ES Analysis for 11/01/06

[ant 10]

The first step of my analysis is to determine the market condition - balancing or trending. The ES, like the YM, is in a 7-day trading range as indicated by the chart below. The upper bracket limit is 1395 and the lower bracket limit is 1378. The ES closed within the high volume node of the composite profile of 10/23-10/31, so I currently do not have a bias going into tomorrow. However, I'll check the Globex session tomorrow morning to determine if the ES is trading above or below the high volume node at 1383.50-1381.75. If above the HVN, I will have a long bias and look to get long (buy pullbacks). If below the HVN, I will have a short bias and look to get short (sell rallies). If the ES is still trading within value, then I will wait about 30m or so to see if the ES approaches any key reference areas. So looking at the composite profile, the bracket limits and the HVN are key reference areas.

 

 

Next, I analyze market structure. I look at the daily profiles and identify key reference areas according to the day structure. On 10/31, there was a buying tail at 1377.50-1377 and a selling tail at 1385.75-1387.25. These are key reference areas as well for tomorrow.

 

 

So what's my trade plan for tomorrow? The ES is in balance so I will look to fade the bracket limits at 1395 and 1378 (just below 1378 there is a low volume area between the two composite profiles in the first chart). If the ES opens above the HVN, I will have a long bias and look to enter a long trade if it trades down to the HVN. If the ES opens below the HVN, I will have a short bias and look to enter a short trade if it trades up to the HVN. As always, I will look for confirmation from market internals as price approaches the bracket limits and the HVN of the composite profile. I will also be paying attention to the single prints of 10/31.

[Gordon G. 10]

Hi ant,

 

thanks for your analysis.

 

I have a question: how do you determine the high volume node ?

I mean, you write that the high volume node of the bracket 23-31 november is at 1383.50-1381.75, but why not to consider it at 1384-1381, for example ?

 

Best regards,

 

Michele

[Soultrader 12]

Hello Ant,

 

I was going through my charts last night as well. From the bigger picture the markets does look consolidated. But does the 4 straight days of lower value placement warn you of any warning signals?

 

Or would you consider this as a slight pullback of the overall trend? We are in a very interesting level. If the consecutive lower value placement indicates a pullback it does look like we found support indicated by the high volume on the daily chart (see attachment). This would offer plenty of long opportunities. However, if this lower value placement is a clear warning sign we need to be extra careful. It looks like volume has picked up the last few selling days.

[ant 10]

I was going through my charts last night as well. From the bigger picture the markets does look consolidated. But does the 4 straight days of lower value placement warn you of any warning signals?

 

Hi Soultrader,

 

What you are describing is an internal trend within a trading range, this alerts me to a potential breakout to the downside. There is a way to measure internal trends, as described by Don Jones at Cisco-Futures. This is something I consider when a market is trading in a bracket. However, in the ES, we had "overlapping lower" value areas and it wasn't that strong of an internal trend. Notice how the ES traded down then back up over the last 3 days, not that persistent to the downside. Your question was an excellent example of understanding market context.

 

Antonio

[ant 10]

Hi ant,

 

thanks for your analysis.

 

I have a question: how do you determine the high volume node ?

I mean, you write that the high volume node of the bracket 23-31 november is at 1383.50-1381.75, but why not to consider it at 1384-1381, for example ?

 

Best regards,

 

Michele

 

Michele,

 

I also create composite profiles and daily profiles using Volume to compare with MP using TPOs. As you know, they can differ in a significant way, especially in the daily Market Profile. To be honest, about the HVN in the composite, I eye-balled it and wasn't trying to be that exact. I do try to be as accurate as possible in my trading, but keep in mind that being off by a tick or so is not a big deal, unless you're trying to trade mechanically. 84-81 or 83.50-81.75, what's a tick between friends?

[ant 10]

The ES opened at 1386.25 above the HVN of the composite, so I will have a long bias. Buying pullbacks.

[Gordon G. 10]

Ciao Antonio,

 

thanks, I thought you had a method to identify the HVN, but it's ok not to be always too precise

 

I think yours and James' analysis are to be considered together, like watching a 120' chart (like you did) and then going into details looking at 30' and 5' (like James did). From macro to micro.

 

Best regards.

 

Michele