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.

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