[forrestang]

Here are significant areas as I see for tomorrow. It's basically unchanged from yesterday, only that I have moved the high range from 30 to 32. So the midpoint was adjusted(dotted blue line), which is good as it reflects how price bounced off of this midpoint today. The POC as you can see will adjust dynamically throughout the day.

So a few questions about current S/R.

I've noticed each day that even after defining major S/R, it might be useful to look closer at the intraday trading, and notice areas where price touches many times each day.

Example would be the 00-32 range is obvious. And in between, there are places where price has touched several times. That 23 level I have up now, I got that from noticing what price did in that area, denoted by the green circles. Today however,the 25 level seeemd to be more significant, denoted by the red circles. This is only 2 NQ points and might wind up not effecting trading much, but it's just a point of clarification...... so would it make more sense to highlight the 23 or 25 area?

Second question, price noticed the midpoint today (red rectangle), and the midpoint is generally the middle with the most activity, most whipsawing? Would it be prudent to look to initiate trades near the midpoint, i.e. just flat out looking at it as a valid support level as it sits now? I understand one could consider it a range within a range.

[DbPhoenix]

Keep in mind first that support and resistance are created by price, not by the trader. Price really couldn't care less about the lines the trader draws. It is up to him, rather, to take his cues from price. Midpoints, for example, are not the low of the range plus the high of the range divided by two. There can be considerable flexibility in placing them, but, again, one has to take one's cues from price. Yesterday, for example, I pointed out that VAP --which is created directly by price without any interference from the trader -- pointed to 17 as the midpoint, which was slightly higher than the calculated level (the accuracy of which depends on how accurately the low and high of the range are pegged).

Next, it is important not to get too wrapped up in the drama of the extremes. This is easy to do since the extremes are easy to find. But what matters more is where the bulk of the trades are taking place. It should be clear, for example, that price is being turned back far more often at 28 than it is at 32 or even 30. Therefore, if one waits around for price to hit 30/32, he may find himself immobilized and wondering WTF when price instead reverses at 28. If it does in fact reach 30 or 32, as it did yesterday, this makes for a very high probability reversal. One can see price being stretched and snapping back in real time.

Third, if the midpoint is tested repeatedly and if price repeatedly finds support or resistance there, then it is likely that traders are creating a new trading range. As I've pointed out, the trading ranges have been shifting higher, like stacking shoeboxes. The VAP helps to confirm this, and it should not be overlooked. If traders are -- and they are -- shifting the trading range higher, the bottom becomes 17 and the high becomes 28, the midpoint of which -- arithmetically -- is 22-23. The midpoint of VAP is 20-21. The trader, therefore, must be open to reversals anwhere in that area. This means watching how traders behave as they approach these levels.

[DbPhoenix]

So where did we end up?

You pegged the range as 1600 to 1632. Price dropped at the open from 1631.25.

It then fell to today's VAP midpoint of 20, then to the low of yesterday's range at 17, then tested 20 from the underside, and continued its descent, eventually reaching 1602.5. This was 2.5pts from anticipated S, but it coincided with Friday's opening swing low (see inset). Whether this coincidence is anything more than that remains to be seen, but it's interesting.

Price then recovers to the "midpoint zone" between 17 (Monday's VAP midpoint) and 20, or 18.75.

Not bad.

[DbPhoenix]

I neglected to point out yesterday evening that you may want to go back to 7/23 and include the 1605 level in your consideration of support. Though we love round numbers, 1605 hasn't done too badly, and looking at the S level here as a zone will help you to avoid waiting for that last push to hit the limit of the range. Again, don't forget that the range is defined by the location of the bulk of the trades as well as by the limits. The VAP plot helps to drive that home.

[forrestang]

What I have for Monday, 10Aug2009

[forrestang]

First, here is a follow up from yesterday. Just after the open, price moves up to test the 1618 RESISTANCE zone, it then falls down all the way to 1598. I didn't anticipate that much movement, so had to adjust fire and update levels as the day progressed.

I've adjusted some things which you can see on the continuation part of the chart, as well as the 2nd chart in this post.

This picture of the follow up should be self explanatory:

HERE IS THE CHART FOR TUESDAY:

[wjrusnak]

Time for the wizardry: The levels should stay nearly the same as yesterday (Monday), but now we have a new high to work with. I'm keeping my highest level at 88, since we are now below it. If we do break higher, hopefully a nice setup (break out or retraction to 88 support) can occur at that level. Otherwise, I am level-less above 88.

I decided to use a 10 Range to get a real clean look at S/R. This works much better than using a 5000 or 10000 volume chart at the moment, since my data feed ends up smashing all the previous months into an inch of my screen (makes sense if each bar is a certain amount of volume and this is the "new" contract).

[DbPhoenix]

You may be right about 88, but I'm extending it up to 90+, with the other limit at 72, maybe 74. Depends on how climactic the action is when price gets to those levels, but the very most recent activity has been more pertinent lately than that going back several days. This range also gives us pretty much that same midpoint that was so useful yesterday.

So shorts at the upper limit and longs at the lower, unless we break out of the range.