Back on May 3rd, the European Central Bank (ECB) announced a rate cut in ES pre-market hours. The ES shot straight up from the 1595 to the 1605 area. This left a large price range of low volume and a support cliff at 1605 which if cleared, price would surely tumble back towards 1595. Thus I wrote in my 6:48am EDT pre-market commentary “As I posted yesterday, there’s a lot of air under the 05/06 area… I’ll be looking for shorts below 05.” Well, the 05 area got tested in the cash open volatility. Order flow and price action never set up a short and price soon rebounded strong to play the morning out between the DTG 05.50 and DTG 13 levels. Several short and long order flow opportunities unfolded, but for the example trade I wanted to focus on price falling over the 05/06 cliff. Just before noon EDT, the ES started to tumble, bouncing temporarily at the bottom of the DTG 05.50 level. The intensity and quickness of the drop was a good indication that the sellers were going to try once again to send the ES over the cliff. The buyers had their turn and could only move price up to 13.75 during their initial drive and then failed to take out that high with a subsequent move up to 13. This was a signal the bears were waiting on. Order flow played out beautifully below 06 and several opportunities were available to get in on the drop towards 95.
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