Up/Dn volume during 150 min sideway action gives clues

SP structure 120min - bull trap (H&S)

yesterday's 15h30's rejection of 75 was a good clue we were done with the upside and dnside momentum was resuming

Oups ... wrong chart (previous post)

Here is the updated chart

SP Structure Update (Freddy)

coil forming imo while Ben testifies, after "violent" swings and rejection on each side

Sometimes, Auction Ends with Narrow Bar -- But Downside Action Doesn't Kick-In Until Overnight...

see similar chart
https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg9RLnNK2u60zzT8QxOstgYmuTDsjQRTQbE8ta_N-Z44tNzP9GvvZYZVSZHNEg1lVry6rcOIotaMghIcMCFPZEUgKQwbf4psnmrggdhSDbi1nFGdi0FaDLrbSWW8yNao-S9nUV0htB5bwU/s1600-h/Gap+Pattern.png
by fchris

70-75 Levels (by Freddy)

Failed auction (or power buy) on HTF and LTF ... the "contrarian sniper" trade ...

1400 next ...

Developing Range vs Avg

for a 2-Min Chart using ES.D (counts back bars assuming full trading day)... this works but would like a better way to do this if anyone knows.




variables: firstbar(0), length(0);
if date>date[1] then begin firstbar=currentbar;end;
length=currentbar-firstbar;
value1=highd(0)-lowd(0);
value2=highest(h,length)-lowest(l,length);
value3=(value2[203]+value2[406]+value2[609])/3;Plot1(value1, "today");Plot2(value3, "3-Day Avg");


Wolfe Wave - Follow up

blue arrow shows entry this morning from power buy setup at HTF support level - 5 min couldn't break down after 5 or 6 attempts - even had 5min power buy with HTF power buy.

ES forming a 120min Wolfe Wave ?

120min Wolfe Wave forming up ??? Target would be previous 1400 swing high area... Will buy a retracement back to b/o level if we break with conviction and offer longs at 1400. Entry at current level is too risky being right at bigger POC level - but will watch a b/o of a previous selling tail to enter the trade on a retracement.

120 min swings and averages

Price Control

Chart 1: 7-Day Balance in the S&P.

Notes from CBOT 6-part Study Guide To Market Profile:

The market is either "controlled by price" (balanced) or "controlled by market activity" or "non-price control" (imbalanced).

As long as a particular mean price is in control (1357.50 in the above SP chart), the market will probe a higher or lower level and then return to the controlling price. Over time, the back-and-forth movement, as price moves away from value and then back to value, develops the distribution. Opportunity occurs when price moves away from value.

This mean price is not going to maintain control indefinitely because news events and market developments continually change traders' perception of value. If something occurs to change market sentiment, what kind of activity can suggest that the market may be getting ready to trend?

Basically there are two ways the market breaks the control of a particular mean: distance or time.

• Distance. A directional move propels the market far enough away from the controlling price to break its influence.

• Time. The market reaches a critical price area and then trades sideways at this level. Over time, the low volume, unfair price area becomes a fair price area and, generally, the market has to move higher or lower to shut off the activity.



Chart 2: Eurostoxx winding down to an equilibrium point.

When the deviation of assorted lengths of momentum approach zero, the action becomes whippy and erratic. Such price movement tends to precede a large trend move.

SRS

Intraday Volume Indicator

Ever wondered how volume is doing so far compared to x number of days at any given period of time? I found this indicator on the TS forums and thought was really nifty.
I use it on Standard Session and minute charts.
Note: DaysToAvg i am using 7 days. That can be customizable and is an indicator. Place it on TS and have fun.
--Raj
<<>>

Input: DaysToAvg(7), AlertPct(150); Vars: LenOfDay(0), BPD(0), BarsPerDay(0), VolSumToAvg(0), VolSum(0), VolSumAvg(0), VolSumPct(0); If BarType = 1 then begin LenOfDay = TimeToMinutes(Sess1EndTime) - TimeToMinutes(Sess1StartTime); BPD = LenOfDay/BarInterval; If FracPortion(BPD) = 0 then BarsPerDay = BPD else BarsPerDay = BPD + 1 - FracPortion(BPD); VolSumToAvg = 0; If Date <> Date[1] then VolSum = Ticks else VolSum = VolSum + Ticks; For Value1 = 1 to DaysToAvg begin VolSumToAvg = VolSumToAvg + VolSum[BarsPerDay*Value1]; end; VolSumAvg = VolSumToAvg / DaysToAvg; If VolSumAvg > 0 then VolSumPct = VolSum / VolSumAvg * 100; Plot1(VolSumPct, "VolSumPct"); // If VolSumPct > AlertPct then // Alert ( "Intraday Volume exceeds" + Spaces(1) + NumToStr(AlertPct,0) + Spaces(1) + "percent of average." ); end;

SP 11-Day Balance

The SP gapped down and rallied from the lower end of value back above the PoC of the Dalton balance.  The control price moved up a tick to 1357.75.
Watch for a breakout from this balance.  As yesterday proved, volume is needed to break price control.
SRS

as mentioned yesterday the coil went to deep- so now we have my favorite - horizontal lines w - coil in a coil that may shoot out from the middle

6 Day Coil in a 20 Day Coil w/ low ADX - Vince

Updated Dalton Balance

On Tuesday the SP tested the upper end of the Dalton 10-day balance range. The PoC moved up from 1338.50 to 1357.50. Watch for a breakout from balance.
SRS

120 Low ADX coil - but usually the best coil b/o come out 2/3 into the coil - this is getting a little to deep - Vince- let's see what happens

ES - Dalton Balance

ES 9-day bracket, as identified by Dalton / Liberman
SRS

ES - Pocket Examples

FTH/FTL + <>yest TS indicator

Heres a quick indicator to help see the FTH/L type stuff.
- puts a dot on each FTH/FTL
- alerts FTH/FTL past 10:30 EST
- puts brighter dot when low < yest or high > yest (and alerts that)

Hopefully this helps someone. Code follows.

//ShowMe _GT_TickHiLo

Variables:
tickHigh(0),
tickHighY(0),
tickLow(0),
tickLowY(0);

if BarType < 2 then begin
if Date <> Date[1] then begin
tickHighY = tickHigh;
tickHigh = High;
tickLowY = tickLow;
tickLow = Low;
end
else if High > tickHigh then begin
Plot1(High);
tickHigh = High;
if time > 1030 then
Alert("FTH");
end
else if Low < tickLow then begin
Plot3(Low);
tickLow = Low;
if time > 1030 then
Alert("FTL");
end;
end;

if tickHigh crosses over tickHighY then begin
Plot2(High - 40);
Alert("Tick > yest");
end;

if tickLow crosses under tickLowY then begin
Plot4(Low + 40);
Alert("Tick < yest");
end;

PF3 Discussion – 17/12/02

PF3 Discussion – 17/12/02

I called it the PF3 system, wanted to see what profile was like when you had positive slope of 1) 2 period ROC
2) The fast line on the 3/10 oscillator,
3) The slow line on the 3/10 oscillator.....(16 period SMA of the 3/10)

PF = positive feedback.

You rarely get more than 2 PF3 days in a row, they are like short term market impulse. So if we had 2 PF3 days UP...what happened the following day? (was good day to sell any further rally)

BUT also, you could get days where you would get really hurt if you sold the day after 2 PF3s up, so what was the profile of this condition?

Also, what happened if you had 2 PF3s up and then you bought the first pullback, 2 days later?

We posted three chart examples showing the PF3 bars on Beans, bonds and SP’s. We profiled these bars and the days after these bars every which way and back.

When a bar is WHITE, the slope of the 2-period ROC (rate of change) is plus. The slope of the 3/10 oscillator is PLUS (the gray line) and the slope of the longer period 16 moving average, the PINK line is plus.

Quite frankly, the 3/16 fast line is the least significant variable...maybe about a 54% edge there. Most of the power is in the 2 period ROC, combined with the trend of the slow line.

So when we first started testing this, we would look at what happened if you sell the CLOSE OF THE NEXT BAR AFTER A PF3 up, or the opening of the next bar after a PF3 up and then ask, what happens on open and close of the next bar and also day 2 open and close...what is average holding time?

We are looking for something that works across all markets. When testing off daily bars, really best to test enter on close or open, or at previous day's high or low or range expansion function...don't try and optimize this looking for intra-day entry or trigger. We want to look at basic tendency only.

Also tested out looking for entry the other direction...i.e. if we have 2 PF3's up (white bars), what happens if the buy the close of not the next day but the day after that.

Believe me, we could not come up with a mechanical system based on these rules alone. But you see, it does make excellent pattern recognition...it really keeps you from getting too bullish after PF3s up...need that one day correction, and vice versa.

I look at this every night. You notice coming in yesterday morning. We had had one PF3 down, and I did not know if we would get one MORE down, but you can see that the 2-period ROC had already been down two days. I am just really careful after we have an NR7 day, because that has always been an excellent filter for momentum type of stuff, range contraction.

And, if in fact, you look at the left hand side of the SP chart, you will see nasty run to the downside and likewise with the bonds it would not have been a good idea to have been LONG on the close of that second PF3 DOWN (you see the gap). Here was rare run, too...nasty downside, that type of run, where the PF3 FAILS to provide a check after the 2 big bars, that type of run only happens about 10% of the time.


So now we want to ask, what type of conditions PRECEDE that type of run, where we could get 3- 4 days in a row? We sure want to avoid thinking in a countertrend mode in these periods. And the conditions that precede this type of move are:

1) A divergence on the daily charts
2) A break from an extended chart formation...a low volatility area.
3) When the HIGHER time frame (weeklies) is just turning back up or down.

So we can work backwards in a roundabout way to see where the home run trades come from...the runs like we saw in the crude to the upside (which we exited too soon), or the gold, or the EC, or nat gas.

PF3 is a strong signal, so the fact that a FALURE to check back after 2 PF3 days indicates an even stronger force behind the markets movement. Well this is how I construct a model in my head each night of what I am expecting the market to do. 90% of the comments that I make on my trade sheet, that you have been watching get posted for quite awhile now, come off this model.

You can see in the bonds, the chart that we posted, how there was 2 PF3's up on the right hand side of the chart. The next day, it may not look at first like the market was going to check back, but it did.




On the trade sheet that we post, there is a number on the far right column, it says STpvt = pivot. It is the level at which the 2-period ROC will flip up or down.
Where it says Sig, there is a B for the SP’s. This means that it has only flipped up one day.
We should be looking for one more day up today (except that a trend day like we had yesterday often uses up all its bullets in one day)

Better example...coming in this morning...the Canadian Dollar had (s) meaning the 2-period ROC had been down 2 or more days in a row and was poised to flip up again. We see that if this market was above 63.62 today, it would turn the momentum back up again. It is up almost $500 a contract so far.

Now, there was also an NR7 notation. That is one thing that can throw off the rhythm of the 2-period ROC, so we always respect the fact that the market is in breakout mode FIRST, and then look for directional bias second.

Well...maybe this can give you an idea of the twisted little way I have gone about constructing my price models...again, most of the edge is in the 2-period ROC....

Now, if you want to really play mind games with yourself late at night. Now try to figure out the conditions that PRECEED a good PF3 move. Instead of taking our cue as to how the price behaves the day following and the next day following a PF3 what conditions precede the best PF3s, because this is ideally what we want to capture!




Blue bars are PF3 days down. White bars are PF3 days up. PF3 = positive feedback between three indicators...lots of ways to test these patterns!



Big Day Pattern

But I can take a few minutes and explain a novel pattern to you. Was something that came out of our Golf System that we used to trade many years ago and is also something that I go over in our workshop... it is a momentum phenomena.

You will notice that I posted 2 charts to the website that have numeric tables...
One is of the bonds. The second is on the beans because I wanted to show you this pattern on another market too.

There are specific patterns that setup when Momentum has extreme readings they do not work 100% of the time but they work enough of the time that I have a lot of respect for this pattern...it works particularly well in the SP’s.

It sets up when there are two consecutive HIGH extreme readings in the 2-period ROC. It sets up a sequence of 5 trading days which we call the BIG DAY pattern which is a pattern of 5 bars...1-2-3-4-5.

Days 1 and 2 are the extreme readings...If you look at the bond table that we posted, you will see 2 readings under the header MTM -1'16 and -1'02. That is day 1 and 2 and then day 3 is the countertrend reaction. A very aggressive trader can go LONG on the close of day 2...looking to exit Day 3. (Day 3 was Friday in the bonds)
.
But, you can also go SHORT on the close of day 3...for the great majority of the time you will gap DOWN and not see the highs of day 3. You will see how this makes sense when I show you several examples.

This is one of the reasons why I was trying to stay short the bonds on Friday, we just shorted too early in the day on this trade. But, you can see that the highs of Day THREE were not exceeded...and ultimately, the market has tendency to retest back down, make lower lows, and then possibly setup short term divergence pattern in the 2-period ROC.

Bonds - Sell short day set-up – 14/05/02

Close of Day 3 is rarely seen on Day 4 of Big Day pattern.

When we used to trade the golf system in the SP’s, one of the rules was never to INITITATE a trade on the close of day 3. I know there are some older members in this room who have heard my lectures before on the GOLF system, and it is something that I will go over again, in the future, even though we do not trade is mechanically now.

But it was studies in the 2/period ROC - and this is also where we learned not to initiate Golf trades on NR7 days. At any rate, let me clarify with a another example....

Beans - example of Big Day count – 13/05/02

We have both an example of a Buy and a Sell on day three of the Big Day pattern

If you look at the next chart of the BEANS you will see 2 large MINUS readings on the table.... -13'6 and –11. This is day 1 and day 2. Now Day 3 we expect countertrend reaction, but it is scalp ONLY on the buy side. This is where Scalp ONLY mode comes into play - you would not carry any LONG position home overnight on Day three in the beans after 2 high minus readings.

Sure enough, the CLOSE on 4/30, which was day 3, was not exceeded the following day and the market continued lower.

Now, we also had pattern to the PLUS side in the beans. Last Wed and Thursday, we had +9'2 and +10'6…2 STRONG readings. Friday was Day 3...we corrected back down, but you would not have held any short positions overnight.

This dovetails with the Taylor method. So, you can see that this morning we gapped HIGHER.

You will see this pattern over and over in many different markets. And perversely, this is what we had coming in this morning on the NAZDAQ futures. We had two strong back-to-back readings Wed and Thursday in the 2-period ROC…115.5 and 90.0. Friday's close was day three...we closed on the lows but gap HIGHER this morning. Funky little pattern.

There was a good question that was posed regarding the Big Day pattern. How do you quantify what constitutes a big reading...is there a specific look back period?

Moore Research center did the testing on this at the time, and we used a fixed amount in the SP’s...this was many years ago, and was not proper way to do it as we should have used ATR function.

The best answer that I can give is that by posting these numbers by hand, you are quickly able to see what constitutes a big reading. And you can have a Big Day pattern and then have another one 2 weeks later.
.

We talked a bit about Big DAY pattern in the Bonds the other day......today would be Day 5 on the pattern, and any shorts would be exited on close....usually do not get much downside follow through after Day 5. We exited earlier after morning number came out, but there was also Big Day pattern in the Nazdaq futures... model says that the market should close near the upper end of its range but NOT to take longs home overnight.

That is always a good way to think about your "roadmap" for the market's action....do you want to be long or short in the afternoon, playing for overnight follow through or do you want to exit on the close or by the close.

On a trend day, or when in breakout mode.....we usually exit by the close. There is not much play after trend day. When we look at the 2-period ROC, this is often what we are looking at, in one day on fresh flip, close out the position the following day.

H or L First

Franks read of 'Structure' for Monday

Volume Acceleration After Breakout from 'Balance' (Inside Day)

Of Tick Charts and Timebased Charts - A cursory Look

I have always been a user of time based charts and over the last 6 months have slowly caught onto the tick based charts. I never really had a chance to compare Tick Charts with Time based Charts to see how they compare and hold up with regard to the 4 key Technical Analysis Principles of:
1. Market alternates between range expansion and range contractions.
2. Momentum precedes Price.
3. Trend has higher probability of continuation than reversal.
4. Trends end in a climax

Since it being -35 windchill in Chitown this weekend, I decided to test the performance of Tick charts and time based charts for Principle #3 Continuation Entries using 3 of LBRs models:
1. Holy Grail/IT Buy
2. 5 SMA
3. New momo highs/lows

To be consistent, the data tested is from 1/1/08 to 2/08/08.
Targets are 1 ATR on timeframe chosen and Risk is the opposite side of Keltner Channels.
NOTE: Sample Size is Small and may or may not fall under the statistically significant realm...But again the goal of this whole exercise is to better understand the differences between timebased charts and tick based charts. Testing done on TS.
NOTE#2: To be consistent with Time based charts, the Tick Charts have their data setting from 8:30 CST - 3:15 CST so that i can perform an apples to apples comparision.

Model #1: Grail Buy/Sells
Enter @20 EMA. Target 1 ATR Stop @ Opposite Keltner Fixed at time of position entry.
@ES
Timeframe Net Profit #of Trades % Profitable
400 Tick $712.5 132 70%
800 Tick -$1075 67 64%
1600 Tick -$975 38 58%
3200 Tick $1800 21 76%

Lets see how the numbers stack up if we use same strategy on 1, 3, 5, 15 mins
Timeframe Net Profit #of Trades % Profitable
1 min $3525 132 80%
3 min -$12.5 44 68%
5 min $2362.5 28 86%
15 min $1537.5 10 80%

Bottom line: Time based Grails outperform Tick based Grails.

Model #2: 5 SMA Trade
After 8 closes on one side of the 5 SMA and the first close on other side of the 5 SMA, a trade is taken in direction of original thrust. Buy or Short next bar at market.
Timeframe Net Profit #of Trades % Profitable
400 Tick $37.5 315 81%
800 Tick -$1537 156 78%
1600 Tick -$2050 74 72%
3200 Tick -$1487 36 86%
NOTE: Nice % Profitable #s but Net Profit very small....May be using Wider Stop...Using Fixed Bar Time Stop may improve the model.....?

Timeframe Net Profit #of Trades % Profitable
1 minute $1225 196 80%
3 minute -$1137 64 80%
5 minute $325 46 83%
15 minute $1025 13 100% (WOW!!!!!)

Bottom line: Timeframe based charts comfortably outperform Tick based Charts.

Model #3: New Momo Highs/ Lows
Price and 3/10 makes new 30 bar highs and pulls back to 20 EMA for Longs and vice versa for Shorts. Target 1 ATR Stop @Opposite Keltner. Notice how small the # of trades are...
Timeframe Net Profit #of Trades % Profitable
400 Tick $475 56 61%
800 Tick $1250 33 67%
1600 Tick -$225 11 64%
3200 Tick $1337 10 70%

Timeframe Net Profit #of Trades % Profitable
1 minute $1363 50 78%
3 minute -$162 19 74%
5 minute $625 13 77%
15 minute -$112 5 60%

Bottom line: Time based charts have better % profitability but overall less Net Profit. BRING ON 1 min and 5 min...

Conclusion: Based on the 3 models we discussed above, it can be safely concluded that timebased Charts are better for Trend Continuation Setups than tick based charts.
Next week i intend on updating the various other models and see how the numbers pan out...

NOTE:
A timebased Chart is fixed between platforms..in other words, a 3 min bar has same Open, Close, High and Low. A 400 Tick bar differs from platform to platform. TS has different O, C, H, L compared to eSignal. Is it worth the hassel and pain of watching the Tick Charts as opposed to Timebased chart? Next Update will compare performance of Divergences and Power Buy/Sell between tick charts and timeframe charts.....Stay tuned....
till then....Signing Off.....Raj

BTW....Any questions, comments or model suggestion, welcome for discussion :-)
Atleast i have stuck my neck out there to challenge the validity of using Tick Charts for Trend Continuation Models....

Futures Trade Into Previous Support Level on Globex: 1313. Pause or Reversal?

Big Day Pattern?

The SP has had two consecutive extreme readings in the 2-period ROC. This can set up the big day pattern. (The Big Day pattern does not work 100% of the time, but it’s something to keep an eye on.)

The following came from a small class given by Linda in 2002:

Day 1 and 2 are the extreme readings, then day 3 is the countertrend reaction. A very aggressive trader can go long on the close of day 2...looking to exit Day 3.

But, you can also go short on the close of day 3...for the great majority of the time you will gap down and not see the highs of day 3 on day 4. Shorts would be exited on Day 5…usually do not get much downside follow through after Day 5.

SRS

Dax - Single Prints

Dax tests Tuesday's Single Prints. Also had 3-pushes up on 3-min.
SRS

AAII as of Jan 31, 2008

Steenbarger Study Check 5-Years ended 2/5/08

Downside Gap Pattern -- Subtle Weakness Is Often Huge Clue

SP TY Breakout Mode

Chart1: SP - NR4/ID and narrowest Value Area so far in 2008


Chart2: TY had an NR7 on Monday within a well defined 8-Day Balance

SRS

10 Year Notes - 7-Day Bracket

A breakout beyond this range should signal the start of a trend.

SRS

Fed Day Fill --- Buy Stop 1 hr ahead of time

Intraday Fri 1:22pm EST

SP - Longer term profile

Longer term profile showing the breakout from the 7-Day balance on Jan 15.

The Value Area has moved up following Thursday's strong rally. However, it still looks like the market will need to further develop this range before breaking out.

SRS