The weak buying from past the few days made this market vulnerable…
Today we opened on a gap up as well as a 3-Day balance breakout and the longer term trend was up.
So what caused this market to be so weak today ?
I talked about weak buying from the past 3 days. Inventories were long on all time frames. The first reaction came from the overnight longs from the overnight high.
Below 52.67 pressure was on the late overnight long traders. The first 2 periods of the day could not trade above this level and pressure was building adding day traders inventory.
I’ll stop here for a moment…
Look at the difference between September 25 profile and today’s profile.
Both opened on a gap and balance breakout.
Where the market opened relative to overnight inventory ?
On September 25 the overnight long inventory was never in danger as we opened near the overnight high which was not the case today.
- Too long ?
I also mentioned in my Contextual factor blog this morning that the market could be too long because of yesterday’s poor and weak high. That was not the case on September 25.
- Breakout strength
Finally I would like to draw your attention to the day balance. Today we were facing a 3-day balance compared with a 7-day balance on September 25. There were not as many shorts as there was on September 25.
- Weak hands domination
The last 3 days weak hands dominated the market. pushing the market higher. That was not as clear on September 25.
Today the overnight and day traders caught long at the high triggered the first move down. Tempo was now on the down side and made all the weak hands of the past few days nervous. The poor high also confirmed that the market was too long at the top.
When you put all these factors together it allows traders to be quite confident about being and staying short.
All these differences in context between Sep 25 and today are called nuances. These nuances is what makes the difference between good and bad traders but It takes lots of screen time to be able to internalize this.
Good trading !