The correction lower showed early signs of stabilization overnight by balancing out amidst weak Asian markets. The sellers however still hold the upper hand in the current environment, especially given the pace with which we distributed lower. Less active participants who bought the #NoTaper headline may be considering trying to reduce exposure on any upward move which makes them whole.
As the USA comes online, I am already seeing a bit of sell flow creep onto the tape. It will be interesting to see if early selling is enough to press through the overnight low at 1689.50. Thus far they have not been able to breach this level, which was also the low of yesterday’s cash session. A break could trigger sell stops and enough order flow to push to 1687 and if price accelerates 1684.25. I am suggesting that the order flow from taking out the lows could be a temporary phenomena and a buying opportunity. However if these levels do not hold we need to be very keen on 1681.50 which is a huge value area high dating back to 09/11 before the gap up.
On the upside, price needs to sustain above 1693.50 to show acceptance of yesterday’s value instead of value continuing to migrate lower in search of balance. That would be the first accomplishment. Next would be trading above 1698.50 which could trigger a squeeze.
I’ve highlighted most of these levels and drawn on some scenarios on the following market profile charts:Comments »