Dogpile

Updating this thread for the last few days. Again, my thesis is that you get a better trending move only after 40k contracts trade at a single price. If price moves strongly before 40k contracts trade, it is likely to ultimately fail and you should consider fading the move on pushes into support/resistance. Once 38-55k contracts trade -- gear-up to play for a potential trending move breakout (bigger win). This is a point of very good reward-risk. Monday Nov 19th: We had a 'breakout' set-up coming into this day. Friday had been a narrow (nr7), inside day. The classic Tony Crabel play is to take a first-hour breakout. The market did do a successful first-hour breakout basically as soon as the first-hour was over. When in breakout mode, this is a 'go-with'. That said, note that contract volume did NOT build at a single price sufficiently and thus the move ran out of gas as the odds are that 40k+ contracts WILL build at a price at some point and thus once the market has already trended, you should now EXPECT chop. This is what happened as volume first built at 1442.00 for 48k contracts. This looked like it would be the PVP for the day. The market made a break lower after building that 42.00 PVP and it was reasonable to try for a trending move lower after all this chop. If watching the volume distribution in real-time, you would have seen clearly that buyers came in aggressively at 1437.50 as the volume bar at that price shot out very aggressively indicating extremely strong buying and that price would not go lower. (Watching this in real-time was dramatic and actually also foreshadowed a nice 14-pt move up on the overnight Globex session). Tuesday Nov 20th: Tuesday needs commenting on... This day really stands out for being an especially unique, crazy day relative to other days. 1) Volume was heavy on the day with NYSE volume going over 2 billion shares during a holiday week. 2) The volume distribution is quite different than any other day in recent memory. For such a high-volume day, volume was spread out across the entire price range. This is highly unusual. This was the first time in months that no price reached 40k S&P contracts traded while volume for the day was heavy. The range on the day was 34.50 pts. 3) The market showed very strong 'range expansion' off opening price (Opening Price was also 1437.50 -- perhaps not so coincidentally, remember 1437.50 was the huge buying price from the previous day). This upside Range Expansion on decent volume massively failed in an 'outside day'. Following the rule of thumb for Tuesday would have you doubting the sustainability of a trend until 40k contracts traded (we were not in Tony Crabel type of breakout mode). This was a valid high-level concept because the market tried to trend up and couldn't, then tried to trend down and couldn't sustain it. But this is a bit misleading because we did have a 34.50 pt range on the day --- it was like a day with a trend-day up, a trend-day down, and then another trend-day up all within the same session. This was one of those days that was just very rare and you kind of shake your head at how crazy it was. Wednesday No 21st: This was straightforward day where market attempted down before building 'proper' chop. This was a fade. Market then attempted up before building the proper amount of chop and this was a fade. Classic 'Range Trading' until 40k contracts trade. The market then chopped sideways until 45,576 contracts traded at 1431.00. It then faked up and trended lower (sustained its trend). Importantly for intraday traders, you could see how no volume spike occured late in the day -- signalling that big money was not going to hold the market up and that the trend down had legs. This is in stark contrast to Mondays action where on the attempt lower, volume spiked hard at 1437.50, denying the trending move lower.

Review of last few days. There is not necessarily a 'Taylor Play' every day. For example, as noted before, an 'inside day' can set-up a breakout where the H or L violation is a 'go-with' -- not a fade.

Final Volume Distribution Commentary for Monday Nov 19, 2007

Fridays volume distribution comment: I am just going to comment on the afternoon action here. The afternoon was interesting in that the S&P futures were pinned just under VWAP for a good deal of the afternoon. The afternoon did show a 'higher low' vs the morning low (1448.00 vs 1447.50). Volume began to build at 1452.75 and reached above 40k contracts, a 'rule of thumb' level for me for what constitutes good trading. The market had opened at 1464.75 and thus was building up significant volume low in the range. Thus, for most of the afternoon we appeared to have little buying interest above the VWAP price near 1456.50 but significant buyers near 1453.00. This led to somewhat of a stalemate for a while. As soon as price was able to climb through VWAP late in the day, it shot up to 1464.00. Here were the pieces I put together for a profitable long trade: 1. The higher low in the afternoon is a factor that argues for a long. 2. Building volume low in the range (10 pts below Opening Price) is a factor that argues for a long. 3. The market kept faking lower after testing VWAP but not following through. ----------- I decided to take a good breakout away from 1452.75 that also exceeded VWAP and went long 57.75. I exited 1463.75 as it challenged the morning 'selling tail' high.

S&P's did run nearly +20pts up off the 'higher bottom'... you can see how as soon as it fulfilled the 'low to high' move, it reversed. it was its own little 'intraday high violation' after a +20 pt move up. The day ended up a NR7 (narrowest bar of last 7) and an 'inside day'... A narrow, inside day can be a 1-bar breakout pattern so need to think about Monday being a potentially dynamic day with 'range expansion'. a morning high/low violation is still a 'potential' fade but need to be careful as we could get a strong directional move out of the NR7/ID. Will have to monitor volume/breadth and range expansion off opening price. It looks to me like we have had good buying low in the large trading range and that Fridays afternoon 'higher low' might have been a 'tell'... On the other hand, we are still stuck right in a price zone that has built up a ton of volume now near 1461.00. We have not seen any sustained 'initiative' selling below 1461.00 yet. The Thursday-Friday action does not suggest immediate 'downside continuation' to me... Thursdays down day was on weak volume and Friday made a 'higher low' so maybe next auction is up. We'll see.

here are some comments on last 4 days. I don't mean for this to be a trading strategy in and of itself -- just a higher level concept to be aware of... My hypothesis was that the market will generally not sustain a trend until 40,000 contracts trade at a single price. The implication of this is that you can generally think about counter-trend trading until you get to something approaching 40k contracts and then you need to start to be more careful of counter-trend trading as the market might have chopped up enough traders such that a trend could not ensue. The bigger implication is to then gear-up and try to catch the trending move that could develop and just hold on. Be aware that this is just a tendency I have noticed. The market could trend strongly and THEN do its 40,000 after the movement --- but somehow, some way -- it will get to 40,000 on any decent volume day. I will add the caveat that it is important to figure out ways to confirm this tendency on lower-timeframe such that you do not get 'run-over' in a trend day. Personally, I like to watch how price is reacting to VWAP and to use various standard deviation types of methods to gauge whether the market seems to be acting consistently with my various trading concepts. Let's look at last 4 days from only a high-level. Tuesday, Wednesday and Friday were very much consistent with my hypothesis - Rangey Price Behavior until 40k. Tuesday was a trend-day but even that day first printed nearly 50k contracts at 1461.50 before the REAL trend began. Wednesday was straightforward sideways chop with a giant plunge at the end after printing nearly 55k contracts. Thursday came close to 40k before dropping really hard (it hit 38k). Obviously, when you see price failing just under VWAP, as it did on Thursday on that test UP, you would want to think short. A market that is rejecting VWAP (while under VWAP) is a short. Friday was a 'wide and loose' day that saw giant swings but no sustained trend away from VWAP. All you really have to do is catch 1 of these afternoon moves and your week is made. Or catch just a piece of a few of them and your week is made.

after 2 high to lows, a possible taylor buy is a 'higher bottom' there are 2 entries he looked for, the low violation or the 'higher bottom.... today looks like higher bottom buy day... expiration friday can be tough though in afternoon

Thursdays Volume Distribution Summary: Overall volume for the day was weak. The PVP that formed was also the lowest in months at ~39k contracts. These two facts seem consistent and probably not that noteworthy. It would have been much more interesting if overall volume had been stronger and the PVP had been so light. The face that overall volume was weak tells me institutional players were just not interested in doing a whole lot today. The day had multiple trades in it but here is a comment regarding just the volume distribution. The market went down and tested 1461.00. 1461.00 was the daily PVP from 11/12. 1461.50 was the daily PVP from 11/13. The market tested up off this level and then eventually broke hard below it, with 'single prints'. You can see the low amount of volume that took place and price moved quickly through this level. The daily PVP formed at 1456.00 which occured near the close, very low in the range. If you were watching the distribution late in the day, you would have seen that it really did not look like the earlier PVP up at 69.50 was going to be exceeded. But it was. This is normal behavior as volume comes in near the close but it also shows a market that got pushed down on weak volume, was closing far below 'value' for the day, and buyers came in late. This confluence suggests that location is better to be long than short.

yes, note we started out -20pts vs the 15-min 20-ema so we needed to work-off oversold situation. we also had a 'low violation' early on. this argues for a long trade. after we trade towards the 15-min EMA, location is now set-up for the High first... Note that there is strong support in the 61.00 - 61.50 area so look to exit shorts above that.

Starting a thread to try to generate discussion about information contained within the daily volume distribution. Here are the final volume distributions for this weeks trading. It is kind of difficult to take snapshots during the day to see what the volume distribution looked like as it developed. That would be very labor intensive. Nevertheless, comments on HOW the distribution built to its final shape and get others 'reads' on what it might mean for future trading could be a very nice collaborative endeavor. You can look at some initial comments here: http://www.traderslaboratory.com/forums/f6/random-distribution-regarding-volume-distribution-2733.html Final Distribution for Monday Nov 12, 2007: Final Distribution for Tuesday Nov 13, 2007: Final Distribution for Wednesday Nov 14, 2007:

A few other things I am monitoring: Extremely high PVP's have become important price pivots. Multiple daily PVP's building up near each other also have meaning. Last Wednesday, the daily PVP actually built at a price outside the 'value range' for the day. (ie, the PVP was below the Value Area Low). this PVP was also the lowest (in terms of number of contracts) in the last few months. In this situation, this was a signal of extreme weakness as the market dropped another -30 pts the next day. I find the 'daily PVP watch' to be something that is quite useful to watch and think about. there is a ton of information there. Would love to discuss what others are seeing and what they may have picked up that I haven't yet discovered, which is surely a ton..

yes good point. I meant it to be taken as a concept rather than an everlasting rule. I posted it simply because I wish someone had shared this with me a few years ago. Would have saved me a lot of money not getting chopped up. The concept is just that you should almost EXPECT the market to play a chop-chop game after some good morning movement (with some exceptions). This choppy action is what is needed to eventually set the market up for an afternoon directional move. 40,000 was just a number I have pointed out as a starting point. take today as an example (Wednesday): the market played a sideways chop game for much of the day. 40k contracts did not form at a single price until 3:40pm. Thus, the play was to either fade moves away from 'value' or just wait. Not getting caught up in that chop (or playing fade-trades only before 40k) was a nice guideline to have. The market ended up printing ~55k at 1489.50 today and then had a nice directional move down for -20 pts. Waiting until at LEAST 40k saved you any chance of getting caught in the chop today. Waiting for 55k was golden on this day. Tell me when a market is ready to trend and I can just bracket it and use a stop and clean-up. Over the last 8 weeks, the median daily PVP is 54,986 contracts. The lowest one that occured is 39,917. As market dynamics change and volume goes up over time in the futures market, 40k will prove too low and I will adjust it upward. But I am just thinking of 40k as a MINIMUM type of number anyway.

Review of Monday Nov 12, 2007 Had 1 'Low to High' coming into the day = neutral factor Had 'low violation' in opening few minutes = factor to look long Price traded 14-15 pts below 15-min 20-EMA = factor to look long Market traded up and through 15-min EMA. Then tested Fridays PVP of 1465.00 = factor to look short. It then flirted around this pivot and eventually got to 1469.25 before making high for day. Have seen this a lot recently where price tests 4-5 pts above/below the key PVP before reversing. Seems to really want to shakeout a lot of traders watching that level before it reverses. Today was no different. the market then chopped around on opposite sides of VWAP (1460.00). I generally look for 40k contracts to trade at a single price before a directional move occurs. This was good today as S&P's didn't move directionally until they printed 40,903 contracts at 1461.00. The market then did a late vertical plunge all the way down to 1439.50, closing far below 'value'. Down volume swamped up volume in the final hour of trading. Somewhat odd action, IMO. Why did the market let longs out during the day only to plunge at the end of the day? Usually, if the market wants to go down, the bias is for the market to go down hard early in the day and force the weak longs out at bad prices. Today, the market let longs out and then tanked at the end. Perhaps this is a sign of a mini-capitulation? The 'profile shape' does not suggest continuation. Note that Market Profile concept is that a close far away from the days 'value' is most often a 'fade' if the profile shape is not 'elongated'. Note that 1438.50 was the lowest price that has traded since the Fed first eased in that surprise 50 basis points on August 17. The futures tested this level after the close. Will 'value' migrate down tomorrow towards/below this level or was today a 'bear trap' whereby price will revert towards the prior days value? We will have to see but 1438.50 is the key pivot to watch for now...

Review for Friday Nov 9, 2007 Today was good example of Taylor concepts defining trading 1) we had a very low start due to a large gap down. but given the high close of the previous day, we did not violate the previous day low right away. when starting far below the 15-min 20-ema, the market often trades towards this level FIRST. this is what happened on Friday. (note that the overnight move as measured from the 4pm close into the opening bar low was negative -2.0% --- this is the equivalent of an entire 'trend day' happening in the overnight session. this is a massive gap and given our tendency (per Taylor) to look for 'morning reversals' -- shorting right off the bat was not a high-odds trade. note though that there was no 'low violation' right off the bat.). 2) after testing the 15-min 20-ema on an up-move, 'location' has now improved for a short (remember, there had been no 'low violation' so fading the initial move up for a 'morning reversal' is reasonable Taylor type of play. the market did reverse and proceeded down until it made its 'low violation'. note that coming into the day, we already had 2 'high to low' days. at this point, we had a third day. now, you have to think. you have had a very large move down. you have a 'low violation' and it was still 'morning session'. after 2 high to low days and a 'morning low violation' --- the Taylor play is to look for a potential LONG. 3) the market went and 'accepted' VWAP, confirming the LONG bias. at this point, the market is either going up or its going to chop sideways. in order to short here, I think you need 'renewed downside momentum' away from VWAP. Thus, the default play here is to be long. 4) the market did chop sideways for a while (consistent with my 40k contract-rule) then broke UP until reaching its key resistance near 1478.00-1478.75. This was important pivot for 2 reasons: a) 1478.75 was Wednesdays low for the day --- and highs and lows are important. b) it was Thursdays highest volume price --- and the daily PVP's are important. (note that this was a significant 'volume price' as over 60k contracts traded at 1478.00 on Thursday --- program trading algorithms seem to respond to these key daily PVP's quite reliably). 5) After testing this key pivot, it drove down hard. Note that the entire move up was on low-volume and actually led by the lagging financial sector. After a LONG move up and a test into key resistance, a short here is a reasonable play for at least a short-term trade. You can see how the 'higher timeframe' is in a downtrend and that this was confirmed by aggressive selling to end the day as 'higher timeframe players' came in and sold.

this isn't magic, just monitoring the high-volume zones and highs and lows. Todays afternoon high was 1478.50 and then it reversed by -24 pts.

review for Thursday: Had Low Violation in morning Formed range trading around previous days low price (1478.75 area) Market then tested up towards 15-min 20ema Then Broke Lower (momentum away from VWAP) Test up fell short of VWAP Formed Higher Afternoon Low Broke Up Through VWAP and rallied hard Traded 'High To Low' 2 high to lows in a row now 1478.00 was Peak Volume Price Since 1478.75 was previous day low and now we have a PVP at 1478.00, I think this is becoming an important price pivot. Watch action closely around this level. strange sidenote: NQ dropped -3.4% today while Russell closed up +0.21% NQ futures were actually limit down at one point today (-100 pts)

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.

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.

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.

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.

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.

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. ------------ 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'.

Tuesday review: gap up led to morning high violation which led to test down toward 15-min 20ema and test of major support area 1503-05 market made 'higher bottom' vs previous day low and traded up went 'low to high' for second day in a row

Tradestation has it as a free add-in. just google it for information. I have found VWAP to be an important measure for the S&P futures... not for the other futures contracts though. I used to follow market profile POC but have switched to VWAP. I don't use it for 'set-ups' -- I use it for 'context'.

yes, 40k is watched in my matrix window (ES.D not ES). yes, this is 'breakout mode' --- I won't look for this on days where I would expect a directional move to be likely. but this condition is the exception, not the rule. Have noticed that often best to wait for volume to build about 30k contracts at one price --- then expect back & fill until it becomes 40k. I faded a move yesterday for 5 pts based on this tendency. Caveat is that once it builds to high 30k zone, even a 'fake' move can go quite a ways before reversing --- so I like playing this fade just maybe 1 time and then stop once it starts to close in on 40k. After 40k, I will look for an afternoon trending move.