Wednesday, October 5, 2016

A beautiful operation on a slow day - Stepping back....

Yom Kippor & China shut down for a week…   Volume won’t return until the 13th….  

The NQ pulled an interesting one where inspection of the Institutional volume Filters data showed large lot liquidations around the 4873 level and completing by the end of the morning around 11:00.  (The large lot traders appear in different shade).

The yawner took place as whoever bought all of that inventory marked price up to  the R1 level around 4881 (about 8-10 points) before liquidating their holdings about an hour before closing.    Pretty slick...

The ES participated in this operation too however with the volume filter settings I had on, the operation did not stand out as well.   I need to work on my volume filter display a bit more…

Thinking this through, there had to be three Parties involved - Party A was needing to unload inventory this morning. Party B who was large enough to absorb Party A's inventory, strong enough to mark it up, then unemotional enough to liquidate upon the Party C retail trader. This would agree with the balances we've been noticing in the Commitment of Trader Reports.

All in all, a winning day for the market & one I had hoped to have participated in better.  

Stepping Back 

Instead of paying attention to the market today as it was playing out, I stepped back from the desk as lot of economic data was released today and attempted to look over the field:

The NQ appears to need the rest of this week in this present region (4850-4900) to bring symmetry to the 90 day POC (aka Barnacle Island).   Conflicting it the long term trend of On Balance Volume showing a liquidation while price is trending higher.  Examination of the price action at all time highs suggests a reluctance to buy high….   <duh>   Trend lines and Fibs project potential next levels high (i.e. 4950)    Chart technicians could also argue we are putting in a complex top which would agree with the Fundamentalists that we are overpriced.  I like the idea that so much energy was expended getting price up to this altitude, that we are essentially in orbit and hopefully got some time before a fireball re entry.

The ES is displaying very strong reluctance to create further all time highs - In fact, the Market profile is putting in a Cliff around 2200 level.   Inspection of the long term On Balance Volume shows a continued selling at these high levels, something that smart money would be doing.  It would seem that the safe place for the ES to park into orbit would be the low volume are between 2100 to 2150, which based on inspection, will take some time to honestly fill.