Before I begin tonight’s blog, some news: until Wednesday April 16, my blog may be a little late and a little light. I am speaking in Mumbai ( see http://www.theatic.net/2008/speakers.php) and I am not sure what the Internet connections will be like. The mobile phones (cell phones) connections are not that great.

As Figure 1 shows, last night we saw a Failed Auction in the ES Traditional Profile. What’s a Failed Auction? It’s a single print at one end of the profile occurring after the Initial Balance that is followed by a Range Extension at the opposite end. Last night we saw the Failed Auction in the ‘E’ period and the Range Extension in the ‘J’.

A Failed Auction says that we’ll revisit that price (1372) within 5 trading days.

Figure 1 Failed Auction

In the current context, the more interesting thing about the Failed Auction is it normally marks the start of a new IPM in a direction opposite to the Auction - should we fail to see the Failed Auction price in the 5 trading days. In this case, unless we see 1372 by next Tuesday, we are likely to be seeing or will see the start of the 1270 retest.

The Failed Auction becomes a great assessment tool. If the market breaks down now and moves at least 2 ATRs away from 1272 by end of trading Friday, we have a reliable indication that the 1270 retest is underway.

The key is to get set before the breakdown. In this regard, what is tonight’s profile telling us?

Tonight we have a possible test-open. This suggests rotation with a possible range of 22 points. If 1270.5 holds, we can expect to see 1248.5. I am bearish the market and will be looking to see 1269 to 1268 if I see the right volume configuration in Market Delta.

Figure 2 Market Profile April 9

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