Trader’s Narrative

I suggested yesterday that the overnight and pre-market range would be a good market tell for what we had in store today.

I really meant what the market would do after it had set this range. The classic interpretation is that if it breaks down, a lot of people would be disappointed and in a loss, increasing the chance of another cascade down.

But on the other hand, if it breaks above the range, it would also set the precedent for the coming trading day and we would close the gap.

Which is exactly what happened:

As you can see, the range was quite tight. It broke down to 1255 but after several attempts didn’t break down any further. In the morning we had a spike up and in a furiously fast market we raced up. There’s something magnetic about gaps - they are almost always filled in.

The tell was clear but you still needed some nimble fingers (or preset conditional orders) to be able to get in and out.