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May 182010

This is a message for premium members.  If you have not been in the forum lately, you might want to log in and read through the posts.  The forum was slow to start but now that it’s three weeks old, there are nearly 100 posts.  There are several good discussions on risk management, trades taken by other members, and introductions by other DTG premium members.  Get the most out of your premium membership; post questions, interact, and learn.

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 Posted by at 7:50 am

Low Volume Area On Composite Profile

 Misc Commentary/Analysis  Comments Off on Low Volume Area On Composite Profile
Apr 282010

Something to pay attention to today. This is my composite profile overlayed on daily bars. The profile is built from the 2007 swing high through the 2009 swing low to present. Note the low volume “notch” right at the overnight low today. This is a classic multi-period rejection of a range of prices with relative volume much lower than the major acceptance area surrounding it. If it does break through to the short side, expect a relatively fast market to the next high volume area below which is well estabished for value by buyers and sellers…

 Posted by at 9:27 am

September 2008 Detail #2

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Apr 152010

Here is a snap of all the traded volume in late 9/08, which was the last time we saw the current prices. The rejection & acceptance areas are harder to pinpoint because the market moved fast in the overnight sessions and grinded through the days. Anyway, my drawn lines are gut instinct as to which prices are most important given the multi-day picture. Rejection in red, acceptance in green. Yesterday, notice the fast rip up can be seen with the virtually zero traded volume between the 1 and 5 handles from back in 2008. If the market does what it almost always we think the next rotation up will play up like this as evidenced by the lines drawn on the sheet:

-We will likely grind a bit slower from 5 to around 7.5 or 8

-We will likely see another fast rip up from 7.5 or 8 to 12

-We will likely grind REALLY slow from 12 to 18

Volume is king. As you know we use nothing else to make price decisions. It never lies and is not market specific. Futures, options, equities, fixed income, real estate, Coca-Cola, bubble gum – all the same. Rejection of previously unfair value on the first retest, acceptance of fair value. Always and forever. Common sense…

 Posted by at 7:46 am

September 2008 Volume Detail

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Apr 052010

This image is pretty self explanatory. It shows the trading detail in September 2008 during the huge selloff. Obviously, there were a lot of prices in the 1180’s virtually “skipped over”. The market will have a difficult time understanding those prices and once we get into the tail enough, we can expect a fast market up to the next known area of previous balance. The single prints start at 79 and the no prints start at 81. As I write this I see that we traded right up to the no-print zone overnight and rejected. 81 will be an important area to watch today, or whenever it gets re-tested. If we trade above it by much we are likely to move to 84, 86, or even 88 very quickly. Volume at price in this image is presented with 5 minute granularity…

 Posted by at 6:28 am

Volume Divergence 3/31/2010

 Misc Commentary/Analysis  Comments Off on Volume Divergence 3/31/2010
Apr 012010

Big volume divergence showed up in yesterday’s volatile trading. We have been reporting for days now that institutional volume in particular has been flowing to the short side. The following chart shows the “big picture” of diectional sentiment and conviction. As we rally, less and less volume is interested in buying. As we sell, more and more traders are coming to the party…

 Posted by at 8:16 am

Key ES Level Range: 1176-1180

 Misc Commentary/Analysis  Comments Off on Key ES Level Range: 1176-1180
Mar 232010

Just a reminder about something coming up of great importance for those not yet keeping track of volume traded at price in a macro sense. Attached is a volume profile chart built from all trading between the 2007 highs and the 2008 lows through to present day coupled with daily bars. Please note that not quite all the bars are shown on screen, but the profile does include everything from swing to swing. 1176-1180 is basically the low volume center of the massive October 2008 sell-off in the S&P. Typically, just as in intraday trading at key highs/lows or other support/resistance areas, the whole market WILL fight hardest at levels comprised of thin volume profiles like these. Pros will all tell you the  the same thing, and that is we want to be trading where the liquidity is and where price is most hotly contested. Low and high volume areas are where this is happening, with the low volume areas being favored of the two for most typical initial rejection. Remember, trading is only a series of auctions and prices MUST constantly move. But don’t get all hung up on trying to make a system out of auction theory by using Market Profile. There are just as many traps to that as any other “indicator”. If you try to systematize MP you will have no better success with it than anything else you have tried and failed at. Above all DON’T have a rigid system, and if you do use profile tools, focus on VOLUME. Time based profiles are antiquated and mostly useless in modern markets. The TPO system was very valuable when we used to run tickets on the floor. We didn’t HAVE volume numbers until the end of day so time based information was the best that could be had intraday. Volume is FAR superior and while time based profiles are not terrible there is no need to use them is you have actual volume information, other than to look for congruence between volume and time which makes support/resistance areas that much more powerful. Just remember when you are considering any trade or managing an existing position that price treats areas previously heavily traded as comfort zones. High volume areas act like magnets to price. In any case, watch what happens(nd) at this key level and expect rejection first. If it does get through, expect a faster market on the backside trying to make its way up to the next important balance area between 1200 and 1220 – and eventually on to 1275 or so.

 Posted by at 5:03 pm

Huge volume divergence

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Mar 112010

Here is something interesting which is one of the most powerful tools in trading. Obviously the chart is self explanatory, but this kind of stuff makes fading previously identified moves to key levels a no-brainer from a probability perspective. These are 30M bars trading into the high on 3-9-2010. As mentioned in the pre-market commentary for that day, there was hardly any institutional money in that rally as the majorrity of the position traders had already been as long as they want to be prior to a break of the 1148 highs. Fade trades in conditions like these are just a dream…

 Posted by at 7:09 am

High fade trade

 Misc Commentary/Analysis  Comments Off on High fade trade
Mar 102010

As RG mentioned in his post,  selling the highs at strong resistance can be a high probability trade. All other things being equal, of course. On this daily chart, you can clearly see that there is resistance from mid-January around 1148:

Around 11:35am, the opportunity presented itself.  Once price failed to reach the highs after bouncing off the 1148 resistance, a good short entry was made for a 4.5 point target.  With risk at only 4 ticks, this trade has a great risk to reward ratio:

The chart below shows how analysis of bid and ask volume at the entry area.  The chart shows order flow and helps see the potential market turn.

 Posted by at 1:54 pm