There is a correlation between EuroStoxx50 and S&P500. I trade the Stoxx but I watch the Stoxx and ES (S&P500 e-mini) ladder together. Many times the ES moves first and the Stoxx follows it. I have less than a second to get out of my position before it starts to move against me. In the morning the Globex has a low volume and the ES is not significant, but after the US cash market open, it is important to watch both of them. The Stoxx will do the same as the ES. It is important to analyze the ES before the market opens and watch both market together.
Yesterday there was a big rally in the ES. Today the ES opened much lower. There was a gap. Gap means something changed during the night. It was some negative news from China.
If there is a gap, a trend day is highly probable but in which direction? Up or down? In the first 10 minutes the market tried to find it out. The range was small. After that there was a breakout to the downside with big volume. In the pullback we could open short position. The pullback was slow and on low volume and retraced the whole drop, but after the pullback, the market trended downward.
It is a common phenomenon. The is an uncertainty after the open. When there is a breakout from the opening range and the direction becomes clear, everybody joins to the trend and the trend will be strong.
After the pullback the market trended to the downside and stoped around 1127.50. The volume profile showed that there was accumulation. It was time to close the short positions.
Here is the ES 2 minute chart and the Stoxx 5 minute chart. The US market opens at 14:30:
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