19.10.2010 market review

the execution chart, look at OF and price

- from yesterday we could see that value was moving higher, towards the high of the balance area, with price closing at VAH and at the high of that 4 days overlapping balance area. The POC (very wide to the right), however was located in the lower half of the profile, showing the possibility of the price to revisit that area in the next trading session ??? The total volume was low (1.19 mil), so the break that occurred didn't show to much of conviction and acceptance.

- however there is a poor high at 1182.25, suggesting that the auction higher didn't finish

- the ON profile looked balanced, but inside and lower compared to 18.10 days range, with POC@1172.50 (initial R)

- 19.10 opened with gap lower, below yesterday range and VA (POC), out of balance, situation that creates opportunities

- the open was lacking conviction and confidence, price auctioned several times through that price, before attempting to close the gap

- theory: gap = a form of excess, a selling tail (in todays case), showing the presence of sellers being present with confidence through-out the ON session, driving the price way out of balance. One way to monitor the odds of a gap to be close, is to analyze it in conjunction with the type of open we have (lack of confidence, like today = lower chances for the gap to be filled, as price has to move without conviction through an area defended by confident sellers)

- in its attempt to close the gap, and after the IB was set in stone, price was rejected from VAL from yesterday (before covering the singles, going up the zipper). VAL served as a strong R, sending the price to form and look for lower value. Also another poor high was made, by double prints at 1173.75.

- price got rejected back inside the IB, after forming a small balance area at the high (see the overlapping range bars with sellers being present, shown by the OF and body of the candles)

- like expected, when price hit the OR and opening price accelarated its move down, through all S levels, being stopped at 1155.50 which happens to be the POC from the previous balance area created by the overlapping days from 05.10 to 13.10; and the so called "regression to the mean" happened.

- however the shape of the VP was a double distribution with price closing near the separation of the 2.

- price closed inside VA

- VA didn't migrate too low, after the break to the downside

- VA slightly overlapping to the high of the previous balance area

- POC didn't followed price (theory: the failure of the POC to migrate lower with price, high odds of a short covering rally the following day)