Thursday Prep

The open drive lower yesterday below September’s low, following a strong pre-market selloff, was a strong indication that it was going to be a potential trend day as long liquidation and new sellers entered the market below the recent range. Once it had moved down to the 2840 area trade became quite balanced for a few hours as two-sided trade formed the vpoc on the day at 2843.50. After lunch, sellers pressed lower trapping the recent longs and spilling lower in a much more accelerated way. The extent of the move can be exacerbated when the order book thins out due to volatility rising. These types of impulsive moves don’t care about levels the vast majority of the time due to the institutional level offloading and volatility. Volume traded was 3.4m contracts.

There was no respite after the close with the overnight range extending over 30 points lower, giving a 144 point range since yesterday’s overnight high.

The current range overnight is 2747.25-2785.50 versus settlement at 2781.00. The market is clearly extremely vulnerable to short squeezes, which is visible now in the overnight market. I’m expecting these rallies, if they happen, to be sold heavily. It’s worth looking back at the top daily bar chart back in February when we had the selloff, and see how the day after traded - it barely moved back in range and continued a lot lower. Also of note on the daily chart is the large volume area on the composite profile, between approximately 2722-42.

Different situation and day now obviously, but it’s rare for these moves to V bounce and we’re more likely to see continuation in the trend…though anything can happen.

Looking at the breakdown points from yesterday as potential areas of resistance today, or just continuation lower to test that high volume area.