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Dogpile

ES Trading for 10/8 thru 10/12 2007

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This thread is for discussing futures trading for this week.

 

Friday began a new 'up auction' after a decent multi-day downswing. Thus, we enter the new week with the expectation that there is 'residual momentum' leftover from Fridays trend day up. We did get a late afternoon corrective move down so I am expecting bulls to retake control and the odds would expect us to make a higher high versus Fridays high at some point on Monday. A higher high is expected but should not be expected to have large continuation in the morning session. The afternoon session after a trend day tends to be the more likely time of day for a continuation in the direction of the trend day. The morning session often has a false breakout after a trend day. Many times, a new 'coil' will develop through lunch-time where a balance develops --- and then an upside breakout could then occur.

 

PVP for Friday was 1570.25 but volume was not significant at this level -- 48,537 contracts is not indicative of an important level. I will watch closely to see how VWAP builds on Monday relative to this level. Friday was day 1 of a new 'up-auction' so I would look for buys either on a good downswing Monday morning --- or wait for the expected afternoon coil-break should a balancing develop in the morning.

 

Attached is the volume distribution for Friday, showing 'Initiative Buying' (Buying resulting in range extenstion above last value area) -- with a 'single print' at 1563.75.

5aa70e0d2588b_Oct5FinalVolumeDistribution.png.104e49a7a2d8c478973e8b0ad8e36ddd.png

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12pm update of my thinking -- would be curious to hear others.

 

Fridays high is starting to look like an 'excess high'...

 

so there are 2 options here:

1) a new down auction began and just ran down -10 pts off 70.25 Friday PVP -- could run further but also could be long in the tooth.

or,

2) this morning was just a shakeout move down to get the weak longs out and the up auction is ongoing and could re-ignite in the afternoon session.

 

#1 seems more likely but that is just a guess. location close to the 58.00 high-volume area along with potential upside residual momentum left-over from friday argues for a long entry somewhere not too far above 58.00 and play for a re-test of Friday high... if we do re-test and make lower high --- that would then be bearish. until then though, still considering the long-side if a short-term entry presents itself and 1558.00 support is not too far beneath the entry.

 

attached is simplified PVP summary

5aa70e0d4f305_Oct8PVPSummary.png.87879874b526ff4d0da6108596f46ef8.png

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grrr, my software is all messed up for some reason but pretty much agree with you. Seems like a great spot where the market has to make a decission one way or the other.

I actually spent the weekend reading everything I could find on the market delta/footprint software. Seems like right here is when that information would be perfect. I would expect aggression to come in when we move from this level, if you could see what side is getting hit market order wise, lifting or sinking bids, when that happens then just jump on that side and go with it.

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12pm update of my thinking -- would be curious to hear others.

 

Fridays high is starting to look like an 'excess high'...

 

so there are 2 options here:

1) a new down auction began and just ran down -10 pts off 70.25 Friday PVP -- could run further but also could be long in the tooth.

or,

2) this morning was just a shakeout move down to get the weak longs out and the up auction is ongoing and could re-ignite in the afternoon session.

 

#1 seems more likely but that is just a guess. location close to the 58.00 high-volume area along with potential upside residual momentum left-over from friday argues for a long entry somewhere not too far above 58.00 and play for a re-test of Friday high... if we do re-test and make lower high --- that would then be bearish. until then though, still considering the long-side if a short-term entry presents itself and 1558.00 support is not too far beneath the entry.

 

attached is simplified PVP summary

 

Based on the relationship of Friday's close and today's open and similar occurances during the past 10 years, that 1558.00 area has 75% chance of holding

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<<Based on the relationship of Friday's close and today's open and similar occurances during the past 10 years, that 1558.00 area has 75% chance of holding>>

 

don't tease me like that... please elaborate.

 

any advice on where to put a stop? I got long at 60.75 and took some off at 62.25 just so I could keep a wide stop on the balance --- how would leave a stop relative to 58.00 at this point. you are saying it shouldn't touch 58.00? thus 57.75 for the balance of my long?

 

thx in advance

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For tomorrow, my bias is bearish. Taylor trading technique shows that the 2-period closing ROC is high and due to flip down, particularly for Nasdaq. Moreover, we built lower value today (other than Nasdaq) -- showing no residual upside momentum from Fridays big up day -- somewhat surprising. Friday is looking like an 'excess high' was made and we may have begun a good downward auction here?

 

ES & RUS both have 3 bar 'cap' formations (an Art Collins 3-bar daily pattern with highest high and highest close occuring in the middle day).

 

All that said, we traded down and formed a fat profile low in the 2-day range -- indicating lack of seller conviction. Volume was extremely light. Nevertheless, I was a bit surprised that bulls never really showed up when they really could have taken control from the bears today. The lack of buying pressure today combined with a gap down off an excess high is all a big red flag in my book. I did not go home short though because of the PVP/high-volume area just below us in the 1558.00 area.

 

Ant, what you thinking for tomorrow?

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Hey Dogpile,

 

Today's trading occurred on very light volume because of the holiday. I wouldn't put much weight on today's action, but it held above Friday's low and the previous balance area high at 1561. So I would say that the uptrend is still intact and would be looking for an opportunity to get long tomorrow. I agree with your "lack of seller conviction" assessment. I will be monitoring prices between Friday's buying tail and today's low for a possible long entry, if it trades there. If we trade above today's POC, I will be looking to get long on a pullback above today's value area, or possibly near today's POC around 1562. Again, the balance area high from 10/1 to 10/4 around 1561 seems to be providing good support. My short-term long bias would change if we trade below today's low with conviction. We'll see what happens in the overnight session.

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Analysis of European Session Thus Far... This is a 5-min DAX chart -- which is another way of thinking about what happened overnight for the S&Ps.

 

We will gap up -- notice location is not good to be long at this point.

5aa70e0dd0df5_Oct9DAX0915amTues.thumb.png.23675063490092e3dbad6e73400fe8af.png

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well, we are building higher value thus far in front of the FOMC minutes due out at 2pm EST. This is a tough spot as the higher value that we are building is bullish but we are pinned just beneath 1570 higher volume area and rejected just under that level this morning. If we break up, consistent with the theme for the day (higher value) -- it might be choppy sledding.

 

If we break lower, then there is some running rom down to 1558.00. This would be consistent with my bearish bias coming into the day.

 

We built a good PVP at 1567.00 with VWAP and price there too. This was a good balancing.

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Today is a rotational day with higher value, as Dogpile noted, I plan to get long if the ES trades below today's developing value area for a play back to value. If the ES trades below 1558, I would not go long.

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here is what I think I missed today...

 

 

On Sep 19th, we gapped up after a big move up and then had ~107k contracts trade at 1546.00 -- and this PVP proved to be a major pivot for the 7 successive trading days.

 

This time, the 1570 pvp was actually not a really large PVP in terms of contracts traded there. there were 48,357 traded there on Friday. We then shook out longs with a down day before building more volume high up in the range.

 

As it turns out, getting long would have been tricky today anyway. But this was not really such major resistance to fear.

 

When there is any doubt, best to just go with the daily bias --- ie, when there is no major morning buying/selling tail indicating a reversal --- just trade in the direction of the value migration. If VWAP > VWAP[1], stay long biased. If VWAP < VWAP[1], consider the short side or look for a 'b' type of profile and a higher low to get long.

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here is what I think I missed today...

 

On Sep 19th, we gapped up after a big move up and then had ~107k contracts trade at 1546.00 -- and this PVP proved to be a major pivot for the 7 successive trading days.

 

This time, the 1570 pvp was actually not a really large PVP in terms of contracts traded there. there were 48,357 traded there on Friday. We then shook out longs with a down day before building more volume high up in the range.

 

The high volume area around 1570 did provide resistance the first time it was visited this morning. I wasn't aware of that area until you mentioned it in your post above. Why did you think that that level would provide strong resistance given the other conditions you mentioned (b shape, higher value, etc)?

 

ES-HV.GIF.4a6f94ef1ddcd5935ea1af57417a0f8d.GIF

 

As it turns out, getting long would have been tricky today anyway. But this was not really such major resistance to fear.

 

There were two long trades today that set up at the VAH and the POC with bullish divergences. But I agree, that the second trade was difficult to take.

 

When there is any doubt, best to just go with the daily bias --- ie, when there is no major morning buying/selling tail indicating a reversal --- just trade in the direction of the value migration. If VWAP > VWAP[1], stay long biased. If VWAP < VWAP[1], consider the short side or look for a 'b' type of profile and a higher low to get long.

 

I think that the breakout day on 10/5, followed by a 'b' shaped profile yesterday, and the higher value today helped me maintain a long bias. I wouldn't rely solely on value migration for a bias. Not sure if you're saying that you would.

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<<Why did you think that that level would provide strong resistance given the other conditions you mentioned (b shape, higher value, etc)?>>

 

I was thinking about that Sep 19 PVP and wrongly equating it to the 10/5 PVP.

 

The 'b' that formed low in the 2-day range and 'lack of seller conviction' led me to be cautious about shorting. But the failure to re-test on Monday confused me a bit. I was a day off as I was thinking re-test the high yesterday and when it didn't, that Friday afternoon high looked like an excess high to me (bull trap). But you are right, that played out on Monday and the 'b' Monday profile and higher value being built was not something to fight. I haven't been trading futures much lately -- the real action has been in the sector rotation setting up interesting opportunities in individual stocks.

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<<Do you scan for stocks or are you working off of some "bigger picture" theme?>>

 

Scan. I basically have adopted the 15-min First Cross Buy to stocks -- so looking for a few days of downswing and then some upward range expansion off opening price to trigger. This works well when the market is rotating.

 

Here are a few examples:

5aa70e0de21a3_Oct9XTO.thumb.png.89a8c4abfa9d7970c1c0b32555aa05a7.png

5aa70e0de83db_Oct5CSCO15-minFCBuywithBullFlag.thumb.png.0399e3579c6626e9654ce331c5f546fa.png

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Summary of recent PVPs -- where support can be expected to come in...

 

note by the way that European markets have not confirmed the move up in the S&P's. we are due for a down day and todays gap down could spark a down auction. That said, there is support at the various recent PVP high-volume zones so this might be tricky.

5aa70e0e1f395_Oct9FinalPVPSummary.png.bf4ebb10ffc7f95dfc17a0814c2d24c4.png

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everyone take note of the large PVP building at 1569.75 today to go along with Fridays 1570.25 PVP...

 

In the recent past, I have seen some big-time selling tails develop after a lot of churning builds at a single price like this action at 1570.00....

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