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....


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.

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


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 ( 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

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...

Thursday, October 6, 2016

Calm Before Hurricane Matthew or What's the Jobs Number?

he calm before the storm….   Hurricane Matthew is to hit Florida and the jobs number is due out tomorrow at 0830 (opening bell).   In preparation for the upcoming mess, there was only one recognizable campaign in the morning today where large lot selling was observed against defined HVA support.

Then, at 11:00, a one day reversal was executed driving price perfectly to defined support levels and rallying directly opposite of the opening where prices essentially stopped for the day resulting in a bimodal day.   This move is indicative of price clearly the ledger getting reading to move (somewhere)

The trigger on this move was purely volume with price action tagging along for the ride - If this is the way things are becoming, it will be time to break out my robot trading programs…   I took time this slow day to better try showing the large lot trading.   Hope it helps….

Inspection of the market profiles shows better the bimodal distribution and while the day did show some initiating activity compared to yesterday, it was still inside the second day prior meaning, we are going nowhere…

Because tomorrow’s jobs numbers is the excuse for the lame price action lately, a step higher is in order in the event the market does decide to move.  The NQ has been boxed in a rectangle pattern and the ES appears to be fixing to get squeezed out of it’s apex.   

While taking time to track some distant price targets for tomorrow,  I came to realize my new bain, disagreement of MP data between Bluewater and ThinkorSwim.   Linda Bradford Raschke had mentioned this would likely  happen and now it’s time to deal with it.   I’m believe my preference is to lean towards the ToS MP soon on the assumption that a larger population of traders use ToS than Trading Advantage.   Shame as the latter can really help tell the story…  

Finally, on a side note, it’s interesting seeing the OBV for the ES continuing to decline, investors are selling yet price continues to float.

Here is the Blue Water MP, also for a 90 Day look back…   Similar yet with differences which I believe is due to their scaling code to squeeze unbounded volume data into a fixed display window.   This is annoying as many of my trade triggers rely on reliable HVA definition.


Volume for both markets was lighter than average and with value essentially unchanged, this amounts to simply waiting for the storm... Hindsight shows a CLEAR reversal pattern on the NQ. The price was ripping down at such speed, it raised question on taking it but did yield good money.

Targets for tomorrow. - I've no idea what the market will do with the the labor number, with the hurricane, with global banks in arrears, with the election. Volume has been diminishing and the ranges tightening typically meaning it's time to move. Who knows where and how orderly will it be... Get up early and watch for elephants.... Nonetheless.....

If NQ breaks above ATH and into white space, go with the Pivot and Fib levels on TOS.  If price falls, week defined support levels.

The ES if further away from white space.   A break out in either direction and we’ll pay attention to our defined support/resistance levels

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.

What Happened with Gold? 10/5/2016

I was watching the charts when gold liquidated hard yesterday, wasn't in the trade yet watched several do well.   The move on the intraday time frame was large and made lots of news.   

Looking at the move on the 1 year chart suggests that the price of gold (in coarse round numbers between 1300-1400) during the Summer of 2016 was considered too expensive.

A retreat to a price level earlier in the year was appropriate.  Again, in coarse round numbers, this would be between 1200-1300.  What will be important is watching if the faster SMA's catch up and price becomes accepted in this lower range.

Zooming back and looking at the 20 year chart, gold is still above it's 20 year POC.

Is the sky falling? A reversion to the mean would be a better technical description.

I can see either price jump back into the 2016 Summer Range or become accepted in the 1200-1300 range. More likely, I suspect price will be filling in the low volume area between these two regions, what I like to refer to as the "welding zone"....

To Be Continued....

Tuesday, October 4, 2016

London Bomb Scare and Busy Markets

A very odd day..   Yesterday, I was confused if the market would continue it’s late day march higher or would follow the MP structure lower.  Recall this:

Well, surprise, surprise….   

(Neutral) Turns out the NQ engulfed yesterday and stayed within the recent range directly above its barnacle island while the (Bear) ES clearly refersed off it’s 90 Day HVA top and liquidated into its 30 day HVA (see below)

It began with the Asian markets holding steady yesterday’s rally position and then during the London session from 3-6am, price probed further higher before returning to yesterday’s settle.   At the open, we had every signal indicating we would be going long but as many days before, the probing activity longer would stall encouraging several false reversals off the top.  

Then came the bomb scare out of London which started a HFT sell frenzy with flash liquidation. Examination of the stopping points were insightful (Note to self - mark key points as potential gathering spots in the event of future "news").   After the bomb scare, price action went on auto pilot to recover some of the damage done in the morning.   It appeared to take a couple passes to be sure everything was in order and trades we should’ve seen coming. It was a good day to trade what was in front of us.

(Bear) In the afternoon, the pit session went opposite of yesterday’s trend and began to liquidate which agreed with the day time framing - Lesson, go with the bigger trend...

Overall, the volume was very strong today with this wild news.

(BEAR) For the ES, we actually have the makings of a Bearish engulfment of yesterday’s range. Initial eyeball analyses says go short on ES.

(Neutral) The NQ was able to maintain building support above it’s barnacle island

Based on the MP alone, my call for tomorrow is

(neutral) for NQ at 4840-4890 or
(bear) for NQ into the LVA 4812-4846
(neutral) for ES into LVA  2146-2156)
(bear) for ES to 2121 HVA bottom

With so much price action today, a zoom out is in order (180 days)

(Bear) On Balance Volume shows a continued liquidation of shares since Brexit .  
(Neutral Bull) We see the NQ continuing it’s pattern of rectangles long.   
(Neutral Bear) It appears ES may have put in a complex top with pendant and returning lower to fill in it’s LVA

Simply for reference is the YM chart agreeing with the ES chart and showing we are on the Bear side of SMA200 and approaching a point where things might start getting interesting...

Zooming into today’s action:
Very good agreements, this market is clearly being operated by short term brokers and dealers
Key Levels reached:
(Bear) NQ Low at Major Trend line, Fib level, 90 Day Barnacle Island HVA edge
(Bear) ES LOW at 30 day HVA POC Edge & Globex Low (-3 nights)

VOLUME : nearly twice average volume

POSITION/STRUCTURE - Within well defined MP Structure.  Today’s MP displayed 3 distributions.

Runaway / Excess / Spikes - None
MP POC/VA/LOD/LOD Feature relationships (higher, lower?)
  •      (Bull) (NQ engulfed yesterday, POC higher, settle higher)
  •      (Bear) ES engulfed yesterday, POC lower, settle lower)

TEMPO - Multiple drivers (morning, post bomb scare clean up, and US/afternoon mission)

Has one time framing failed?  
  •      (Bear) ES still framing lower
  •      (Neutral) NQ stil neutral

Lower closes and lower lows project the probability of lower prices 85 to 88 percent of the time. This trend usually lasts for three days before reversing.
(Bull, both ES & NQ) End-of-day trend (last hour) returned to the VWAP/POC after a day down low

Directional Preference
  • (Bear) ES Moderately weak (higher volume, OL lower)

Sunday, October 2, 2016

Wrapping up September and Looking Into October

The ES appears clearly above the base camp from last year and filling in th LVA between the basecamp and the barnacle island.  Observe the long term negative slope of the On Balance Volume - This is telling us long term (?) money is leaving the market, selling to retail buyers near the highs (see other institutional volume filters)   

There are four green trade zones:
2165-2180 - The top green zone is the Barnacle island.  
2145-2160 - The center (is an intermediate LVA below the barnacle island.
2120-2140 - The green zone below is the 30 day HVA.   
2100-2120 - This green zone gets is back to the contract low
Further levels lower exist from the prior contract.

2165 has demonstrated to be strong resistance and an accumulation level
2140 has demonstrated to have strong support and an accumulation level

The NQ is building support above it’s basecamp. On weak volume, achieves all time highs. Observe how the NQ On Balance Volume is climbing positive indicating net long positions.   This is opposite of what’s happening in the and making signals based on confluence “goofy”

The four current trading zones for the NQ are:
4900-4975: While space where I am anticipating low volume cautiously probing  higher
4850-4900: The 10 day HVA directly above the barnacle island
4750-4830: The barnacle island (price appears to visit this area regularly to be sure it’s still there)
4615-4747: This area covers us to the contract low.   If we fall into here, it’ll probably be due to bad news

Strong support appears at 4800

The Market Profile view shows the NQ and ES being slightly out of phase (NQ above it's barnacle island while the ES is entering it's barnacle island from below.    The pace at which the market is climbing higher is definitely much slower than when we had QE pushing things along.   Trade this region carefully.

Commitment of Traders - We have the ES and NQ going in different directions, perhaps due to some sector rotations.   Keep this in mind if you're seeking confluence between the two markets for signal entries.   (charts from

Buying:  Asset Managers, Small Traders, Commercial Speculators and Dealers Intermediaries (short term money)
Selling: Large Speculators, Leveraged Funds
Takeaway, The index has mostly followed Large Speculators and Leveraged Funds,

Opposite of the ES!!!
Long: Large Speculators, Leverage Funds & Asset Managers
Short: Commercial Speculators & Intermediary Dealers
Takeaway, Long Term money was going long.

Well, we are doing much better than a year ago.