Thursday 22nd August – ES_F Review

Afternoon all,

Midway through the day session on the ES on Thursday 22nd August, and just thought I’d post some perspective in the context of what I posted earlier in the week, and how this week is unfolding.

Currently, we’re going through a balancing period, between 2900 – 2935 where the market is seeking acceptance in this new range on the back of the selloffs in previous weeks. I’m of the believe, late in the day on Friday 16th August, some Other Time-Frame order-flow hit the market following a confirmed breakout above 2880. On Monday, we had an enormous gap up (30+ points) which took until Tuesday to partially correct – for the new traders reading this, the market closed on Friday 16th @ 2891 and opened on Monday 19th @ 2923, a gap of 32 full points on the ES. When markets gap up (or down), market auction theory suggests, the price will trade back towards the gap at some point, in order to properly auction each price along the way, to see if it can find value. On Tuesday we had a down day which closed the vast majority of said gap, but it hasn’t fully closed. This is what’s called Market Generated Information, or ‘MGI’, we can carry forward for potential use at a later date.

We had another gap up on Wednesday opening just above Tuesday’s range which adds further complexity to this period we’re currently experiencing. On the back of the FOMC minutes last night, we traded down to Wednesday’s low and Tuesday’s Value Area High which is again significant. Value is well established in the 2915-2935 area.

Today we’ve seen a break lower on the back of balanced overnight trade, with a fake out by taking out the overnight high and then reversing hard to the downside, once yesterday Volume Point of Control was taken out. I’ve been of the feeling that, in the context of the 2 gaps, that the area between 2900-2015 is poorly auctioned, and I think the moves today are going some of the way towards taking care of that. The 2 gaps are still open, which is MGI I’ll consider when taking on any new positions on the extremes.

Overall, I believe either the market breaks higher either tomorrow or early next week trying to find new value, or we trade back into the 2800’s range to repair the two open gaps. What I believe to be Other Timeframe money in this market from last week, there will be some tough questions to be asked if this market trades below 2880, as those longs will be underwater.

Jackson Hole, Jerome Powell & Trump will probably dictate which direction we move next.

Stay safe!

SB – SG Futures