Final 'Volume Distribution' Commentary

[Dogpile 10]

Starting a thread to try to generate discussion about information contained within the daily volume distribution. Here are the final volume distributions for this weeks trading. It is kind of difficult to take snapshots during the day to see what the volume distribution looked like as it developed. That would be very labor intensive. Nevertheless, comments on HOW the distribution built to its final shape and get others 'reads' on what it might mean for future trading could be a very nice collaborative endeavor.

 

You can look at some initial comments here:

 

http://www.traderslaboratory.com/forums/f6/random-distribution-regarding-volume-distribution-2733.html

 

Final Distribution for Monday Nov 12, 2007:

 

 

Final Distribution for Tuesday Nov 13, 2007:

 

 

Final Distribution for Wednesday Nov 14, 2007:

 

[Dogpile 10]

Thursdays Volume Distribution Summary:

 

Overall volume for the day was weak. The PVP that formed was also the lowest in months at ~39k contracts. These two facts seem consistent and probably not that noteworthy. It would have been much more interesting if overall volume had been stronger and the PVP had been so light. The face that overall volume was weak tells me institutional players were just not interested in doing a whole lot today.

 

The day had multiple trades in it but here is a comment regarding just the volume distribution.

 

The market went down and tested 1461.00. 1461.00 was the daily PVP from 11/12. 1461.50 was the daily PVP from 11/13. The market tested up off this level and then eventually broke hard below it, with 'single prints'. You can see the low amount of volume that took place and price moved quickly through this level.

 

The daily PVP formed at 1456.00 which occured near the close, very low in the range. If you were watching the distribution late in the day, you would have seen that it really did not look like the earlier PVP up at 69.50 was going to be exceeded. But it was. This is normal behavior as volume comes in near the close but it also shows a market that got pushed down on weak volume, was closing far below 'value' for the day, and buyers came in late. This confluence suggests that location is better to be long than short.

 

[Dogpile 10]

Fridays volume distribution comment:

 

I am just going to comment on the afternoon action here. The afternoon was interesting in that the S&P futures were pinned just under VWAP for a good deal of the afternoon. The afternoon did show a 'higher low' vs the morning low (1448.00 vs 1447.50). Volume began to build at 1452.75 and reached above 40k contracts, a 'rule of thumb' level for me for what constitutes good trading. The market had opened at 1464.75 and thus was building up significant volume low in the range.

 

Thus, for most of the afternoon we appeared to have little buying interest above the VWAP price near 1456.50 but significant buyers near 1453.00. This led to somewhat of a stalemate for a while. As soon as price was able to climb through VWAP late in the day, it shot up to 1464.00.

 

Here were the pieces I put together for a profitable long trade:

 

1. The higher low in the afternoon is a factor that argues for a long.

 

2. Building volume low in the range (10 pts below Opening Price) is a factor that argues for a long.

 

3. The market kept faking lower after testing VWAP but not following through.

 

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I decided to take a good breakout away from 1452.75 that also exceeded VWAP and went long 57.75. I exited 1463.75 as it challenged the morning 'selling tail' high.

 

[Dogpile 10]

Final Volume Distribution Commentary for Monday Nov 19, 2007

 

[Dogpile 10]

Comment regarding watching the late afternoon action to 'read' the tape.

 

On Monday, Nov 19th -- the market attempted to break lower late in the day. On Wednesday, Nov 21st -- the market also attempted to break lower late in the day.

 

There were lots of differences that I won't go into. But watching the volume distribution late in the day was an excellent way to see in real-time what was happening (tape-reading by watching the volume distribution build).

 

Monday: Price attempted down and then volume spiked at 1437.50. 55k contracts built at this price very late in the day. Big money institutions, the 'higher-timeframe' players that you should be aligning yourself with -- were saying, we like 1437.50 a LOT on this particular day.

 

Wednesday: Price moved down and no volume showed up. It just fell and fell. Higher-timeframe institutions were not around or not interested and this led to a very nice move down.

 

Knowing nothing else, (there were big differences in the days anyway), you could have seen how one meant to either close your short and/or go long. The other meant, stay with your short and play for a trend (until volume showed up low in the range).