FOLLOWING THE AUCTION, LOOKING SPARSE UP HERE?

This week in Following the Auction, we’re looking at recent price action in the S&P 500 and recent action in the EuroStoxx 50. 

News this week from the worlds financial gurus was a riot with Warren Buffet declaring he did the research and 6-year-olds have the lowest death rate in the world, so he strategically developed a diet to mimic that of a 6-year-old boy. He’s enjoying his PB&J’s and lots of Coca Cola… 5 a day! (do you think he owns KO?)  Buffet is also known as a value investor as was another financial guru who passed away this week, Irving Kahn. Kahn, born in 1905, had an understanding of the concept of value investing prior to the stock market crash of 1929, when  he noticed that traders were bidding stock prices into the stratosphere. Selling short 50 shares of red-hot Magma Copper that June, Kahn wagered the price would plummet. When the market crashed on Oct. 29, his $300 investment, about $4,000 in today’s dollars, more than doubled. On an NPR interview in 2006 he said, “I wasn’t smart, but even a dumb young kid could see these guys were gambling. They were all borrowing money and having a good time and being right for a few months and, after that, you know what happened.” Interesting comment to think about… fear and greed… always an integral gear to the auction. 

Talking about value investing relative to our current market prices versus Europe and some say European stocks look very cheap, especially compared to the U.S.  investment strategists are mixed on whether to overweight or underweight Europe but agree investors would be wise to include some exposure in their portfolios. As futures traders we worry less about the investing aspect and more about volatility, ATR and margin. However, we track smart money footprints and resulting trends. With the financial worlds’ eye on Europe and Dragis’ QE, let’s take a closer look at the S&P 500 and the EuroStoxx 50. While the S&P 500 has 500 stocks and the EuroStoxx 50 has only 50 stocks, it nevertheless is a very liquid market and over the last decade has become more popular with day-traders in the US, and clearly longer term investors as well. Note the following information on both charts, please click to enlarge.

• High in 2000 – ES 1655.25 – EX 4941
• High in 2007 – ES 1466.75 – EX 4060
• Low in 2009 – ES 530.50 – EX 1188
• Current price (circled in yellow) in relation to above highs and lows
• Lower pane chart shows the United States Dollar vs the Euro currency.

Note these two indexes relative to the old highs from 2000 and 2007 and where they are now. The S&P 500 broke the trendline the end of 2012, the EuroStoxx 50 broke the trendline last month.  Not to be ignored are the currencies in the lower chart pane,  see the dollar in a short squeeze and liquidation on the euro. Note the euro has broken the 1.18/1.19 level (grey horizontal line) it has held as support over the last 10 years as the dollar is coming close to hitting the 1.00 level, it’s resistance over the last ten years. 

Clearly the trend is up on both indexes but the auction in the S&P got a little tired last week as evidenced by an RTH (regular trading hours) excess high. The last all-time-high at 2088.75 was a market profile ‘poor’ high which implies an unfinished auction. Wednesday’s high of day at 2117.75 left a 3 TPO ‘excess high’ and marks the end of the auction, for that period in time. While the excess certainly marked the high for last week, with 3 days of one-time-framing lower, value moving lower yet not quite reaching 2099.50, the lower BAE (balance area extreme) upper limit. Staying above 2099, LVN (low volume node) keeps the weekly trend up and challenges the excess high. Acceptance below the LVN targets the two prominent HVNs (high volume nodes) below at 2096.25 and 2093.25. Carry forward information, a poor low from 2/23/15, 2099.75 an additional poor low from 2/20/15, 2082.25 and a gap between 2070 and 2071.50. Two poor highs, Thursday and Friday.

A final day-trading comparison chart between the EuroStoxx 50 and the S&P 500. The charts compare last week, the EU on a 24-hour chart, the US day-session open marked with a grey vertical line. The ES chart is the day-session only. I think the arrows give a relatively good feel for how the week progressed in both markets. Please click on chart to enlarge.

Coming into the final month of the quarter, what shall we expect? Register for FREE on the website and then get your coffee and open Pat Tabet’s Pre-Market update, waiting for you upon login. Then, Charles Cochran posts commentary on the ES, ZB, CL and 6e with actionable trading levels based on volume profiling! Heading into the open, Lewis Borsellino will get down to business with the Man Over Market’s Morning Call. When you’re asking.. whaddawedonow?The MOM team has answers!  

Have a spectacular week! Trade smarter… not more often!

FOLLOWING THE AUCTION – WE ALL WANT AN EDGE

This week in Following the Auction we’re talking about what everyone wants… an edge. The current hysterical discussion that’s all over TV and the internet is about balls. The NFL and literally everyone is being questioned… were the footballs intentionally deflated to less than what actual game balls are, by rule, supposed to be? Regulation standards say balls should be inflated to 12.5 to 13.5 pounds of air per square inch and weigh 14 to 15 ounces. Deflate gate is really an argument about Team A having an advantage, an edge… over Team B.  Clearly having an edge over your competitors is big business… ask the 1994 Cleveland Indians about their corked bat, ask the HFT traders (if you can find them), or… just ask Lance Armstrong. 

As traders we want an edge over our competitors. Part of our edge is preparation. And part of that preparation is knowing our competitors and what they’re doing. Jim Dalton, market profile master, looks at market trends and divides the market participants into 5 different categories.

• Innovators – These are the traders that have have insight into possible game-changing news.
• Early Adopters – These are the traders that see the balance and get in before the breakout.
• Early Majority – These are the traders that see the breakout and create the herd.
• Late Majority – These are the traders that see the developed trend and join the herd.
• Laggards – These are the retail traders that finally got the word… 

What happens next in the above cycle is usually profit taking by the innovators… the trend has run it’s course and there’s no one left to buy. So the auction develops excess and goes into balance as profit is taken and then trades lower in search of prices that will bring in new buyers to start the cycle again. So why talk about innovators and laggards? Let’s take a look at the Bund. Bunds are the German equivalent of U.S. Treasury bonds. Click on chart to enlarge.

The next chart is the same as above but a closer look at the most recent trend that started the day Draghi said… QE. 

The question for Bund traders is clear, where do we go from here? All this activity has brought a lot of attention on products that may be new to you. A traders’ edge is knowing the products he trades, a great place to learn about the Bund, the EuroStoxx 50 and the Dax is the Eurex Exchange website.

The question coming into this week is what’s going to happen with our own market? Monday, no news, Tuesday, Durable Goods, Consumer Confidence and New Home Sales, leading into Wednesdays FOMC at 1:00 pm CT. With Thursday’s rally on the European QE news, and Friday’s fizzle back to the safety of Thursdays value area… what do we expect for the week? Will you prepare – be an Innovator – take profits? Or will you join those Laggards – and pay the price?

Register for Free! on our website! Then you can access Pat Tabet’s morning updates with the ever popular Bull/Bear line and support and resistance plus lots of other information, including current rotations for the different time-frames. Join Lewis Borsellino first thing in the morning to get his colorful youtube video’s showcasing his preparation and Pat Tabet’s specially designed proprietary indicators. Then during the day Lewis will update on the twitter feed @ManOverMarket. Get with the MOM team! Lewis and Pat have been knocking it out of the park! And their bats aren’t corked!!! But their calls have an EDGE! 

Have a great week! As always trader smarter, not more often!

FOLLOWING THE AUCTION – PRICE, VOLUME AND OPEN INTEREST RELATIONSHIPS

This weeks Following the Auction topic is Price, Volume and Open Interest Relationships. All market behavior and pricing decisions are based on individuals’ expectations for future prices. Technicians study price movement and have many different methodologies for studying and forecasting future price movement. One such relationship technicians study is price, volume and open interest. 

There are 10 relationship guidelines that are often used to suggest bias. The first four of the guidelines are price and volume relationships. The next four guidelines are price and open interest relationships and the last two guidelines are the triple – price, volume and open interest. Having a reliable bias in trading is the second holy grail. (The first being the 6 inches between your ears.) Let’s go over the relationships…

Four Price – Volume Relationships

• price up, vol up, new buying pressure and/or short covering
• price down, volume up, new selling pressure and/or long liquidation
• price up, vol down, buy pressure drying up, downside reaction likely Note – don’t buy a quiet market after a rise.
• price down, vol down, selling pressure diminishing, upside reaction likely Note – Don’t sell a quiet market after a fall.

Four Price – Open Interest Relationships

• price up, open interest up, new buying
• price down, open interest up, new selling
• price up, open interest down, short covering
• price down, open interest down, long liquidation

Two Price- Volume – Open Interest Relationships

• price up, vol up, open interest up, triple signal, bull move
• price down vol up, open interest up, triple signal, bear move

Below is the daily 24-hour chart with last week’s  volume, open interest and change per day noted. Note the 100 point bounce after touching the vpoc magnet at 1961! Click on chart to expand.

Here’s the link for the CME volume and open interest page if you are interested in tracking these relationships to help inform your trading bias. 

As we head into the week of Christmas, check the CME holiday schedule in my previous post, for all the holiday trading hours. Check in Monday morning for the updates from Pat Tabet and Charles Cochran, then Lewis Borsellino will update with his plan via his video posts.

Have a great week, Happy Holidays and always remember, TRADE SMARTER, not more often!

 

 

Anatomy of a Trading Day and * Special * Indicator * SNEAK * Peek *

This week to help motivate ourselves to have a great week, let’s review a profitable trading day from last week with a look back at the charts and the Pre-Market information provided to our users. Additionally, for a special treat, we are including a picture of a proprietary chart developed by Pat Tabet. Then we’ll talk about what’s been hi-lighted on these charts and how a trader could put it all together for a very profitable day.

In the chart above we can see the day begins one-time-framing down for the first 3 periods of the day, D is an inside bar in the pre-market support zone of 2063.25. E period looks below D, is rejected, finds buyers and traps the late shorts starting the rally. The market moves from 2061.75 to about 2070 and pauses before the ECB news of possible QE pops price through the pivot at 2071 and rallies to a new high at 2077.25, just one tick short of the 200 % measured move fibonacci extension shown in the Trend post from November 23. 

Below is the bid/ask footprint illustrating the reversal at the lows.

And here as promised… please click on the chart below for a closer look at the proprietary chart indicators developed by Pat Tabet.

Please note the beautiful signals these indicators produced that supported our trading throughout the day. A short signal is displayed by the first set of circles, this is where a trader could either initiate a new short or add-on to an existing short to take advantage of the 5 minute downtrend. The second set of circles show the reversal at the support zone, and a long signal. The third set of circles shows the breakout from balance, another short opportunity, confirmed again by the indicators. Altogether 3 distinct opportunities with low risk and high probability of great returns. 

As always, check in Monday morning for all the updates from Charles and Pat, followed by Lewis Borsellino’s trading plan and thoughts on the market day. 

Have a great week and as always, trade smarter, Not more often!

FOLLOWING THE AUCTION – TREND

This week in our series, Following the Auction, the glossary term we’re looking at is trend.

Trend …  A market price movement in a clear direction, up or down, over time.  We know ‘trend’ is time frame relative. For example the monthly time-frame is making higher highs and higher lows in an uptrend, see chart at the top. This month’s numbers are,

• November open – 2011.25
• low – 1995.25
• high – 2072.50
• Friday’s 11/23 close – 2061.75

One of the most famous trend-traders is Richard Dennis, his style was about mammoth home runs and many smaller strikeouts. A favorite trading quote to keep in mind as we reach the 200% extension from the recent correction…. ‘Remember the trend is your friend… til it’s not.’ 

The weekly time-frame (below) is trending higher, making higher highs and higher lows. Please click on chart to enlarge.

The daily time-frame is also trending higher. The steep ascent has softened however. Please click on chart to enlarge.

Check in Monday morning and get Man Over Market’s Pre-Market update with the Bull/Bear line, support and resistance on several markets. Pat Tabet and Charles Cochran start the early morning updates followed by Lewis Borsellino’s pre-market video of the market day ahead followed by updates throughout the day on an on-needed basis.

Have a great week! Trade smarter, not more often! 

 

 

FOLLOWING THE AUCTION – GRIND

This week in our series, Following the Auction, covering terms from our glossary, we’re looking at recent market action to illustrate Grind.

Grind … we sometimes refer to a market slowly moving in one direction as a grind. The recent 10% market ‘correction’, has rebounded to new S&P market highs, leaving us in uncharted territory. In the last four weeks since the correction low, we’ve seen three impulse moves of 50+ points, followed by shallow retracements, followed by the market slowly moving in one direction in a grinding manner, with last week showing slowing progress.

The weekly ranges since the correction have contracted from the initial 93 points to 89 points to 72.25 points, to last week’s grinding 38.25 points.

On this chart, from the last impulse move, the market has tagged the 61.8 extension at 2030.75, with the 100% extension at 2052.75.

Notice the volume profile (in gold) has an upper distribution (dashed red arrow) that spans 1887 to 2000, with 1987 to 1993, and 1960 to 1964, two prominent high volume areas below, (solid red arrows).

Coming into this week, will the market continue to grind higher to fulfill the 100% extension statistic?    Or has the rubber band stretched too far and it’s time to snap back? Please click on image to enlarge chart.

Key references to start are the OVN all time high, 2033.50, Friday’s low, 2021, the previous all time high, 2014.50 and last weeks low of 1995.25.

What’s coming up this week? Check in Monday morning for Pat Tabet and Lewis Borsellino’s updates for some key  market analysis. Trade smarter not more often! Have a great week!

 

 

FOLLOWING THE AUCTION – VPOC, MODE, AND THE MEAN

In this series, Following the Auction we’re looking at several terms covered in our Glossary, found through the link on the home page.

This week we’ll look at VPOC, Mode and Mean. These terms are often confusing because of their similarity. The Mean is synonymous to the middle. It is the mid-point and has no relationship to a profile other than the mathematical 50% of whatever range is being considered. Many day-traders are very keen on observing ‘half-back’ for acceptance, rejection to initiate, close or manage positions. VPOC is the Volume Point of Control. It is the price that has traded the most volume for the period or session being analyzed. The Mode is the value that appears most often in a set of data, so in essence the mode and the VPOC are the same. A VPOC can be found in a 5 minute time period, or as shown in this chart, for the year. VPOC is an attractor, a magnet, and the tractor beam for Friday’s late rally. The chart shows the following information.

• The years open, 1815.50, high 2014.50, low 1709.75, 10/24/14 close 1960.50.
• 3 major balance areas,
  • 1^st, Jan 1 through Feb 14, VPOC 1809
  • 2^nd, Feb 14 through May 23, VPOC 1850.25
  • 3^rd, May 27 through October 10, VPOC 1961.25
• Fibonacci retracement from low of year (in green) to high of year and note the 61.8% retracement is 1826.25.
• Fibonacci retracement from high of year to pullback low (in red) and note the 76.4% retracement is 1967.

The yellow circle is the intersection at the current correction low and contains the following data points.

• VPOC, 1809, from the year’s opening balance area.
• The 70% value low, 1822, of the 2^nd balance area, closing open VPOC, 1850.25
• The 61.8% retracement for the low to high of year, 1826.25. Click on chart to enlarge.

Now that we’ve hit the VPOC magnet to the tick, what’s next??? Be sure to tune in early Monday morning for Pat Tabet’s Pre-market update for MOM’s proprietary analysis. You can also read Charles Cochran’s commentary on the es, zb and 6e. Then pre-opening bell, Lewis Borsellino will post a ‘Morning Call’ video with the latest update and his plan for trading the day. Updates are posted on an as-needed basis. LAST WEEK THIS TEAM WAS ON FIRE!!! SIGN UP AND CLEAN UP!!!

 

Following the Auction – Week of October 6th Pre-Market Review

This week in Following the Auction we’ll look back over the week via our Pre-Market Updates and note where the Bull/Bear line was for the day as well as support and resistance and any special notations in the pre-market related to bias.

Coming into each day the registered trader can read Pat Tabet’s Pre-Market update. The bull/bear line is an important tool for planning the trading day. Please note, looking over the past week, selling rallies when price is below the line and buying pullbacks when price is above the line were the highest probability trades on any given day.

 

Monday Pre-Market Bull/Bear 1963

Bias lower

 

 

 

 

 

Tuesday Pre-Market       Bull/Bear 1954.25

Bias lower, possible test of 1931.25

 

 

 

 

Wednesday Pre-Market Bull/Bear 1930.25

Unlikely to fall below 1918 today, 1926 could provide support for a rally. Expecting active buyers around 1919-1918.

 

 

 Thursday Pre-Market    Bull/Bear 1957.50 to 1955.75

Bias, fill in singles from prior day’s short-covering rally.

 

 

 

Friday Pre-Market  Bull/Bear 1924

Bias, DETERMINED TO TEST 1900, BELOW 1900, COULD PUSH TO 1894.25

 

 

 

Remember to prepare each morning starting with the Pre-Market update to mark your charts. Lewis Borsellino will update users at the open and during the day. Have a great week! Trade safe… always use a stop!