London session market profile preps and journal for DAX

My younger daughter is sick. Again not able to trade today.
In fact Thursday's price action was supposed to occur on Wednesday but was interrupted by the US holiday.
This was a reaction to the development in the longer term chart. Basically a bearish structural was broken, those late big hand shorts would have to cover.
Given the size of this broken bearish structure, it could take us to as high as 12680 in the coming weeks.

Technically, there is some demand to correct lower in order to flush out the weak longs that are in position.
Thursday's spike was mainly short covering, not much new money taking long DAX. The first target 12500 has been achieved by the market maker, the rest was merely stop run or weak hands forcing action.

We would watch the development in the coming days to see if new money would move in DAX to pop up the market.

Weekend prep:

1. 6B/GBPUSD

The weekly volume profile bars of 6B looks quite bullish as the 4 weeks long base is finally maturing and it is ready to tear to the upside for a big time.
However, the brexit development and some party politics has resulted in a dip of Pound in the later part of the week. The dip has been bought up by some serious players. Once Pound takes out the 13300 volume node, where a big group of trapped longs are, the pound would much higher in a short period of time. Let's see what kind of dip buying opportunity the Pound is going to give us.

2. 6E/EURUSD
Euro has also been bullish. The 11600 level has been robustly defended from end of May. Euro has broken the structure resistance at 11800 level the Friday before last week. Since then it was slowly drifting lower. At the 11680 level, we have seen stronger buyer showed up. Too bad that I have missed that obvious buying opportunity. The path of least resistance now is to slowly drifting higher to challenge 11900 major resistance and the pre-ECB high.

3. 6A/AUDUSD
The situation in 6A is quite similar to that of 6E. It has broken the structure to the upside last week, and it was pulling back since then.
The consolidation area between 07360 to 07420 has accumulated plenty of volume and value. Once it is broken to the upside, this area would acted as a base for further upside assault.

4. After DAX broke down from the 7 day rising streak, it has consolidated for two days to arrest the long liquidation break. With the selling pressure absorbed at or near 12400, it has broken to the upside on Friday (too bad again that I was not able to trade).
To me, the chart of DAX has changed character since the week of July 2nd and has been quite bullish even since.
The path of least resistance for DAX at this moment is to the upside and the target in the cross-hair of the market maker is 12800.

DXY is flirting with 95.20 major resistance. Could this be just a stop run or a major break out?
If Euro is able to hold firm at 11680 （here i am talking about the levels in the 6E future not in the spot), we are going to see a failed break out in the DXY.

From what I see from the order flow, the buyers are very enthusiastic to the Pound at this price level.

DAX had a consolidation day yesterday. Given the volume being built at this level, we are going to inevitably correct lower to fill in the TPO holes left on Tuesday, or in other words, wash out the weak longs, if it fails to hold a test below 12720.

Be mindful that we are in earning season hence the index could be popped up or down by a good/bad earnings report. We are going to have a lot of volatility these days. To avoid getting trapped in the whip saws in DAX, it is worth to take a look at the price action in EUStoxx to see where the European shares are traded at this moment.

EuStoxx50 has failed to take out 3480, a pullback to 3450 looks inevitable on the chart, which is consistent with our view on DAX.

A strong held bid has appeared precisely at 12720.
The buyers are defending this level aggressively. But the delta has been negative all throughout this morning.

Let's see how long this buyer could hold. Once this is given away, a flush is going to come.

Massive selling pressure being absorbed.
This buyer is quite strong, but on the impatient side, to my opinion.
I think he had quite substantial position at 12750 consolidation zone.

It is completely an algo dominated market today.
It is unplayable.
The absorption at the low took less than 11 seconds and immediately pops up.
Can't get anything filled.
The algo is rescuing his bad position that is why it is rotation between liquidity node and stop pools.
I am out to watch AUDUSD now.

Battling confirmation bias

This morning I have come to the market with a bias that the market is likely to flush below 700 to wash out the weak longs.
Therefore I was viewing the tape action with this colored bias that I was only seeing selling pressure but didn't aware of the strong absorption activity appeared again and again at 20, 10 and 00 level. Quite a lot of good trades in the direction of held bid have been missed.

Maybe it is due to the summer time flow that algo completely dominating the market, the DAX was trading with a 50 points range, which is characteristically un-DAX. In a normal day, it would be easy, easy to see a 100 point drop as a beginning of the flush. But now what we have?
30 points drop and absorption? that's it?

Yesterday DXY has formed a massive engulf bar with a long wicks to the top, which means those who got excited on taking a long in the dollar in anticipation of the breakout are all trapped.
It is interesting to hear the pundit in yesterday's FT hard currency podcast saying that he expects the dollar to go much higher from here. Once again, he is another joker on the radio who does not know what trading is all about. Trading is about deceiving and trapping -- The more you lose, the more the market maker is going to make. If you got excited, the market maker would take your money and say thank you for your participation.

The primal hypothesis is for DXY to complete its rising wedge formation and resolve to the down side to take out stops for those who is long and then go higher from there. You could also view this setup as a Wolfe wave short.

Yesterday I was anticipating a flush to the 12650 and was quite disappointed by the pathetic London range.
The 12650 was tested and held to the tick during NY session, but I wasn't trading DAX at that time. The bounce from 650 to 690 is some what workable in my frame work that I could view this as a Wyckoff range built for accumulation.
However, in order to break through the massive volume/inventory built at 750 level, the consolidation/accumulation range in its current form is not going to achieve that. We would have to correct through time and space for much longer.
Hence the primal hypothesis is for DAX to correct even further and build value, preferably, around 12600 level.

DAX is attempting to break this mini-down trend.
It looks promising now as strong buyer showed up at 12630.

Aussie is also a greatly manipulated instrument. Too bad that most of the volatility are in the Europe midnight session.
Here is a strong move taken by the market maker. See if you can identify yourself without looking at the explanation below.



The market maker has spread out the prior day's London low to the 7320 bank liquidity pool to the tick. After absorbing all those stop orders, market maker lifted the market and hit the 0.7380 liquidity pool, above the prior day's London high, on the other side of the trading range. In this move, the market maker has pocketed a full daily ATR in just 5 hours. Millions pocket, bingo!

Yes, this is the long liquidation that I am talking about.
This is showing me that DAX still mean business.

It has taken out the consolidation zone built earlier part of the week easily in one go.
This is the strong move I want to see from the market makers.

The key point is to understand where are we trading at this moment.
If you take a look at the cac40, which has a much clearer structure than that of DAX, you can see that it has been trading a range between 5348 and 5436 for two weeks now. The both sides of the ranges are tested multiple times, hence it is a well defined trading range.
Until this range is taken out to either upside or down side, we would have to assume that we are still trading in the range, so as the DAX. Hence the DAX is a bit lagging at this moment, because there is a massive absorption going on at the low. Before the market maker accumulated enough contracts, it is not going to let the price to go the upside.

After the big liquidation break on last Friday, we had a balanced day yesterday where strong buyer showed up defending the key 12480 level multiple times. This strong buyer has raised his bid subsequently to 12520 after the NY open.

At this moment, DAX had a gap up and is standing above 12580 level. I would expect the strong buyer to show up again at 12550 level. 12580 is a risky buy, but we could slide in a small position there.