Tuesday, October 11, 2016

Columbus Holiday 2016 - The Day After


When I was a contractor to NASA, we would get caught up on Federal Holidays and when the government workforce returned, the place was abuzz as they often returned with “bright ideas”.   Today after Columbus Day, I think we’ve something similar….

Prelude: On Monday, Columbus day, volume was half the average as banks were closed.   Price was yet able to climb higher into areas previously rejected as too high.   Watching this,  I had a feeling that smaller operators were moving price higher so that they would establishes short positions without much squabble.   My volume data yesterday did not confirm this as the On Balance Volume reported net selling (perhaps retail buyers were buying at the highs?!?!?!)    

Sure enough at opening bell, price made a strong move back into last week’s popular trading areas (and lower), putting in  very pronounced selling tail.   

Price Action:

The piloting in the NQ and ES coupled with the magnitude of large lot trades demonstrated to me that long term traders played a major part of the price action - Bringing price back into the norm.

The NQ really impressed me making a low of day at the 90 day Point of Control.   If I were big money NQ, I would be happy here with all the uncertainty in the air to simply fill in the major LVAs here.   However, this does not jive with the big picture On Balance Volume.

Equally interesting was the controlled ES selloff to the Pre-Brexit all time high, a level which coincides with the 90 day Point of Control.   Very impressive piloting, indeed….   Bearish is the continuing decline of the On Balance Volume, what may be a complex top pattern, and price below the 90 day SMA200 - Items I’m sure the elections and earnings will iron out. Casio's famous quote comes to mind, "how much longer will this pig float?"

Peculiar about the action today was that while there was considerable large lot trading (long timeframe trader), price paused at nearly each and every S/R level, prior settling prices along the way (short timeframe trader).   Curious was Mr. Dalton would have to say about today if he were still around.   There were several legitimate reversion trade entries today.   Making entries difficult was the jungle of visual support/resistance levels.   My internet is impaired with an upload speed of only 0.2 Mbps making for lagged interactions - I chose to sit out today.   My loss…..

Volume - Inspection of the Institutional Volume Filtering showed large lot traders participating during this price move in the morning and the afternoon.  Coincidental that this level of action occur the day after Columbus day?   NQ volume was 116% of average compared to 125% from Friday (lighter!!!).   ES volume was  148% of average compared to 115% from Friday.   The ES drove the bus today.

On a side notion, while most of the sectors went lower, Utilities (blue) and Real Estate (yellow) went higher in the morning.  Leading the liquidation was Healthcare & Building (white & grey). Perhaps a sector rotation signal?   Not sure…. In the afternoon session, all sectors were liquidating.

Thoughts on trading tomorrow….   We haven’t been in this area for awhile so memories of MP structure may have diminished.   This could make for great opportunities.   To be continued...