YM Analysis 1/12/07

[TinGull 10]

Yesterday we had a really powerful trend in the morning, and then come afternoon things faltered and we fell back down...right at the 600 level that provided us with resistance before.

 

TPO count was balanced at 122/123, so nothing to talk abou there. We did see what looks like a short covering rally shown as a "P" formation in the profile, and what clues one into the fact that it very well may have been is the lack of buying through the 600 level. The momentum was there to clear it, but we started faltering at 580 which was a real critical level for days and days, and never made it past 602.

 

Today, we're opening up under value as of this moment. Retail Sales has just come out and the market seems a bit questionable as to it's direction, but just about anything under the close is going to give a price under value. We closed just 2 points inside of value from the downside.

 

After the F profile probed the high of the day, we never came back to that level. As it happened in the first half of the day, I would say buying waned and old shorts had been covered, but no new buying was happening.

 

 

While volume surged in the cash markets, the YM had it's lowest volume day of 2007 which supports the cause for no renewed buying interest. For those that follow the delta divergence...notice how on the dailies we're moving up on less net buying...interesting!

 

How could we play today? If we do open up under value, I'd look to possibly short at 565. Be careful, as we've got a smaller VA than yesterday and we're very close to it. Any probe back into value could lead us through the value area into the 600 area.

 

I somehow think that may be a more likely scenario...but with the range the YM has traded all '07 (around 100 points a day), if we falter at 600 we're gonna be heading down towards yesterdays lows.

 

Careful out there...could be tricky!

[domanaperth 10]

Chris

 

YM action yesterday 12 January just before noon.

 

Would you have any explanation for the YM gapping up over 30 points at about 11:45 am. The cash market was around 12550 or thereabouts and hardly moved when the YM suddenly gapped up. In fact it didn’t really move until later.

 

Thanks Chris

 

Robert

[Soultrader 12]

Hi Robert,

 

The gap up was caused because of the trading halt on the CBOT. I think it gapped up roughly 30-40 points when if started trading again. Doesnt happen often but sucks if you're stuck on the wrong side.

[TinGull 10]

Exactly. CBOT went down twice yesterday. YAY! Also...interesting to note the last line of my first post. Yesterday was a tricky day indeed all told by the profile.

[TinGull 10]

Something interesting to look at in hindsight...what sort of things did the profile tell us on Thursday that could have led to Friday being a "day off" for most of us?

 

First of all...with Monday being a holiday we kind of knew it wasn't going to be a fantastic day. BUT, with that being said, Thursday did give us clues. The biggest clue for me was the TPO count. It is seldom that we have a day when the TPO count is as equal as it was on Thursday.

 

We had volume discrepencies between the futures players and the cash market. Could that have been a sign? I've never done any research on that, so any help there would be awesome.

 

As I had mentioned, any probe into the value area would potentially lead us up through value (as it did end up doing) but we were opening up under value having closed at the very low of end value, looking like we wanted to sell off further.

 

When signals are this mixed, from now on, I will most likely stay out of the market as best I can unless something truly unbelieable comes into action. As it was, I had a losing trade yesterday of -9 points, and called it a day. There wasn't much I felt I could trust in the markets. That's not even considering the CBOT fiasco.

 

Just some interesting things to take note of for when something like that happens again.

[domanaperth 10]

James

 

Thanks for your explanation.

I didn’t know and didn’t even realise that the CBOT had gone down at the relevant point of time. Something new to me and to bear in mind for the future. Sure agree with you that it sucks if on the wrong side of the market – I was flat at the time.

 

In fact I thought that the YM had finally caught up with fair value as it had been trading under FV for some days.

 

Anyway after I posted my query I got an email from PureTick.com advising that the CBOT had gone down and that they had a video created on how to handle this type of situation if it happens again.

 

I am placing the link to this video for the benefit of other members [i don’t have permission from them to do so but I hope they don’t mind me just directing interested parties to their creation]. Don’t know if the contents are with any foundation but would be grateful if you could give us your comments on the suggested method of handling a similar situation.

 

“The CBOT (the exchange the YM is traded through) went down today for the first time in awhile. It's bound to happen from time to time and you should have a catastrophic plan to protect against losses. A few of our traders were in positions when this happened. I've asked Bearish trader to create a video on what to do if this happens again. I don't want any of you guys to get creamed. Please take a few minutes and listen to his comments. Thanks.â€Â

 

VIDEO:

 

Chris

 

I understand your comments about the use of MP to gauge the type of trading day Friday was likely to be.

 

However there is no likelihood that MP powerful and useful as it maybe could have foretold the situation created by the CBOT halt. The TPO count etc might have indicated a possible type of trading day but it could not have taken the halt into consideration. As you say ‘something interesting to look at in hindsight’

 

 

 

All told we live and learn – something new each day.

 

Thanks

 

Robert

[Soultrader 12]

Hi Robert,

 

The easiest way to hedge against your position on the YM is go with the ES. If you are short the YM and the CBOT goes down, go long the ES. Im assuming the CME is still working fine. If you are long the YM, go short the ES. The YM mimics the ES in terms of price movement so by doing this you should be able to limit your losses.

 

If both the CME and CBOT goes down, you may want to use the ETF's for a hedge.

[TinGull 10]

Robert,

 

I'm in no way saying that market profile could have told the CBOT was going go down. I'm just saying that up until then and pretty much after that as well the trading was sloppy. If that halt hadn't come into effect, you still would have seen the sloppy trading on friday, be it because of the action the day before or because of a holiday weekend.

 

That's all