Eiger

D and H or I are the best trades on this day. L or M are also reasonable odds trades. B is aggressive, but good odds.

It has been a while – a nice, long long summer of good trading and other nice, relaxed fun…. A – Look at that volume – very heavy, but the close is off the lows. B – Hidden Test on volume less than the previous two bars. C – Up bar braking though resistance on wide spread and increased volume – no doubt – it’s bullish! D – After holding gains nicely atop of old resistance now support, a 2-Bar Bottom Reversal at Demand Line rallies the market upward. E&F – Although E moves up on heavy volume, F closes below the middle – possible selling and possible weakness. Next bar is up on light volume – possible No Demand and still uncertain. G – Next bars are up on good spread and good volume. Demand is still in control. H – After a sideways move, price returns to the Demand Line on a light volume down bar – No Supply. Next bar is up. I – Test J – wide spread up bar on good volume, closing on its highs – bullish. K – Heavy volume, close in the middle, potential supply. L – Hidden Test M – Test and rally into the close. Have to love VSA! Hope this is helpful, Eiger

Yes, it is profound. I think the times in which RDW wrote shaped his thinking, or at least his analogies. Machines and mechanisms were new then, promising a bright future. Freud - writing about the same time - has a mechanistic view of the personality. Perhaps today his analogies would be influenced by the 0s and 1s? In the reverse order from where (I think) you may be going ... A chart of yesterday's activity in the S&P eminis - the 1-point (1x1) Figure Chart (FC) Wyckoff used on many stocks. A fine resoultion of the coastline. A chart of the 5-point (1x5) FC. Same coastline, stepping back. --------- I haven't thought about randomness and probabilities with respect to FCs. I am quite interested to see where you will go with this. I like this definition of chaotic - "a system that appears random but behaves according to a well-defined set of rules." The rules I think about have to do with cause-effect, effort-result, supply-demand, and now, up-down --------- And speaking of up-down, a third chart showing the 3-point (1x3) FC with the Wave Chart superimposed. Facinating, isn't it? Now, add an element shown in Tape Reader's chart and you have something marvelous, which, of course, Wyckoff saw so long ago. Eiger

A wave from the Wave Chart represents a figure(s) on the P&F (and vice versa), but few understand this point. Nice to see you here MW.

I found this post on "Re: Open and Free Discussion on Volume" interesting and have nominated it accordingly for "Topic Of The Month June, 2009"

A way to look at this chart from the VSA perspective is to first note the background conditions. The background indicates that this market has been trending down for most of the day. Although some volume came in at A, it was not climactic, which would give a clearer indication that the downtrend was over - so background is weakness. The rally up to C becomes overheated as we reach the old top at B. Spreads widen, volume suddenly expands. The spread and volume indicate activity. Markets do not like high volume on up bars because along with the buying, significant selling occurs within the high volume. We have high volume up bars on both 1 & 2. Stepping back from the individual bars a bit, note how the angle of accent steepens dramatically after D. It is unlikely that this can be sustained, though it looks to the untrained eye to be quite bullish and many traders are buying into the rally here. At bar 2, volume is essentially the same as the volume on the wide spread bar at 1. Notice the difference in the spreads between bar 2 and bar 1, yet the volume is nearly identical. This can mean only one thing - significant selling occurred on this bar. The volume indicates substantial activity (both buying and selling), but the spread shows that for all the buying taking place, the selling not only matched the buying, but prevented price from moving higher. Another way to think about it is this: if buyers were truely in control on bar 2, then bar 2's spread would be similar to the spread of bar 1 and price would have rallied up to about the level of E, give or take. Instead, it is the narrowest bar in the rally. Only large, professional interests who have the wherewithall can do this. Bar 3 tends to confirm the immediate weakness. The market tries to rally higher and makes a new high, but then falls and closes well below bar 2. The thrust to the upside has shortened, and we see a close just below resistance at B. The spread has also widened (compared to bar 2) to the downside, indicating weakness. Bar 3, though, has volume less than the previous two bars. So some may see this as a Test bar. It is a bit wide for a clean Test bar, but more importantly, there is weakness in the background. We discount tests when the backround is bearish. But, let's say you weren't sure. Maybe you are thinking that this is a Test that is occuring after some weakness has come in and maybe the test is negating that weakness. The key to solve this dilemma is the next bar or two, and the very next bar tells us. The bar after 3 is another down bar (lower close) and closing under the resistance at B. It is also making a lower high and a lower low (bar high and bar low). Note the volume. This is the key here. It increases. It is showing downside pressure as it slips lower. Again, another way to think about this is that if the increase in volume was buying over selling, then the bar after 3 would be up making a higher high and the spread would likely be wider as well. Instead, it has the largest volume of any down bar since the rally at A. During the rally from A to C, down bars brought out lighter volume (it was the up bars that had good volume). Now this has changed and we see volume come in to the downside. So, this shows us that market behavior has indeed changed from up to down, further confirming the weakness we have seen on bars 1, 2, & 3. When you are unclear about what is going on, wait for a bar or two -- it will usually tell you (a useful rule of thumb). This is a nice study and I am glad you posted it. It illustrates how to properly use VSA: Always, always, always seek first to understand the background Identify key support & resistance levels Look for the important VSA principles to unfold on your chart, especially at S/R Be detailed about how you look at the bars, but always stepping back to gain a wider picture If unclear about what is happening, be patient. The next bar or two will usually help you interpret what is going on. Hope this is helpful, Eiger

I appologize to you Monad for my recent comment and have delted as you requested. Eiger

That seems fair. Let's give him a day to respond.

Mr. Rumpledone, I googled as suggested and found no clear link that seemed worthwhile. If you post your indicator in the Coding Forum, we can link into that from here. Otherwise, i will have to agree with Tams and delete your posts. Eiger

I agree that volume drives the market. Regarding tracking volume intrady: One thing I like to look at is volume in the first part of the morning (in ES). I compare the first 15 to 30-minutes of the morning volume with similar periods over the last 10 days. It often tells me what kind of day to expect. For example, if volume is significantly higher during these periods compared with the first 15 to 30 minute periods of the past two weeks, it suggests that larger interests may be coming into the market. If the market is trading on one side of the open and gives us a wide range or wide candle body early on (first 15 to 30-minutes), then I am looking for a trend day. On the other hand, if volume is just average or especially below average, I am expecting more of a range-bound market where fading tests of yesterday's highs or lows might come into play. If it is really low, then it's likely an NR day. Usually on the intraday, volume is heaviest in the early hours of the session and in the last hour or two. It tends to be lighter between these two periods (the 'volume smile'). If, though, volume picks up significantly when it is usually ebbing, it can be significant. If we get that in the early part of the afternoon, often it will result in a directional move into the close. These are just a couple of observations, FWIW. I think it is useful to have a 'mental map' of the market, and for me, volume figures pretty promentently in that map, but this is my personal take and others may see it differently. BTW, I am looking at the total NYSE volume during the day for this. Eiger

Hi DGC, It is a wonderful course and it is what Hank Pruden bases his course on at Golden Gate University. Most all of it is written text (no video), though the third unit (there are five all together) is audio. Lots of charts that are well-described. Point and figure charts were a fundamental staple of Wyckoff's analysis. Very odd we never see them presented here, but I couldn't tell you why that is. In any event, the course has ample instruction on how to construct and read P&F charts. Like everything in Wyckoff, P&Fs require study and experience, but all well worth it. FWIW, the person I learned Wyckoff from and who learned it in the 1970s when the latest edition of the Course was published, said that people studying the Course at that time revered it so much they used to talk about it in whispers. IMHO it still deserves that respect. Hope this is helpful, Eiger

As a follow up to the premarket Spring posted earlier and to get this thread back on track .... Just because a market dips below support and then rallies, doesn't make it a Spring. On the attached achart at A, the market comes down on wide spread and an increase in volume - not what we are looking for in a Spring. The wide spread, poor close, and increased volume is an indication of supply. Compare the premarket Spring with the behavior at A. In the pre-market, we see a modest dip under support. At A, we see the largest reaction since the rally began. The larger reaction, wide spread, and increased volume to the downside signals a change of behavior and not a wise place to enter longs. Hope this is helpful, Eiger

No free course that I know of. Tom Williams's Undeclared Secrets that Drive the Stock Market is the basic text for VSA. The Wyckoff Course is available from Wyckoff/SMI - google and you will find. Units 2 & 3 are the heart of the course, if they still sell it by individual units. Eiger