For the early part of the session, it looked like the LOD was formed in the first few minutes. But then the market started to stall.
- any longs who were still
in,would have seen the opening PA and early strength, felt some relief and stayed in their positions, perhaps with a stop below the LOD
- they couldn’t make any progress above the BNR and weekly S2 around 12200, which was also an ON PA level and from there it reversed
- so in a sense, this was a fake bullish move and it was all over in the hour of trade
- once it began to reverse, any hope that the remaining longs had of an easy exit evaporated and below the LOD of the day the capitulate
- judging by the speed of the move, it looks like there was an order vacuum between the futures low at 12163 and weekly S3 – with no buyers to be seen
- from weekly S3, the market made a robust 170pt reversal
- this behaviour fits the market’s raison d’etre, which is to maximise trade
See here What is a washout?
A similar principle is at work when the market spikes into a level, pulls back fast – everyone jumps on board – and then it makes a swift reversal to form a new H/L above/below the level, stops the impatient entries out and then makes the move.