced until it finds liquidity. Here it found it at a prior composite HVN that I had marked out beforehand.

Trade well and prosper.

Get the journal in your inbox

The daily journal, the week reviews and the Weekly Ahead, by email. Subscribers get the pre-market update first.