Dogpile

August 30th is a really interesting day to study closely... Here is some of my insight: a few factors to think about, IMO -- best shown in context of what are 'higher conviction days' (8/28 and 8/29).... see attachment for visual aid. 8/28 showed very strong conviction to downside as measured by the down-up volume ratio at the top of the attached chart. moreover, all volume was occuring below the previous days closing VWAP. here you have a very bearish combination of high down volume/low up volume all occuring at lower prices (vs previous day closing VWAP). 8/29 morning session showed very little down-volume (consistent with the gap up) -- but the volume was occuring below the previous days VWAP -- this can be considered a mixed situation with not much selling going on but you could still consider it a bearish consolidation due to where it was occuring -- it has trapped bears below vs previous day close -- this is bullish.. . but in general, trading that occurs below previous days closing vwap should be considered a negative factor among the positive factors that are emerging. thus we have a mixed reading at first glance. price attempts to push below VWAP but peters-out early in the 8/29 day -- another sign that sellers aren't showing conviction. pattern-wise, you have a higher low and a 'bear trap' that has formed off the 8/28 closing 'excess low'... I have added ants 5-min volume indicator at the bottom as well. here you can see how price pushes up on good vulme and then the volume on the mid-day pullback occured on low volume and that price found support at VWAP... effectively, you have a triangle here -- and price eventually auctions up hard out of this mid-day 'balance'... up volume is strong and vast majority of trading has occured above current-day VWAP and all trading above previous day low. moreover, I posted one of my favorite 'oscillator patterns' here: http://www.traderslaboratory.com/forums/attachments/6/2587d1188439940-potential-afternoon-es-action-8-29-15-min-first-cross-buy.png thus, you have very strong afternoon trend up and a key rejection of the previous days closing price -- IBD calls this day a 'follow-through day' and the kind of day that often ends major corrections (to be determined though). on to the day for comparison... 8/30: very interesting day to study. price gaps down but stays above previous days closing vwap. any big gap will skew the upside/downside volume indicator so you have to monitor action and not rely too much on this indicator. ant analyzes this day very well. you can see how price moves up immediately off the open (after the globex 'abc down'/1600t buy divergence). price holding above previous day VWAP is a clue of 'positive consolidation' going on... Responsive buyers come in and push price up above VWAP where it continues up. as price extends above previous day high, can see the up/down volume ratio trending in the right direction but is not in 'high conviction' mode --- where the ratio would certainly be well above 2.0.... Again, a triangle forms mid-day and price breaks below VWAP for an attempt down. volume never really picks up though and the sellers exhaust themselves after a decent move down. net net, the day ended down on a close to close basis but built higher value and the attempt down that peters out is a positive sign that there just aren't many sellers around -- that was a good chance to break lower --- and it ran out of gas --- closing essentially right on the VWAP level.

what is wrong with YM? it has nice range and spikes to fill orders and run stops -- just like RUS does/did... this can sometimes be tricky but when in sync -- it is awesome contract because it trades like a hybrid --- trades a lot like RUS but correlates with ES nicely -- I like that combination. RUS would often be out in Right Field doing its own thing and show absolutely no correlation with anything.... for this reason, it was high maintenance to track that thing... you can watch the S&P's and have a choice with trading either ES or YM....

I agree with your thinking here. very bullish pattern (ABC down with a buy div after a strong afternoon trend up = 'power buy') -- the tricky part of 8/30 was that it bottomed almost exactly on the open... trading at this time can be a humbling experience as many days will just chew you up trying to enter a position around there -- whether in a support zone or not.. very nice analysis.

re entries and exits. I use limit orders on pullbacks for that atr-pullback set-up (for ES). Very recently I have not been getting filled and have a back-up plan that gets me into YM on a swing trading rule using parabolics. For instance, on Friday -- I had a limit order to buy ES but it missed trading there by a tick. The market did pullback by about 1 ATR but not far enough to fill my limit order.. But I have seen that movie before and I liked the pattern so I entered a 'buy-stop' on YM based on a 2-min parabolic break-up (parabolic input parameters were re-set to 0.15/0.15 fwiw). This way I get a position on for the pattern I see if ES doesn't let me in. This is a 'feel' game at this point as I may scratch the YM for a trivial loss if it doesn't carry. I like using buy and sell stops on YM and don't feel it is giving up too much because of the tick value is low relative to the tick range (a few ticks on YM isn't so crucial when its $5 per tick and trades 150+ ticks in range per day -- whereas a few ticks on ES can be crucial at $12.50 per pop trading maybe 80-100 ticks (20-25 pts) on a good day)... ES is definitely cleaner with YM acting more like RUS lately --- but YM using buy/sell stops is kind of cool as you can often catch a buy/sell program and join in early and instantly go 'in the money' by 15-20 ticks which gives you room to evaluate the action. If your buy stop triggers and ES reverses before YM -- you can exit YM and look to 'market order' back in -- often at a better price than your last exit -- if you like the action in ES... yes, you can out-think yourself on this stuff so I only do this kind of thin in situations where the market seems to be acting real spikey -- like it was late last week -- not letting you in on your usual set-ups. spikey is good for buy/sell stops and not good for pullbacks. I spend most of my time watching ES -- but I trade YM more than ES at the end of the day.

just took another look at that 8/30 day in my previous post... it never made a new low in the afternoon. therefore, statistically it would qualify as a day where low was made in opening 30-mins AND a day where high for the day was made before lunchtime. good example of a day where you could make money from both sides as there was not much Taylor bias -- 8/29 was a buy day and came into 8/30 with residual upside momentum from strong 8/29 action (can see how gap down was bought aggressively just after the open). curious what your 'post-mortem' on 8/30 is ant? how do you think about the structure for that day in context with previous action?

<<why wouldn't you use the trend in the daily chart to increase your trade size when price moves in that direction in the lower timeframe charts (i.e., the one you trade off)? >> I guess what I was trying to say but didn't come out and say was --- I have a slight bias towards fading any trend that develops on a daily chart. I don't believe in sustainable trends on the daily chart -- I believe in choppy daily action... Now, don't get me wrong -- I DO believe in trends on intraday charts so I will take full size for an intraday trade even if it lines up with a daily trend --- having said that I want to fade the daily trend. So effectively, the daily just has no bearing on my trading. <<how do the weekly charts affect your trade decisions? >> they don't currently. But when stepping out to this timeframe -- the indicators seem to want to speak to me. always playing around -- check this one out (buy weekly macd histogram upturn that occurs during traditional seasonal strength for second half rally --- sell Jan 31st): http://bp1.blogger.com/_5h-SWVGx6Ms/RtpeUx72PHI/AAAAAAAAAZs/r0h8QTBaKho/s1600-h/MDY+Seasonal+MACD.bmp

Its funny but many of the traders I interact with seem to be obsessed with shorting. Do you short more than you go long? Do you get more pleasure out of having a big day on a big market down day? What is it about shorting that is so attractive? The S&Ps were up over 1% in August -- despite an onslaught of bad/scary news. This thread is for holding hands together and all vowing to make more money on the long side from here until death.

thank you ant... awesome... <<High/Low in first 30 mins: 354 out of 756 days or 46.83% High/Low from 10-12 EST: 297 out of 756 days or 39.29%>> just to be sure I am reading right, this is either/or such that: 1-[(1-.4683)*(1-.3929)] = 67.7% of days high/low would be before lunch (9:30-12pm)? or am I reading it wrong? if right, this would imply that the market makes a higher high AND a lower low after lunch 1/3 of the time? that is surprising. guess that would include those times it run stops above/below a morning high/low by just a tick or two -- but still, seems higher than I thought even including those days.... btw, I use Taylor rhythm just for thinking about the days potential structure -- that is the thing about Taylor... a 'sell-short day' can quickly morph into 'sell-short day, low made first' -- which effectively equals a 'buy day' -- so he has covered all the bases with that book because you just insert the 'low made first' or 'buy made first' in after the fact.... therefore, I agree that you can't really rely on Taylor for much other than kind of a starting thesis with which to look for supporting/refuting evidence as the day progresses.

<<I think a daily chart and Taylor go hand-in-hand. >> I actually do use a daily chart for the Taylor stuff --- busted... but taylor bias only uses last few days (generally 4 days) -- and looking at a daily chart is tough not to get some overly bullish or bearish bias that extends back further than 4 days... if you are a short-term trader, it is very easy to get a bias looking at a daily chart which might show the last 60-100+ days of trading -- a time-period that has cost me money over the years -- so I try to just block it out best I can and focus on lining up the last 2-4 days and the intradays... I do see some use in weekly charts actually for bigger picture stuff -- I just think the daily timeframe is the most difficult timeframe of any to make money from looking at... classic MACD & MACD histogram, 3/10 oscillator, ADX, stochastics are all (more than) useless on the daily timeframe, in my view... will often just lead you to a bias that will lead you astray...

<<I'll trade off the 15 or 30 min charts and take 1-3 trades per day and have it easy. But the other side of that coin is that creates an INCREDIBLY BORING day. >> I find that the most interesting part of trading is the puzzle of figuring out what type of day it will be and how to implement a strategy to take advantage of it. I could do this without entering any orders. But I have to pay bills so I go ahead and enter the orders. I think focusing on the bigger 'structure' is what traders should focus on -- it will always keep you from getting bored.

one other request of ant... I like to think from George Taylor perspective which is most easily thought about as you form a thesis about whether you think the days basic theme will be trade from a low morning level to a high afternoon level ('low made first' was how it was written in the book -- The Taylor Trading Technique) -- or whether you think the day will trade from a high morning level to a low afternoon level (high made first). I generally see this 'reversal' occur in the 10am-12pm EST timeframe --- as it did today (Friday) and yesterday (Thursday). Was curious in the stats associated with a high or low made in precisely the 10am-12pm EST? btw, This is more for 'context' that for entries and exits. attached are last 2 days:

"For example, if you trade off of a 5 minute chart, you can calculate 2.5 times of a 10 period ATR and use that as your initial stop loss. " ant, clarification -- curious if you personally use the 'close' of the bar or the 'high' of the bar for the calculation -- assuming you are long and would like to automate this stop? I use a very similar method where the EasyLanguage code (for a stop to be used with a long is): value1=highest(c,3)-(3.0*avgtruerange(10)); -- I use highest close just because of the occassional intrabar spikes -- and I would stop out on a violation of the highest stop price.... rarely does this get hit if pattern is legitimate. I have experimented with entering on a 1.0 to 1.5 ATR pullback after a momentum-high-pullback type of set-up so the distance to your initial stop (3.0 ATRs)... is around 1.5 to 2.0 ATR's (entry pullback #ATRs minus stop # of ATRs)... this has worked pretty well -- though the market doesn't let you in on days of spikey non-stop/no-pullback moves.

I stopped using daily charts a while back and must say -- its been a really nice adjustment. In a nutshell, daily charts give you a bias that you just shouldn't have. Admittedly, I do use info from the last 2-4 days but for that I do not need a daily chart -- I can use 15, 30, 60 and 120-mins charts just fine to get the pertinent information. I think there is some use in weekly charts -- but daily charts have been rendered meaningless by too many people using them --- just my opinion ---discussion/agreement/disagreement welcome... Set yourself free and don't even look at a daily chart.

Just a possibility

pretty sick when it makes Vegas look commonplace.... wonder how much an indoor ski day-pass goes for?

<<So risk 16% each time ... How many ES contracts should I trade if I use a 100K account?>> if this is a serious question --- dude, 16% per trade? 60% and 1.25 ratio is fine if you do lots of trades. that isn't my style but I know some traders with numbers like that and they do great. Personally, I would err on the side of being very conservative with contract size if you are getting 40% losers. If your style is to do lots of trades per day, smaller size trades can add up and you will not get the big dollar drawdowns associated with trading bigger size after having a bad run. a 'bad run' is never that far away if you are getting 40% losers. moreover, many 5-lot ES trades in a day adds up quickly if you trade a lot and can really get that 60%/1.25 target consistently.

One of my favorite set-ups from LBR library is the 15-minute 'First Cross Buy' --- which uses the 3/10/16 SMA oscillator and lines up nicely with the market profile analysis ant provided (higher low and low volume correction towards VWAP)... nice job Ant

is it fair to say that PVP is really a proxy for peak volume area? I mean, if you have a cluster of huge volume in one area -- but the PVP happens to be slightly higher in another area, it would seem to me that the cluster of huge volume is more important than the particular PVP... is that right?

by the way --- in the past, the Nasdaq futures have the best record of showing inflection points -- for whatever reason. You can see how the NQ futures gave a good signal in mid-2006 and that as of most recent reading -- are NOT at an extreme -- implying the market is not done going down yet.... I will try to post the NQ futures net positions here.

<<This may be a dumb question, but how would the price be rising so dramatically if so many people were going short? Unless these are longer term positions that were accumulated over the last few weeks?>> Futures are just one part of the equation. There is very complex relationship between futures, options and stocks. For instance, if you buy index puts -- whoever sold those puts to you very likely turned around and sold futures to hedge his position. Selling those futures puts downward pressure on the index but that may be offset by Fidelity or Joe Public buying stocks. If outside selling does come in then the put goes more 'in the money' and the seller of the option now has to sell more futures in order to stay hedged (hedging options is a dynamic process as they rise and fall in value exponentially). You can see how there can be kind of a spiral effect as puts go in the money creating increased need to sell futures by option sellers. Eventually, the futures sellers will cover the futures positions as the puts expire. If put buyers come back after expiration then more futures will be sold. Thus futures selling and put buying are closely related. Re these charts, they just show we are at one end of the spectrum in terms of futures selling. I just look at the chart and see some reasons to look for upside --- amid many reasons to look for downside -- it is just one thing to consider.

I have learned over the years to remain flexible. I find it helps to think about reasons why the market can go up or down to keep you as objective as possible. It is so easy to get overly bullish or bearish based on recent action. This data has been consistently 'crowded short' lately -- it does not mean the market can't go down. It just seems like I know a lot of bears right now... and I am trying not to be too bearish --- trying to remain open to whatever pattern presents itself next. looking at data such as this helps that.

Russell and Nasdaq Attached

Data is released to track the outstanding value of futures contracts held overnight.

Hi ant, great stuff. I was wondering if you have ever quantified how often the market exhibits ‘open-drive’? Maybe one way to look at this would be when the market makes its high or low for the day in the opening 15 minutes… I don’t mean for this to be a forum where you do the work at our request – but in effect, that is exactly what it is quickly becoming. Nonetheless, I shamelessly ask you this anyway in hope you are interested in this also….. :)

Chart 4 shows how this level has worked over last 6 days.