Bigger Picture in E-minis Discussion

[TheNegotiator 13]

I wanted to start a thread to discuss longer term technical picture of the E-minis and thought it could be useful to not only e-mini day traders, but those looking to swing trade too.

[TheNegotiator 13]

Here is what I posted in the Day Trading the E-mini Futures thread.

 

[TheNegotiator 13]

Does anything I have noted mean much though? Yes, but anything can happen within the context of the observations.

 

1- Last year's back-adjusted high and important low volume area near each other at 1344.50 & 1348.00 respectively. Well this is a psychological one I guess but then what's not when you really get down to it? But anyway, the area is important in how the market has traded near it already. Maybe Josh could pull up a cash chart for comparison.

 

2- Last year had in my mind 3 broad areas of balance. No clear direction. This year so far it has been a different story and we have been very much in "vertical price discovery" mode.

 

3- So far, we have seen 2 phases of subsequently higher and expanding balance areas. These two phases are separated where there is an RTH volume void between 1324.00-1326.00. As important as this price might end up being, a test of it would be a test of the whole of the second expansionary phase.

 

4- In the just 'completed' second phase, each retrace has been very close to the prior balance VPOC.

 

5- The topmost balance VPOC is @1392.50 and the SOC (Scene Of Crime) from 4/6 NFP is @1392.25. If RTH we get above 1371.50 (2nd to top balance high) and back above the 1380.50 (top balance low), this could well prove to be a key test as to whether we are likely to continue into a new expansionary phase, or develop a new broader balance area. (you might notice how the current year has the potential to become an expanding balance building on the last two from 2011).

 

6- I just don't know, so I'll try to not second guess the market too much

 

7- Anyone else got anything to add?

[sdoma 10]

I'll start with the weekly chart. I am a market profile theorist by training, but I've significantly modified my approach and generally use VWAPs, its standard deviations and basis, and volume profiles. So, in my charts, the orange line are cumulative VWAPs, the blue lines mark off one standard deviation on either side of the VWAP, and thus act much like a value area, and the basis lines are in red and green dots, and tend to represent stretch zones, though it's more tricky than that and I'll elaborate.

 

In this post, I'm using a weekly chart with a cumulative VWAP started on 7/6/10, a major swing point in the markets that has not yet been breached. I've numbered the chart, and will post my comments here, as they are too long to include on that chart.

 

1. This is the first major retest of value since the swing point was created and we had a series of higher highs and higher lows. As we see here, it was tested repeatedly in a three week time period. We ended that period with a strong move off of value on increased volume. After this point, I was cautious about selling the market.

 

2. The market then moved into what I call a bull crawl, which is a slow, grinding move up with little volatility or tests to the downside. In this period, all but one week finished neutral or up. It ended with a minor volatility expansion and three consecutive weeks of upwards movement to second basis.

 

3. After that volatility expansion, the market dipped to test value. It showed good penetration, but failed to close inside. After this, the market again began to rally.

 

4. The market came close to second basis, had a strong week up and decent volatility, and then failed. If I were short at this point on a swing basis, I would have had a target of value, since a probe of value is a good probability.

 

5. The test of value was more serious this time. The market stayed inside of value for about a month, before rallying out strongly, but on poor volume. This was the canary in the coal mine, technically. The test of value was stronger, and the rally's volume was relatively poor.

 

6. The market failed to retest the highs made in #4, and then failed back into value. In the week after, we saw a hard and fast move back to the VWAP on high volume, where it found temporary support.

 

7. What ensued after this was a high volume balance, where market participants struggled to establish a new order. We saw two tests of the bottom of value, both of which saw strong responsive action. Likewise, we saw sellers above the VWAP. After the second unsuccessful attempt to auction below value, the market rallied past the VWAP, tested and found buyers.

 

8. It then tested the upper edge of value and the upper edge of the previous range repeatedly over the next month, and then failed.

 

9. After it failed, it retested the VWAP, but interestingly enough volume was weak for a strong down move. It then found support, and rallied.

 

10. The market tested the upper edge of value again, but this time was able to hold above it.

 

11. We then entered another bull crawl, spiked up at the end, couldn't extend its highs, and now we are auctioning down again.

[TheNegotiator 13]

It's a slightly different picture looking at ES and imho it is distinctly less "clean":-

 

Edited April 17, 2012 by TheNegotiator

[Nikko 10]

Here are my thoughts on the longer term positions in this market. You should be looking more at the fundamental aspect as technical analysis wont do all that great in this economy when looking for the " bigger picture " because we have an unstable economy right now. It would also help if you specify a specific timeline you are looking at as your " bigger picture " is most likely different then my " bigger picture ".

 

Now for my " bigger picture " I would have to say eventually we should tank as we are so ( excuse my french ) fukn inflated it is ridiculous among many many many many other unresolved financial economic issues but being a day trader I have to follow my guidelines as we obviously can not tank before some serious news / indicators etc. That being said I feel overall this is a very risky time to be in the market for long term traders but with every risk there is reward, so...

 

Over time ( short or long depending on news / indicators ) I believe we should fall greatly and re-test a few vital lows in the ES, now with all of this printing of money and " governmental assistance " for treasuries etc at this particular time I do not feel that we should see drastic lows as of yet. I believe maybe without drastic change we could even get to mid-high 1400's before the truth comes out. Who knows maybe one morning soon things might change for the worse or we might get lucky! Stay updated and on top of things I'm sure we will be able to catch something suspicious.

 

In all honesty I personally could not confidentially give you a good idea of what might happen in a timeline as short as 3 months, now if you ask me what I think might happen in the next 1 month I would say if all is well mid / high 1400's should be expected and or with some fatal news, we could break this beautiful uptrend, but after / if all is well and we near mid / high 1400's I would relax for a bit and see where the market / news / etc wants to go before I feel bearish or bullish. Nice thread though! I personally would be interested in what you guys think might happen within the next 30 days.

 

Nikko

[TheNegotiator 13]

Nikko, I'm talking about the bigger picture primarily from the perspective of a day trader. That could be 30 days or longer, depending on how far back I need to look to get a read or how far forward it takes to determine the market's reaction to what I am looking at.

 

As for your point about fundamentals, I think the time frames and price changes I am focussing on are still well within the bounds of technical analysis. Even much much further out, people do use technical analysis and effectively so. The market is comprised of all kinds of different participants acting within different timeframes. But they all act based on specific objectives and trade at "non-random" prices. They might be different from what you or I believe to be sound technically, but then the market is a composite average of views and objectives. Believe it or not, fundamentals have a technical impact on the markets anyway. In terms of "shocks", for example big natural catastrophies or attacks etc., there will still be some order depending on objectives and positions of market participants. They might not all be immediately useful to every trader, yet they can add up to give a broader technical picture.

[MightyMouse 12]

Here is what I posted in the Day Trading the E-mini Futures thread.

 

 

 

TN,

 

Can you post the the same chart and separate the range/balance volume profile areas from the trend periods?

 

You've outlined the areas. see the volume profiles for those areas separated is more pleasing to the mind. You'll see price leave return and reject or accept a lot cleaner in my opinion.

 

I am sorry to see you abandoned the James and the Giant Peach theme.

 

MM

[TheNegotiator 13]

MM do you mean draw profiles for each coloured box?

[MightyMouse 12]

MM do you mean draw profiles for each coloured box?

 

Yes. A box for each distribution. and box for trends. trends will appear as, well, trends; no balance to them. The balance areas will show the migration of long term value. You already have it boxed. You get decent info from the different sized and shapes of the various balance areas that emerge, including time.

[TheNegotiator 13]

Okay, well for ease I have separated out the broad balances from 2011 and trend & minor balances from 2012. I usually do this kind of thing on an ongoing basis, just didn't post that in the original picture. If you were thinking of something slightly different, let me know and I'll do a chart maybe US lunchtime.

 

 

[karoshiman 10]

Hi Negotiator,

 

Thank you for the charts!

 

Slowly I get used to them. Not long ago, when I've opened your charts I said to myself "%$/&!!!"... and closed them immediately... lol

 

As I am still not an expert with these, could you please help me out with some questions I have?

 

Are the red lines the respective VPOC?

 

Are the green lines showing 2 Standard Deviations of volume around the mean?

 

Is the black lined volume histogram on the right hand side (I don't know, how you call these "vertical volume mountains" ), the volume over the whole period 2012?

 

Could you please post the same chart with pink background and magenta colored point & figure charts? ... okay, just kidding!

 

Thanks in advance!

 

Regards,

k

[TheNegotiator 13]

Are the red lines the respective VPOC?

 

Yes

 

Are the green lines showing 2 Standard Deviations of volume around the mean?

 

Nearly. They are the "Value Area" high and low. The Value Area is created by taking the point of control or volume point of control (vpoc) nearest the middle of the profile and then adding the higher volume of the sum of two prices above and below until the ~1SD is met (actually in this case it's set at 70%). It's not especially useful to me and I could have chosen to not draw it in at all.

 

Is the black lined volume histogram on the right hand side (I don't know, how you call these "vertical volume mountains" ), the volume over the whole period 2012?

 

It is a yearly profile but that's more coincidence to why is was drawn like that than anything. The trend begins to properly take shape imo from the start of the year. MM asked for a separate profile to be drawn for it.

 

Could you please post the same chart with pink background and magenta colored point & figure charts? ... okay, just kidding!

 

Pfft. You must be kidding!!

[MightyMouse 12]

Okay, well for ease I have separated out the broad balances from 2011 and trend & minor balances from 2012. I usually do this kind of thing on an ongoing basis, just didn't post that in the original picture. If you were thinking of something slightly different, let me know and I'll do a chart maybe US lunchtime.

 

 

 

Isn't it just gorgeous that way? seriously.

 

In the longer timeframe the daily moves and trends really just blur into trends and ranges. A profile, like the one to the very right, is really just a trend move away from the lower balances.

 

Conversely, the moves within the balance area are really just moves within the range or balance area even though they felt like trends during the day time frame.

 

If you go back and look at day trades you might have taken, in hind sight, you will be able to see why some of the trades really had no chance of working out and on other days when you performed brilliantly, you can also see why. Learning to distinguish between the trend and balance periods is key.

 

Thanks for the charts

[TheNegotiator 13]

I thought it would be good to update the thread today considering the trading from the last few weeks.

 

As pointed out by Josh (joshdance) in the Day Trading the E-mini Futures thread, since the 3/13/12 Fed day breakout, we've actually developed a broad balance.

 

 

This is the first broad balance this year so far and it's actually a good thing imho as far as the current trend higher goes. Note that I'm NOT saying because a broader balance has developed, I believe the trend will continue. But what it is doing is allowing particpants to evaluate their positions in the market. For a broader balance to develop and the latest smaller balance to be the first lower balance of the year, something has to have changed. In fairness, this change could be merely the perception that although the market is strong, prices are high in current context and activity and so profits need to be booked in before reassessing the situation.

 

Broadly speaking, market activity on all levels goes:-

 

TREND - BALANCE - TEST - TREND (continuation or reversal).

 

This broader balance is a sign that the bigger trend has moved to the next stage of activity. From here we could develop sideways more, break down or break up, but what we now have is a good cleaar visual reference for the market's activity.

[Patuca 13]

with all those flames burning up the price nothing but ashes will be left.:haha:

[Patuca 13]

what about this viewpoint? shed any light?...taken from WHY? on thread "beyond taylor" Post #230. maybe he won't get p$ssed.

Four stages.pdf

Edited April 28, 2012 by Patuca

[sdoma 10]

It's a slightly different picture looking at ES and imho it is distinctly less "clean":-

 

 

I wouldn't say it's that much messier. The only point I think substantially differs from my chart is that when, after the big drop and double bottom are made, the ES didn't retest value like the Dow did. The test of value was more severe, but it didn't close below it on those weeks. It's a different index, calculated off of a different basket of stocks and weighted entirely differently, and just because the two don't exactly correlate doesn't invalidate everything I said. Hell, there are traders who look at differences between the two on the day frame to place trades.

 

Learning to distinguish between the trend and balance periods is key.

 

Understanding market context is not only key, it is the most important skill any trader can learn. If you understand the context, you can easily modify your strategy to fit the current market structure, or decide whether to trade or not if you're a one trick pony (not that there's anything wrong with that, some of the best traders trade only one setup).

[cma6 10]

What do you mean by "VPOC" and "RTH"?

[karoshiman 10]

What do you mean by "VPOC" and "RTH"?

 

VPOC = Volume Point of Control = statistical mode of the volume-weighted distribution

 

I have this from the guys from the 'Day Trading the E-mini'. They use this in their trading.

 

RTH = Regular Trading Hours = 8:30 a.m.-3:15 p.m. CT for the SP Futures contract

 

(as opposed to ETH = Extended Trading Hours, sometimes in this forum also called Globex session, as it refers to the electronic platform on which the ES is traded (about 23 hours per day), check out the CME site for more details -> E-mini S&P 500)

 

 

EDIT: added "for the SP Futures contract"

[cma6 10]

Karoshomin:

Thank you for the explanations. BTW, where did you find that article "Day Trading the emini"?

I was interested in trading the Russell 2000 emini (TF) on the ICE, but I'm sure the same principles apply to both. Do you have any experience with the the TF contract?

BTW, are they are FCMs I should look at to open a futures account?

CMA

[cma6 10]

Negotiator,

Your analysis seems similar to the Market Profile, which I studied when I was a member of the CBOT 40 years ago. Can one get the Market Profile real time online from a provider or a broker?

[karoshiman 10]

Karoshomin:

Thank you for the explanations. BTW, where did you find that article "Day Trading the emini"?

I was interested in trading the Russell 2000 emini (TF) on the ICE, but I'm sure the same principles apply to both. Do you have any experience with the the TF contract?

BTW, are they are FCMs I should look at to open a futures account?

CMA

 

It's not an article, but the longest thread on this forum created by TheNegotiator:

 

http://www.traderslaboratory.com/forums/e-mini-futures-trading-laboratory/9773-day-trading-e-mini-futures.html

 

I trade only the ES.

 

For FCMs check out the review section of this forum.

 

But you say, you were a member of the CBOT. How come you don't know any FCMs?

[cma6 10]

I cleared through Goldberg Bros. Most CBOT members cleared through firms that specialized in Exchange members. In any case, that was in 1986, so things have changed, I'm sure.

[TheNegotiator 13]

Negotiator,

Your analysis seems similar to the Market Profile, which I studied when I was a member of the CBOT 40 years ago. Can one get the Market Profile real time online from a provider or a broker?

 

Yes. There are many platforms which you can get MP/VP realtime. Investor/RT from Linnsoft, Market Delta which is based on Linnsoft IRT, Sierrachart, Ninjatrader I think and many more. The first three I believe to be the best. You can either pay for them separately and get your own datafeed or you can in many cases get them through your broker.

 

Karoshomin:

Thank you for the explanations. BTW, where did you find that article "Day Trading the emini"?

I was interested in trading the Russell 2000 emini (TF) on the ICE, but I'm sure the same principles apply to both. Do you have any experience with the the TF contract?

BTW, are they are FCMs I should look at to open a futures account?

CMA

 

TF is a good contract to trade although it's a little bit different from ES, NQ, YM. I like it but don't trade it myself.

 

If you're looking to open a futures account at a brokerage, there are a few to say the least. Mirus, Amp and lots more. There is another called Vankar which is well worth a look.

 

Anyway this is lol.