Friday, October 7, 2016

The Lull Before the Storm...

Friday's Action and Steering into Next Week

Summary - We waited all week for today's job number what happened and didn't happen was pretty interesting and insightful on how to perhaps handle next week. Also today, Hurricane Matthew made landfall onto the eastern coast of the U.S. Today's action sorta reflected the waiting....



VOLUME

Increased volume activity began during the premarket session with the release of the jobs number at 08:30 and finished 115-125% above average. (I would like to connect the volume indicator to a noise maker to simulate a trading floor perhaps)

The On Balanced Volume shows continuing volume leaving the market.
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I still have trouble wrapping my head around reading the tape but after reading Wychoff and some Volume Filtering, able to show strong large lot participation throughout the day and at key levels. The large lot participants in certain camps have been referred to as long term traders (yellow and green) while the small lot traders referred to as Short Term (red & blue).

When both the ES and NQ put in their low of day, the strong green buying in the NQ stands out (as it has the entire week) when provoked. I would like to think that the large lot buyers are spotted and becomes a signal for the small lot buyers to join in. Just a guess...
NQ with a Large & Small Lot Volume Tracker


ES with a Large & Small Lot Volume Tracker


STRUCTURE / ACTION

By essentially going nowhere, somebody was able to make a lot of money….

Both markets put in sharp selling tails at the open and in concert with the overall declining tendency of the OBV,  suggested the day would be one for liquidating.   The NQ HOD was off a defined HVA edge.  Also, the ES HOD cam right at defined long term trend lines.   Finally, both ES and NQ HOD’s were adjacent to yesterday’s settle price.  Lots of reasons to think short….    In recent days, it’s been demonstrated very difficult to get above these levels and with all the talk of interest rates, over valuations, etc, it will take some kind of doing in my opinion to proceed higher. Even more reason to perhaps follow the flip lower...
Market Profile of the Last Two Weeks
We've gone nowhere...



Until the London closing, prices stayed within the globex range until the London close and at 11:20, made final retests (globex POC, HVA edges, SMA 150) before a crash liquidation which promptly halted right before noon at defined HVA and fib levels one swing range right below yesterday’s Low of Day.    There were several reasons to believe price would go lower but it didn’t.   Close examination shows selling climax occurring at 12:23 right before lunch.  

We've gone nowhere in very rigid steps to very visible levels at some off usual times of day.

Trade continued in this region during lunch with strong buying support observed on the Institutional buying filters making these low of days pretty solid - In my opinion, it will take some really bad news to break below these levels.

The vertical distance from the morning swing lows to the low of the day created a great opportunity for a reversal (big bars down are often followed by big bars up) and that move came at 13:24, just before the bottom of the hour and finished at 13:50ish, both abnormal times since I’ve started keeping notes(I have been noting the time big moves take place seeking to understand the day in the life of a big money mover) - Perhaps these traders had plans for the Columbus Day weekend.   The climb off the low over the day was qualified with an SMA 150 retest before returning  it’s final range for the week.   

The final settling range for the day makes a lot of sense.  Zoom in inspection finds the settling price on top over recent levels (i.e. Globex POC, prior day Value Area edges, Pivot Levels, R1 level (ES),  HVA edges, and a long term major trend line on the ES to boot.   I would guess that all of the operators, with so many visual levels around them, are jammed up in the city - It will take some long term money to march out of this jungle we are in…

Once all the bus drivers arrived at the final parking spot, reasonable volume was traded yet price didn’t go anywhere for the rest of the day.

Despite the sharp selling tails and the three day frames lower, I’m going to say that with the holiday next Monday and the Presidential debates the night prior, price is simply cementing itself into place for either way the tides turn and with that, work on my scalping - Having said that, anything goes…..

Dart Board Time


So, for next week.....

If I were an NQ operator, Today and this month, I've essentially gone nowhere, yet made a lot of money buy accumulating, marking down, liquidating, marking up, distributing, and going home (see price action above).

On the horizon (next week)

I’ve already shown reluctance to explore white space further but spent since September 21st building in a nice body of volume matching the body of volume beneath the 90 day HVA for this contract.   I’ve demonstrated consistent support at 4840 and got a Fib level there to boot....

If there’s reason to go short, there are well defined distributions below and even the Z16 contract low.

If there’s reason to go long, exploring further long using fib and pivot resistance levels would be good guides.

If I’ve nowhere to go, then filling in the Low Volume Areas would be suitable busy work  

Either way, I’d continue to doing what I’m doing here now, selling at the top as shown by the purple On Balance Volume plot descending, selling to anybody willing to buy.

Unless something happens...
The NQ Dartboard...


If I were an ES operator, I’ve killed time since July with two rectangle patterns, a wedge , each of these three time killers about a month long -- and now running out of time with that.   And the world still doesn’t know what to do...

The time up in white space was without strong buying volume and around September 4th & 5th with peak buying, it appears we packed up and retreated in time for the Z16 contract.

The ES Dartboard
While in the new contract, I’m continuing to take money off the table as shown by the declining On Balance Volume Slope.   

A visit to the Commitment of Traders report (www.barcharts.com) tells me that the large speculators are getting out while the small speculators and commercial dealers are buying.   Smart money always said go with the big guy.  That also tells me for intra day trading, start watching the commercial dealers flip product despite going nowhere.
Commitment of Traders, from www.barcharts.com



What to do next week?   The same thing I’ve done the last few weeks, take product off the table and make money moving price up and down while going nowhere - Unless something happens...