Extended markets have a knack for continuing in the direction of the move well beyond what would be considered rational. Mean revision strategies take heat, stubborn traders are slowly forced to liquidate, and eventually prices lurch back when a strong enough opposing force is found. This is the auction process. What we have seen this week is four steady days of value progression higher with only a slight sign on excess showing up on Thursday’s tape. As we close out a week that was focused on retail we are currently trading right in the middle of Thursday’s range and a few points higher from the close.
The market appears to have come into balance overnight and it will be interesting to see how this is treated heading into the weekend. Unlike the fast v-shape that put us into these last 10 days of grinding trade, we have moved higher on healthy auction activity free of overnight gaps. We saw some signs of responsive selling yesterday where two waves of selling swept through the market at 11am and 1pm, vital times of day. Whether that responsive seller is able to turn initiative and press down into Thursday’s range to target the NVPOC at 4190 will be a slight hint. Even more telling of a market that has found a seller would be prices accepted below the LVN zone around 4183.75. This is the key short term pivot for bulls.
I have highlighted this level and other key price levels on the following volume profile chart:
