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Eiger
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Everything posted by Eiger
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Over the weekend, I was reminded of a wonderful quote out of Wyckoff's (aka Rollo Tape) great little book, Studies in Tape Reading: "The study of responses ... is an almost unerring guide to the technical position of the market." This is such a great concept to keep in mind. A look at the hourly chart of the ES from the Spring in mid-March shows this pretty well. After the shakeout at A, reactions were orderly (B & C), or they held gains very well (D & E), refusing to budge lower. The last two reactions in particular indicated higher prices as the market absorbed the overhanging supply from the August 2007 low and the top of the recent trading range before breaking out of that range. Here's a fun excercise. Take a look at the second chart. There is no date or other identifying data on this chart. You can see the rising wedge formation comining into resistance. This pattern predicts a big break down, right? Some were saying the same thing about this current market, in fact more than once Now look at the third chart posted to see the result of that wedge. The heart of technical analysis lies in that simple quote of Wyckoff's, I think. Patterns and chart formations certainly catch the eye, but often they are just eye candy. Like Wyckoff, VSA is also highly concerned with responses. When we see a Sign of Weakness develop, for example, we want to see it tested with the No Demand principle before trading it. The No Demand shows us that there is no response to the upside, and gives a green light. There are lots of other areas in VSA where the idea of responses applies. I was glad to be reminded of this quote. I put it up on my monitor to remind me of its value, least I forget it Eiger
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Amazing how you avoid the subject. You have never pointed out the differences; just complained. Whatever.
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But you have never pointed out the differences, just complained. There was a whole new thread set up before to discuss complaints and differences about VSA, to which you chose to never avail yourself. You simply continued to bitch and moan here. You always do this and have never substantiated your complaints. Now you have another opportunity. So highlight the differences in the new thread. Then maybe you can let it go? Eiger
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You are forever complaining about the differences between the original, SMI, and VSA. Why don't you highlight all the differences on the new Wyckoff Resources thread instead of always bitching and moaning about it everytime someone makes a post regarding SMI or VSA. Eiger
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Unit 2 encompasses the original Wyckoff Course and is fundementally the same as the original, mostly reformatting and some clarifying - hardly a reinterpration. The Course was later expanded mainly by the excellent work of Bob Evans. The additional material was kept separate and is found in Unit 3. The other three units include an introduction & overview of the method (Unit 1), practice trading methods (Unit 4) and a "final exam" (Unit 5). There is much valuable material that supplements the course also available from Wyckoff/SMI. The comment: "Everyone else adds their own interpretations interpretations, ideas, adds things, deletes things, etc" refers to forum threads, blogs, websites, books, software and the like regarding Wyckoff trading. Each of these is neccessarilly a reinterpretation (often quite poor and woefully misinformed, though a few good) of what Wyckoff/SMI has been studying and refining for over 100 years. So again, why not go to the source?
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http://wyckoffstockmarketinstitute.com/ This is where the original/authentic material on Wyckoff is located. Personally, I think it is wise to be very wary of all the rest. Everyone else adds their own interpretations, ideas, adds things, deletes things, etc. You can get the Wyckoff Course here, plus a wealth of realated materials.
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Thanks, MrEd. The figure charts are really something, aren't they? Wyckoff used them extensively, and they can be a big help in intermediate trading. Funny these haven't been discussed. Bob Evans is the early Wyckoff trader at Wyckoff/SMI I referred to. He did extensive work on the figure charts and came up with a succinct way to use and understand them - really great work, including ways to use the FC to time the market. His Count Guide is linked below, for anyone interested. Consult the Wyckoff/SMI Course - unit 2 and especially unit 3 to learn about figure chart application. These are the only things I do by hand anymore, but definately find it useful to do. These are based off the 15-minute chart and updated at the end of the day. I don't try too keep figure charts intraday, though sometimes if there is a long sideways line on the intraday chart, I will do a quick FC to see the potential move. For anyone who hasn't kept charts by hand, its quite good to do. You definately get a feel for the market, which you don't get from the computer screen. As i mentioned earlier, its one of the key things that had kept me bullish despite the weak rally. You can also go to stockcharts.com and get free figure charts, which i often do for a "quickie read" on a stock. There is an inexpensive program called Bullseye Broker (archeranalysis.com) that has good software for figure charting. The other things out there that i have seen use different methods than Wyckoff did, so i don't know how useful they are. Thinking of hand charts, I used to keep hourly hand bar charts of the major indexes and key stocks, if you can believe it. For intraday, I also used to keep 5-minute swing charts by hand. These are also very valuable to do. (I now have this computerized along with the Wyckoff/SMI O-P index that updates intraday, so I don't even do that anymore!) Doing the hand work is really valuable, though. Another very useful thing I still always do is annotate the bars during the day and mark the VSA indications. It's useful just to go bar-by-bar and note up bar/down bar, spread, volume, significance. Do this a while and it will quickly improve your chart reading abilities. Eiger COUNT GUIDE.doc
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It's best to go straight to the source. Why would you go anyplace else? The Wyckoff/Stock Market Institute was originally founded by RD Wyckoff (as Wyckoff Associates). It has operated continuously since the 1930s. There is over 100 years of Wyckoff information here. The best place to start is with the Course. Here is the link: http://wyckoffstockmarketinstitute.com/
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One reason I have continued to be bullish on the stock market is that it hasn't given us any sign of weakness or change of behavior. It certainly hasn't been the most vigorous rally, that's for sure. But a trend will often continue well beyond where we think it ought to stop. Plus, a successful Spring can be a fairly potent indication of strength. On the SPX chart attached, you can see the longer term Supply Line (in red) and the horizontal resistance line (in blue). You would think that this resistance should have stopped the up move - sell resistance and buy support, right? Look carefully at the character of the price and volume at this resistance area. It didn't react much. Instead, it held its gains and absorbed the overhanging supply. As it came back down to retest the blue horizontal resistance, and then the red Supply Line, it did so both times on light volume and narrowing spreads -- straightforward VSA principles. It did this while holding the Demand Line of the up trend channel (green line). Another thing that has keep me bullish is the point & figure chart. The first figure chart (FC) is a 5 point FC of SPX (a pdf file; use the view tab to rotate). I draw this by hand based off the 15-minute chart. It is updated through yesterday. There is a count along the 1280 line that projects up to 1415. This is where we are currently. Now i am not saying that just because the FC had that projection, that the market would go there. But, just like the daily bar chart, the FC shows a fairly orderly sequence of higher highs and higher lows from the Spring in mid-march. No substantial cause developed on the FC to reinforce a significant bearish view. The FC can be useful in many ways. Currently, the FC is showing we are at a resistance area. There is enough cause to create a reaction consistent with prior reactions, but that would break the current Demand Line on the daily bar chart (green line) and might change the current outlook. That would, of course, depend on the character of the reaction. One of the early Wyckoff/SMI traders used to say that FC count projections were places to "Stop, Look, and Listen" -- meaning you don't just change form bullish to bearish because you hit a FC projection or a resisitance area. You want to assess the market carefully at these areas. Right now, I see no indication of weakness. There is another projection on both the 5 pt FC and the 3 pt of the 5 pt (or 5 pt by 15 pt FC) that indicates a potential move to the 1480-85 level. Will we get there? Who knows. It is at a level where there was a lot of churning before the market fell, so it would be an area where a lot of supply still exists (dashed line on the daily bar chart). We shall see. I will simply continue to let the market tell me what it will do. Eiger SPX FC 5 pt FC.pdf SPX FC 3 pt of 5 pt.pdf
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I agree. It is tiresome. There is another thread to criticise VSA. Everytime time a little positive activity comes onto this thread, DB jumps right in and starts criticising VSA. It's all attention-seeking behavior. Very, very boring.
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Of course price can rise on no demand. It does it all the time and it is quite logical. Playing with semantics does not make it different. Take the attached chart as example. Prices rise all afternoon. Note that the volume is generally expanding with the increasing prices. Demand is pushing prices higher. It then rests a bit, and then rises again. Price then reacts (note the increased volume on the reaction). But then price starts to rise again. Is there demand for higher prices? No. Look at the spreads and look at the volume. As price rises to 1, volume retreats. The same thing occurs on bar 2, volume retreats and also the spread narrows. This is quite different than the rally on the previous afternoon where demand was evident. Price has risen on 1 & 2, but it does so on No Demand. This is why even though it goes a tick or two higher on 3, it quickly falls. There was No Demand at that level for higher prices. You see this all the time in the markets and with weakness in the background, an excellent place to take a short. Word games won't change this characterisitc of the market. Eiger
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Well, well, well. A little positive activity on this thread and look who shows up to start criticising VSA and those who trade it. How many times have we seen this scenario before? Tiresome, isn't it? Its not even constuctive; its just another attempt to derail the thread and gain attention. You know, it would be laughable if this obvious attention-seeking behavior wasn't so sad. There is a whole thread set up specifically to criticise VSA and TG. How is it that we haven't seen one post by you on that thread? I think it odd that a person who falls all over himself to criticise VSA on this thread doesn't take the opportunity to do so there. I guess you must just have another agenda. BTW, I really like all those shorts you've been recommending and especially all that hindsight analysis. Keep up the good work!
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Hi Nic, Thanks for the reply. I agree with you that this market has not had a classic bullish response as per the SMI/Wyckoff Course. We talked about the lackluster response earlier. I think the main point is that the rallies all have been stronger than the reactions since the Spring in mid-March. You can be right and this may turn into a trading range (though I think the Dow and Naz indicies suggest otherwise). In any event, I am not trying to pick a top. When there is a significant SOW and the market next rallies on weakness, I will be first in line to shout BEARISH, but not until then. To me, confirmation is important and this market has continued to confirm the upside. The bears have been suspect of the market from before the outset of the current rally and have made bearish calls at any temporary weakness. Unfortunately, they are trapped by their bearish bias. Bias is killer for a trader (do I ever know about that!). Brett Steenbarger has posted some useful ideas today about self-assessment at the end of the quarter. In one of his comments, he suggests that traders ask themselves the following: Have I adapted well to market changes? How have my markets changed over the last quarter, and what did I do to adapt? Which of those adaptations do I need to emphasize in the next quarter? Which further adaptations can I make next quarter to deal with market changes? All traders should undertake this type of periodic self-assessment. Those who found themselves consistently on the wrong side of the market in this recent rally might find particular utility in this excercise. I have not seen real weakness on the intermediate term. Maybe yesterday was the start of it, but maybe it will just give us a repeat of April 30. I don't know. Right now I remain bullish, and the stocks I bought lower down - for the most part - are doing fine. Do let me know, though, if you see any Grizzlies roaming about Eiger
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I've been away from this forum for a while, but thought I'd step in and say hi to everyone. Here's an update on the SPX - sort of a back then and now. If you recall, back in mid-March and again in early April, I indicated that the technicals looked good for higher prices above the 1395 highs in the SPX. It must be quite frustrating for the bears who are still calling for shorts! Will they ever learn? The news has been bad and the market continues to show strength from the lows in mid-March. This should tell them something. The only real concern was the high volume up day after the Fed cut rates dramatically (Mar 20), but the subsequent reaction was on narrow spread and low volume (a test), as has been the character of every reaction in this uptrend since. The period of absorption came later than I originally noted, but you can see that the market nonetheless bought its way through the supply area between 1370-95. Today, the market bounced off the longer-term Supply Line (now support) with some vigor. The market has been trending up and has not been in an overbought position nor shown signs of major supply or ending action. I don't see any concern to long positions taken at lower levels. Rather than hugging tight to a bias and looking for anything that would confirm that bias (known in Psychology and Behavioral Finance as the error of "Confirmation Bias"), I think it best just to follow the market day-by-day using Wyckoff/VSA principles. Eiger
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Oh well, so much for that trade.
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Here's a live trade that corresponds to something I am working on in myself to improve. I sold ES short at 1350.75 on what I perceived to be stopping volume/climactic action at significant resistance (higher time frame horizontal and supply line resistance). What I am working on to improve is holding trades longer than 2-3 points. But, i am also a pretty conservative trader. So, I covered 1/2 the short position at 1348.75, and locked in a profit. I brought my stop down so that even if stopped out on the second 1/2, I will cover my costs of the trade. So, I am trying to hold a short position on a free trade, so to speak, to see what the market might give me. We shall see.
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I thought there was a fair amount going on today. I really was impressed with the way price traded all around the 1331.75 line. I was a little surprised by the strength that came in during the afternoon, though. I almost got nailed on the Upthrust late in the afternoon, but was able to bail out when I saw the reversal and Test about 10-mins before the close. There really wasn't any climactic action preceding the Upthrust, but I found it hard to tell in the moment. I should know better than to fade new high ticks late in the day, but at the time, I thought that UT looked so good . You can really see all of the VSA principles at work. The real art of trading VSA (I think) is to maintain concentration and keep with the flow of the market while looking for each principle to take place. BTW, the attached chart is the 3-min ES. Eiger
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I use the 10 or 15-min and the 3 and 5-min charts in this way all the time. Here is the 10-min chart i posted last night along with the "faster" 3-minute chart. The circled areas on the 3-min are where the high odds trade locations took place. When you study the 3-min, you will see a VSA principle that serves as trigger for the trade. So the 10-min or 15-min is the chart I watch for the set-up, and the 3-min or 5-min is the trigger. Also, because the set-up occurs on the higher time frame, you can hold the trade for more than just a scalp. Eiger
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Great observation, CW, You can see them come back into these price acceleration areas all the time, on all time frames. They can be like magnets for price to revisit (and thus, short exit objectives, or long entry areas). I think that the wide spreads and heavy volume (WRBs) indicate demand, but also supply. They come back to test these areas before rallying prices to make sure supply isn't present to swamp the subsequent mark-up. Eiger
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Hoping this thread now gets to be a normal thread which remains on-topic to VSA. Here's my take on today. Although a narrow spread on the day, there were good opportunities around S&R. This is a 10-minute chart of the ES: A – Wide spread close off the lows on an increase in volume with the next bar up is the first hint of potential buying. B – Wide spread up bar closing above its open and on its highs. There was buying just before the 8:30 news. C – Ultra wide spread up bar closing in the middle on substantially increased buying. This was the reaction to the news, and it looked as if selling was coming into the market, but the next bar closed up on good volume, indicating higher prices. D – The day session opens and this is an up bar closing near the highs, but making no material gain above the highs of the pre-market session. E – An up bar closing on its highs on sustained volume, but again no material gain on heavy volume. F – An up thrust on wide spread with the largest volume of the morning. This indicated supply was dominate and the market weak. G – Some buying entered but the heavy volume continued to indicate supply. Next bar was up, but on significantly lower volume. H – Higher prices rejected at the opening resistance. Note the increased volume. If that was buying, why did the bar close below its open (in the middle)? I – No Demand J – Reversal that once again rejects the resistance area formed by D & H. Market heads lower back to the area of overnight support. K – A down bar closing in the middle on an increase in volume. Buying comes in on this bar. L – More volume and a close back into the area of the previous bar, K. Next bar is up, and the market rallies for the next 3 bars making higher highs, higher lows, and higher closes. M – A down bar closing off its lows on volume less than the previous two bars after strength has appeared in the market. A Test indicating higher prices. N – The market rallies to an old top to the left. Bar N has a fairly narrow spread, closes on its highs, but on a marked increase in volume. Next bar is down. O – An UpThrust on wide spread taking out the lows of the previous two bars and closing back below the resistance area formed by D-H-J. The market reacts and shows no strength. P – Another UpThrust after a weak attempt to rally. Q – Volume increases suddenly on the bar before Q and is sustained on Q, which closes in the middle. Buying came in on these bars. R – A down bar closing on its lows on volume similar to Q. The market has an opportunity to fall lower here, if supply has regained control. S – Instead, we get an up bar on increased volume which closes in the middle back above support, and a small rally into the close. Eiger
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This thread looks like it will have some excellent material. I am really looking forward to it. Thanks for starting it. Eiger
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A lot of good insight in this post, I think. I like the analogy to the martial arts and the thought that whatever was studied, they would have become great martial artists (it's less the method, more the person). It's the same as saying that Tiger Woods would have been a great tennis player, had he been handed a racquett rather than a club when a kid. The main reason for this thread was that these debates and discussions were taking over the VSA threads and that was discouraging discussions on the practice of VSA as a method from happening. I guess you might say people were debating over which piece was most important, rather than playing the chess match I think you have a good point: there is no one best method of trading, but there is a best method for you. This point (and several others) was made in the Market Wizards and New Market Wizards books. Nearly everyone traded the markets in different ways, and were quite successful. Eiger
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VSA comes out of the work done by Richard Wyckoff. Wyckoff was an early US trader. He started on Wall Street around the turn of the (last) century, had a brokerage business, and eventually had a newsletter and wrote a course. He was close to the major traders of his day like Jesse Livermore and EH Harriman, and studied their methods along with the big money pools and their operators. Wyckoff learned that he could read the tracks left by the bigger operators in the volume and price action on the charts. He wrote a course about this and other materials and created an organization called Wyckoff Associates to contiune his work and to educate traders on his methods (he died in the 1930s). Wyckoff Associates later became the Wyckoff/Stock Market Institute. SMI expanded the course over the years and continues to publish Wyckoff-based work to this day. Tom Williams traded for a big money syndicate (similar to the now outlawed pools of the pre 1930s) and used Wyckoff's methodology in his trading. Williams retired from syndicate trading and wrote a book called the Undeclared Secrets that Drive the Stock Market . In the book, he places great emphasis on the reading of volume as the reading of professional activity in the market, and that is it the professionals (i.e., big money operators, not the 1 & 2 lot traders) that move the markets. Williams also developed a charting package called Wyckoff/VSA by Genii Software to help identify and highlight trading principles as they occured on the chart. This later became TradeGuider. Market Profile is separate from VSA. Also, as Rick mentioned above, VSA looks only at the HLC, so candelsticks are irrelevant to VSA. Eiger
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I am coming in a little late to this, but I want to say that I think this is a terrific idea. Let all the philosophical debates reside on a separate thread. At this point, all these distractions are so tiresome, and often motivated by something other than VSA. It gets boring when we see yet another post trying to debate how many upthrusts can dance on the head of a pin? I (and I suspect others) now just withdraw when these debates start. I also agree with you about deleting threads. Unless it is a post in patently poor taste, censuring will only generate hard feelings and more distractions. This is a great idea. Thanks. Edit: I see that the new thread has rallied right out of the gates. As Martha Stewart would say, "That's a good thing." Eiger
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Hi CW, I think that was a good reading of the chart, and certainly good trade management. Maybe the volume on the WRB wasn't ultra high? (I don't know this market). Volume didn't pick up when it approached the low of the WRB compared to the first reaction down (between the two failed tests). Given the data on the chart, that's about the only clue I see. What was to the left of this? This is an interesting chart. Maybe you can post another chart with more data? It was still struggling later in the day at the 15050 area. I don't think VSA addresses the idea that WRBs can be support, as indicated on your chart. Others use them this way too. It might be a question for Williams and Manby? Eiger
