Taylor Trading Technique Nov 2007

[Dogpile]

for today (Wednesday):

1) Market is starting LOW relative to 15-min 20ema but not 'extremely low' (location does however argue for a buy trade first)

2) The last 2 days have been 'low to high' (arguing for a 'high to low' day = bearish)

3) Violation of 1503.50 to downside sets up a 'buy' for a trade back towards 1503.50 (arguing for a long-side trade)

4) Support-Resistance:
The market has not been able to stay below 1503 and not stay above 1514 area. These are the support and resistance levels.

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Summary:
If we trade UP towards 15-min EMA, location for a short would improve to play for a 'high to low' day after 2 low to highs.

If we trade DOWN first and violate the 1503.50 low, this would argue for a long-trade as you have good location on your side and a standard 'low-violation' buy set-up. I prefer these if done into big support area -- and I don't see a big obvious one below the 1503 number.

As always, be aware of possible 'trend-day' conditions. If extremely strong range expansion off opening price to downside then the best play might be to wait for a reaction up toward 15-min EMA to short. Admittedly, this would be a tough set-up to trade as it would be right into a 'low violation' -- which is a Taylor 'buy-factor'.

I think I have listed the factors to weigh though. Watch price action vs vwap and volume/breadth for further 'intraday clues'.

[Dogpile]

here is example of same tape-reading:

note how ES futures are not 'strongly rejecting' VWAP. this indicates to me that we are likely in sideways chop chop mode. Given very bad 'internals' (breadth -2100 and VIX +10%) it seems that we SHOULD come out of this sideways chop to the downside this afternoon.

The signal for me is to wait until 40k contracts trade at a single price. Until then, the 'tape read' is that we should fade the edge of the range. Right now, the most likely price to hit 40k is 1508.00 because its at 29 now. Thus, think this market is a short near ~3+ pts above that (1511+ area) and a buy ~3+ pts below that (1504.50 area). Once we get close to 40k contracts, no more fading, time to look for a breakout. It often needs 45 or 50k so 40k is my absolute minimum.

This would be different situation if we were strongly rejecting VWAP.

[waveslider]

dogpile, have you found a way to get this info from the matrix w/o having to leave it on all the time (cumulative data)?

[Dogpile]

well, went long 1504.50 expecting it to chop back up... instead it impulsed down. but then let me out for breakeven. we have renewed momentum away from VWAP here.

[Dogpile]

	Quote:
	dogpile, have you found a way to get this info from the matrix w/o having to leave it on all the time (cumulative data)?

no, but I have picked up some things by watching the distribution develop so I just keep it on side of my screen most of the day and take note of tendencies.

[waveslider]

check out my post on "wolfe" thread to see an interesting pattern..

[RAVIN]

Once again thanks for your excellent analysis in terms of "If...Then" Scenario for Wednesday, 7-11, Dogpile. very profitable.

After a WRD , once again we could be in for a 80/20 trade (Linda Raschke) ,
20/20 of Arthur Ullirich (Tradetutor).

[Dogpile]

Wednesdays trading session was quite clean:

after 2 'low to high' days, we traded 'high to low'

the market tested up into 1514.25 resistance (previous days highest volume price) for a beautiful morning reversal opportunity to enter for the 'high to low' day.

note that the market tested towards the 15-min 20ema FIRST. The market will test this ema on the vast majority of days so if it starts too far away from it, it often will 'correct' towards it at some point. measuring the distance to the 15-min ema is a very nice and simple way to measure 'location'.

also, the early afternoon move up towards VWAP never 'accepted' the VWAP price. It tested under it and rejected it. This information is very valuable. Along with -2500 breadth (advances - declines) and 'down volume' that swamped 'up volume', you had nice tape-reading signals to tell you the odds remained on the short-side. these signals were loud and clear that this could truly be a dynamic down day (this kind of day is rare so have to 'go with' it when it does happen).

the day was a bit unusual in that it broke lower much earlier than it has done on other strong down days. but, the market clearly alternates in it tendencies. this is why the concepts are really the important thing. focus on the concepts and integrate them with right-brain thinking.

[bh_trade]

Dogpile:

I have enjoyed reading this thread. You recently pointed out the market's tendency to chop around and build large volume around a particular price before trending away from that area. This concept was something I never paid any attention to but after reading this thread I now notice it on (nearly) a daily basis. Yesterday for example, we built some nice volume in the 1508 area before negative up/dn volume completely took over and the bottom dropped out.

BTW, I also enjoyed your prior thread with outlook/chat on the weekly ES action. In a nutshell, thanks for your contributions.

[Dogpile]

	Quote:
	This concept was something I never paid any attention to but after reading this thread I now notice it on (nearly) a daily basis.

of course, the day I posted it was the rare exception to the rule. but this is where 'tape-reading' gets crucial. you can stay out of a lot of trouble if you can develop a sense for action consistent with a trend vs action consistent with range-trading.

yesterday was truly rare action. in fact, the highest volume price of the day was only 39,917 contracts (1482.75). This is the lowest daily PVP since I started tracking this a few months ago. This might be a 'tell'.... I do know that tracking this has been very important as extremely high PVP's become very important pivots. what a super-low PVP means? well, I suspect it means that this is VERY strong trending behavior and we could be going much lower. But I am not sure b/c I don't have much history with the super low ones. Perhaps it just is indicator of extreme panic? I don't know but I don't think it is logical to think that few buyers showing up low in the range is a good thing.

watching the daily volume distribution build every day certainly has been helpful for me. integrating this with Taylor is even more helpful. Adding in some market profile and some oscillator patterns has been fascinating mix for me.