Wednesday, September 3, 2008

An important non event day

In my blog I would like to focus on things that my readers find useful or new. You all know what the indicators are doing in the daily and hourly charts so I wont repeat it for you. One thing though, we are testing the 50-day moving average on the daily chart. We had a good test of the 1260s. The chart above is monthly profile. Notice the TPO count vs. prior month. How crucial the 67s have become and profile still points a higher potential break up. Compare this with the chart in the bottom. Same story. You see the significance of holding this level. We are still within the short term balance.

Now back to today. Frankly, I like the volume and response today. It seems to me that the overall sentiment for the longer timeframe buyers have not yet changed. In other words we are still inside the forcing point threshold.

If you noticed todays profile being built. There was an embryonic double distribution sell off in the beginning half of the day. H period reclaimed the single distribution structure and the buying continued enough to erase out more than 30K of negative delta. So while price ended up doing - well not much, The buyers did come in and some major shorts were covered.

So unless their is a major sectoral breakdown. We have a good probability of holding support. However from a price action standpoint we are at a very crucial point. We need to break the resistance of 80-84 level and retest the 1290s. The price rejection from the 1267 area has been so strong that any break down through the 60s may be violent. It can more likely establish a double excess low (double bottom) that is a healthy technical bottom for a potential reversal. That is almost obvious. But the second wave of the economic downturn has just begun to be quantified as measurable data. Although most of has been built in, any new surprise in either macros or geopolitics is going to be very ugly. Take a peek at the hourly 3lb chart below.

What might be in store ? Well if we open above settlement and settlement is bought during IB, there is a good chance of a good test the 80-84 level covering the single tail there. and if we can do that without a dominant flow reversal, a quick test of the 90s is in store. However based on the price action and where the value is, a balance day is more likely if we open within range and value and make a wide IB like today.

Trade wise today was a small loser on the ES. Did not short the IB or C period because it did not give me a setup, although it was a very good short setup if you short VAL as it opened below VAL. The loser came from my short at VWAP which got chopped (was first profitable before the greed machine came on) with the ying yang. It eventually went my way before the true buying kicked in. Anyways should have gotten out at entry as Beige book was coming out. Did not. Note to self.

Frankly, I was busier in my CAG short which was beautiful. Great risk reward too. Was peaceful a trade as perhaps ice fishing. Nothing like the seesaw in the ES.

And finally the masterpiece of a 3lb daily chart below. No other chart can draw such a long story in so many words. Again, spells out the significance of establishing a good support here. BTW, which longer term of the longer terms are trading this chart? ;-) Puts everything back in perspective of the time frame universe. There are again infinite time frames. Good trading.

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