Tuesday, October 21, 2014

Posted by preznicek at 9:00 AM on Tuesday, October 21st, 2014

Good Morning

Value areas and POC figures for /ESU4 and /NQU4 are posted free every morning HERE.

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Goldilocks gap of +8.25 this morning. A sweet spot for a good fade if the early trade cannot take out the ONH. Overnight inventory is very close to 100% net long which sets the whole thing up perfectly. Gap rules apply.

Yesterday’s late day advance pulled price far up to the upper end of the distribution, closing it at the tip top without value expanding all the way to that area. I think all signs point to a playable fade this morning with the usual targets. Go for yesterday’s close first, then VAH, then POC.

Valuie was overlapping to higher yesterday which I see as not bearish but not overly bullish. The prior RTH session had breakaway value as an opening gap held. I would have expected an intrinsically stronger market to establish value more clearly higher yesterday. Duly noted and carried forward.

Of course with all the talk of fading, let’s not every forget other scenarios which could just as easily be gap and hold, gap and go, or (everyone’s favorite) the slow trickle downwards about 3 handles and then rally. The important thing is to not think you “know” before the bell rings and even more importantly not trying to fit what you think you know on top of a market that has completely other ideas. As always, internals shall light the way.

Market Profile Wisdom of the Day
Impulse trading is what kills most traders. Price is simply an advertising mechanism that stimulates our impulses to do something. Just trading based on a single feeling of greed/fear/price restricts us and can completely block us from the more powerful concepts such as excess, balance, value, and timeframes which are the real drivers of the market.

Have a great day,
peter

Monday, October 20, 2014

Posted by preznicek at 9:07 AM on Monday, October 20th, 2014

Good Morning

Value areas and POC figures for /ESU4 and /NQU4 are posted free every morning HERE.

Click to Enlarge

Click to Enlarge

–Small gap down this morning with /NQ’s showing a little relative strength to the /ES. Read More…

Friday, October 17, 2014

Posted by preznicek at 9:14 AM on Friday, October 17th, 2014

Good Morning

Value areas and POC figures for /ESU4 and /NQU4 are posted free every morning HERE.

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click to enlarge

Of course I had no idea we would be gapping +25 at open but that’s irrelevant. What is important is to be always aware of the tone of what the market is doing. Every day has a particular color to it. Either panicky, hard and fast, slow and plodding, etc. Just being aware of this tone is often times more important than technicals or profile or anything else. Read More…

Thursday, October 16, 2014

Posted by preznicek at 9:06 AM on Thursday, October 16th, 2014

Good Morning

Value areas and POC figures for /ESU4 and /NQU4 are posted free every morning HERE.

click to enlarge

click to enlarge

Relentless is the only word I can think of to describe this selling. Yesterday we came within a hair of a 10% correction from the high, bounced about 40 /ES as expected and we’re currently down 24 in the overnight. Read More…

Wednesday, October 15, 2014

Posted by preznicek at 9:12 AM on Wednesday, October 15th, 2014

Good Morning

Value areas and POC figures for /ESU4 and /NQU4 are posted free every morning HERE.

click to enlarge

click to enlarge

–Gap down is extremely large at $25 handles currently. Gap rules apply, the most important of which is that double digit large gaps are hard to trade so trade later rather than earlier. Read More…

Tuesday, October 14, 2014

Posted by preznicek at 9:07 AM on Tuesday, October 14th, 2014

Good Morning

Value areas and POC figures for /ESU4 and /NQU4 are posted free every morning HERE.

click to enlarge

click to enlarge

Short in the hole again, but this time following through to upside as one would expect when price closes far away from value. Yesterday’s late day action was spiky and indicative of panic selling. Those are usually retraced back up quickly as we are seeing now with a double digit gap upwards. Read More…

Monday, October 13, 2014

Posted by preznicek at 9:12 AM on Monday, October 13th, 2014

Good Morning

Value areas and POC figures for /ESU4 and /NQU4 are posted free every morning HERE.

We had a classic “short in the hole” setup on Friday afternoon which I tried unsuccessfully to buy between 4 and 4:15pm EST. Trade continued lower off of Sunday’s open before reversing around midnight to start rebalancing all that short inventory. Short in the hole is when traders sell relentlessly away from value and you have a settlement far away from the POC on single prints. Read More…

Friday, October 10, 2014

Posted by preznicek at 8:26 AM on Friday, October 10th, 2014

Good Morning

Value areas and POC figures for /ESU4 and /NQU4 are posted free every morning HERE.

I believe yesterday’s blog comments were spot on. The market ended up acting exactly as described premarket. It’s so important to have these scenarios in mind before the market opens so that there is no “guessing” or surprise when the trade is actually happening. You’re (and me) are not always going to be right and there will be surprises but if you have a good grasp of the profile and how price, volume, and time work then there are really not that many different outcomes. Prices change, people remain the same.

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The support point in the low 1900′s that’s coming up is the main downside reference. I believe the market is working it’s way down to this level. I will definitely be looking for a long trade at this support. Between now and then there could be some chop. Note how in the profile picture below there is overnight action inside of yesterday’s range and below even though the market broke a triple bottom to make new overnight lows.

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Yesterday’s low was poor and is in need of repair. It appears we’ll be getting that today. Note how the ONH is right to the top of the TPO POC. Again, short term traders are in control and that piece of information should give you larger confidence to buy bottoms and fade tops when you see them. The bias is down but things are not crashing with wild abandon.

Right now the gap is 9.75. Gap rules apply. If the gap gets much larger use caution if trading it. I tend to shy away from double digit gaps and this has saved me a ton of money. Money saved from not taking losses in this game is just like money earned.

Have a great day,
peter

Thursday, October 9, 2014

Posted by preznicek at 8:27 AM on Thursday, October 9th, 2014

Good Morning

Value areas and POC figures for /ESU4 and /NQU4 are posted free every morning HERE.

click to enlarge

click to enlarge

I tend to think all FOMC related moves are suspect. They often reverse themselves the next day. If they don’t then that’s a good piece of information to carry forward. FOMC or not, you should always question the sustainability of moves that are made up of nothing but single prints on low volume at each price level. We certainly got a lot of that yesterday as if Yellen & Co.’s only comments were “cover your shorts NOW”.

As of this writing, which is a bit earlier than you are used to, /ES is gapping down about 7. There are multiple distributions in yesterday’s profile with a lot of single print spikes. The first one that could come into play would be the top of the spike at 1948.25. If this doesn’t support, note that there is nothing really holding up yesterday’s move (think value and thickness of profile where prices are “fairer”) until 1934.00.

Although the volume POC moved up to the upper end of the range, don’t consider this a fair price to do business. This common on a big day when large volume starts trading in the last 15 minutes or so. Watch the DOM next time the market is up 30 handles or whatever at the end of the day. It’s meaningless compared to where the TPO poc is. Because price closed so far away from real value, I believe short term traders are long in the hole this morning which is why you’re seeing a bit of a gap down already. If the ONH and yesterday’s RTH high cannot be taken out, assume more long liquidation early.

On the upside 1968.50 (futures ONH) is your upside reference. I find it interesting that this level took out the RTH high by a decent amount, knowing that there is a downtrendline in place in the SPX just at yesterday’s RTH highs. Consider this a key “go, or no go” (Dalton-ism) level for the market. If a daily bar closes above the line you see in the pic below then odds favor the upswing continuing. Staying below, we continue to work our way back down.

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click to enlarge

Have a nice day,
peter

Wednesday, October 8, 2014

Posted by preznicek at 8:59 AM on Wednesday, October 8th, 2014

Good Morning

Value areas and POC figures for /ESU4 and /NQU4 are posted free every morning HERE.

click to enlarge

click to enlarge

I sent out a tweet at the close yesterday saying that I felt the market would gap up today. Right now we are only up 1.50 but futures did move as high as +6.25 in the overnight session. How did I know that this countermove would occur? Simply because price got too far ahead of value by the closing bell. In the graphic above, note how value is all the way at the top of the range and the settlement (red box) is down at the bottom. Furthermore, note where the POC or fairest price to do business is. Quite far up in the range. This is what causes the snapback afterwards as even though the longer term trend could be down, in the short term things have simply gotten too oversold. The thinness of the profile down below value is a large key to seeing this as it tells me that shorter timeframe players are just selling with abandon and playing momentum. That is usually unsustainable.

All that being said, the overnight bounce in relation to the size of yesterday’s distribution is rather minimal. The ONH did not make it up to the VAL. I believe that sellers are still firmly in control. Value established clearly lower yesterday.

Overnight inventory is slightly net long.

The ONH at 1934.00 is the upside reference. 1924.25 (ONL) and 1918.25 (10/2 RTH low) are the downside references. The latter is more important as we know that the market touched a main trendline support at that level. A daily close below this bar changes the trend of the S&P which is important.

Minutes from the last FOMC meeting will be posted at 2pm EST. This is a potentially market moving event.

Market Profile Wisdom of the Day
Markets don’t go from trend to trend, they go from trend to balance, then back to trend

Yesterday I posted a video of a live trade of fading Monday’s upside gap along with a lengthy write up of what to look for in that setup in the Educational Articles section of this blog. To check out the whole post click on categories on the left side of this page and then Educational Articles. If you just want to check out the video, it’s below:

Have a wonderful and profitable day,
peter