Yesterday we had the gap up and trend into new ATHs after the CPI report. Today we probed even further higher but then ran out of gas and found a few sellers. After the little smack down at noon ET, I immediately said (elsewhere) that I think we've found the short term balance and expect a range of 5320 to 5350 for the rest of the day. This for me meant that the HOD was probably in place, even if it could get taken out randomly by a few points. Why a 5320 downside lower bound? Note the low volume area on the profile:
How do you play days like this? Well, for me it was a long-only open, because of where we opened and especially how we acted when we tested lower at 10:05am ET. There's really just no reason to short at all IMO. Why? Because we are literally trading prices for the first time. We are searching upward for sellers. If we are still searching, we haven't found them yet, and I don't want to be the first one. After we found sellers (confirmed at noon), we can guess that we will drift lower to find the price where buyers find it cheap enough. During this corrective phase to the downside, you can sell rallies and even buy some dips, since the action isn't aggressive.
In short, we've been in a discovery phase up, and now we are in a short term state of balance. So, buying areas below value, which seems to be centered around 5335, and selling areas above value, are all in the playbook. Selling breakdowns is not, and neither is buying breakouts, though you'd have more success with the latter if you really had to buy a breakout.
You'll also note the selling in equities coinciding roughly with a low in USD, which had drifted lower all morning. It matters when it matters, and around PPI/CPI time, it matters.