1. Market has gapped up in overnight trading and bullish moves accelerate on Non-Farm payrolls. NFP disappoints, so retail traders think the market should come down, as prices rise, they flip chasing the markets higher. When they are all fully long, the market makers pull their bids/support, when the overnight inventory/supply is bought up by the retail traders.
2. Now there is none to very little supply and the market makers have pulled their bids, there is nothing for aggressive market orders to buy into and no support underneath of continued buying, so the weak long traders try and close. The nearest bids are a lot lower now, so Nasdaq falls.
3. When the price has come back down far enough, the MM's put their bids back in, weak longs puke and are grateful to sell their position out to someone willing to buy. Buy the dip traders step in and market makers sell to these guys all the way back up to any remaining or new supply left at the day's highs.
4. A lot of volume comes back in at the return to the highs of the day and the Point of Control flips to these levels. MM's are fully short, all the supply has gone and there is nothing else for aggressive buyers to buy up. Lack of supply means longs start to close positions, and as MM's match up all their inventory all the way back down, weak buyers who bought the highs again puke.
5. Price returns to the Initial Balance lows, MM's have unwound their shorts, have matched their inventory. The overnight supply has been taken, so the job is done. The second bounce is the point where buy the dip and momentum traders come in and they run it a little higher into the weekend.
NFP was the excuse the market used to get up to the overnight supply orders, as there were no new sell limit orders put in at the end of the day we will have to wait to see what they do on Sunday night.
2. Now there is none to very little supply and the market makers have pulled their bids, there is nothing for aggressive market orders to buy into and no support underneath of continued buying, so the weak long traders try and close. The nearest bids are a lot lower now, so Nasdaq falls.
3. When the price has come back down far enough, the MM's put their bids back in, weak longs puke and are grateful to sell their position out to someone willing to buy. Buy the dip traders step in and market makers sell to these guys all the way back up to any remaining or new supply left at the day's highs.
4. A lot of volume comes back in at the return to the highs of the day and the Point of Control flips to these levels. MM's are fully short, all the supply has gone and there is nothing else for aggressive buyers to buy up. Lack of supply means longs start to close positions, and as MM's match up all their inventory all the way back down, weak buyers who bought the highs again puke.
5. Price returns to the Initial Balance lows, MM's have unwound their shorts, have matched their inventory. The overnight supply has been taken, so the job is done. The second bounce is the point where buy the dip and momentum traders come in and they run it a little higher into the weekend.
NFP was the excuse the market used to get up to the overnight supply orders, as there were no new sell limit orders put in at the end of the day we will have to wait to see what they do on Sunday night.