This week in Following the Auction let’s review how last week ended with a multi-day stop-run. Then we’ll look at our charts and some of the research.
News, news, news… now which one of these was responsible for making Thursday so unhappy?
- Rise in inflation and Fed rate-hike fears
- International news sparks turbulence, Greece, Greece, Greece
- Earnings season hiccups? Google, Microsoft, Starbucks… and more this week!
- China, China, China
- BLOOMBERG GOES DOWN!!!!
maybe just all together… or maybe the simple fact is, nobody really wants to buy new highs, except laggards, and I doubt there’s enough of them to do anything except get flushed… so the market had to go back downtown, back where the peeps are cackling to ‘buy low’. Remember the auction moves lower to find buyers and higher to induce sellers. Apparently new highs where not in the cards last week. Just as in the daily TPO’s and a series of 5, 15 or 30 minute highs or lows present a stop-run opportunity, Friday was knocked off it’s balancing act perhaps with all the news or perhaps as Dalton says… “traders do what works, til it doesn’t”. So with price at highs and 3 great areas for stops below, and a lack of new buyers…a liquidation break cleared out the closest stops, starting with Thursday’s poor low, removed overnight.. After the stops were out, a peek into the bullish conviction ‘singles’ and buyers took price right back to the neighborhood VPOC in the 2075 area. Please click to enlarge.
Volume – Notice the volume histogram at the bottom, set for rising and falling volume not price, there has been a decrease in volume, as many are pointing to as the reason the market is struggling without continued buying. The chart below is ES CME Volume from the beginning of the year through last week. Easy to see the trend is down on volume, yellow is actual, the red line represents the 10-day Average.
Rotations – As day-traders knowing the expected or average move in a rotation is key to planning your targets and stops. As this varies with instrument, we’re looking at just the ES. Note the following time frames from recent research shows on 100 days of pit-session only, the rotations are…
- 5 minute – 16 ticks or 4 points
- 15 minute – 27 ticks or 6.75 points
- 30 minute – 38 ticks or 9.50 points
Ranges – Friday’s day range was 22.5 points. This is only slightly over the average, as coming into Friday, day’s ranges were compressed. The way to use this information is knowing the compression will lead to expansion. See the chart below for actual ranges from the beginning of the year. The range has compressed overall from the beginning of the year
The next chart shows the average ranges above the open and below the open. What is useful about these statistics is knowing some ways to employ them in your trading. For example there are zero occurrences of a look below the open by .25 that held from the beginning of the year. Twice recently when the market looked .25 below the open and rallied, looking for a nice LVN above to short provided a high probability opportunity for price to trade back below the open. Let’s say you believe the low is in, if the average range is 18 points, or even 10.50 (average) above the open, use this in your planning, it will help free your mind from the unprofitable scalp mindset.
Last chart is a market profile chart, day-session only. There are singles from 2080 to 2087 from Friday’s high, a 5 tick buying tail off Friday’s low at 2064.50. Value considerabbly off the highs but overlapping the prior weeks auction. Looking below is like looking over the cliff… singles mostly down to 2047, the all time highs have unfinished business. 
What’s up this week? Check in with the team on Monday morning! Lewis @ManOverMarket joins TopStepTrader @MarketBroadcaster to go over his charts here… http://www.topsteptrader.com/chat_rooms/1009
As always, have a great week! Trade smarter… not more often!
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