Long liquidation and a game changer?

For the benefit of our readers here, this was posted after the market close on our subscriber website.


After our close, Mario Draghi changed the course of overseas markets in one telling statement.


Trade carefully!

09/12/11

Coming into the day, we were watching the spike lows at 5064, per this comment from last night

"Today's lower spike was from 5114 to 5064 in a market which stayed above 5100 for the most part. Acceptance below 5058 at the open tom which is the High volume node and below the spike lows would bring an 80% rule trade targeting 5022 and 4986 immediately.Below 4986 can bring gap fill at 4885"

At the close we saw a b shaped profile confirming that the spike which started late afternoon yesterday, was indeed long liquidation!

The value area of a b shaped profile is vitally important and today's value area between 5007-4947 will be important for shorts if they want to continue the offensive.The pull back high was at 5006 just above the high volume prints of 4997 and likely to resist the market up movement tomorrow.


Also of interest to traders would be the weekly value area high which currently stands at 4946. Any move below can still invite an 80% rule trade even though tomorrow is the closing day for the week. Technically the 80% rule weekly trade can work till Monday's first session too.The weekly values are 4946-4824-4751.

We are living in turbulent times with every piece of news, generating huge swings making the market too volatile to call a direction for certain over a period of time. Aggressive traders may look at the above as an opportunity and look for excellent day trading set-ups, though even on a day like today with a clear trend in the morning, it was difficult to be absolutely certain on an entry price. Conservative traders may just choose to stay in cash until all the news flow dies down.