Dogpile

volume distribution shows trend day -- but price found some selling at 1558.00 level. there should be some residual upside momentum/buy pressure today. I will be looking long if we should get a good downswing. attached is the final volume distribution for Monday

skew doesn't really matter when it's a trend day. this is the reason you don't short -- we busted through those 48.25 sellers with new initiative buying. 'trend days' are rare and only happen a few times a month. but this is exactly the reason I have begun trading a mechanical daily strategy in another account. Range expansion off of opening price after a short-term downswing is an extremely powerful set-up. trend days are difficult to trade as the strategies appropriate for a trend day (buy and hold) are not good strategies for the other 18-odd trading days of the month...

this is a bullish day but short-term location is tough. significant volume has occured at 1548.25-50... implying some patient, responsive sellers at/above this level. tough to expect MORE momentum away from this level -- but that doesn't make it a good short given the theme for the day. As I write this, market has built now 56k contracts at 48.25... This is often a significant-enough amount to mark a peak for the day... Someday, the 15-min chart will correct and offer a buy zone.

15-min First Cross buy will set-up at some point. very nice drive off of opening price after a down day, particularly for ER2.

Links if the above links don't work: Recent Action and Taylor Labels: http://bp3.blogger.com/_5h-SWVGx6Ms/Rv7BrCyj7PI/AAAAAAAAAbc/Q3FHHnWgJ7s/s1600-h/Sep+28+Taylor+Chart+and+Balancing+Levels.png Nasdaq Distribution Days Marked: http://bp2.blogger.com/_5h-SWVGx6Ms/Rv7B0yyj7QI/AAAAAAAAAbk/fY8HI4uUcto/s1600-h/Sep+28+Chart+of+QQQQ+distribution+days.png

This thread is to discuss market structure and trading for the week of Oct 1 - Oct 5, 2007. Friday potentially started a 'down auction' with a morning high put in after a reversal day on 9/25 began an 'up auction'. That said, Fridays volume distribution shows buyers interested in the 1537.00 to 1540.00 zone. It was last day of the 3rd quarter so this makes the read on this a little difficult. Thus, we have a selling tail above 41.00 and then a 'symmetrical distribution' after the morning move down. We closed in a 'balanced' state. We have a case of sector rotation where nasdaq stocks have been marching up while other sectors chopped around last week (XLF/XLE). Investors Business Daily tracks 'distriubtion days' -- defined as days where the nasdaq drops -0.8% or more. Note how common these days are on the volatile nasdaq index. We have now gone 9 days without a distribution day and are due for one this week.

Here is my high level structure for the day -- Friday. Given Thursdays low-volume, narrow range day -- the bias coming into Friday was tricky. Note we made an 'excess low' on 9/25 and then 2 up days. So usually, you would look for a 'sell short day'. But Thursdays action was NR7 and at the close, looked like maybe we were coming into Friday for an expansion move up. A gap up would look like a potential exhaustion gap after nearly 3 days of 'up'... Instead, the market gapped down back into Fridays range. I then attempted another break up in the morning but this was a final bull trap and the market traded hard back down. I had orders to short but couldn't get filled as the bottom fell out. Ultimately, we formed a 'ABC up' pattern on a bearish day (VWAP<VWAP[1]) -- which is a short-pattern. Finally, we got a break lower and a bear flag formed. This time, it carried down to 33.00 -- about ~9 pts below the 1542.00 area of balance. The volume distribution was fat for a down day -- indicating there were buyers out there. It was last day of the quarter so that was part of it most likely.

maybe you can give me a primer on VSA Tin if we stay in this low-volume coil today... is there a good book on this?

Tin, here are some Taylor set-ups for last few weeks/months. I have added a few other things as well -- this isn't all Taylor stuff. The 'coil indicator' at the bottom of the page just triggers when 3 closes are near each other -- this indicates a potential trending move is coming so watch for range expansion off opening price. Yesterday was also a NR7 so we are in a super-coil. The 2-period ROC indicator shows a potential sell short day -- but this is not a great signal, IMO. Not right after a coil anyway. There are good, bad and Neutral Taylor signals -- todays isn't so good b/c we have been in a coil so the Taylor count is screwed up.

<<Over-all, I'm exhausted from this non-action. >> I agree, today was brutal -- no volume and narrow range. That profile chart you posted is very tough to interpret. I am lost looking at that. This is one reason why I like to keep it simple and just look at the current condition - for better or worse, at least it is less confusing. The most recent pattern shows me a Head & Shoulder bottom. This is bullish and we are grinding up off of that. This is one of those markets that keeps inviting shorts in and then running them over. The action looks bad enough to tempt you to short. Then again, it was tough to be long today. Just a very difficult trading envornment today. We did make an attempt down and then formed a higher low off that. The trend is still up.

George Taylor was a grains (commodity) trader who wrote a book on the nature of buying/selling pressure in the market (all markets). His book is extremely painful to read. The better read are a few chapters out of 'Street Smarts' by Rashke and Connors -- Chapter 7 & Chapter 8. Basic guideline is that after 2 down days, you look for an up day. After 2-3 up days, you look for a down day. After a run of 5-6 straight up days and then a down day, this sets up a great buy day (called a 'Pinball Buy' -- chapter 8). There are some other nuances to it -- ie, the Taylor 'count' gets screwed up if you have a bunch of narrow, nothing type of days. all of this is just a guideline and you need to be able to decide if market action is confirming the Taylor guideline or not. It works best in a nice choppy market. The most important concept to me is just to expect a choppy market most of the time. Steady trending action does happen, but you can adjust on the fly to this. More often, expect the market to go 2-3 up then 2 down. The other key conccept is to look for morning reversals -- consistent with Ants other thread about how a days high or low is often made in the early morning. Taylor also had all these special situations which need to be interpreted. This is very complex and so its better to talk about recent price action and just label it. Note we had a morning swing low put in on 9/25. this represents a buy day. Now we have built higher value for 2 days since that day. Tomorrow is a 'sell short day' per Taylor. But this just means that the market might make its high in the morning session and this could be from much higher levels if we gap up. Today was also a big coil day so don't read too much into the Taylor count - unless we gap up a lot -- and then have to consider the odds higher of an 'exhaustion gap' after already being up a bunch of days in a row. Adding to the complexity of the current situation is that tomorrow is the last day of the quarter.

<<when your position moves in your favor almost immediately, you're guaranteed to have your smallest position on. >> I have sometimes not been getting filled so small position is better than no position <<How far apart are your scale-ins? >> I play this by feel... I just have a set number of contracts I want to buy and generally watch the tick countdown function. I am trying to do limit orders at the 'last trade price' every 200 ticks or so until I have a full position.. if the action starts moving hard against me, I get better prices. If it starts moving up, I get worse prices. In the end, it will limit losses and its unclear if it really hurts me because it is still better to have a small position on than those times when you get nothing on -- the other day I missed 7-9 points because missed my limit order by a single tick. <<Typically, where is your stop for each position?>> I have a hard stop that I don't think should be hit. If price moves down towards that, I am buying not far above my stop level. <<How many times would you consider scaling in? 3-4 times. <<How do you adjust your stops once you have taken your full position?>> stop doesn't change, I just update the number of contracts that I currently have in the stop order. <<This seems like a good strategy for someone who doesn't like to take too much heat on trades.>> well, for me personally, I can take the heat if I know I have a good averaged-in price. I have trouble psychologically if my initial entry was 2 minutes off and that was a 6 tick difference. Might not be best for someone else, for me -- it works since I am equally frustrated about missing a trade when my limit isn't hit and the trade ends up working versus the frustration of entering and just stopping out...

ES.D session starts 9:30am start...

I mentioned this last night and actually executed something I said -- <<Thus, I am now using the approach of just doing multiple orders and averaging-in at a good level. If the pattern goes against you, you only have a small position so you don't get hurt and if it really goes hard against you -- you can pause further purchases a little bit and ride out the shakeout move without going too far into the red -- if only 1/2 on, seeing the minus dollar amount in the bottom of the Tradestation screen isn't so bad.... If the pattern goes in your favor, you get a worse level but you do get something on instead of potentially missing the entire move while waiting for your limit order to fill -- and you can always average-up or buy a little YM or ER2 if they haven't moved yet. This is my current thinking anyway.>> Together with long bias, allowed a nice start to day. Held on too long cause didn't want to miss a potential bullish day. Had limit orders higher that obviously didn't fill. Note 40k + contracts at 41.75 with price there too and VWAP near-by... Market is balancing. While a balance-break is a 'go-with' -- note that we have built successively higher balancings -- the trend is still up.

Market continues to grind higher, building sequentially higher PVP's and VWAPs. This has happened amid good mid-day shakeouts -- which allows the trend to continue. Also, note the potential Inverse Head & Shoulder pattern that has developed as of yesterday. There is no Taylor sell bias today -- today is an in-between day. Gap up means we will begin building higher value. My bias is long for today but we face resistance of the 'excess high' from 9/19 above 1546.00 and into the 1552.00 level. Yesterday showed better volume than previous day and built higher value. This is where an upside bias makes sense. The volume distribution does not suggest continuation. If this same volume distribution were to occur on a a down day, I would be looking for a reversal. But this is where up markets and down markets differ. Up markets can grind up just like its doing. Down markets tend to just move quickly and so... In general, if a market is grinding up, stay with it. In general, if a market is grinding down (having trouble going down and printing large volume bars -- indicating buyers), look for an upside reversal. This is just my opinion and I would look for others to comment on such. I say this because it can be easy to do too many short-side trades in this environment -- believe me, I speak from experience on this. Just be extra selective on the short-side and be a little more patient on the long-side for now.

<<My only requirement is that my entry/exit is not so delayed that I miss most of the move because of a mechanical approach. >> This has definitely been an issue I have gone around and around on. Right now, I am in the 'average-in' over a few 400 tick bars camp. ie, you see a pattern in a good profile location and you feel like its a buy. You want to control risk but you also don't want to miss your entry by a tick and miss out on a 6 pt move -- something I have done multiple times lately. Thus, I am now using the approach of just doing multiple orders and averaging-in at a good level. If the pattern goes against you, you only have a small position so you don't get hurt and if it really goes hard against you -- you can pause further purchases a little bit and ride out the shakeout move without going too far into the red -- if only 1/2 on, seeing the minus dollar amount in the bottom of the Tradestation screen isn't so bad.... If the pattern goes in your favor, you get a worse level but you do get something on instead of potentially missing the entire move while waiting for your limit order to fill -- and you can always average-up or buy a little YM or ER2 if they haven't moved yet. This is my current thinking anyway.

<<I bet that by filtering that trade using the Taylor rhythm, you also improve its win statistics to something higher than 66% (without filters).>> You know the Taylor count the day before -- so you go to bed with a plan --- then you wake up and see a gap up you can instantly think, First Cross Is a Buy, First Cross Is a Buy, First Cross Is a Buy.

<<I am curious if others find this type of market analysis of interest.>> Ant, I am very interested. Do whatever you can do that will make it sustainable. Don't write too much if it feels like it takes forever but definitely do it if it helps you because I find that explaining it and methodically posting this stuff forces me to think thoroughly through it and even sometimes see a few things I might instead overlook. I also can go back and see what I was thinking a few days ago when we visited a certain level. Moreover, crossing it with your work definitely helps me with my own work. Those charts are great. Having read Dalton, I can follow your explanations well. I find that there is some magic when combining market profile logic with price patter set-ups. The market profile helps hugely in giving me confidence in taking a trade -- whereas a price pattern (with or without an indicator) helps cross-check the profile. When they come together in unison, its like magic -- very high win rate. When the are saying opposite things, its best to exit or not trade. ie, today -- I was long in the afternoon on a buy-anti and really thought we were set for a trending move up and bust out of this zone -- volume was better than yesterday and you had a good shakeout mid-day to set-up a squeeze. It did squeeze and I trimmed but didn't exit the entire position because the indicators made momentum highs. I had orders to exit above the price highs assuming the next push would bring a momentum divergence. But profile said to exit based on price. I instead gave back multiple points as I got caught in a classic bull trap -- where a price high is made at same time as momentum high rather than the usual -- where momentum precedes price. I still made a few points on the balance but I left a bunch on the table.

<<do you not like the First Cross Sell trade?>> First Cross Sell can be a monster trade but it doesn't seem to be quite as reliable as the FC Buy. First Cross Buy is like my 'go-to' trade which I bow-down and worship. The First Cross Sell seems to often just peter out. Or it coils first. Today the FC Buy kind of coiled a bit first too for that matter. I find both are good trades -- especially if you have, like today, an unfilled gap.

This pattern is my absolute favorite LBR pattern: The 15-Min First Cross Buy. I use slightly different indicators than LBR does simply because I think stochastics work better than the 3/10 'fast line'. For those unaware, the 3/10/16 oscillator is simply the difference between the 3-period and 10-period Simple Moving Averages. It gauges momentum. The 'Slow Line' is the 16 period moving average of the 3/10 difference. The slope of the Slow Line effectively shows the TREND of the momentum while the 3/10 'fast line' measures the strength of the most recent price push. I like the 5-period stochastics instead of the fast line because it reacts to current conditions much more quickly than a Moving Average does. You just want to find a spot to buy when the Stochastic gets oversold while the trend of the momentum has just flipped up (crossed up through zero). The move up through zero from below is the filter, the stochastics correcting down is the trigger. Today was a good example. You also had 'ABC' structure and price pulled back right into Fibonnaci support so this was like a 'triple buy'... The nice thing about this set-up, which doesn't occur very often -- maybe once a week -- is that it often coincides with the 2-3 day Taylor type of rhytmic buying/selling pressure. ie, 2-3 up days then 2 down days, then a First Cross Buy -- repeat.

guess it was a bad question, hitting anyone with a wine glass automatically makes that person a complete bitch -- and therefore that person cannot win. beer bottle is arguable -- wine glass is pretty clear-cut. winner due to 'closed-eye stoppage' -- james_gsx.

net net, who won?

well, ABC down worked well -- this pattern gives you good location and with the primary trend. Now we appear to be in a potential 5th wave of an elliott cycle up... This goes against the theme of the day so not trading this yet. A good pattern for late in the day to play this would be a lower high, which would then also be a Head & Shoulder top formation.

got a buy signal on RUS today at 818.40. will get buy signal on ES today if touches 1543.50. I have done a lot of studying and created some new strategies based on the same underlying principle here which I will be trading in a real account starting 10/1. I have 2 filters and set some limit orders to exit trades which greatly increases the expectancy. Also, I will only be trading the long side with this strategy. For the short-side, I will rely on my primary trading account to make money there. I just don't think this concept is valid for the short-side -- or I should say, it is less valid on the short-side and there are better strategies for the short-side. For the long-side, 'range expansion off of opening price' is awesome. I have my own concepts which I believe in for the short-side, which I will trade on a discretionary basis. Thus, I am going to stop this thread here as I have changed the strategies and this forum has served its purpose for me.

<<One thing that is interesting about Marc Fischers ORB system is he says in his book that the more people who use it the better it will work. >> better strategy might be to scalp the opposite direction after everyone fills