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Thanks Soultrader. The ES is currently trading at 1338.50 so the key reference areas to the upside are: 1350: Upper limit of the 3-day composite market profile. 1347-1348.25: High volume area of the composite. Also includes yesterday's high. 1343-1343.25: Lower limit of the composite and the single prints from yesterday. The key reference areas to the downside are: 1335-1336.50: Buying tail of 9/26. 1330.25-1331.50: Single prints from 9/25.

Thought I'd share my ES analysis for tomorrow which includes key reference areas identified using Market Profile. First, let's look at what happened today. Refer to the chart below. Coming into 10/02, the ES was in a short-term, 3-day trading range so the key reference areas were the upper/lower limits of the trading range and the middle of the distribution (or high volume node). On 10/02, the ES opened and traded down to the lower bracket limit of 3-day composite at 1343.50 and bounced off of it. Typically, if a responsive trade is taken here, the target is the middle of the distribution. One thing to keep in mind is that when price is rejected at one of the bracket extremes, it could trade forcefully to the opposite side of the bracket. So if you're in a trade, monitor internals and see if it would make sense to continue to hold for a play of the opposite bracket extreme and a potential breakout. Notice that a high volume area will usually slow down a market as it did in the ES today when it traded near the 1347.75. Markets do not usually reverse on a dime at high volume areas (not true for low volume areas although high/low volume areas both act as support/resistance but for different reasons). Today, the ES traded to the high volume area of the composite between 1347 and 1348.25 and reversed. This becomes a key reference area for tomorrow. Afterwards, the ES traded through the lower bracket limit of the composite on high volume and slowed down around the high volume area of 9/26. Again, the high volume area slowed down the ES giving the trader time to monitor price action and make the appropriate trading decision to either exit a position, continue holding a position, or add to a position. The selling range extension around 1343 left single prints in today's market profile which also coincides with the lower bracket limit of the composite. 1343 - 1343.25 should serve as the immediate upside key reference area followed by the high volume node at 1347 and 1348.25. To the downside, the low volume area from 9/26 at 1336.50 - 1335 is the key reference area. Could this be the lower limit of a larger bracket that will form? I don't know, but we'll see. As the ES approaches one of these key reference areas, I will monitor market internals and then apply the appropriate trading tactic. In the morning, I will review overnight trading and determine which key reference areas immediately above/below where the ES is trading at the time. Note that no predictions have been made here. I have identified key reference areas, but I don't know whether I will be going long or short until the market trades near these areas and market internals are monitored.

I strive to make 30% to 50% of the daily range with 2-4 trades per day on average. Sometimes I make no trades. I do not stop trading based on my profit for the day, but will stop trading if I am down a pre-defined amount.

That's an important point. Until the uptrend is broken, we should continue looking to trade on the longside. Point well-taken. Thanks. EDIT: Soultrader, I missed your other post about the ES leading the YM. Thanks for your observation.

Here is a longer-term index divergence that will be in the back of my mind for the trading in the coming days... Looking at the DJ and SP, the Dow traded above the May highs, but the SP could not trade to the May highs. On a longer-term, the market is looking weak.

Yes, it's possible that the rest of the market is lagging the Dow, but I don't know. If the index divergence were the opposite, i.e. the S&P made lower daily lows and the Dow did not, I would still have made the same analysis. The divergence is still indicating a possible reaction in the opposite direction.

Perhaps I shouldn't have made such a blanket statement about not fading a trend. I believe a countertrend strategy can be implemented successfully, but probably not by many. An example of a countertrend strategy in a trending market might be to monitor a trend for loss of momentum and then fade the trend, such as a divergence, three pushes in a trend, etc. That is, trade the pullback/rally in an uptrend/downtrend. However, this would be a scalp only, not a big picture play. The point that I was trying to make was that fighting the trend is a tough way to trade, and hence, make money, IMO. Why not follow the trend and trade with the wind at your back? Catching a trend early and riding it is the best trading opportunity that the market presents, but unfortunately it only happens about 30% of the time. That's why I believe learning to trade brackets is important for full-time daytraders. Just my opinion, so take it FWIW.

Hi James, I don't try to determine if one index is leading another. Basically, the index divergence is indicating a decrease in momentum in the direction the market is moving. The index divergence I pointed out is simply suggesting that the market is not as weak as the YM was indicating in the short-term. Since the market is also near a key S/R level, one might expect the market might bounce off of it and trade in the opposite direction. I use an index divergence the same way I would a divergence based on weak market internals. If I trade the ES, I am not looking at the YM for any predictive value, or vice versa. Hope this makes sense. Antonio

Looks like Friday was a day after a 3-I selling day in the YM...

Here's another perspective that supports your long bias for Monday, 9/25... An index divergence occurred betwen the YM and ES on Friday, 9/22. The YM made lower daily lows whereas the S&P did not. This divergence may have started to correct itself into Friday's close. In addition, the YM has formed volume divergences, and volume started to pick up to the upside. We'll see how this continues to play out on Monday after checking the Globex action...

Robert, consolidating markets and trending markets are traded differently! In a trading range, you should fade near the bracket limits (i.e., short the upper limit and go long at the lower limit) and in a trending market you should buy pullbacks and short rallies. Do not fade anymore. No doubt you will lose big bucks fading a trending market. Trading a trending market is a lot easier than trading a consolidating market. When a market is trending just jump on board and then manage the trade. You don't need to use many tools to trade a trending market. Don't complicate this. When a market is in a trading range, you do not want to enter in the middle of the range. There is a lot of noise there and offers poor trade location. From the middle of a range, you really don't know in which direction the market is likely to go. From a Market Profile perspective, the middle of the range would contain the value area and the limits would contain the "unfair" prices. When prices trade in the "unfair" area, it is likely that price will rotate back to value. This is exactly what you said about about markets trading beyond the BBs and then back inside it (until the market breaks out, of course). You can use the middle band of the BBs for your target (according to Linda Raschke), which makes sense to me. So you could short at the upper BB and cover when it reaches the middle band. Keep in mind that prices don't always trade directly from the upper limit to the lower limit and vice versa. Again, the idea is that after range expansion, consolidation is expected and that's when you could employ the BB trading strategy.

Single prints will show up as two consecutive price levels with a single TPO. each. Buying range extension are two consecutive price levels with a single TPO above the IB (so this could show up in the middle of the distribution). On a 30min chart, just look at the price levels with one TPO which is a line that extends to the next bar. See the chart above for an example.

I compared it to the TTM Squeeze and did notice that it is very similar, but slightly difference. I haven't looked at the code so I don't know what is contributing to that.

luke, if you have TradeStation, you might want to take a look at the Market Delta simulation tool I made available in the thread below. I use it with Market Profile as well. http://www.traderslaboratory.com/forums/technical-trading/388-market-delta-footprint.html

Namstrader, I see what you mean (see chart below). By the way, attached is the Squeeze indicator re-created by other traders. Note that I have never used this indicator and cannot vouch for its accuracy. BB_SQUEEZE.ELD

No wonder I couldn't find too many examples of 3-I days. Below is a chart with an example of a 3-I day. I just want to make sure I have it right, since I would like to be aware of these days when they occur.

Can you clarify what initiative buying TPO's are? I never full understood this. It sounds different than the TPO count that is used in rotating markets to determine whether buyers or sellers are in control. That is, if the number of TPOs below the POC is greater than the number of TPOs above the POC, then the buyers are in control (reverse for determining seller control). Thanks.

Thanks James. I didn't know what was behind the TTM Squeeze. It does sound like a clever way of using BBs and the Keltner Channel.

Robert, I would only pick up Mind over Markets by Dalton. It's the best book out there on Market Profile - it's excellent, well-written, and inexpensive. I'm looking forward to Dalton's next book coming out Feb. 2007. Buy from Warehouse SUPER Sale and get the $10 coupon.

Linda Raschke uses BB after a trend day when consolidation is expected. She uses it to fade the upper and lower BB and uses the 20EMA as the target. She only takes the first 2 signals in the morning though. The 3rd signal is slightly positive based on her testing. This setup is not used in the afternoon session. In general, she doesn't use BB for her other setups, she uses the Keltner Channel. BB may work better with Options because they are both volatility based.

lasherm1, Although I haven't used it myself, I've heard good things about Amibroker (http://www.amibroker.com). I think it is the least expensive option out there and easier to use than some other options, from what I've heard. I believe you can download free data from Yahoo or MSN. I use Wealth-Lab and TradeStation for backtesting.

Robert, Here are my suggestions... Study Wyckoff. A lot of what you read today about technical analysis is based on Wyckoff's work in the 1920's or so. Another great book on swing trading is "New Blueprints for Gains in Stocks & Grains & One Way Formula for Trading in Stocks & Commodities" by William Dunnigan written in the 1940's. Amazon.com: New Blueprints for Gains in Stocks and Grains: Books: William Dunnigan I also recommend reading some free newsletters from Robert Krausz (one of Schwager's Market Wizards) available at the link below. Specifically the stuff on swings and determining the main trend. Fibonacci Trader - The first Multiple Time Frame Software for Traders Over the years, I've read many books on TA published over the past couple of decades, and except for Market Profile, there is very little out there that is original. My suggestion is to go to the source. Hope this helps.

Glad I could help. Regarding EasyLanguage, it's not an intuitive language to learn IMO. I find that it is an inflexible language that makes doing certain things that should be easy, harder to do. But hey, no platform is perfect...

Changes are in this version. Thanks for the clarification. SOULTRADERPIVOTS.ELD

James, I still couldn't tell what was wrong with the pivot point formulas. What did you change? I could change the trendlines to extend to the right. Basically, the function is TL_SetExtRight(<TL_Name>, True). With respect to the rounding issue, are you saying that if a pivot point calculation results in 10660.5 that you want the line plotted at that value instead of 10661? If so, I'm not sure if that's possible since the YM has a granularity of 1 point (i.e., no decimals). I'll check into it though.