Thursday, September 11, 2008

Surviving the market cycle and profiting from it.

Heres the daily market profile for the S&P 500. Trading the ES emini is probably the hardest job in the world. It is also the best job. Besides being heir to an oil field today. Dare I say that. But if you bought anywhere in the A, B or C period and held it till the N period or overnight, trading 5 contracts or less, I will officially award you the "tradersteetime knighthood" of trading. I have looked up the definition of day trading to see if they include holding a runner for a swing trade. They don't yet. But the market does not give very many opportunities like today for a swing trade.

Today was one of the easiest map and the probability played in our favor. However it was also one of the hardest to hold the winner. Now with 10 contracts and above, I would say it is possible to ride it out with runners. The contract rollover split the volume and that played havoc in volume analysis too. We did get the short squeeze in the end and the ride through the neck of the distribution was really nice. You should have seen the tape.

Now that we are finally in the upper distribution the test of the support below is the key event to observe for any clue where it finds value. Keep in mind the strength of the dollar is reaching forcing points of many inventories. Anybody held the gold short? - you are knighted.

Finally the squeeze - a pictures worth a thousand words. Before I forget, congratulations we survived doomsday.

Prayers and remembrance on September the 11th. Jupiter -may you rest in peace and always in our hearts.

Wednesday, September 10, 2008

Double distribution profile

We did get to the globex high but we had price rejection today from the distribution above it. Couple of scale out opportunities and couple of adds. With a 10 point run to the high. I'd expect the market to attempt to rotate to the upper distribution of this double distribution formation. We might get a hook low tommorow before an attempt. Caution is the word. Very nice balance today. We did not see any major short covering either and it lends to the fact that a lot of the down move has beed aided significantly by intermediate/longer term long liquidation rather than all new shorts below the 47s. Will look at the COTs report to confirm that. If we rotate above to the upper POC we should see some swift covering. Theres unemployment news to watch @ 5:30 EST and financials as well as housing sectors are worth keeping in peripheral view.

Heres the daily and weekly distribution as well as monthly.

The perspective at mean

We are in the F period. What is significant is the bounce of the low took us from 17-20K net negative delta on big contracts into positive territory here at mean. Overall market is still - 42k.

The long opportunity off the retrace to the VWAP is getting a little profit taking. Volatile in spurts and the mean could mean consolidation here for some time. Lunch time just around the corner.

Oh yes. At the bottom, notice we made lower low. However, quite buying (controlled buying) took out the -ve delta from -17k to -11k right before the hook (the sucker play to the downside). The hook is sometimes needed for propulsion. Notice the late shorts bailing quickly adding fuel to the move as they got caught in a hole. This is a different picture again from yesterdays break of the 47 area.

Above the mean, we need to be able to facilitate business above mean at 30.75 with increasing volume ( not yet evident) to be able to test the hod and possibly globex high. We have resistance galore above 36 area.

Todays IB had a good short opportunity at the overnight VAH, both in the A and B periods high, after the dominant flow @ 6.36 AM to the downside. It made those highs with a net -ve delta.
So far we are balancing around yesterdays value. I had expected a steeper drop ( a hook) than what we had so far before we retrace some of yesterdays value (the notorious 80% rule).

Tuesday, September 9, 2008

What a difference a day makes

Notice yesterdays profile and compare that to todays. Not very dissimilar at the surface for the first half. We did open above the value area. Until the break down right before lunch I personally heard a pundit ( someone who is very well respected) assert that yesterdays lows will hold with quite a bit of confidence.

What was different today? Well first, it was a completely different market. the IB did an open drive to the downside like yesterday. Narrower IB (relative to the day before) with the dominant flow to the downside. However what was not visible in the chart and profile was the mood of the market. We had a double reject of the dominant flow during the IB. But the price rejection from the B period high was much stronger and the buying at the A period low. The mood began there. My trades got chopped a bit as well . The break of the IB low and range extension in the C period was a good entry with the dominant flow. At the low of CDEFG periods however there was a big difference in the mood (vs. yesterday). We were -20K delta in the big contracts, -50K in the general chart and failing to make higher highs. Read yesterday's post and see the difference. The retrace of the H period was a great high probability opportunity to the shortside. The same level that had the high confidence long trade had become very vulnerable. It did take a while to break that level. The news of Lehman's failed buyout talks took the financials down the toilet.

Monday, September 8, 2008

The importance of holding out

I did not short the VWAP opportunity @ 7:45 AM today nor the IB high. Partly because my brain was still foggy;-). But mainly due to the overnight sentiment. After the the run up and the volume in overnight trading I was less inclined to short. Matter of fact, I had the opposite bias. The selling during the initial balance was very intense after 7:45AM. However it was quickly reversed in the big contracts chart. Though not as evident in the general chart. This is why following the big money is so important.

The best opportunity personally was the the low @ 11:01. Here the trin was markedly divergent, the big contracts were net positive at the low. Two extremely important factors that lent confidence in entering this trade.

This was a 20 point trade with an add opportunity @ 12:10 timeframe near the 2nd std. deviation. Arguably in my opinion, the best opportunity of the day. Will expand on that more in the next post.