In this article, we examine the significant daily order flow and market structure driving WTI price action.
17 September 2018:
As noted in Friday’s WTI Daily, expectation for Monday’s auction was for price discovery higher based on Friday’s development of a buy excess and trapping of sellers near the low. Buying interest did unfold from Friday’s settlement during Globex. Selling interest emerged into the NY auction as the market traded within Friday’s sell excess area. Rotation lower developed to 68.53s where sellers trapped amidst responsive buying near Monday’s NY average daily range expectancy as rotational trade developed into the NY close, settling at 68.91s.
Monday’s auction saw Globex buying interest from Friday’s settlement, 68.99s, driving price higher achieving the Globex stopping point high, 69.65s. The London structure reflected a p-shape distribution, implying asymmetric potential for higher prices (but not necessarily a higher close) into the NY auction, based on the market generated data. A stop clearing probe developed off the NY open, achieving the stopping point high, 69.72s, as selling interest emerged, developing balance, 69.72s-69.20s, early in the NY auction.
Two-side trade continued before initiative selling entered ahead of the London close, 69.20s, driving price lower out of balance, achieving the stopping point low, 68.53s, near Monday’s NY average daily range expectancy (117 ticks) from the NY high, 69.72s. Sellers trapped amidst responsive buying interest, driving price higher in retracement to 69s ahead of the NY close, settling at 68.91s.
Our first daily inference (68.35s holding as support) played out albeit selling interest emerged early in the NY auction halting the buy-side auction shy of the daily statistical resistance targets overhead. Early NY selling was order flow indication of potential for sell-side activity. This development played out into the NY close as the market continued to develop the prior balance rather than break from it directional trade.
Looking ahead, Monday’s auction saw buy-side price discovery as inferred which was truncated at key supply overhead. This structural development along with potential trapping of buyers into the NY close provide indication and warning of further potential for sell-side activity. The highest probability path for Tuesday’s auction would be for price discovery lower to develop. Failure of the sell-side to drive through key demand, 68.50s-68.35s, would negate the sell-side premise.
As noted in last week’s WTI Weekly, seasonal price weakness in confluence with continued extreme bullish posture in the Managed Money suggests headwinds for WTI trading beyond the key supply cluster overhead (72s-75s). Today’s failure of the buy-side at key supply provides updated market generated information that the key demand areas, 68.50s-68.35s/68.06s-67.94s, could be tested.
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