05.11.22 | Vertical Extension to the Downside

Auction Market Analysis

• Trading below the prior day’s fairest price (“Value”) shows sellers in control and defines the trend.
• Rejected prices marked by single prints when prices are advertized above prior balance areas identify a lack of value.
• Shaded areas mark where 68% of the day’s business was conducted.
• Today’s trading typifies a “double distribution” day.  Initial balance established a fair price at 4020 but price broke out of the bracket with a further drive down.   Today’s closing price was made on increasing volume and below both areas of temporary balance … below both levels marking “fair price”.
• Double distribution days often represent exhaustion in momentum.   That exhaustion can also be seen by the slowing in the downside migration of value.
• Range extension occurs when transactional volume occurs outside of the initial balance.

Implications

• From an auction market process perspective, the most likely follow-up to today’s down-auction would be a retest of 4000 with a re-establishment of balance around that level.


• If the response to tomorrow’s economic announcements are strongly positive, the market would have to trade above 4020 and with a downside retest of that level … new buyers would need to enter and fuel upside momentum.
• If tomorrow’s announcements become another excuse to take the market lower … rotation around 3900 … then 3800 would be most likely … based on prior high volume auctions at those levels.