A market in wait

The last two sessions has been balancing in a 20 point value area which is a break from the volatility. The 1225 level in the S&P 500 Emini is holding as a price rejection level. The market spent a lot of fuel yesterday on the buy side without getting much liftoff early on. That is a sign of temporary price acceptance of multi-time frames. Everybody is waiting on the word from the Hill on the bailout package. The market is preoccupied. There is still sign of mild accumulation as we entered the mid morning net delta positive. A moderate sign of price getting some responsive buyers. We are building additional TPO count in the upper distribution of the 3 day profile. Key area to watch is again- the 1225 and the 1187-1191 area overnight. Key to trading days like these is not to get killed by a thousand pricks. Taking very selective 2-3 trades and living with it. I was biased to the upside based on the delta but we did not test the 1225 level although we rotated through yesterday's value. The market just does not have the ammo quite yet. As we have seen in the past few sessions, any strong move in either direction will be preceded by a strong flushing move in the opposite direction. Sometimes small time players like us need to stay out.

A Trend following the Balance

A trend following yesterdays balance. We are 83K net positive on the Big contracts and 93K in general. Indicating a strong potential for more upside.

A balanced day so far. No sign of upward rotation as the big contracts are net negative and the general market is neutral. Good trading oppurtunity in the K period on the weakness of the test of the I period high. Having seen the late afternoon liquidations so far and the distribution yesterday, which was an multitimeframe liquidation as evident in the distribution, one should be poised in the direction of todays balance. The market is probably not going to commit until the bailout is clear. The direction from this distribution today may set the direction. You want to in that direction.

Day type in trading plan

Here's todays profile. Notice the sharp downturn in IB both in the profile and in volume of the dominant flow as well in the direction. The PNF chart also had a down sloping angle through the morning. It was profitable day turned into a loser. I write this blog to bring up the point of incorporating the day type into the trading plan. And outside of value analysis, one needs to set aside days like the sessions we have had - then have a playbook for it. Did you notice the financial's steep down trend. I dont remember it turning around. So you can call it - special exception session - open below value etc. Price never closed above VWAP or the volume weighted moving average. The important sectors to watch were the commodities, the financials, the uncertainty of the bail out program. And how that played in the traders minds. The big contracts actually were buying below VWAP and net positive. The day intended to balance today - but capitulated in the L period. The mistakes in trading are made when one fails to recognize that the opposite flow has won out. It does seem like an excess low, however. An inevitable rotation down when price spends so much time below the POC at the bottom. Tommorows open and the price behavior at the settlement will determine the type of day. Look for long term players to be responsive at the settlement or todays (as well as overnight) LOD.

Clearly, financials and the bailout program needs to be watched intently.