ES Analysis for 10/03/06

[ant 10]

Thought I'd share my ES analysis for tomorrow which includes key reference areas identified using Market Profile. First, let's look at what happened today. Refer to the chart below. Coming into 10/02, the ES was in a short-term, 3-day trading range so the key reference areas were the upper/lower limits of the trading range and the middle of the distribution (or high volume node). On 10/02, the ES opened and traded down to the lower bracket limit of 3-day composite at 1343.50 and bounced off of it. Typically, if a responsive trade is taken here, the target is the middle of the distribution. One thing to keep in mind is that when price is rejected at one of the bracket extremes, it could trade forcefully to the opposite side of the bracket. So if you're in a trade, monitor internals and see if it would make sense to continue to hold for a play of the opposite bracket extreme and a potential breakout. Notice that a high volume area will usually slow down a market as it did in the ES today when it traded near the 1347.75. Markets do not usually reverse on a dime at high volume areas (not true for low volume areas although high/low volume areas both act as support/resistance but for different reasons). Today, the ES traded to the high volume area of the composite between 1347 and 1348.25 and reversed. This becomes a key reference area for tomorrow. Afterwards, the ES traded through the lower bracket limit of the composite on high volume and slowed down around the high volume area of 9/26. Again, the high volume area slowed down the ES giving the trader time to monitor price action and make the appropriate trading decision to either exit a position, continue holding a position, or add to a position.

 

The selling range extension around 1343 left single prints in today's market profile which also coincides with the lower bracket limit of the composite. 1343 - 1343.25 should serve as the immediate upside key reference area followed by the high volume node at 1347 and 1348.25. To the downside, the low volume area from 9/26 at 1336.50 - 1335 is the key reference area. Could this be the lower limit of a larger bracket that will form? I don't know, but we'll see. As the ES approaches one of these key reference areas, I will monitor market internals and then apply the appropriate trading tactic. In the morning, I will review overnight trading and determine which key reference areas immediately above/below where the ES is trading at the time. Note that no predictions have been made here. I have identified key reference areas, but I don't know whether I will be going long or short until the market trades near these areas and market internals are monitored.

 

[Soultrader 12]

Great analysis like always Antonio. The markets are consolidated indeed with overlapping value for the past few trading sessions. Any break out should be explosive.

 

I am also approaching the market with an open mind for now. The markets can offer both short and long setups.

[ant 10]

Thanks Soultrader.

 

The ES is currently trading at 1338.50 so the key reference areas to the upside are:

 

• 1350: Upper limit of the 3-day composite market profile.
  
• 1347-1348.25: High volume area of the composite. Also includes yesterday's high.
  
• 1343-1343.25: Lower limit of the composite and the single prints from yesterday.
  

 

The key reference areas to the downside are:

 

• 1335-1336.50: Buying tail of 9/26.
  
• 1330.25-1331.50: Single prints from 9/25.
  

[Soultrader 12]

I find observing premarket action gives tremendous market information for the direction of the day.

 

Usually globex lows and highs act as key support and resistance levels. For example, premarket action seems to be holding for both the ES and YM at critical levels. This gives me a short term long bias at the opening. Always good for one play.

[Soultrader 12]

Hope you caught some of the nice uptrend today Antonio. I caught that mid day gap up

[budman 10]

Thanks guys. I'm new to "market profile". Are you guys using 24 hours and 30 minute settings for you profile charts?

 

Thanks.

[Soultrader 12]

Thanks guys. I'm new to "market profile". Are you guys using 24 hours and 30 minute settings for you profile charts?

 

Thanks.

 

Market profile is designed to be used for 30 minute settings so I would recommend it. I personally use 30 minute settings with a regular trading hour chart. For the YM, the opening would be at 930eastern and close at 5pm eastern. For the ES it would be 930 to 415.

[ant 10]

The key reference areas worked out well today. See chart below. The ES found support at the buying tail of 9/26 and then hit resistance at the high volume node of the 3-day composite. Although the ES paused around yesterday's single prints, it blew right threw it shortly thereafter. The ES offered two nice trade opportunities today.

 

Soultrader, I caught a nice piece of the action today but then had to go to work, unfortunately. Glad you got yours too!

 

[Soultrader 12]

We went from the lower range to the upper extreme today. I mentioned in my YM analysis that if the 11720 should hold, we would see a rotation back to the upper extreme by this week. Didnt expect to see it so soon

 

That premarket hold was crucial information today. Gave me a long bias from the start.

 

Good luck tomorrow!

[ant 10]

That premarket hold was crucial information today. Gave me a long bias from the start.

 

Good call Soultrader! Glad you pointed that out since it helped me too.

[Soultrader 12]

Doing your homework and having a trading plan is soo important

 

I also find premarket information crucial to understand the direction of the markets.

 

I love your analysis Antonio. Possibly because I am a huge fan of market profile. I'll post one up for tomorrow later on.

[budman 10]

Market profile is designed to be used for 30 minute settings so I would recommend it. I personally use 30 minute settings with a regular trading hour chart. For the YM, the opening would be at 930eastern and close at 5pm eastern. For the ES it would be 930 to 415.

 

Hmmm. You prefer the trading hours instead of the 24 hours. Interesting, especially where you value pre-market data. I'll give that a shot, obviously it's working for you.

 

Thanks again.

[ant 10]

Hmmm. You prefer the trading hours instead of the 24 hours. Interesting, especially where you value pre-market data. I'll give that a shot, obviously it's working for you.

 

Thanks again.

 

I use Market Profile the same way Soultrader does. Market Profile uses 30min intervals because that is roughly how long it takes for new information to be absorbed by the markets. Market Profile can be formed in one of two ways, using TPOs or Volume. I would only use TPOs for regular trading hours (i.e., US day session) because of the thin volume during trading at other times. For 24 hour markets, like the CME Currencies (Euro, Yen, etc.), I would actually use all 24 hours but use a Market Profile using Volume (similar to the LDB), not TPOs. I would also compare the daily Volume Profile against the Market Profile using TPOs because sometimes they differ in a meaningful way. For those who use TradeStation, the Matrix provides a Volume Profile. Very useful, IMO. See example of the Matrix with the YM below.

[budman 10]

I see ant. I have been using it through Esignal. I'll change a few settings. I appreciate your help. Market profile is new to me, but it seems like a great tool.

 

Thanks again.

 

Budman