[VSA] Volume Spread Analysis Part II

[tawe trader 10]

Why IS it that No Demand, and No Buying Pressure, so often show up at the beginning of up-moves??? This is when I'd like to get in long, but these contrary signals keep my finger off the trigger, and I miss the move.

 

I see these ND or no buying pressure bars (coming in before a rally) frequently occuring in all timeframes, especially after a long decline and with a sign of possible strength in the background. I now see it as activity (buying and selling) temporally drying up and another reason to be in the long camp.

 

There was a similar situation on the 5 min ES this morning, when the London markets opened.

 

The charts say it all.

 

Tawe

[Eiger 10]

...If I am right longer spread on low volume is no buying pressure. Is possible say that it is selling pressure dried up too ??. I am a little confusing from it but ofcourse I understand that when is nobody who wants sell in this level of price only what can do is buying on higher price . But why it calling no buying pressure ??? Or I made some mistake in my analysis ??

 

I think you might have made a small mistake in calling it no buying pressure. We are seeing no selling pressure in this example because all the selling was taken out of the market and has dried up. I do things like this all the time - example: calling no demand a test, or selling climaxes buying climaxes. No big deal. You understand that when there is no one left to sell, price will be bid up. Thats all that really matters.

[VolumeJedi 10]

Attachment shows the rest of the day...and my continued confusion and frustration over this issue. Todd Krueger used to call this the "polar bear in Hawaii". A "No Demand" (the polar bear, N.D. being a bearish signal) showing up where the bloody thing don't belong. Todd used to just dismiss these anomalies, but I think we can do better than that, at least I hope so. Long ago I queried the VSA#1 group as to whether we could come up with a VSA-based logical explanation. Why IS it that No Demand, and No Buying Pressure, so often show up at the beginning of up-moves??? This is when I'd like to get in long, but these contrary signals keep my finger off the trigger, and I miss the move.

 

Anybody got any good advice here?

 

Ouch! LOL!

 

Repeat after me:

 

I totally understand that consistency is more important than being right. Having desire to be right is for armatures and making money consistently is what the real pros do. I am striving to be a real pro everyday by focusing on what is proven to really work and which produces steady profits while protecting me if a am wrong.

 

Nice pick out CW and Eiger. Two great posts that help clear up a difficult situation that is not that uncommon. Thanks all.

[delta 10]

I read somewhere a post by sebestian, " after seeing signs of strength if there is no demand that does not mean weakness necessarily. It may be that market is resting before

making an upmove". is that the point you all are discussing?

[Tasuki 10]

I read somewhere a post by sebestian, " after seeing signs of strength if there is no demand that does not mean weakness necessarily. It may be that market is resting before

making an upmove". is that the point you all are discussing?

 

Yup, delta, that pretty much nails it. Todd Krueger used to use two terms, "polar bear in Hawaii" (bearish sign with strength in the background) and "palm trees in Alaska" (bullish sign with weakness in the background). We haven't talked about these "problems" very much in the two VSA threads on Traders Lab, which is why I posted those charts, so we could collectively deal with the palms and the polar bears.

 

Thanks to all for your posts and clarification. Truely one of the trickier parts of VSA

 

Tasuki

[larsdelgars 10]

oh no!!!! attack of the trading shrink that can't trade.... i feel like i'm having flashbacks of a steenbarger seminar... lmfao...

 

who would have guessed... another edition of tradeguider.... steaming hot pile of pump and dump...

 

now quick... i need to login under my other screen name so i can talk to myself on the boards...

 

LMFAOOOOOOOOOOOO

[Shamal 11]

I see these ND or no buying pressure bars (coming in before a rally) frequently occuring in all timeframes, especially after a long decline and with a sign of possible strength in the background. I now see it as activity (buying and selling) temporally drying up and another reason to be in the long camp.

 

There was a similar situation on the 5 min ES this morning, when the London markets opened.

 

The charts say it all.

 

Tawe

 

Was that not pointed out rather succinctly by monad in response to tasuki few posts back:

 

"Tasuki,

After a substantial downtrend, it indicates that the supply has been absorbed on the previous high vol down bar (strength appears on down bars) and now the buyers are able to push prices up without meeting much resistance.

No demand is of more validity after a rapid rise followed by a climax ie. signs of weakness."

[tawe trader 10]

Was that not pointed out rather succinctly by monad in response to tasuki few posts back

 

Shamal, yes I guess it was, but I didn't see the harm in giving my 2p worth's and a current chart / example, of these 'polar bears in Hawaii'.

[Shamal 11]

Shamal, yes I guess it was, but I didn't see the harm in giving my 2p worth's and a current chart / example, of these 'polar bears in Hawaii'.

 

infact your examples are very clear, I was confused about first somebody saying the market was weak at that point(referring to Tasuki's chart) and then there was something about floating supply , that does not make sense in a futures market. so when I read the short post of Monad, the answer seemed obvious which was then confirmed by your post. in between there are so many posts I was not sure what to make of.

[tawe trader 10]

Shamal, no probs.

 

There was another example again this morning on the 5 min ES.

 

Regards

Tawe

[Eiger 10]

Yup, delta, that pretty much nails it. Todd Krueger used to use two terms, "polar bear in Hawaii" (bearish sign with strength in the background) and "palm trees in Alaska" (bullish sign with weakness in the background). We haven't talked about these "problems" very much in the two VSA threads on Traders Lab, which is why I posted those charts, so we could collectively deal with the palms and the polar bears.

 

Thanks to all for your posts and clarification. Truely one of the trickier parts of VSA

 

Tasuki

 

It can be trickier, but it doesn't have to be. Here is another idea that might help in this: Focus first on the volume rather than the price bars. VSA is areally more about volume than price. VSA sees volume as the key indicator for professional activity. It's only the pros that have enough 'power' to turn the trend.

 

So, when looking at a chart, always look for the swelling of volume or volume spikes. These are big clues that important activity is taking place. Then look at the price bars on that volume. Did they close in the middle or on the exteme (e.g. closing on the highs at the end of a down trend). This would tell us that pros are stepping in and attempting to change the trend. We then, of course, look for a low volume test or no demand for confirmation.

 

Once we see the the high volume, we know the background is potenially changing. The character of the subsequent volume and bars--especailly the low volume test or no demand--gives confirmation.

 

If that is our background, and we've now gone from a downtrend to strength in the background, then any No Demand that shows up is out of place and can be ignored. A single bar will not alter all the heavy effort that was demonstrated in the background (i.e., all the high volume effort changing the trend).

 

Wyckoff talked about this as well. He understood that volume is one of the keys to detecting shifts in trend. He talked about the swelling of volume that nearly always occurs as the trend shifts from up to down or down to up. His little book, Studies in Tape Reading is a great read regarding this kind of stuff.

 

It helps to know your market, as well. How much volume is typically required to change a trend on a light volume day? What about a normal day? And, a trend day? Knowing these will help keep you from seeing stopping volume and climactic action at every minor turn.

 

It is always better odds when you see volume come in and there is nearby support or resistance.

 

One other thing to say is that the shift in trend from down to up seems more difficult to discern than the shift from up to down. I don't know exactly why this is so. I guess it takes a little more time for accumulation or maybe fear takes a little longer to recede in minds of traders. I'm not sure. But typically, the 'accumulation' phase takes a little longer than the 'distrubution' phase. So, you might see more polar bears (or palm trees, whichever is the right association) as the market is trying to change from down to up. It's just something to keep in the back of your mind.

 

Try to remember that background is the crucial thing to watch for. The easy 'tell' is swelling of volume. After it has been confirmed, single bars (that are definate keys in the context of other backgrounds) can safely be ignored.

 

Hope this helps

 

Eiger

[monad 10]

Shamal, no probs.

 

There was another example again this morning on the 5 min ES.

 

Regards

Tawe

Good on you Tawe

SAME but in reverse, climactic action on high vol after a trend up, weakness now, at previous resistance levels,

A: prices move down easily as no support from buyers, sellers able to offer it down.

B: no demand after weakness in the background

C: AGAIN climatic action after price fall, strength appears, supply gets absorbed, prices move up on low vol, less resistance from sellers.

 

How I see the market and trade, why make it complicated.

Edited January 23, 2009 by monad

[Seb Manby 11]

Good on you Tawe

SAME but in reverse, climactic action on high vol after a trend up, weakness now, at previous resistance levels,

A: prices move down easily as no support from buyers, sellers able to offer it down.

B: no demand after weakness in the background

C: AGAIN climatic action after price fall, strength appears, supply gets absorbed, prices move up on low vol, less resistance from sellers.

 

How I see the market and trade, why make it complicated.

 

Thanks, I moved it to the correct one, must have slipped to the wrong chart. sorry.

regards Sebastian

Edited January 23, 2009 by Seb Manby

[monad 10]

SM,

The chart attached to your post is not my chart.

[Seb Manby 11]

Shamal, no probs.

 

There was another example again this morning on the 5 min ES.

 

Regards

Tawe

 

Hi;

 

I have a little difficulty with your text, 1st is that you will NOT see a 'no demand' bar after a shakeout, not weakness. The market is now primed for a rally as the herd have been shaken out of their losses, a key ingredient.

 

A; This bar is a test after strength has appeared, the previous bar is simply that professional traders wait to see the reaction of the shakeout, they do not want supply to get in the way of a rally, as it is unproductive and not good for profits. As we now see a test at A, we can now assume that the market is strong. After a shakeout, we look for confirmation that this shakeout was genuine and not false, this test gives us a major clue.

 

B; This is another sign of strength, because the price is marked down into the bar of A1 bar, as you can see, the volume on this down bar is lower than on A1, next bar is up, and the bar to follow is narrow, on a down bar with a slight increase in volume. The market needs to continue to test on the way up as it does at point C.

 

You need to look at the unfolding story and not get bogged down in 1 or 2 bars. If you see a low volume up bar after a shakeout, assume the market is resting after the effort, if there is no confirmation, the market may very well go sideways.

 

Regards Sebastian

[Tasuki 10]

Hi;

 

 

A; This bar is a test after strength has appeared, the previous bar is simply that professional traders wait to see the reaction of the shakeout, they do not want supply to get in the way of a rally, as it is unproductive and not good for profits.

After a shakeout, we look for confirmation that this shakeout was genuine and not false, this test gives us a major clue.

 

If you see a low volume up bar after a shakeout, assume the market is resting after the effort, if there is no confirmation, the market may very well go sideways.

 

Regards Sebastian

 

Take note, VSAers, Sebman lays it out, clearlike:

Q: what is a "No Demand" type bar doing after a Shakeout?

A: The BBs are waiting to see how the market reacts to the Shakeout. Were their efforts to "wrongfoot" the public successful, causing them to sell their long positions, or is there more supply below the market?

 

Q: What does the VSAer do when confronted with a polar bear in Hawaii or a palm tree in Alaska?

A: Keep an eagle eye out for confirmation!

[monad 10]

Thanks, I moved it to the correct one, must have slipped to the wrong chart. sorry.

regards Sebastian

 

You see I am kind of a simpleton, nature having provided a rather simple mind I am afraid but thankfully with clarity in thinking, hence this bigboys in dark glasses, polar/grizzlybears,tigers/palm trees,cactus etc stuff scares me silly, used to think about all that once, got me chasing my tail therefore now when I look at charts I ask myself, is there more demand than supply and vice versa, is it meeting resistance or support, couldn't care less as to who is doing the buying or selling and why?

 

This rather simple approach allows my simple mind to focus and to process less info. regarding what BB's/polar bears/rest of the animal/plant kingdom are doing or not doing:) guess what, works fine for me. can only speak for myself, others may not find it so.

Edited January 24, 2009 by monad

[habi 10]

 

Tasuki

 

Interesting discussion, let give me some comments too. First of all, Sebastian made an important statement:

 

You need to look at the unfolding story and not get bogged down in 1 or 2 bars.

 

Attachments 10 and 3 min charts:

 

Let’s first have a look about one degree higher. The Shakeout (Jan 20) occurred at the end of the regular trading session, at this time we have always some volume spikes. At point A, we see a tree bar reversal pattern and you mentioned already, that strength comes in. If this could be a potential bottom, then we would expect that this area will be tested later.

 

Bar A in the 10 min chart: it’s a wide range body bar with high volume, closing a little bit above the low. If we would know, what really happened within this bar, we need to analyze it in a smaller timeframe. We see in the 3 min chart, that most activity was in the two bars at A, with a small body. Even we have seen this activity in the last minutes, the fact that it occurred in a small rang signals strength.

 

For the next day, we were looking for a test in the bottom range from Jan. 20. The sharp drop was not confidential, but we saw a nice reversal pattern in the 10 minute chart, followed by a test at C. The same price action at B in the 3 min chart shows increased volume for the last four down bars. As we easily see now in hindsight, most selling pressure was taken out in this down move. Prices moved then up with lower volume, but the volume to point C was even lower and with the following up bar we had a successful test for the reversal at B.

 

The test on the higher degree was confirmed with the up move at F when prices rose above the opening high.

 

The move up from point B to D looks not very strong to me. I think, it was not really easy to anticipate the whole move for the day in real-time. Price movement at E and F signaled that the least resistance was to the upside.

 

I learned that the so called “smart money” buys on down moves and sell into up moves. If they have taken most of their positions during the move down to A, they would like to see, how much selling is present in this area. The remaining selling was removed in the move to B and again tested at C. After this test prices could move higher with lower effort, it just need some more demand than supply.

[Tasuki 10]

Mostly just posting to see if this thread is still alive. Apparently a bunch of posts were deleted. No activity here for 4 days. Very strange.

Anyway, attached is a daily chart of the OEX. Hard Right Edge---doesn't that look like "No Selling Pressure"?

[tawe trader 10]

Yes Tasuki,

 

I agree on both counts, it has been quiet here with some odd stuff going on and yesterday does look like a NSP (no selling pressure) day on the OEX.

 

There's a similar situation with Microsoft (MSFT) with the added bonus of ultra high volume in the background six trading days ago.

 

Regards

Tawe

[wan2no 10]

Could anyone upload a pdf of VSA part II kike posted Part I. Thanks in advance

[BlowFish 10]

As Svensa asked you when you enquired before why don't you do it yourself? A bonus is that as you collate things it is likely to fix them in your mind.

[Eiger 10]

Mostly just posting to see if this thread is still alive. Apparently a bunch of posts were deleted. No activity here for 4 days. Very strange...

 

People tend to withdraw when the thread gets hijacked like this. The same thing has happened several times before.

Edited January 30, 2009 by Eiger

[tawe trader 10]

Some fairly predictable ES action thus far today, prior to US GDP news. The mkt was down nearly 10 pts from yesterdays close and around an hour before the news was due there was some pretty big pre-mkt volume.

 

The 'talk' on Bloomberg and CNBC websites this morning was that the GDP figures were going to be the worst for over 25 years ......... surprise, surprise the news was better than expected and the mkt jumped.

 

Now I wonder if the market taken down so the so-called smart money can load up long on some ES contracts and make a quick buck ?????

 

The charts tell the full story.

 

Tawe

[Tasuki 10]

There's a similar situation with Microsoft (MSFT) with the added bonus of ultra high volume in the background six trading days ago.

 

Regards

Tawe

 

Brilliant, tawe. So, what sort of confirmation would you like to see to make MSFT a longterm buy (we are at multiyear lows)? A test, right?