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Eiger
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Everything posted by Eiger
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Thanks, Dan. I would have bought B on the close with a stop just below (though I didn't take it because i was perplexed with A). It was a reversal bar and closed well into the preceding bar after dipping down underneath it. That's a pretty strong bar in general and shouldn't come back on you. Sometimes, the next bar will retrace a little into the reversal bar, but sometimes it just takes off, so I just take them on the close. These trend channels shifted a few times during the run up. I first drew a demand line from B and the small swing low preceding B, with a parallel from A. That was OK for taking C, but made A1 look quite weak. It wasn't until D was in place that these trend lines were drawn. You could also have drawn reverse trend lines off A and A1 just as effectively. I thought they highlighted the top at E1/E2 pretty well. I think you heard Sebastian correctly. The trend lines are support and resistance. Tom Williams talks about this in his book. You do want to see No Demand and UpThrusts occur along the lines, and also see volume recede.
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I thought today was a pretty interesting, sometimes a little difficult to figure out, though. I have a VSA question for the experts. Maybe you can help. I attached a chart of this morning's session in the ES (5-min). The second bar this AM (Bar A on the attached chart) had 80,000 contracts on it. That is ultra high volume for a 5-min bar, even off the open. The bar was fairly wide spread and closed on it's lows on the heavy volume. I read this as supply. The next bar was a level bar. Then, two bars later on Bar B, price dipped lower and reversed closing on its highs. Volume was less than the previous two bars, and B bounced off of the last top at the area I labled as 1. I didn't buy this test, as i was concerned about what I thought was supply on A. Was I reading A as supply correctly, or am i missing something? Is this one of those instances where the market suddenly becomes bullish at B? This drove me nuts all morning Thanks for the help, Eiger.
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My experience of reading and re-reading the Undeclared Secrets is that it was a real eye-opener. I had studied and used Wyckoff prior to reading Tom Williams's book, so I was already pretty familiar with the concepts. I think, however, that the Undeclared Secrets brings Wyckoff to life. It explains the concepts and prinicples of supply & demand and no supply, no demand in a very unique and comprehendable way. It is a true manual on tape and chart reading. The Boot Camp CD is also highly valuable, but I see this more as an extension of Undeclared Secrets. The recent Master Classes - more high quality material - also augment the book. Personally, I didn't really understand chart reading until I studied Undeclared Secrets. I think so highly of it that I just finished re-reading it again. I have re-read it several times, and have a notebook full of my own notes on the book. As usual, I learn more on each re-read. All of the material put out by Tom Williams and TG is valuable, but I wouldn't miss the book. That being said, I don't know how different Undeclared Secrets is from Master the Markets. I have heard there are differences, but never read MTM. Eiger
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It is No Demand, but you have no background for the No Demand to be meaningful. To be meaningful, you would need to see supply hit the market. Once you see supply, then you look for No Demand. You have an up trend on this chart. With the overall background bullish, this particular bar has no real meaning. If you are in need of a resource on this, the TG Boot Camp DVD set goes into this in great detail, and is quite worthwhile to study if you are interested in learning more on how to use these signals and when they are meaningful. Hope this is helpful, Eiger
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Don't you mean the "Mordwand"? The first test is known as a Secondary Test - this is what Wyckoff called it, most just refer to it as a test. Note that the low of this test comes into the area where there was ultra high volume on the SC. It is a test of that volume. In this chart the test still had some volume on it. I assume that this is why it was tested again with the Spring. A Spring is also a test. To be a Spring, however, the low of the Spring bar must penetrate the low it is testing. This is one of the reasons why it can be such a good trade. If there is strength in the background, and there is a test of a high volume area where price dips below support and does not draw out supply, then this is a strong signal that there is no supply left. The market will thhen often rally vigorously. Eiger
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Morning Session on the ES: Here is what I saw this AM (3/12/08) on the 5-min ES H8 chart: 1 - Globex high A - Market falls to the early morning demand line (support) where buying comes in (note mid-range closes and very heavy volume) B - Market falls into an Over Sold position. B shows a narrowing spread and mid-range close on heavy volume. This is bag holding. They were buying at A and again at B. The bar after B is a Bottom Reversal, confirmation that the buying was successful and the trigger to an up move. C - Test on volume less than the previous two bars. Next bar is up with a strong close. D - Market runs up above the Globex high, but immediately selling enters the market. Very heavy volume on up bars. Note the close off the highs on the bar before D - an indication that supply is beginning to swamp demand. D is a mid-range close on continued heavy volume - supply overcoming demand. Confirmation comes on the bar after D, a down bar. E - an attempt to rally, but on No Demand There is some support around the 9:30 high, as seen by the shortening of thrust and mid-range closes. It may try to rally from here, but we'll have to see. All of this is based on my studies of Wyckoff and Tom Williams's good work, nothing more. Eiger
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Here's a chart of the daily British pound (March contract) through today. E-Signal plays with the volume, so it is off by one bar (annoying, and it always makes the work difficult). Anyway, this is an interesting chart. First, does this remind you of today in the ES? There is a Selling Climax, rally, then not one, but two tests. The second test is a Spring. A Spring often puts the market "on the springboard," as Wyckoff used to say. And, this market was no exception. A quick and vigorous rally off the Spring led to a Jump Across the Creek and an uptrend. Note the absorption that occured at each resistance area. This is a classic chart. So, two good examples of how Springs work in two different markets and time frames. It is one of my favorite trades. Eiger
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Those are them (not sure about that grammar, but those are the two areas of the springs) If any one wants to post what they see as the differences, we could have a discussion about a valuable trade set-up that comes up often in all markets and all time frames. This is one of my key trades. It is Wyckoff based (actually, I don't believe that Wyckoff had ever wrote about springs, though he did discuss shake outs, which are a bit different. I believe that the spring concept was developed by Bob Evans, a successor to Wyckoff). There are times not to take these trades, but when the background conditions are right as was the case today, they are excellent trades. Eiger
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The most valuable trading books I have read are: Undeclared Secrets of the Stock Market - Tom Williams The Wyckoff Course in Stock Market Science & Technique - Richard Wyckoff Reminisensces of a Stock Operator - Edwin Lefever Trading in the Zone - Mark Douglas Eiger
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Ticks are the net number of shares on the NYSE trading on the up-tick or down-tick (i.e., trading at a higher price than the immediate last price or at a lower price than the immediate last price). They can be helpful. The S&Ps have most of the biggestest, most important stocks of the NYSE - sort of a sample of the NYSE, so Ticks are fine to use with the S&Ps. It is the only other indicator I use when trading the ES. You can use the Ticks kind of like an oscillator. Usually, when the market hits an extreme of buying or selling, the ticks will show an extreme. Typically, these are in the +1,000 to -1,000 range, but it all depends on the day. At the Selling Climax at noon today, Ticks hit -1229. That was pretty extreme, given that they didn't crack below -1,000 throughout the morning downtrend until the climax. They can be useful for timing an entry, too -- sometimes showing an extreme reading (like that buying climax yesterday during the noon hour) and sometimes giving a divergence. For an example of divergence, look at the last swing high on the attached chart before the Selling Climax. It is not labled, but if you look closely, you will see that price rose higher at the top of the rally; Ticks did not, and that action resulted inan upthrust. Plot them on the same chart as price and volume and you will begin to see the possibilities. Here is a 3-minute chart of the ES with Ticks at the Selling Climax and Spring today. Note how ticks showed an extreme on the Selling Climax (the market was one-sided). On the Spring (L), ticks were considerably above the climax lows (K), indicating a lack of selling pressure. The same indication was seen in the volume. Here's a pretty good article on trading the S&Ps with Ticks: http://www.lbrgroup.com/images/terry_april_2002_AT.pdf Eiger
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Not sure what you mean by that. Other than to know when reports are due, I don't pay any attention to the news. It is not necessary to trade springs. I would never know what the news means to the market anyway.
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This was a Spring of a Selling Climax. The exact entry was on the close of the 12:55 bar on the 5-min chart at 1287.50. Risk was modest. Reward was very good. Springs are an excellent, high probability trade. Every one that sets up properly is a no-brainer. There are diffierent variations and they are thoroghly discussed in Unit 3 of the Wyckoff Course. You need to look at volume. This is the main indicator, along with the spread and close of the price bar. You have a Selling Climax in the immediate backround, and the market responded to the climax with a vigorous rally. Wyckoff said explicitly, once you see a Selling Climax, the market is now assumed to be bullish. The reaction back down to the SC area was on generally narrow spreads and receding volume, confirming that supply is now gone from the market. The penetration was minimal and the close on the Spring bar and the bar after couldn't stay under the SC. Also, as you noticed (but not necessary to see this as a choice Spring set-up) there was non-confirmation with the Naz for lower prices. You can't ask for a much more perfect set-up. There was also a Spring at 10:50 this AM. This failed. Here's a very good excercise: find as many differences between these two springs as you can. Once you have a sense of what you are you are looking for in these two springs, look for other springs on other days (there are plenty of them). Put each one you find into one of two catagories: Springs that Succeed and Springs that Fail. Do this with as many springs as you can find and you will soon own this trade. And, forget about candlesticks with this trade; they are immaterial and a distraction. Eiger
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I suppose there may be differences, but I see them generally as the same. Tom Williams's materials make it come more "alive", though. Units 2 & 3 from the Wyckoff course are the most important. Unit 2 is the original course Wyckoff wrote in the 1930s, though it has been somewhat modified over the years. Unit 3 has the refinements to Wyckoff that were developed from the 1940s on. Both are important. Start with Unit 2.
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You are right, it is a Buying Climax. When I see these I get so excited that I am just thinking about selling, I guess. Speaking of Selling Climaxes, there was a very nice one just at noontime today. You can see the volume come in beautifully on that. Study the 10, 5, & 3-min charts of this climax. It tells you a lot about how to read them. BTW, I feel that the work I put into the charts is necessary. It is not really work, though, because i love doing it. When i review the day and annotate the charts, I am also reviewing my trades, putting more emphasis on the trades that went well. Just like my charts, I log every trade. I find that doing this every night, I learn new things about the market and myself as a trader. On the weekends, I usually review the charts of the week, and sometimes for the last few weeks. It really helps. I think if you really want to learn VSA/Wyckoff, this is a good way to do it along with studying the available material by TG, Williams, and SMI/Wyckoff. Eiger
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Interesting discussion. I thought today was a pretty difficut day to trade, as there weren't a lot of VSA signals. However, there were some indications. The trend line off the overnight high in the Globex might have been helpful to plot. In the morining ES session, price was rejected twice off this supply line, first at B. Then, on the weak rally up, the bars at D and F showed supply - up bars closing in the middle with high volume. In between at E, we had No Demand. This all occurred at the supply line and where supply came into the market at B. H was stopping volume, but I agree with Db, it's not enough context ("background" in VSA) to take a position off that bar, tempting as it might seem. A better location was at I, where volume at least dried up and you had a second bottom reversal, indicating some demand for the typical countertrend rally over the noon hour. With the downtrend in place, however, I would only trade that as a scalp. You need cause (or a base of buying) to build before you would anticipate a decent rally, at least one that had good odds of running up a bit. J was a selling climax of the weak rally. The SC came at resistance formed by extending a horiztonal line off 2 & C (the red dotted line was not in place yet). Note the heavy volume at J and the mid-range close -- supply. VSA and Wyckoff both talk about trading ranges or congestion areas housing a lot of trapped traders. Those who went long around A, 2, & C, and again on the rally up to F were trapped and under pressure. They are hoping for a rally up into that area to get out even. Fat chance. There was not enough buying (cause) to take it up into that area. (As price starts to fall away again -- especially after 3&4 -- these trapped traders will help fuel the downtrend by selling). As it usually does, selling came in on the lows of that congestion area. 3 & 4 showed sideways resting action after a bit of volume came in two bars before 3. Clues that this was not going higher were: 3 was No Demand, and 4 had (slight) increased volume to the downside. K was the Selling Climax for the day (remember those trapped traders?). It occurred over two bars and caused a bottom reversal bar at K. They had a hard time holding the market up at L, though. I thought that this was bag holding at the time and went long. It didn't go very far. Look at the rally to M. Increasing volume and shortening of the thrusts. I kept looking for it to break to the upside (the two closes at M were constructive), but it never did. Still a lot of supply in the market. Eiger
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You are right. They focused on the Dow averages. I guess you would say that this is an extension of the theory. It can be pretty helpful at times, though. And it is also a good way to view relative strength and weakness among the indicies. The attached chart is the small distribution area and turn at the end of February highlighting the confirmation/non-confirmation between the SPY and QQQQ on the 10-minute time frame. At A, both made a new intraday high. SPY made a new high at B, but the Cubes did not confirm, and the early afternoon saw a small sell off in both markets. Interestingly, SPY then became weaker at C. The next day it continued to show relative weakness and gapped lower, made a lower low, and then a lower high at D. QQQQ tried to go higher at D, but there was no confirmation in the larger cap index. This occured again later (not shown on this chart) and the markets sold off for 3 or 4 days. Eiger
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This has several positive characteristics going for it, though the volume may still be a bit high. First, there is a potential Selling Climax in the background (January). Friday's price action is a spring, meaning that price has dipped below previous support and was able to rally during the day back above the low of the support. The penetration or dip below support was rather modest, so far. As noted, volume has receded. Each push push down into the climax area has drawn less volume. And, each time this has happened, a rally has ensued. Also, there was a small rally just before the spring. This is often a good sign for a spring as it is indicating the presence of some demand. You can also look at the other major indices -- S&P and Dow, and see that they both are holding higher lows. So far, this is non-confirmation of lower prices by the other indicies (i.e., they are not confirming the new low put in by the Naz -- a bit of Dow Theory that can be helpful in these kinds of situations). Even though there are a lot of positives, you won't know for sure whether or not this spring will lead to a new leg up without a couple of more elements (principles) coming into play. It can be still be swamped by supply. Even though volume has receded, it is still fairly high and needs to be tested. If you think back to the 5-min chart of SPY that I posted last week, you can see the same potential here. Along the tops of the narrowing trading range since the climactic action in January, you have a line of supply. SMI would call this a creek. Just like in the 5-min SPY chart, you now want to see the market vigorously rally away from the danger point (the lows) and get up above Wednesday's high on good volume. This would be a potential sign of strength and a jump across (at least) the minor creek. If we then see price react on narrow spreads and lighter volume and give a solid test, we have a pretty good chance of seeing higher prices. If it doesn't rally and just hangs near the lows in here, or just drops through support on increasing volume, it has much better odds of falling lower. Either would indicate a failed spriing or test. It will be fun to watch this. Remember, that this is the daily chart, and it will take more time to unfold than the 5-min chart. Nevertheless, the principles remain the same. Eiger
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I don't really know, Ed. I have only read the Undeclared Secrets. I have heard that master the Markets is different, but not sure how. You can ask Sebastian Manby. He might know. Eiger
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It was Bob Evans who associated the jump with volume, and where to expect a test. Tom Williams explains this particularly well in his book, the Undeclared Secrets. He talks about many, many trapped traders who went long along the top of the trading range (or, the creek). Professionals who want to move prices higher know that there are thousands of traders trapped up there, looking to sell and get out even on their poor trades. The professionals don't want to be buying the contracts or stock the trapped longs want to unload -- they already have their line bought lower. Having to buy at higher prices isn't good business. So, what do they do? They will rapidly move price through the trading range and jump the creek (or, gap it higher). When trapped longs see this, they are more likely to just hold onto their position and ride the mark-up. It saves the professionals money. It's a useful explaination of breaking through the opposition of supply. For the What It's Worth Department: Personally, I think Tom Williams's book is incredibly valuable. It is one of -- if not the -- most valuable trading books I own. I study it often. Mr. Williams created VSA based on Wyckoff and his experiences as a modern, professional trader. So, when studying and learning Wyckoff, his book is particualrly helpful (IMHO). I think it helps make Wyckoff come alive. Eiger
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For fun, here is the full SMI/Wyckoff analysis of today: Creek - The area where supply had come in at the top of the accumulation area. There is often (as there was today) a minor and a major creek. JAC - Jump Across the Creek - A Sign of Strength as the market breaks through the oppositional supply. LPS - Last Point of Support. A testing area that the market makes, usually in the same area as Preliminary Support. BUEC - Back Up to the Edge of the Creek - Typically after the jump, the market comes back to test the jump area. If successful, higher prices can be expected. However, the market can also fall back into the creek (i.e., head south and resume accumulation or fall into a downtrend). The Creek story was developed by Bob Evans, a successor of Wyckoff, to explain how the market breaks out of an accumulation area. It was about a boy scout looking for a narrow enough place to get across. It is a helpful metaphor to understand certain market action, nothing more. Please note this is a 5-minute chart. Just because the market jumped out of accumulation doesn't mean were are going to retest last year's highs! Eiger
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I know what you mean. One thing I found helpful which I do is to do a quick annotation of each bar on a separate sheet of paper I have set up just for this. I write down stuff like this for each bar: Volume - high/low/ave Bar - up/down/level Spread - wide/narrow/ave Close - highs/lows/middle Significance/meaning - see below In significance or meaning, I jot things like higher high/higher low, no demand, test, up thrust, whatever seems meaningful at the moment etc. I do this for a couple of reasons. First, it really improves concentration. Our minds naturally wander and we start thinking about all kinds of extraneous stuff during the day, so this brings you back to the market and makes you focus (I am a psychologist, too, so I think about these things!). Second, it's a good way to see where you are missing things. If I miss a move, I go back to the log and see how I was reading the market at that time. It is a good learning tool in that way. I basically made a blank table in MS Word and fill it in for the 5 min chart during the day. Eiger
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Great! I'll take a scotch :missy: Then the next round is on me. Also look at the early January 1931 section where he talks about shortening of the upward thrust indicating a lessening of demand. SMI probably expanded on this, though, as I think more about this. If I recall correctly, when they talk about trend lines, they use SOT in terms of swings or waves. This is in Unit 3, I think -- all the material that Bob Evans (mostly) developed. I think they call it the Basic Tapes.
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Thanks, Ed. Glad you like these. I do this every night with my charts -- I annotate the entire day on the 5-min. I also indicate important areas and bars on the 3 & 10-min charts, too. I love this stuff, and I think that analyzing charts like this is great way to learn. You really do begin to see this stuff as it unfolds. Eiger
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Actually, Db it is Wyckoff. He talks about shortening of the thrust in the case study of the NY Times Average of 50 Stocks during 1931. SMI may have later expanded on the concept, like they did in several areas. Eiger
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You have some of it right, but there are other things going on in the chart. I made up a chart of SPY so you can see what I refer to. In classic Wyckoff, markets don't turn on a dime. They need to first stop the down move, then build cause (i.e., allow for a period of accumulation). There is a sequence that markets often follow that Wyckoff identified. We saw it today. After a down move has been under way for a while, you will get a rally that will typically (not always) last longer and be larger than any previous rally in the down trend. This is called Preliminary Support and signals that we are getting close to the end of the down trend. If you are familiar with Elliot, think of it as the 4th wave. Where you had the Selling Climax, was actually Preliminary Support. There was climactic action, but not really the SC. There was a secondary test (ST), but note that that ST still had a lot of volume. Then, on the rally up you had a series of up thrusts at 1 and No Demand bars at 2. See how the volume was receding on the rally? You don't want that if you are looking for or in a long position. It means there is no momentum (professional buying) behind the rally. Thus, the market is weak. Contrast this with 3 on the chart. At 3, the bars were closing on thier highs and volume was increasing with the rally. Professional support was behind the move. That first rally had nothing behind it and a minor Buying Climax (bc) occurred at resistance and the market fell back. The Selling Climax came later with the heaviest volume on the chart. Two other tests occurred, and accumulation had apparaently been completed as the market then rallied vigorously. Hope this helps. Eiger
