[Eiger]

Originally Posted by mister ed »

Outstanding post thanks Eiger ... For ease of matching your post up with the chart I have attached a 5-minute chart here with the two times of springs marked with boxes.



To convert the times on the horizontal axis to EDST, add 9.

Those are them (not sure about that grammar, but those are the two areas of the springs)

If any one wants to post what they see as the differences, we could have a discussion about a valuable trade set-up that comes up often in all markets and all time frames. This is one of my key trades. It is Wyckoff based (actually, I don't believe that Wyckoff had ever wrote about springs, though he did discuss shake outs, which are a bit different. I believe that the spring concept was developed by Bob Evans, a successor to Wyckoff). There are times not to take these trades, but when the background conditions are right as was the case today, they are excellent trades.

Eiger

[mister ed]

Originally Posted by Eiger »

If any one wants to post what they see as the differences, we could have a discussion about a valuable trade set-up that comes up often in all markets and all time frames.
Eiger

Good idea Eiger,

One difference I noted was the price move down to the first low of the springs (i.e. the price low to the left of each blue box) is further in the 2nd example than the first.

I have noticed on my chart I have blanked out the prices , I don't know how I did that (just talent I guess) ... but makes it a bit difficult sorry. Anyway, on the first example I see the price fall about 8 points, in the second example price fell around 10 points From the high between the 2 lows of the spring the price fell about 6 points in the first example, 7.5 odd in the second.

From a volume perspective, the difference in the volume activity at the two lows of each spring is greater in the second example than the first - more noticeable reduction in volume in the 2nd leg down of the 2nd example. Also, the volume on the bar off the 2nd low of each example is quite diffierent - in the first example the volume on the bar following the low is about average, while in the 2nd example the volume for the bar off the second low is huge - urgency here.

[Eiger]

Here's a chart of the daily British pound (March contract) through today. E-Signal plays with the volume, so it is off by one bar (annoying, and it always makes the work difficult).

Anyway, this is an interesting chart. First, does this remind you of today in the ES? There is a Selling Climax, rally, then not one, but two tests. The second test is a Spring. A Spring often puts the market "on the springboard," as Wyckoff used to say. And, this market was no exception. A quick and vigorous rally off the Spring led to a Jump Across the Creek and an uptrend. Note the absorption that occured at each resistance area. This is a classic chart.

So, two good examples of how Springs work in two different markets and time frames. It is one of my favorite trades.

Eiger

[Bearbull]

Originally Posted by DbPhoenix »

Patterns aren't so much the issue as what it is that traders are trying to do at each of these levels. The "pattern" at extremes tends to be a lot of trading activity (volume) spread out over a wide range of price in a very narrow window of time. This creates a lack of support at any given price level during that move. Thus those who for example buy on such an upmove will be the first to bail when things start to go wrong (the weak hands). This is what is meant by "sell strength", when what is meant is more along the lines of "sell apparent strength".

If one has a lot of shares to buy or sell, however, he is more likely to find the opportunity to do so at a price that is beneficial to him if he trades where everybody else is trading, i.e., at the point or level or zone where the greatest number of trades are taking place.

If one can get past the jargon and catch phrases and buzz words, this is what is at the core of any approach that trades via price action, whether the volume is expressed, as for example in stocks, or implied, as for example in forex.

This is a crucial concept DB, would it possible for you to dig up a pattern on your own chart to illustrate ' realise you trade NASDAQ but that should not be a problem to elucidate the concept.

[DbPhoenix]

Originally Posted by Bearbull »

This is a crucial concept DB, would it possible for you to dig up a pattern on your own chart to illustrate ' realise you trade NASDAQ but that should not be a problem to elucidate the concept.

Perhaps the easiest way to illustrate it is with constant volume bars. This is a copy of a chart I posted yesterday to the RT thread as an example of prep. Each of these bars represents 100,000 contracts. Note that in area between 1272 and 1280, you've got 800,000 contracts. However, in the area between 1280 and 1310, the range is three times greater but the volume is half as much, so at any given price point, the number of contracts traded is less. This helps to account in part for the ease with which price retraced all the way back to 1286.

Another example may be found at the end of the day. Note that there are four bars between 1308 and 1315, but only one between 1315 and 1320. This creates an "air pocket" in which one can expect to find little support.

.

.

[zdo]

That does illustrate some of the differences my original and general question was about. Thanks Db. A regular chart with a volume study would also be appreciated as that is what most of us are studying RT. Does the same period on a regular time bar chart show the same process?

Yesterday, jjthetrader replied to my question about volume patterns in value and volume patterns away from value area with “I don't find them any different at extreme levels. If they're going to happen they're going to look the same where ever you are. It's just way easier to take the trade when you're at S&R.” I too have observed that they can and do pop up anywhere. But, if nothing else, the ‘background’ is different for SR’s in ‘value area’ and SR’s outside of ‘value area’ in tails. Let’s narrow the question some to triggered ‘no demand’ and ‘no supply’. Is there consensus that no differentiations should be made about whether price is in value area or out of value area? And only that it’s preferable for these ‘patterns’ (using the word for brevity only db ) to occur at SR?

Thanks,

zdo

[habi]

Originally Posted by Eiger »

First, does this remind you of today in the ES? There is a Selling Climax, rally, then not one, but two tests. The second test is a Spring. A Spring often puts the market "on the springboard," as Wyckoff used to say. And, this market was no exception. A quick and vigorous rally off the Spring led to a Jump Across the Creek and an uptrend. Note the absorption that occured at each resistance area. This is a classic chart.
Eiger

Hi Eiger (north face? )

Interesting explanation as allways. I have a question about the spring. Why is the first test not a spring, but the second one is? I see in both cases a higher volume up bar closing near the high after the test, but the following price action is different. How do you define a spring?

[Eiger]

Morning Session on the ES:

Here is what I saw this AM (3/12/08) on the 5-min ES H8 chart:

1 - Globex high

A - Market falls to the early morning demand line (support) where buying comes in (note mid-range closes and very heavy volume)

B - Market falls into an Over Sold position. B shows a narrowing spread and mid-range close on heavy volume. This is bag holding. They were buying at A and again at B. The bar after B is a Bottom Reversal, confirmation that the buying was successful and the trigger to an up move.

C - Test on volume less than the previous two bars. Next bar is up with a strong close.

D - Market runs up above the Globex high, but immediately selling enters the market. Very heavy volume on up bars. Note the close off the highs on the bar before D - an indication that supply is beginning to swamp demand. D is a mid-range close on continued heavy volume - supply overcoming demand. Confirmation comes on the bar after D, a down bar.

E - an attempt to rally, but on No Demand

There is some support around the 9:30 high, as seen by the shortening of thrust and mid-range closes. It may try to rally from here, but we'll have to see.

All of this is based on my studies of Wyckoff and Tom Williams's good work, nothing more.

Eiger