Oil inventory release day. . .
This is usually a day I sit on my hands because of the volatility brought by this number. The market seems to have no direction most of the time before the number with low volume and low trading opportunities and when the number is released moves are often quite dramatic.
This is what we have witnessed today as the market opened inside yesterday’s profile with no direction and low volume before the release. I think overnight and short term day inventories were both short at the open and we saw a bit of short covering before the release.
After the release no clear immediate directional move as we traded up and down in D period. POC was migrating up and inventory were still very short. The odds were in favor of an inventory correction as the market could not trade down after the oil inventory release.
Remember that yesterday’s move down was characterized by low volume and today’s short term and overnight inventories were both short which I think was what triggered this big short covering rally. A good opportunity to trade this market based on what I said would have been a buy in E period but for those of you who wonders no I did not take it I just sat on my hands !
After the inventory correction guess what the market become too long. As evidence by the image the ensuing down move caught a lot of short term long traders that jumped on the buy side to add fuel to the short covering. Look at all the small volume breaking down on J period.
Again there is no evidence whatsoever of strong hands dominating the market lately. I think the market was still driven by inventories being too short first and too long at the end of the day.