The full weekly plan and commentary should be reviewed ahead of this post and can be seen HERE.
Yesterday had closed on a spike up. If you are not familiar with what a spike is, here is a free post on it SPIKES
The plan for today early was to buy dips against a hold of 5330, the base of the spike. The range spike extends to the high produced as a result of the spike. Thus, the entire spike for yesterday was 5330.25 (we used 30 for price action reasons) to 5337.25 yesterday’s high.
Futures open last night and traded less than 5 minutes below the base of the spike. Price proceeded to immediately retest yesterday’s high. This is expected. Once it broke and bid 5337.25 it rallied another 6 handles before tiring out into the European session. The index was a sold a bit on data, but the premarket low was exactly 5330. Most of the futures traders in the room likely initiated longs. The opening drive was higher which took price to a test of 5337 where it stalled. This made things somewhat indeterminate. Prices below the base of the spike had thus far been rejected, but buyers lacked the strength to drive back through the prior day high and to the overnight high.
It was suggested that trims be taken at 36/37. Price rallied to 36.75 and sellers were found. After struggling to make progress, a warning of liquidation risk was given. This liquidation rinsed the market of weaker buyers and gave stronger buyers an opportunity to get long on the look below and fail:
The look below and fail produced a 19 handle long to high of day 5349 where buyers once again fatigued and were liquidated. This time sellers persisted, creating lower highs and lower lows and numerous long liquidations, including a spike down today. As mentioned previously, long liquidations strengthen the market. It gives stronger buyers a chance to enter at better prices. The questions for tomorrow are as follows:
Have enough weak buyers been liquidated to attract new money longs?
Will buyers be punished for today’s late date spike DOWN?
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