What we saw Friday and today is essentially short covering as the market got too short and found buyers below the August 2012 lows. Taking out last week's high will be significant as it stops the 1-timeframing mode to the downside. However, finding Sellers after we do a peek-a-boo above last week's high is also a possibility. My focus for tomorrow is whether we can find acceptance above last week's high and the 1387-88 level - a failure there and odds are that the auction turns back to the downside. The Regular Pit Session chart below also shows the significance of these levels.
As you can see Price has so far found acceptance in a prior 4-day balance - destination becomes the Balance high which is the 1388 area. Friday's low may have marked an Excess Low. An Excess Low followed by a Gap higher as we did today is the most potent combination for reversal - when observing a multiple day auction.
First thing to look for tomorrow is where we open relative to the Spike - in or out of Balance. A rejection of the Spike indicates change and targets Monday's prominent POC. The pull back low is 1377 which should offer short term support - the first sign of change will be if we find acceptance below this level. Trading above the Spike confirms the Excess Low and targets the 1400 level.
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