ant

Below is a composite profile of the ES starting from 8/18 (FOMC Day), the day when the ES broke out of the lower bracket. The profile shows that there is very little volume below 1529. There is virtually no volume between 1504 and 1512. According to Dalton, and as visible in the second chart, the key reference area below 1529 is around 1508, which is roughly the lower limit of the upper bracket and the upper limit of the lower bracket. Currently, the ES is trading around 1527 in the overnight session. If the ES opens under 1529, I will be considering the short side for a potential big move down, especially since we've been balancing over the past 4 days and are due for imbalance soon. If the ES opens within the 4 day balance area (see chart in previous post), then I will continue to look to fade the balance area extremes, if volume and momentum supports it.

Attached is today's profile compared to the composite profile of the previous 3 days. The high volume area, Friday's selling tail, and the lower bracket extreme were key support/resistance levels today.

Done trading for the day. Very disappointed with my trading as I missed the big trade of the day. Grabbed one point here, two points there, and broke even on the others, that's it. :crap: Anyway, my trades are attached...

Hey Darthtrader, sorry it took me a while to respond. I did take a short at the high volume area but didn't get any follow through. Made a tiny profit though.

My ES analysis highlights similar ES trading characteristics pointed out by Dogpile, namely the high volume area at 1540.50, the 'fat' profile shape, the NR7 that may lead to range expansion, and a bias to the downside. In the short-term timeframe, the ES has been trading in a 3-day balance area as shown in the chart below. Friday's day structure was a Neutral day with range extension above and below the IB. There was a selling tail and a spike down in the last 45 minutes of trading on Friday. Nevertheless, the ES closed near the lows making the sellers the winner of the day - so technically, this was a Neutral-Extreme day with the sellers being the 'victor'. Currently, in the overnight session, the ES seems to be accepting the prices at the spike low. Since the ES is balancing, attempted direction is not clear and volume analysis is not very helpful, but the profile shape is, which is discussed below. On Wednesday (9/19), the ES formed a volume TPO at 1546 with volume of 107458. On Thursday and Friday, the ES never traded back up to 1546. The high volume area over the past 3 days is between 1538 and 1541.75 with volume at each price of that range being higher than that of 1546. The composite profile in the chart above depicts a prominent high volume area and a fairly symmetrical profile indicating balance. The key reference areas of the balance area are the extremes (tails) and the mean (or high volume) of the distribution. Another sign of equilibrium is the 3-bar triangle that developed as shown in the daily chart below, where the high/low of the last day is contained within the high/low of the previous 2 days. According to this LBR pattern, we should be alert for a new high/low and expansion. So my expectations are for a breakout of the 3 day balance area soon, and for the reasons mentioned above, my bias is for a breakout to the downside. Based on these observations, the possible trade scenarios I see for tomorrow (9/24) are as follows: If the ES opens within the trading range, I will monitor price at the balance area extremes to determine if momentum is increasing or decreasing. If decreasing, I will fade the move to the extreme with a play for the mean of the distribution. If the ES opens and starts trading towards the high volume area, I will monitor price as it approaches it. If momentum is decreasing, I will fade that area for a play back to the balance area extreme and a potential breakout. Right now, in the overnight session, the ES is accepting prices at the low of the spike down from Friday. So it is possible that the ES might have a gap open down, outside the trading range. If so, I would plan on trading in the direction of the gap. During the trading session, we can discuss the support/resistance levels above/below the market. I'm also looking forward to seeing increased volatility this week.

Dogpile, thanks for your comments on the book. I perused it at amazon.com and it looks interesting. I agree with you about complementing a discretionary style with some 'mechanical trade' ideas.

Dogpile, nice analysis and chart! Today was a tough day to trade the ES. For me, there weren't too many opportunities. The break of yesterday's low seems to have provided the best opportunity (i.e., the bear flag that Dogpile mentioned). The only thing I would like to mention for tomorrow is that trading into the bracket from where the ES broke out of (upper limit around 1523) would be bearish, and that there is virtually not volume in the ES on 9/18 between 1503 and 1512. That is a potential trade destination over the next few days if the market stays weak.

Dogpile, your Taylor sell short bias was right on for today. Is the book by Art Collins worth reading? TIA.

Welcome to the discussion OAC. I thought it was going to be followed up by an A-B-C correction.

Huh, pretty cool.

My current thinking is to be long while price is above the high volume area around 1532-1533 or so and short if price moves below it.

Small trade off the low...

Really interesting point! Strength in the Yen could spell weakness in US markets.

Hey Dogpile, the ES is perfectly balanced right now, like you said. There are resistance and support areas above and below the market. I think my preference would be for a long position near the selling tail, gap, or 9/18 POC at 1533 or so for play towards 1544-1546 and maybe higher. My preference comes from the breakout on Fed Day which occurred on high volume as well as yesterday's session (with higher value) which also occurred on good volume. I'm thinking of the ES trading yesterday and today as a pause within the uptrend.

The following charts highlight the key reference areas I'll be watching in the ES. The following daily chart is of the full S&P contract which highlights gaps. Dalton suggests using the S&P contract because the Emini S&P tends to overshoot by a tick or so. Note the gaps above and below today's trading. The next chart shows the volume profile for yesterday (9/18) and today (9/19). Note that the volume POC for 9/18 is 1532 and the TPO POC is 1500. The volume and TPO profile will differ notably on trend days like yesterday. Compare the volume profiles with the TPO profiles below. I will be monitoring the volume POC. The last chart contains today's profile and the key reference areas. Today was a Neutral Day with trading occurring on both sides of the Initial Balance. The ES closed in the bottom half of the daily range, which means that the sellers were marginally stronger. Finally, note that some of the key reference areas overlap making them more significant.

Dogpile, thank you for your thorough response. I really do appreciate it! I too benefit from reading other people's posts so I will continue to collaborate with you and others if there's still interest. Throughout the day, I watch the 400T, 1600T, 5min, 15min, and 30min charts. I use the tick charts because they form some really clean patterns on the 3/10 oscillator and tick charts also allow me to set tighter stops compared to time charts. I use the time charts because I like to look at volume. Momentum and volume are the two key indicators that I look at. I also wtach the 30min chart for the Market Profile stuff and annotate one chart with key reference areas. Lately, I've been paying close attention to the developing Market Profile as well. I feel I still need to simplify my setup, but I'm not willing to get rid of any of these charts yet. Over time, I hope to keep the higher timeframe charts, such as the 15min and 30min, and use a tick chart for fine-tuning my entries. One thing that I have been struggling with lately are my entries. Not necessarily looking for long or short trades, but instead determining how to enter. Should I enter a limit order ahead of time near support/resistance or do I wait for confirmation (i.e., wait for current bar to take out or close above/below previous bar)? This causes me to hesitate pulling the trigger at times. As a general rule, I think I am going to start waiting for confirmation. I think this improves my entries and allows me to set better stops. EDIT: I forgot to mention that I also look at Time & Sales.

Dogpile, I really like your charts and annotations. Where did you get the 'TVOL Comparison' indicator? Another question, in your chart above, you show a bear flag, did you trade that bear flag because price was below VWAP or do you look at the wave structure in the 2min chart to set your bias? I'm assuming that your bias may change throughout the day. Is that correct? Thanks.

Attached is the composite profile I referred to in my previous post in case you're interested in seeing it. I monitor the high and low volume areas, not individual prices.

Day structure in the ES is a Neutral Day, with trading on both sides of the Initial Balance. I'm hoping to get a trade opportunity to go long for a play towards today's high volume area around 1546, which Dogpile pointed out. Looking for a potential long around 1540. Let's see what happens...

I am definitely alert of the high volume area around 1546. Thanks. Here's my read of the market thus far... The day started with the buyers in control. As Dalton explained in MoM (pgs. 102-105), after the E period traded below the D period, that was a signal of a "potential" timeframe transition. When F period printed double EF TPOs below the D period, that confirmed seller control. So it looks like buyers relinguished control to sellers. As you stated, we are building higher value which seems to indicate that the longer timeframe is keeping value higher (since the trend is up and it's the higher timeframes that starts trends/breakouts), but the day timeframe is trying to sell the market. Dalton also mentioned that when there is conflicting information, that may be caused by conflicting information from two different timeframes. If the buying tail below is retraced, there is a high volume area around 1540 in the composite profile.

Hey Dogpile, how have you been? I've been reading your well thought out ES analysis and I agree with them. Let me give you my perspective, but I think you and I are pretty much in sync. Specifically, that the ES was balanced today, the profile shape was squat and symmetrical, value area was lower the past 2 days, and that we should look to trade with any directional move away from balance. However, with the FOMC meeting tomorrow, I don't expect any directional moves in the morning. Here are some more details of my observations (see chart below), which may repeat some of your points. The ES gapped down and then traded up toward yesterday's POC, where the ES reversed and put in a selling tail. The sellers then auctioned the market down with some confidence towards yesterday's low. This is an initiative response from sellers since the ES was trading at or below yesterday's value area. Near yesterday's low, the buyers came in an put in a buying tail and auctioned the market up. The ES reversed prior to reaching today's selling tail. A few observations regarding the strength of the sellers vs buyers... The length of the selling tail (5 TPOs) was longer than the buying tail (2 TPOs), the morning auction down moved with more confidence and covered more distance than the up auction in the afternoon, sellers rejected the prices near the today's high (i.e., the selling tail provided resistance), and again we had initiative action by the sellers. If I had to pick a winner in today's tug-o-war, I would say that it was the sellers. This and the fact that the ES started a down auction within the bracket last Thursday gives me a short bias. Note that today's low also coincides with the high volume area of the composite profile shown in the chart below. Let's take a closer look at the composite profile in the chart below, which covers the last down auction and the last up auction in the bracket. Note that the ES stalled today near the high volume area and that a 'ledge' has formed in the composite profile. According to Dalton, a ledge should be traded like a breakout. A directional move below the ledge will play well with our theme of a breakout from today's balanced profile. But we still need to monitor activity near the ledge because it could provide support as well. It looks to me like the market needs explore prices in the lower half of the composite profile before the ES can move up with confidence (especially in this low volume environment that we're in). I'm also keeping in mind the low volume area of the composite profile which could provide support. So unless tomorrow is a trend day (which I doubt), I think we can see the ES trade between 1497 and 1480. If the ES trades below the 'ledge' tomorrow and price is accepted below it, we could see an auction to the bracket low over the next few days. Given that tomorrow is Fed Day, perhaps these reference points will provide support/resistance after the announcement. EDIT: Forgot to mention that there was also selling range extension in the ES today.

I didn't read through this entire thread, but think I got the jist of the discussion. I just wanted to add my understanding of the TPO count. Floor traders seeks balance (or fair price) in a market to facilitate trade between buyers and sellers. Floor traders control the value area, because that's the price region that indicates fair price. When the TPO count below the POC is higher than the TPO count above the POC, that indicates that an imbalance exists with buyers being more dominant. When the TPO count above the POC is higher than the TPO count below the POC, that indicates that an imbalance exists with sellers being more dominant. When an imbalance exists according to the TPO count in a rotational day, I immediately start thinking about the inventory of floor traders, i.e. their short and long inventory. The imbalance in the TPO count tells me that floor traders are either too long (have too many long positions) or too short (have too many short positions). So the behavior I would expect from floor traders is to either start selling/buying in order to balance their inventory. Floor traders are expected to buy if they are too short and sell if they are too long. This is similar to a daytrader having a short position and needing to cover at some point during the day. Since the longer timeframe does not usually trade in the value area (it is not their expected behavior), their action in the value area is negligible. The TPO count is just one component of Market Profile and it needs to be considered within the context of the market.

On Mondays and Fridays I work as an engineer for a communications company.

Good luck with the trade! So far it's looking good in teh after hours session. I heard someone say that the market is unlikely to rally after yesterday's gap down opening because professional money don't often give you a second chance to jump onto a trend if you missed the first rally.

The ES continued to balance between the low of 8/31 and the upper limit of the balance area at 1484.75. No directional move yet, but it's coming (because we know that imbalance follows balance). Today, I identified two trade opportunities, I got stopped out of one due to an error in my analysis (see http://www.traderslaboratory.com/forums/6/es-move-suspect-9-4-07-a-2391-3.html#post18356) and missed a fill on another trade by a freakin' tick! You know how the saying goes, right? :doh: The first trade should have been to fade the upper balance area limit at 1484.75 as there was a momentum divergence and no Volume follow-through (Dogpile hinted at that today). Instead of doing that, I actually went long one tick above yesterday's high at 1482.50, missed my first scale out point and got stopped out. In retrospect, my mistake was underestimating (ignoring) that resistance level that I have been discussing soooo much in this thread. I also violated a basic technical analysis maxim, i.e. support , once breached, becomes resistance. So that's what I learned from this losing trade. The second trade setup was the same one that occurred yesterday and is described here http://www.traderslaboratory.com/forums/6/es-move-suspect-9-4-07-a-2391-2.html#post18343. The following chart illustrates the two trade opportunities that I had identified for 9/6, but botched up the execution on both. If I could only eliminate these unforced errors... This closes the week out for me as I don't trade on Fridays. Hope you all have a great trading day tomorrow!