UrmaBlume

Between 0808 - 0812 PST today there was coordinated intense commercial selling in all 3 major US equity futures. The first chart is our longer term chart (volume bars 900,000 contracts) with net money flow. Of note is that price met resistance at around a 2/3rds retracement of the previous leg down. Also the negative divergence between price and money flow continues. The second chart is of the HUD and the pie charts show the selling against the backdrop of the strong early buying. The third chart is of the coordinated commercial selling in all 3 equity futures. The fourth chart shows the selling just before the top in ES. ***** Of note is that price met resistance at around a 2/3rds retracement of the previous leg down. Also the negative divergence between price and money flow continues. The second chart is of the HUD and the pie charts show the selling against the backdrop of the strong early buying. The third chart is of the coordinated commercial selling in all 3 equity futures. The fourth chart shows the selling just before the top in ES.

For several days before the beginning of this 60+ point drop in the S&P we reported on a building negative divergence between price and net money flow in the S&P. Below are 4 charts that use both longer and very short time frame indicators to reliably define longer term extremes. The first chart shows the days before the top at 1,075.75 and the continuing Negative Divergence between NetMoneyKG and price. The second chart shows the very few minutes duing which the extreme was formed at 1,075.75 and the perfectly coordinated, very intense commercial selling across all three US traded equity futures that formed the extreme. The third chart shows the Positive Divergence in Net Commercial Trade that formed the low that began the 100+ point rally from 861 to 1,075.75 The fourth chart shows an intra session negative divergence in net new commercial trade that was good for a quick 20 points. *** The first chart shows the days before the top at 1,075.75 and the continuing Negative Divergence between NetMoneyKG and price. The second chart shows the very few minutes duing which the extreme was formed at 1,075.75 and the perfectly coordinated, very intense commercial selling across all three US traded equity futures that formed the extreme. The third chart shows the Positive Divergence in Net Commercial Trade that formed the low that began the 100+ point rally from 861 to 1,075.75 The fourth chart shows an intra session negative divergence in net new commercial trade that was good for a quick 20 points.

Thanks bakrob99. Those divergences in price / NetMoneyKG happen every 2 -3 months and so far this year every one of them has been good for 60 -120 points. Given another reaction we don't think this one is finished yet. Here is a shot of the busted triangle and the continuing selling in NetMoneyKG.

For several days we have mentioned the strong negative divergence between price and money flow in US equities. Price has broken from the triangle shown earlier. This shot of the HUD shows record selling in both volume and commitment.

With a ton of numbers out today, a triangle on the chart, stronger than average nite session volume (10/01) and strong longer term price / money flow divergence - today and tomorrow could see some real action.

Dave, As to Bars and Time Frames: While we do believe that it is important to stay in touch with higher time frames, how much higher depends on where you execute. At some point much higher just adds lag. For our human traders in ES the 16k bars are our highest and 250 the lowest. We use NO time bars and we use NO tick bars. In the price time volume continuum time is only a marker - price is motivated by trade, propelled by an imbalance in volume and time has nothing to do with it. Of all the different bar structures we find the tick bars to be something worse than useless - they can be misleading. Knowing that it is an imbalance that drives price, bars that treat each transaction equally regardless of size make it impossible to measure that imbalance with any degree of precision. Tick Bars give transactions of 1,000 contracts the same weight as a transaction of a 1 lot and that can easily be misleading. As to your reference to the public/retail trader "is time since this is probably what most of the world looks at" we don't care or notice this trade. Public/Retail trade never leads the market, never turns the market and loses tons of money chasing the market. You may have noticed that much of our work is about identifying and classifying COMMERCIAL trade. As to Jim Dalton, I found him to be a very nice guy but too linear to evolve much past what he was doing 30 years ago. Market profile is invaluable as a theory but almost usless as a method. Almost every commercial trader I know has spent tens of thousands of dollars learning market profile but only 1 of them uses it as a method.

When you start talking about "initial lean" you are starting to talk about psuedo science. Whether the time frame is days, intra-session or sub-second most of our trading is of a single modality. The trades are based on bias and time/volume frame. The method is to fade a shorter term thrust into a stronger, longer term opposite bias. That is to sell a short term up-thrust into a longer term down bias.

If it was that easy, I would just subscribe to Market Delta. Some misguided soul even suggested that tick ratios in delta would reporoduce intensity as we read it. Add about sixty lines of code and 2 more data feeds to market delta and you are there.

The point here is that it is imbalance that drives price not volume. The concept behind this point comes straight from market profile theory and addresses how such big moves can happen during the night session when there is so little volume. When there are buyers and sellers of equal conviction then volume is high and price movement is low. When there is only buying, price can only go up as successive offerings are taken out. Night session trade is done mostly by commercial traders and because of that we take the night balance or net trade, the night range and night support and resistance as very important numbers for the coming day session. These indications have nothing to do with velocities - simply how much more buying than selling across different time/volume frames. While during the first hours of today's trade (09/28) there was much less than average volume, there was a much greater than average buy side imbalance in the order flow. Our calculations show net new longs of +73,694 contracts, not record but certainly above average and about what you would expect in a reaction to the reversal day on 09/23.

A family of indicators that can oftentimes lead price are those based on order flow or the balance/imbalance of trade. We find measures of trade imbalnce are much more predictive of future prices than measures of high or low volume The blue pusle bars in the app below reflect percentage of normal volume for 6 different intra-session time frame and normalized for time of day. The red and green bars to the right of the pie charts reflect our measure of trader commitment over these same six time frames and again normalized for time of day. This measure of trader commitment is but one more way to express the balance of trade. This pic was taken during today's (09/28) price run up. Please note that the blue/volum bars show volume well below average in all buy 1 very short time frame while trader commitment is well over average and to the buy side in all but 1 time frame. The point here is that it is not the velocity of total trade or the amount of total trade or even the movement of price itself that predicts future prices but rather it is the degree to which that trade in imbalance to one side of the other that will most often chage before price tops or bottoms.

This particular version was indeed written in Easy Language for Trade Station. We have our own dlls that allow us to use Trade Station data with much greater time granularity than is normally allowed. At the very top of today's market higher prices attracted very strong, coordinated commercial selling in all three US traded equity futures. This charts shows all three futures and the spikes that drove all three futures to new session lows and formed a reversal day down on higher than normal volume.

Peter has always stressed the importance of the balance of order flow as an indication of future prices. We use a harmonic of short term money flow to measure the extent of the imablance of trade. In the chart below the extent of an imbalance is mesured by how far apart the lines are. If the top line is blue, orderflow is imbalanced to the buy side and vice versa. If the +'s are blue, orderflow carries a buy bias and a sell bias if they are red. We use this indicator in conjunction with other money flow metrics.

Nothing gets by you Tams. Did you really buy one? I didn't know that you are a poker player, seems so many of the best ones here, are. Working on the next one, market related, let me know if you would like to see some early peeks. cheers

Congratulations Dave. I applaud your efforts. Posts from guys like you who are smart enough and willing enough to do this work for themselves are so much more uplifting to the community than the never contribute, always knocking, intellectually bankrupt perpetual code leeches. Funny you should mention the lack of efficacy in other markets. We find the opposite is true. We find that the indicator works better in almost every market other than the S&P, especially the overseas markets. Below is a shot of both intensity and money flow in this mornings trade in Soybeans (09/23) this market is another measure of inflation. I believe the few remaining issues with your work are 1) missing inputs 2) missing parameters and 3) parameters incorrectly optimized for different markets. Good Luck with your quest and congratulations on your progress.

Looking back over charts of short term money flow in the hours before the FOMC announcements often reveal that the "smart money" was often able to anticipate the market's reaction to the coming news. So far today (0848PST 09/23) they have been selling it and the first 15 minutes of trade set the tone:

In the past Peter taught that the best indicators of future price don't have price as part of their calculation. We agree. Price based indicators cannot lead price because they can't change until AFTER price changes. In the screenshot bleow the lines are Jurik's AMA on the mid-points of the price bars. Note that on this chart, with time as the bottom axis, that the lines are to the right of price which means they come after or they LAG price. Next note the dots which represent an index of weighted biases whose construction is described here. Please note that the dots, in almost every case, are to the left of price which means they lead price. Certainly we reference price but indicators such as this index are heavily weighted towards indicacations taken from our calculation of the balance of trade/order flow.

diablo272, Thanks for the kind words. At 1224 PST, less than an hour before the close on last Thursday 09/17 a single trading entity sold suddenly and sold big accross all three equity futures and coordinated that trade down to the sub 1 second time frame. In each of the three charts below for NQ, YM & ES you can see the sell spikes that drove price down and see that it was coordinated to the second in all three markets. This is the signature of what we call commercial trade - trade done by whomever that is of such volume and intensity that it creates local extremes as was the case with the trade shown below. This was the second such spike of the day and you can see them both discussed in a thread here. While Peter always taught the importance of spotting commercial trade and the indicator shown below does exactly that - as this trade occured well into the value area none of this activity would have been apparent to users of the profile graphic.

clmacdougall, First of all thank you very much for the kind words. Peter introduced time at price as a method of approximating online volume from the pits when online volume from the pits was not available. For starters how can an estimate or an approximation be as useful as the real number? Its a matter of metrics and method. Almost every commercial trader I know has a background in Market Profile theory but only 1 of them still uses it as a method. We also teach market profile theory to our in-house traders but only as concepts key to basic market understanding - never as a method. The reason we teach it that way is because we believe that there are trade decision support technologies that while based on market profile theory as it was taught in the old days they are able to more precisely present the information that the profile was designed to approximate but fails in today's enviornment. For example you can see in my posts on the Harmonic, HUD, Balance of Trade, primer on the construction of an index of weighted biases, Order Flow and Commercial Intensity that they all present information on topics basic to market profile theory but impossible to read from the market profile graphic. Market Profile as a theory should be basic to any trader's education. As a key to understanding general market dynamics for sure - as a method - its time has passed.

No WSOP for me for the last several years. My last big events were a couple of the Party Poker Million cruises that I won online. They were really great parties. The whole ship chartered for a week's trip to Mexico and nothing but poker players onboard - tequila, lobster, poker and a shot at a million what a week and I while I didn't cash in either event I won both $14k entries by moving up from a $25 satellite. Party was great back then. They had just moved to Gibraltar and flew me to Gib to do some consulting for them. As to the House of Shields, San Francisco has always been a great "eating" town. If you play poker maybe you should visit the Garden City poker room in San Jose. Not the best poker in the bay area but certainly the best food of any poker room in the bay area. While you can certainly eat well here in Vegas it is almost always in one of the "name" joints where dinner costs a grand and that's only if you don't drink a lot. I miss the bay area for all its small, out of the way, hole in the wall resturants that are soooo good across so many cultures. Two exceptions to that here in Vegas are the King and I on Trop for Thai and Mamacitas on Fremont for Cuban/Mexican. cheers PS - While we are waaaay off topic here is a shot of the Miraflores Locks in the Panama Canal that updates everytime it is loaded or refreshed, in my days as a sailor I made a dozen passages of the canal and all of them were fascinating.

Very astute. Yes indeed the indicator is calculated with sub-second granularity but no we do not depend on sub-second execution except in our very high frequency tick systems. You are also right about not needing to be cheek to cheek w/exchange data to operate. From a practical perspective for all but the Goldman's of the world the difference between a thousand dollar a day connection and feeds such as ZenFire are not meaningful. We have done this work in both TradeStation and Ninja and we find no practical advantage to either. While we know that ZenFire is faster we have ways to add much more granularity to Trade Station data than their 1 minute time stamp allows. The net is that for our purposes we find no practical difference so we stay with Trade Station because we are very familiar with the platfrom and that over the years we have written several thousand indicators, paint bars, show me, activity bars, functions, strategies and dlls based on Easy Language plus we find Ninja to be very young in its presentation and cumbersome to use. Day after day I post here and in certain reports the occurence of this indication on session extremes for a variety of markets and yes indeed we treat and trade this as a "longer" term intra-session indicator and execute, sometimes more than a few times in the same direction from a single such indication. How many of these entries and how long we stay i them is taken from indications of order flow and the rate of change in the balance of trade on volume charts that range in time frame from about 20 second bars to 3 min bars. BTW I used to live in your neck of the woods. Lived in HIllsborough, just to the South, and had offices on New Montgomery next to the Sheraton Palace. Did many a drunken biz lunch at the long gone House of Shields accross the street, great food and evern better bar. cheers

You analysis of this indicator mixes in waaay too much from the thread I started as a primer on the construction of an index of weighted biases. That is not the way this indicator is calculated plus almost all of the inputs for this indicator are preprocessed from a single time/volume frame and that is waaaaay sub 1 minute. Again to get closer to the essence of this dynamic I recommend that you reduce your focus on blocks - they are not to the point here. While slightly off-topic yet still related and another clue for the AI folks here - Does anyone else here use MARS (Multivariate Adaptive Regression Splines) from Salford systems as part of their final layer of processing?

Frank, Thank you for your query. You are indeed correct when you note that big blocks mark commercial activity, 1-10 lot traders NEVER trade 100's or bigger. The fact of the big blocks is sometimes a warning that it is NOT the KIND of commercail activity that forms local extremes. It all depends on how you measure the metrics of the order flow. Block trades and MA crossovers have nothing to do with the calculation of this indicator or how it should be used. On reason the method you discuss might lack efficacy is that those block trades could be premium arbitrage and the fact of a block trade says little as to whether it is buying or selling. The calculation of this indicator involves much more that just volume over time. "When taken in combination, the acceleration and deceleration of buying and selling volumes, total volume and the velocity/rate of change in the balance of trade reveal a certain dynamic that we find present at many, if not most, intra-session extremes." For those with greater than retail market understanding that are also technically astute the value in these screenshots and the accompaying text has been, or so they report, two fold 1) the screenshots document that the indication occurs at almost all session extremes and many intra-session local extremes. 2) the value of the accompanying text to those same informed, technically competent traders is that they have been able to gleen from that text enough informaiton to build their own. The value of the ability to locate session highs and lows as or slightly BEFORE they occur speaks for itself. Speaking generally - of course those are the traders with above averge intellect and ability. The lowest intellectual common denomiator has never done well in this game and most likely never will. It has always been a very small percentage of the players that win at this game and what separates them from the masses is not their size but is their understanding and ability. Some of what is so wonderful about this game we both play is that to win you don't have to have a license, you don't have to have anyone's approval, you don't have to be a member of anything and you don't need tremendous capital - all you have to be is right and if you are right you wont be little for long. There is and always has been unlimited backing for those that can demonstrate either great efficacy in their personal trading or the understanding and ability to construct profitable automated systems. cheers

BlowFish, Thanks for the kind words. I too have had many PMs & emails about this and other or our indicators and I am very appreciative that the vast marjority of them have been so complimentary and suppotive. I especially applaud those with the intellectual capital, market understanding and technical ability that report a significant increase in the efficacy of their trading as a result of their efforts to build their own versions of our work. Long-term successful trading is not about instinct, divine inspiration or spontaneous intellectual combustion. It is about intelligent data processing and sound method and those willing to think for themselves and do their own work will usually lead the pack in any endeavor. Thanks again for the kind words and your many contributions to this community. cheers

Easy BlowFish. The point of interest here is that precisely coordinated selling at an abnormal intensity in 3 related markets got knocked off. Of course you are right about millisecond accuracy. Everybody with experience at that level of operation knows that. The point is that the code is written to millisecond or even microsecond time stamps so that is the time frame most practioners use as a reference. Also, there are, indeed, ways to handle Trade Station data FROM inside Trade Station with millisecond granularity. Not as good as thousand dollar a day data sources that put you cheek to cheek with the exchange but certainly close enough for practical application. For everybody but the Goldman's of the world and from a practical standpoint the issue has always been one of method rather than of latency. Whether I work with milliseconds, microseconds or half-hours is not nearly so to the point as the fact that in the sub 1 minute time frame this indicator spotted this very significant anomaly in commercial trade in 3 different markets. Certainly the signals were timely engouh to allow entry at very advantageous prices and after all shouldn't accurate, timely indications of profitable Trade Points be the most valuable product of any Trader's Laboratory? Call the millisecond, micorsecond, half-second point poetic and or technical license and liberty and take a broader look at a very rare view of a rare occurrence.

We are always on the lookout for original, outside of the box thinking and have software engineers ready to go to work. Experience doesn't matter. If you have an idea that is truely original and makes sense from a trading and risk/reward standpoint we would be happy to collaborate on its development - as would almost anyone. We have relationships with several hedge funds and there is unlimited money available to back such technologies. Today the greatest demand by the hedge fund community is for automated systems, the higher the frequency the better. We get several such requests each week and in the last year have only gone forward with 1. If it is nothing new and just more of the sameO, sameO, good luck. Skype = UrmaBlume. cheers