Traded ES volume was 1.023.838 according CME settlement data.
All core US markets played around unchanged for much of today even though we had seen 150 point gain for the DOW in early trading. The 2.5% peak to trough range for the DOW has been in light volume, even after the central bank, large treasury auctions and inflation data. Talk is that there is a huge amount of money floating in the US Money Market funds with last week alone increasing by $5.5bln, taking the total assets to $2.77tln. Could get interesting when that starts to move.
One of the observations we can make every day is called "sweeping through the book". By "sweeping throught the book" or only "sweeping" we mean, that orders break through several price levels because of missing liquidity. The natural end of sweeping moves is exhaustion. And a counter move! Nearly always. This behavior is so reliable that is can be used as a part of a proftitable trading pattern.
Today we have seen several sweeping moves in ES:
The first one was great on the one side because I was long. But not reacting fast enough it swept out nearly all my profit because the retracement or correction happend extremly fast.
Exhaustion at Long Term High Liquidity Areas
Liquidity can be seen and defined on the Order Book as "Long Term High Liquidity" and "Short Term High Liquidity". Both kind of liquidities are labeled as "HIGH" liquidity because this liquidity is clearly visible with a visual tool like Bookmap™ and is higher then adjacent liquidity in the Order Book.
Long Term stays or remains in the book for a longer time period then Short Term liquidity.
In today examples above, the "Long Term High Liquidity" areas gives us a good reason to take a short position especially because price bounced several times from that level showing "Exhaustion" at the top.
"Short Term High Liquidity" signalizes that market participants wanted to manipulate the price in one direction. When done the "Short Term High Liquidity" is cancelled and the price can go through until it find a solid base at or in a "Long Term High Liquidity Area".
So far the theory. When you look at todays liquidity areas, you can easily see that this liquidity concept stand his ground.
I want you to look at the pictures and make your own judgement about the reliability of long and short term liquidity areas which represents higher volume on either bid or offer side.
Feel free to leave your comments below!