Day Trading the E-mini Futures

[TheNegotiator 13]

What would you say is strong selling or buying in terms of delta and how long should it continue to have more of an affect on the market?

[joshdance 10]

What would you say is strong selling or buying in terms of delta and how long should it continue to have more of an affect on the market?

 

Well, I'd say that the delta is showing medium selling strength today so far. Anytime it has a peak to valley of about 40K contracts it turns my head. Today's it's been from about 10K up to about -14K down. Not domination, and the fact that we are several points higher than the open shows me that buyers are clearly interested. But as a percentage of volume, I'd have to work it out.

 

I'm just looking at 79% of "normal" volume and asking myself, how do we expect to go higher with this? And I don't think we can.

 

Good question by the way, it makes me think, always a good thing.

[joshdance 10]

Just does not seem to be enough buyers here willing to pay up, I will take a small short at 88.50

 

Delta could pop up at any moment and may very well do that. But as long as it's as negative as it is, and since we are at the top of the range, it is a reasonable short for me, win or lose.

[TheNegotiator 13]

This is just the kind of action that makes me wary. I could see it grind up towards o/n highs then spike through a few points taking stops out with it. ACH...

[clmacdougall 11]

Well, I'd say that the delta is showing medium selling strength today so far. Anytime it has a peak to valley of about 40K contracts it turns my head. Today's it's been from about 10K up to about -14K down. Not domination, and the fact that we are several points higher than the open shows me that buyers are clearly interested. But as a percentage of volume, I'd have to work it out.

 

I'm just looking at 79% of "normal" volume and asking myself, how do we expect to go higher with this? And I don't think we can.

 

Good question by the way, it makes me think, always a good thing.

 

Josh, thanks for your input. If you don't mind me asking, why do you think there is any validity to watching volume or delta at all? If all markets (ie currency, commodity and stocks) are so intertwined then watching the movement in volume or delta in the ES could not possibly be construed as having value.

The volume or delta in such a small instrument has basically no meaning whatsoever to the market as a whole; while the larger market forces found in the currency markets would have an enormous impact upon the ES.

I'm not trying to take sides against your way of context, just trying to understand the "why" behind it.

Wouldn't it be somewhat dangerous to make too much of the information garnered from such a small instrument over such a short amount of time everyday? Or do you somehow accept it as being representational of the market as a whole and if so please tell me why?

[TheNegotiator 13]

Josh, thanks for your input. If you don't mind me asking, why do you think there is any validity to watching volume or delta at all? If all markets (ie currency, commodity and stocks) are so intertwined then watching the movement in volume or delta in the ES could not possibly be construed as having value.

The volume or delta in such a small instrument has basically no meaning whatsoever to the market as a whole; while the larger market forces found in the currency markets would have an enormous impact upon the ES.

I'm not trying to take sides against your way of context, just trying to understand the "why" behind it.

Wouldn't it be somewhat dangerous to make too much of the information garnered from such a small instrument over such a short amount of time everyday? Or do you somehow accept it as being representational of the market as a whole and if so please tell me why?

 

What do you think the ES is exactly?

[TheNegotiator 13]

Despite the lack of strong follow through up to now, the key is still the early rejection of the balance VPOC:-

 

[CYP 10]

What do you think the ES is exactly?

 

Hmmm...to quote Meredith Brooks,

 

I'm your hell, I'm your dream

I'm nothing in between

You know you wouldn't want it

Any other way...

 

That's what I think the ES is...

[clmacdougall 11]

What do you think the ES is exactly?

 

I think the ES is one of many runners in a relay race which spans a 24 hour period everyday. It has the baton for a very short period of time and in a very small way. At best it gives us some information in its price structure alone as to what market participants think of the market on the whole.

[TheNegotiator 13]

CYP, that is exactly what the ES is!!! :rofl:

 

On a different note, if it keeps floundering on it's highs it will need a deeper rotation down to attract buyers. It could be that we've moved up way too quickly. We'll see if that's the case if we do start moving back down. :missy:

[TheNegotiator 13]

Either way, currently ES is about as energetic as an inebriated koala bear.:sleep:

[TheNegotiator 13]

I think the ES is one of many runners in a relay race which spans a 24 hour period everyday. It has the baton for a very short period of time and in a very small way. At best it gives us some information in its price structure alone as to what market participants think of the market on the whole.

 

That's not really what I was asking. What I meant was what exactly does it represent contractually.

[clmacdougall 11]

That's not really what I was asking. What I meant was what exactly does it represent contractually.

 

Definition of 'S&P 500 Mini'

A derivative contract representing a designated fraction of the trading value of a standard S&P futures or options contract. Designed to expand the group of investors that could afford them, the S&P 500 Minis trade and act much like their pricier peers: the contracts are cash settled, follow the same expiration schedule and trade on the same stock exchanges. Got that from the internet, it must be right!!!:rofl::rofl::rofl:

[TheNegotiator 13]

stops .

[joshdance 10]

stops .

 

Mine was one, 90.50 :doh:

[joshdance 10]

Despite the lack of strong follow through up to now, the key is still the early rejection of the balance VPOC:-

 

I was looking along those lines this morning:

 

Plan for open today:

...

* If open above 82.75, buy if market shows support

 

And unfortunately, we only traded 83 and so I did not feel good about a buy from the start. We never got the actual test, and to me it did not seem to be a real "test" ...

 

I must say that of all days, this is one of the ones where I am almost completely out of sync with the market.. will only sim trade for the rest of the day. It does happen, and boy does it ever feel crappy. I had my plan, and really didn't follow it, and that's really at the root of what I've been so out of touch today.

[TheNegotiator 13]

And unfortunately, we only traded 83 and so I did not feel good about a buy from the start. We never got the actual test, and to me it did not seem to be a real "test" ...

 

I did get long there but didnt hold it all the way up. If you look, we first tested @yesterday's midpoint/low vol. Then it pulled down to 82.75(83.00) all important VPOC and showed no interest in going through. When balance is rejected it often happens from high volume.

 

Mine was one, 90.50 :doh:

 

Oh well. At least you took it. Look where we are now!

[TheNegotiator 13]

Definition of 'S&P 500 Mini'

A derivative contract representing a designated fraction of the trading value of a standard S&P futures or options contract. Designed to expand the group of investors that could afford them, the S&P 500 Minis trade and act much like their pricier peers: the contracts are cash settled, follow the same expiration schedule and trade on the same stock exchanges. Got that from the internet, it must be right!!!:rofl::rofl::rofl:

 

The e-mini s&p 500 is the futures contract representing the S&P 500. The constituents of the S&P 500 represent some of the largest companies across America and the index is often seen as a bellweather of the US economy as a whole (this was traditionally the DJIA). So even if you think it's not big, what it represents is and its trading activity is broad. Whatever participants motivations are- outrighting, spreading or hedging(technically the same thing as spreading), delta represents aggressive participants. It shows you what the current balance of trade is when coupled with price. I use cumulative delta personally as I don't like isolated single bar delta. This way you can see momentum. Same as a standard price chart. Even if you think that it is moved by all kinds of other markets other than itself, traders want to make money and so they will trade based on that. Besides, if generally delta is not agreeing with price and those aggressive participants are wrong, that means something too. But the key point is if you are trading the ES, what its volume and delta are doing directly affect what you can do whether or not you like it.

 

Hope that makes sense

 

s&p 500 fact sheet

Edited April 26, 2012 by TheNegotiator

[joshdance 10]

If you don't mind me asking, why do you think there is any validity to watching volume or delta at all? If all markets (ie currency, commodity and stocks) are so intertwined then watching the movement in volume or delta in the ES could not possibly be construed as having value.

The volume or delta in such a small instrument has basically no meaning whatsoever to the market as a whole; while the larger market forces found in the currency markets would have an enormous impact upon the ES.

I'm not trying to take sides against your way of context, just trying to understand the "why" behind it.

Wouldn't it be somewhat dangerous to make too much of the information garnered from such a small instrument over such a short amount of time everyday? Or do you somehow accept it as being representational of the market as a whole and if so please tell me why?

 

I love it when people challenge views. It's very healthy and one of the reasons I spend time here on TL. Not for the agreement where we all feel fuzzy, but for those times when I hear dissenting opinions and get an opportunity to re-evaluate why I do things.

 

First of all, regarding delta:

Delta is something that I sometimes use, and sometimes don't. As a result, I have considered on more than one occasion simply throwing it out, as least as it pertains to a cumulative delta amount for the day or other period. This last trade is one of those cases where it simply tells a story, and the conclusion I drew from that story led to a trade which was a loss for me. I also have dug deep into exactly what it means for a transaction to occur at the bid or the ask, how it's reported from the exchange itself, and have come to the conclusion that the actual delta calculation itself is subject to interpretation. Some people will calculate it based on upticks and downticks, instead of bid/ask values, and that adds another level of uncertainty. But let me get off of this tangent and back to the point.

 

Regarding the main point:

By your logic, it would seem that because currencies are king as far as traded volume and actual money flow goes, that all markets are subject to the effects of correlation to these currencies. However, we know that each market is separate and distinct. Crude oil is its own market, though it is certainly affected by the value of the dollar and euro. Likewise for gold, silver, live cattle, pork bellies, and all other commodities and equities.

 

The market cap of the S&P 500 is 12.7 billion USD. This is larger than the entire market cap of the four largest non-US stock exchanges combined: Tokyo, London, Shanghai, and Hong Kong (about 11 billion USD). The ES is the most actively traded derivative of this index, and the most heavily traded futures contract in the world. We are talking about huge world economies, and the ES reflects as perfectly this index as any derivative can. Does the value of the euro, dollar, yen, etc., have an effect on US markets? You bet, but you seem to be saying that it's a function of size traded, and I just don't think that is accurate.

 

After thinking about this for a moment more, I think a simple picture will explain my general view. The attached chart shows the euro, and the s&p. I hope you don't think I'm insulting your intelligence by posting such a simple chart with diverging trends, but I think it does basically speak to my point: all of the eurozone problems have taken a toll on the US market, but it does not really matter that trillions per DAY changed hands in the currency market. What matters is how the US market stands on its own. It experienced growth in the last 6 months, while the burden of eurozone debt has failed to drag it down with it to the same degree. In fact, in my opinion, each market stands on its own, regardless of intermarket relationships. Does the eurusd in some way affect the price of oats? Certainly, as oats are denominated in USD, but there are more important factors in the price of oats, and it doesn't matter that the volume traded in oats is essentially zero compared to currency volume. Same for other markets.

 

Hopefully I have addressed your question, and I would love to hear further discussion regarding it, particularly how you disagree, as these are all great topics and questions, and I am very open to changing my mind if I hear an argument which is more logical than my current one, as I have no skin in the game about being right here or anywhere

Edited April 26, 2012 by joshdance

[joshdance 10]

The e-mini s&p 500....

 

I was typing my post as you wrote this, similar thought processes on this it seems.

[joshdance 10]

Talk about an ugly profile...

[clmacdougall 11]

I love it when people challenge views. It's very healthy and one of the reasons I spend time here on TL. Not for the agreement where we all feel fuzzy, but for those times when I hear dissenting opinions and get an opportunity to re-evaluate why I do things.

 

First of all, regarding delta:

Delta is something that I sometimes use, and sometimes don't. As a result, I have considered on more than one occasion simply throwing it out, as least as it pertains to a cumulative delta amount for the day or other period. This last trade is one of those cases where it simply tells a story, and the conclusion I drew from that story led to a trade which was a loss for me. I also have dug deep into exactly what it means for a transaction to occur at the bid or the ask, how it's reported from the exchange itself, and have come to the conclusion that the actual delta calculation itself is subject to interpretation. Some people will calculate it based on upticks and downticks, instead of bid/ask values, and that adds another level of uncertainty. But let me get off of this tangent and back to the point.

 

Regarding the main point:

By your logic, it would seem that because currencies are king as far as traded volume and actual money flow goes, that all markets are subject to the effects of correlation to these currencies. However, we know that each market is separate and distinct. Crude oil is its own market, though it is certainly affected by the value of the dollar and euro. Likewise for gold, silver, live cattle, pork bellies, and all other commodities and equities.

 

The market cap of the S&P 500 is 12.7 billion USD. This is larger than the entire market cap of the four largest non-US stock exchanges combined: Tokyo, London, Shanghai, and Hong Kong (about 11 billion USD). The ES is the most actively traded derivative of this index, and the most heavily traded futures contract in the world. We are talking about huge world economies, and the ES reflects as perfectly this index as any derivative can. Does the value of the euro, dollar, yen, etc., have an effect on US markets? You bet, but you seem to be saying that it's a function of size traded, and I just don't think that is accurate.

 

After thinking about this for a moment more, I think a simple picture will explain my general view. The attached chart shows the euro, and the s&p. I hope you don't think I'm insulting your intelligence by posting such a simple chart with diverging trends, but I think it does basically speak to my point: All of the eurozone problems has taken a toll on the US market, but it does not really matter that trillions per DAY changed hands in the currency market. What matters is how the US market stands on its own. In fact, in my opinion, b]each market stands on its own, regardless of intermarket relationships[/b].

 

Hopefully I have addressed your question, and I would love to hear further discussion regarding it, particularly how you disagree, as these are all great topics and questions, and I am very open to changing my mind if I hear an argument which is more logical than my current one, as I have no skin in the game about being right here or anywhere

 

Thanks for the reply Josh. Please excuse me as I have to help a friend from my church buy a car from the public auction. Its his first time going to an auction and I am going to show him the ropes as I've bought vehicles there a few times now.

I am going to write you back concerning this, but probably not until tonight or tomorrow. You know that I have agreed with you in the past concerning the indiscernibility of market participants. I personally believe this stretches to volume and delta and will explain my self later.

All the best, Cory.

[TheNegotiator 13]

I love it when people challenge views. It's very healthy and one of the reasons I spend time here on TL. Not for the agreement where we all feel fuzzy, but for those times when I hear dissenting opinions and get an opportunity to re-evaluate why I do things.

 

This really is a nice thing to hear buddy! Absolutely the kind of thing I want us to foster in this thread.

[TheNegotiator 13]

Next up areas if we push some more:-

 

[joshdance 10]

The market since the fed euphoria of 3/13: makes a normal distribution, but boy is it ever gappy and not too pretty.