Here We Go Again? Maybe...

Wednesday July 11, 2007 ES Futures

I did not trade today. Took some family time to to go see the new Harry Potter and the Order of the Phoenix movie at the local IMAX theater. I have liked other IMAX movies, but I left thinking I would have liked seeing this movie from a "normal" theater instead. I still would recommend the movie either way.

Back to the Charts - I found it interesting when I looked at the charts after the fact. Today would have been another "Out of Synch" day. To me, this means my CAT Indicator keeps telling me one thing (today to take short trades), but price is trending better in the opposite direction (today price was up more than down.

Since the July 4th Holiday, it seems to me that the NYSE Tick has been notably weaker. In the chart above, the Tick rarely touches the Green line. In a sustained up trend, the Tick will normally touch and produce extremes above this 1000 level frequently.

I can not wait until tomorrow to see what happens. Will we have a Gap down, will the NYSE Tick still remain weak, will it be a down day, or will price continue higher to the top of the channel we are currently trading in?

Time will tell.

Trade Wise, Trade Well
John

Did It Again

Thursday June 28th, 2007 ES Futures - FOMC Day

Today the CAT Indicator kept driving higher up until the FOMC Meeting, but price was choppy and driving sideways for the majority of this time. This is another case of price having to "catch up" to what the CAT Indicator is predicting to be happening. An earlier posts shows this happening to the short side and today was a good long play example.


I still need to do some more research to verify that this is not just a recent phenonmenon. But I find this a very interesting and so far a reliable clue towards price action produced from the CAT Indicator.

Trade Well, Trade Wise
John

Have You Ever Noticed

Just before a "Big Move"

The following charts display two examples from today's (June 7th, 2007) price action that I'm always trying to be on the lookout for in price action. I have to say I'm just beginning to trade them properly.

Well get to it already

Just before the big moves are made, the market does the best it can to shakeout and fake out as many people as possible. I dialed into the 1-minute chart to show more of the price action.

What Do You Mean by That

Notice the nice methodical "Stair Step" down pattern was from the double top high after 9:00 CT down to what could be a double bottom low at 1527. The second low comes in right at 9:30 CT. Then the market moves up above 1528 and does a head fake lower to get some more shorts to jump in.

Then there is an abrupt detour in the down trend and price drives straight higher. We make another top at 1530.50 price. I'm actually surprised that we did not go at least 1-tick higher as I'd expect some people had stops above the prior 1530.50 high. Enough people must have moved their stops to 1529.50 area. Would your have left your stop 4 points above and stayed in this down move?

Then note what happens on the way back down. Price hesitates at 1529 for those people that want in of this "up trend" we just had. Then price presses a little lower. The people long at 1529 are now "hoping" for price to come back higher and I'm sure a few more people get long at this "better price" before price is crushed down past the prior lows.

Also Note

Be sure to note the high in the NYSE Tick when price drives back up to 1530.50 just before the big drop. The Tick made a "higher high" when compared to recent Tick highs. This could mean a turn back higher, but also often signals the big "stop run" before a return to the prior trend. It is our job to figure out which one is being signaled.

Another One

Look at how complex the bottom is before the market goes nearly 10 points higher. The first low is 1509.00 at 12:42 CT. Then we have step one higher to 1512.50 at 12:47 CT follow by the retracement down to a potential "higher low" just missing 1510 at 12:49 CT. Now notice the 12:51 CT and 12:52 CT candles. A quick slam down and back up again for anyone wanting to get short as there has not yet been a "higher high" yet that may keep some people from getting short.

Price grinds higher to the 1513.50 high after 13:00 CT. Then the move down seemed to me to be a pop up in price followed by a quicker slam lower until we made a lower low. Then price went up 2.5 points, back down 2 points, up 2.25 points, back down 2, and then up 3.25 points. In this big of a down day, who would hold through all of that to catch the long move higher? I did not play in any of that chop.

Look what happened next. Price comes down 3.5 points. 1 Tick lower the the last of the three lows described above. I tried to to get long this last time down.

You What?

I tried to get long at 13:36 CT. If you look at the 5-minute chart, the 13:35 candle had lower over all volume. Call me crazy, it looked like I should try it. Well I did not get filled. Looking at a faster chart (not posted) price dipped below 1510.00 @13:36:23 CT, touched 1509.00, and was back above 1510.00 at13:36:38 CT. I had 15 seconds to place my order. Actually I tried for 1509.50 and price was only below for 5 seconds. I could have gotten in at 1510.50, but that is where I would have taken off my first half trying to let the second run for more profits. With only a few hesitations for people to get short at, price drove straight up 6 points.

Hope that makes sense. Let me know if I should mark up the charts more and what you would like to see as mark ups to help better describe the price action.

Trade Wise, Trade Well
John

One Step Forward, Two Back

Wednesday June 6th, 2007

How did it go

Don't ask... I traded very poorly today. Volume started out good and gave the appearance of a trend day fairly early. I lost count of the number of signals that I should have taken. They all would have been profitable to varying degrees and some were even long trades in the afternoon.

I did get a couple of profitable trades, but gave it back chasing entries on trades I did not get in at the signal.

I really need to start trading my system. In the long run, I will be far better off just trying the confirmed entries with the trend. I'll more than be able to give some profits back on the choppy days as days like this will more than make up for it. Assuming I trade them right.

Note the Volume Tells

Check out the lower volume on the early green 5-minute candles. Especially the 3rd, 5th - 6th, 11th - 12th, 15th, and 27th candle on the chart. They all helped to confirm 4 short legs on the initial press lower. The final was a clue to catch the last half of the second big push ;lower in today's Gap and Go price action.

Then we had the opposite for the 11:15 CT candle: Red candle with lower volume - Time to get long.

Then a harder one. The 11:35 candle with really light volume. But also notice the increased selling volume in the prior candles. I saw it, but instead of getting in, I wanted to see price press closer to 1522 again. This second move down was ugly, but volume was trying to coax me in. I just like to see a better rallies to short into, but I'm starting to be a broken record about not taking signals in tight sideways chop.

Later in the afternoons I often find it difficult to use the 5-minute volume as we seem to be more apt to chop around and the read is not as clear as in the mornings.

Trade Wise, Trade Well
Someone needs to as I have not been recently
John

High Volume Day

Market Observations

Today started slow. But it did not last long. Two of the first three 5 minute candles had volume less than the average expected for their time period. The average expectation for volume can be seen in the chart by looking at the blue line. this threshold value changes for each 15 minute time period of the day. Note how only a handful of 5 minute candles had volume less than the expected average.

The initial light volume had me cautious to trade in front of today's 9:00 CT report. I had nice long signals and wished I realized the volume picked up so this I would have tried one of my two long entries. The market took off to the up side after the report and hardly looked back.

Formidable Resistance. Price quickly turned when it bumped into the combination of the R1 pivot and the Market Profile Point of Control from yesterday.

Big Selling. Our afternoon sell off started early today. I can say I'm going to start allowing myself to take more counter trend trades. I had a "perfect" sell signal at the first touch, the second time up to the high quickly retreated back down. Secondary sell signals were a "higher risk" trade signal, but worked great.

Almost did it again. Did you notice where the Midday low came in? Well look... The initial low touched 1513.00 and this is 2 ticks lower than twice the first hours range.

S3 calling. Twice the first hours range could not hold up the market in the afternoon. The S3 pivot level was beckoning. It was a struggle to get there. We pierced through this value and hit the 1508 level which I still had noted as a prior POC level of importance. The market popped slightly higher to close for the day.

Trade Wise, Trade Well

John

It Happened Again

Well... this makes two days in a row.

What is it

Today's high came in at exactly twice the first hour's price range again. To the Tick. You can see this on the chart as the top of the Blue background represents twice the price range from the first hour of trading.

Wishing I shorted it just for fun, but I did not. I need to consider adding rules to get me more aggressive at price levels like this.


Right now I protect unrealized profits or even take profits just below these key levels. But I do not reverse or short these levels just because they are on my chart. I do have to admit that I'm often watching good trades go by that occur at or near key levels like the hourly range and twice the hourly range. Other key values include the Pivots, R & S values, and the Market Profile levels.

Trade Wise, Trade Well
John

There it is again

See the chart from my earlier post about my trading issues for today to see the Chart.

Notice where the Highs came in today?

If you did not see my earlier posts on this observation, I wanted to point out that it happened again. This time it was the High of the day instead of the low.

What is it?

Today's high price was almost exactly twice the range created within the first hour of trading. This can be seen by the Blue background that appears on my chart. Price could only get two ticks higher.

This was a big resistance area. R1 was 1533.00 and I also had Market Profits Targets just above 1534.00 as well.

Trade Wise, Trade Well
John

Interesting ES Volume Fact for today

Interesting Action Today

Something happened today that threw me off track and helped shift me into taking more Short trades when my trend indications were actually saying "go long." This was the Volume Breakdown Delta Accumulation indicator. For those that do not know what it is, it is an indicator that can categorize or break down the volume traded to show if there is more buying pressure or more selling pressure.

Background

In the chart below I have added two versions of this indicator that I will reference from time to time in my other posts.

1. Volume Breakdown Delta - The difference of the buy and sell volume for the current candle.
2. Volume Breakdown Delta Accumulation - A running total for the above VB Delta.

I use the Up Tick and Down Tick option instead of the Bid and Ask option to calculate my Delta values. Both options produce very similar results, but I have found the Up Tick and Down Tick to suit my tastes better and provide fewer "fake out" moves. Usually the Delta Accumulation tracks reasonably well with price action. Meaning both values will make higher highs or lower lows together. When there is a difference or divergence, I feel the Delta often leads the price action in the turn. Nothing is 100% and focusing on the "short term" can be misleading if you don't also step back and compare with the "bigger picture" of price action.

So What Happened

Just look at today's price action compared to the VB Accumulation (VBA). I marked two areas on the chart with Pink trend lines. In both cases the ES made higher highs while the VBA actually chopped it's way lower in the first example and chopped relatively flat in the second time period. Also note the light Blue trend line showing how the ES Price put in a series of higher lows and the VBA put in a series of lower lows.

Once we got past the opening candles of the session, the VB Delta Accumulation drifted lower below the zero line all day. The horizontal Red trend line across the top of the VBA indicator is to highlight where the zero line. Note that while the ES put in new highs, the VBA went up, but still stayed below Zero.

What Does This Mean

To me, the "Big Players" are being sneaky about liquidating their long position that they have built up in the persistent up tend we have been in. They are not being aggressive and coming down in price to sell at the Bid. Instead they are letting new buyers lift the price to take out their long position.

I'm not trying to call a top and I wont call tops and bottoms. I job is to "trade what I see" and follow the price action as it unfolds. I do suspect there could be more price correction on the horizon, but it may just be another 1-day sell off like we have had recently and right back to the "Bull races" again.

Trade Wise, Trade Well

John

Interesting ES Fact for Today

Market Observation

I forgot to point out one interesting item in my trade review today. This happened in today's price action, but don't get real excited as this does not happen everyday. I'm trying to study it and see what I can discover.

What is it

The Low of the Day came in, to the Tick, at twice the range of the price action within the first hour of trading. Above is a 5 minute chart of the ES emini. There are three bands on color that show on the chart behind the price action.

1. The narrow green band, is a 32% to 68% range of the first 15 minutes of trading. I use it to help me determine early directional trades.
2. Wide green band - represents the price range of the first hour of trading.
3. Blue Band - Twice the range of the first hour of trading.

Check out that low. Interesting, but need to discover how to use this when it does happen. The reverse can be true as well. That is, a high can come in at twice the range of the first hour of trading. On a choppy go-nowhere day, the price action can stay within the range developed within the first hour of trading.

Trade Wise, Trade Well

John