Wyckoff Principles in Morning Trading
Yesterday morning, it was all about Wyckoff springs. Springs are bullish trades that occur when an important support has been penetrated, but fails to follow through to the downside. This morning, it wasn’t about bullishness, but weakness. We got the opposite of a spring this morning: an upthrust.
The S&P futures made a new high in the European session last night at A, but then fell back, producing a large amount of supply. As the US session opens, price holds around the 2743 level and then rallies upward. But look at that rally! Hardly any volume until the last leg up. That’s not bullish; it’s bearish with climactic action at the end of the rally into an upthrust position. This occurs at B.
Sometimes, a market will try for another rally after the upthrust. We knew in advance that this was more likely to fail than to drive up and through the resistance at A ang B. The rally to B didn’t have fuel (volume) beehind it until the end, and the reaction immediately after this–although not large–had significant downside volume. It all gets confirmed at C with a very light volume attempt to go higher.
Supply gets drawn out on the fall to about the 2746 level. A weak rally back to resistance just below 2750 is a place to add to the trade. This is the classic Back to the Edge of Ice with all the Wyckoff principles needed to take a short: volume, price action, market structure. The exit is at the overnight low at 2742, painted on the chart in the Asian session.
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