[steve46]

I really enjoyed "Mind Over Markets". Inspired me to write Dalton a note. Unfortunately I did not receive the courtesy of a reply

Anyway, although I do monitor MP charts periodically, I find that monitoring intraday volume also works well. Specifically, I use a method I read about in Brett Steenbarger's blog "Traderfeed". What he (Brett) suggested was to lookback 20 days, averaging intraday volume on a 15 minute basis. What you would do is to compare what you see to this 20 day average to determine whether institutions are playing that day or standing on the sidelines. Here is a link for those interested

http://traderfeed.blogspot.com/2007/...ck-market.html

For what its worth, I lookback 20 days and break out the average volume in five (5) minute increments. I have found a couple of interesting things using this method. One thing that becomes apparent is that the market "breathes" volume. That is to say, volume seems to drop significantly just prior to what I charaterize as an "impulse" move. It drops somewhat, then picks up as price develops momentum. As a move loses momentum, you can see volume expand and then fall off. Typically, these changes correspond to increases or decreases in the size of the bar or candle.

As regards today's move, I believe it took place on slightly low volume (daily basis) so I am suspect that institutions are selling it, and/or using the opportunity to modify positions. For instance, I took profits on several existing positions for tax reasons.

Good luck in the markets
Steve

[ant]

Originally Posted by steve46 »

Anyway, although I do monitor MP charts periodically, I find that monitoring intraday volume also works well. Specifically, I use a method I read about in Brett Steenbarger's blog "Traderfeed". What he (Brett) suggested was to lookback 20 days, averaging intraday volume on a 15 minute basis. What you would do is to compare what you see to this 20 day average to determine whether institutions are playing that day or standing on the sidelines. Here is a link for those interested

http://traderfeed.blogspot.com/2007/...ck-market.html

For what its worth, I lookback 20 days and break out the average volume in five (5) minute increments.

That's a good suggestion. In fact, I wrote an indicator to do just that. Check out the chart below. The yellow dot by each volume bar indicates the average volume for that 5-min time period looking back 20 days.

Originally Posted by steve46 »

As regards today's move, I believe it took place on slightly low volume (daily basis) so I am suspect that institutions are selling it, and/or using the opportunity to modify positions. For instance, I took profits on several existing positions for tax reasons.

That's a good point Steve. Thanks for sharing.

[ant]

Let's review the market action in the ES...

Yesterday (9/4), the ES traded above the upper balance area limit at 1484.75 and traded as high as 1499.25. It was a trend day up. However, there was concern for the bulls because the move occured on low volume and the ES closed about 10 points off its daily highs. After yesterday's trading, the upside in the ES seemed limited. During the evening and overnight session, the ES sold off about another 10 points. Since volume in the overnight session is light, one should consider what occurs in that session with a grain of salt.

Today (9/5), the ES gapped down in the open about 10 points, which put it back in the balance area - a potential false breakout. Throughout the day, the ES barely retraced any of the overnight losses, and in fact, traded lower. This indicates that the lower overnight prices have been accepted. See the chart below with the overnight and today's Market Profile and compare today's trading prices to those of the overnight session.



Basically, today's trading range was contained within the upper balance area limit and the gap/buying tail from 8/31. See the chart below.



Today's profile shape was "squat," meaning that it was a fairly tight range from the daily high to the daily low and it was wide from left to right. This indicates a balanced market in the day timeframe. As mentioned before, the play for tomorrow should be to trade with any directional move away from balance. Today's tight range is unlikely to hold tomorrow. Today's volume was also on the low end, but higher than yesterday. Although volume analysis is not as useful in a balanced market (the shape of the profile is more important), what I find interesting is that yesterday we had a trend day, which usually occurs on high volume, but it had lower volume than the balancing day from today (see chart below). Is this detail or nuance? You decide. Again, this market does not appear to bode well for the bulls and we should use this information as "context", not blindly short the market tomorrow.



If we look at the composite profile from 8/20 to 9/5, the market appears balanced (i.e., a bell curve distribution), to break out of this balance area requires power (i.e., volume), something that the market has not been showing us. I don't know if the market will break out to the upside tomorrow, but it's not looking too good right now. We'll have to consider the overnight session and the developing trading tomorrow. Again, go with the directional move away from today's balancing day, but be aware of the possibility that the market might be capped at 1484.75, unless it can muster enough volume to break out.



Note: My analysis is based on the Market Profile concepts described in Mind over Markets and Markets in Profile. I have been learning and practicing trading with Market Profile since Feb. 2006 and am still developing as a Market Profile trader. Writing down my market analysis is very useful and helps improve my market understanding. I suggest that all traders do this regardless of trading methodology. My trading has improved dramatically since I started doing this and being prepared for the next trading day. Market understanding and knowing yourself are perhaps the two biggest obstacles to consistent, profitable trading. For example, even if you can analyze a market accurately and identify some big moves, do you have what it takes to hold to trades long enough to capitalize on those big moves requiring you to withstand the adverse moves against you? The latter part is proving to be much tougher.

As always, feel free to agree or disagree with any part of my analysis.

In my next post, I will review how a Market Profile trader could have traded today's ES session. Stay tuned.

[Dogpile]

for anyone familiar with Art Collins book... we have a 'cap formation' that has formed. he swears by this pattern as robust across virtually every futures contract he has tested it on... essentially, its a 3 bar bearish daily pattern. where c<c[1] and c[1]>c[2] and h<h[1] and h[1]>h[2].. see attachment and some strategy results based on shorting the open and covering the close. the key here is just to think of this as a bearish bias over next 1-2 days --- sometimes it needs 2 days to play out -- other times it just doesn't work.

also, notice that we have a Taylor bullish bias for tomorrow -- Rashke calls this a 'pinball buy'... in general - I think we have a bearish set-up due to the very solid 'cap' structure and I will be looking for that -- but we might need another day before a bearish bias plays out due to the 'pinball' buy pressure. Just be ready to take advantage of a downside move over the next 2 days should it start to roll that way -- and know that you have potential for a big win with this daily structure.

[Blu-Ray]

Once again Ant, Excellent analysis.....keep it coming

Just one quick question, when you do the composite profile, why do you pick that particular date (20th)?

Cheers

Blu-Ray

[Dogpile]

re-post -- other attachments in post didn't seem to work

http://bp3.blogger.com/_5h-SWVGx6Ms/...and+9-7-07.png

[Blu-Ray]

I still can't seem to open the first attachment

[Dogpile]

added a link now -- Traders Lab just doesn't seem to like that attachment -- I give up after 2 tries -- link is the same thing

http://bp3.blogger.com/_5h-SWVGx6Ms/...and+9-7-07.png