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Yesterday ES has responded from prior day's value high and finished a bullish day.
The profile was sort of double distribution type. Though edging on the ugly side.
We are not trying to pick a beauty queen profile, but a nice balanced profile is going to lend a stronger support.
And double distribution one has the energy more spread out, thus a bit difficult to find the strong support level.
Anyway, so long as the prior day's VAH in ES has not been taken out we are going to maintain a bullish bias.
The next significant obstacle for ES is the POC of the week of Mar FOMC meeting around 2720 level. Now ES is venturing into a thinly traded area that it might be pausing to build some value.
Can you help answer these questions from other members on NexusFi?
Yesterday's bullish reaction in DAX was a significant development in the longer term price structure.
I would like to call your attention to this daily chart with yearly TPOs.
Yesterday's big bull bar has pierced through the VAH of the yearly profile and it has taken out the significant daily swing high of 12600, behind which was a big pocket of stop loss order for some big hand short positions.
I haven't seen a flush of big market orders flushing in the market yesterday but in CAC i have witnessed a slew of mega block orders -- 300, 500 lots. It is a confirmation that the European equity has finally completed its 2 months long base building process and ready to move higher. Note that the top was a 2.5 month long top, hence the 2 month long base is nearly symmetrical enough to at least counter balance the bearish pressure.
Given that big picture, how should we devise the daily strategy to take advantage of that info?
Firstly, i would not be all out bullish saying that we are going to make a new high. No i don't really think so. Because the base is still smaller than the top, the best DAX can do is to fill the TPO holes from 12600 to 13000 before it can do anything to challenge the high. On the other hand, DAX is the weaker than the US equity. It is not going to make a new high before the US equity do.
Secondly, I would expect more stop probing price action today that it can probe even higher today or tomorrow to squeeze the shorts. What usually happens is that the price would back down after the shorts are squeezed. Because the market maker would be too short after absorbing those buy stop orders. That is why after a significant long term level being taken out, market never went straight into all out bullish drive. The Market maker is not going to let it go before it balances its inventory first.
Hence the primal scenario for today is Open-test drive and failure.
If we take a look at the profile yesterday, it has quite a poor structure with too many holes. So just anticipating stop runs by the Market maker and watch any significant swing low on a 30 min or hourly chart for a potential location for a test and reversal.
Our scenario of open test drive and failure was spot on that the market maker has run the stops behind 12650 and 12580.
12580 is the double bottom low of yesterday. Behind it, there are plenty of long stop order. And 12650 is a 4 hour swing high back in Feb.
That is why DAX has had such a wide rotation in such short period of time.
The market maker absorbed those stop buy orders at the high and auction the price lower to liquidate their short inventory at the liquidity pool behind the 580 double bottom.
This is what DAX typically do when I started trading. Since the middle of last year, DAX don't this kind manipulation very often anymore. Good to see the old trick back in play.
In a mild bull market, the open test drive is the most common open type.
How can we buy the test leg?
Better not to buy blindly at the VAL or VPOC, or POC, especially not in NQ. It can run over those levels like a freight train. The best bet is Wolfe wave combined with TICK divergence.
I don't see anything else works as consistent as this combination.
When you see NQ making the third down leg (flip it when you want to short), don't be afraid and take a long into the third dip. If you want confirmation, just take a look at the TICK.
Yesterday was a balance day with a bearish tilt for DAX.
That is a typical day when the day time frame player is in control, which is to say the market maker was in control.
The rule of thumb is when the market gaps up/down, it is more likely to be driven by higher time frame player due to earnings or macro factors. Open in range or even in value, it is more likely you are going to see a market maker market. When market maker is in control they are not going to push the price into trend, but just load inventory by running stops and get out at the stop order pool at other side of the market.
Back to today's trading. DAX is opening in the value, hence the primal scenario is day time frame control. Beware of the market maker stop run, which is to say it is likely that the TPO holes are going to be filled and, more importantly, the stops behind yesterday's high or low, sometimes both, are going to be raid. DAX does not have inside day very often. It loves to run the stops behind the prior day high/lows.
If the market failed to find response at the prior day's POC and value low. I will immediately shift my eyes to the raid of yesterday's low and subsequently the TPO hole in the chart.
If it is able to find support and trade above the VAH, then I am going to be bullish to eye yesterday's high as target. Basically, at this moment, I am neutral. I don't favour one side or the other. I will let the market maker tell me which side it would like to raid.
Market maker has shown their control out of the open.
The first play of the day is to run the stops behind the double bottom built after the cash close.
