OK.....I see what you mean. This is simple to clarify.....the most important aspect is the pocket of resting inventory which REMAINS just after the cash session open pullback (at the order flow transition decision point with a intraday delta divergence in place).... http://www.charthub.com/images/2009/06/20/ESCD_Sep.png
amt That is a rather vague discrription of "COMMERCIALS", The commercials are the actual buyers/sellers of the "ACTUALS", the actuals are more comonly known as the "CASH" products. That and this is a rather simplified description but valid ones. Players Involved in Commodities Trading There are three different types of players in the commodity markets: 1.Commercials: The entities involved in the production, processing or merchandising of a commodity. For example, both the corn farmer and Kelloggâs from the example above are commercials. Commercials account for most of the trading in commodity markets. 2.Large Speculators: A group of investors that pool their money together to reduce risk and increase gain. Like mutual funds in the stock market, large speculators have money managers that make investment decisions for the investors as a whole. 3.Small Speculators: Individual commodity traders who trade on their own accounts or through a commodity broker. Both small and large speculators are known for their ability to shake up the commodities market. >>>>>>>>>>>>>>>>>.END>>>>>>>>>>>>>>>>>> Now, in real life so called commercials are better known as hedgers. Hedgers are price adverse players, they do not speculate in price movement like speculators do. As traders we are specs because we want to be rewarded for accepting the price risk the hedgers are laying off to the futures market. Thats the business rational of the futures mkt in the first place, to transfer risk of a huge crop, etc to the specs who are willing to risk the grocery money to make some cash. Hedgers in general are not mkt speculators, it is a business not a gambling house at Cargill and other well known commercials. Farmers also in general are not specs for fear of betting the farm he could lose it. (not a cliche) There is "ZERO" inside information in commercials trading in the futures mkts like there is INSIDE info in the stock of a public company. What the hedger knows about the crop condition, the demand or lack of demand, who is buying, who is selling etc, etc are their own projections and thats what they base their business on. They conceal their trading in the mkts as much as possible to not let the other hedgers get a clue about price etc. Thats a simplified explanation but a very valid one. History has shown that big commercials that speculated in the futures mkts are not around for long. The futures mkts were originally formed as RISK TRANSFER from the business man to the specs on the street. Insurance companies do the same thing but in general we are FORCED to take out mandatory insurance on the car, house etc, etc. As taxpayers we are now forced to bail out the fuckheads on wall street that gambled the farm and lost. When was the last time a futures mkt had to be bailed out? Right, when the contracts are all sent to a clearing house, everyone has an interest to not screw the little guy. ...END.... PS: Farmers are not really commercials, farmers are better known as producers on a small scale. Yes some farmers are very large but not known as commercials in the real sense of the word. Stock exchanges seem to always want to fight amoung themselves and screw the little guy, unlike future exchanges. like i always say: get MODERN, trade futures. http://www.reuters.com/article/governmentFilingsNews/idUSN1841430520090619
Not really.......this entire thread has been directed to S&P500 action, so all you need to do is take a look at the CME members who trade the PIT/E-mini contract with SIZE. There are institutional players and there are small groups/individuals.....it is easy to separate the groups here imo.
Right... In sp500 futures market (ES) the commercials (Institutions) hedge (trade) directly with the derivative instrument not the cash market... In most other markets the commercials place their hedges (trades) in the cash market...
Thanks for clarifying. As I understand it, the correct back reference point for divergence calculation (from the cash open pullback) can be determined uniquely to the extent that you choose the correct inventory dip during the previous cash session. Theoretically speaking, if you were to have multiple such dips, you'd choose the one with the lowest CD as your reference? I also note that there are two pullbacks, one prior to the cash open and one right after the cash open. The divergence at the first pullback (pre-cash open) is more positive than the 2nd one but I'm guessing that the first bounce is smaller than the second one due to the much lower volume prior to the open.
Thanks again for taking the time with this thread. Trying to soak up as much as I can. The commercials essentially unloaded some of their shorts that they carried from higher levels on the probe of 900. We are now in a range between 900 and 950. Where are the resting short inventory holders between 900 and 950? Nirav said maybe 24-27....where the initiated sellers were that took us down through to the lower end of the range? Also, corresponding to a low volume area. After the bounce of the 899s, the CD seems to be acting like the Big players are selling, maybe looking for another probe of the 900 level. This is indicated by the negative trending CD while the price trends up and gapping on lower volume and then hammering it during RTH? So the players are reloading there shorts, making it look like a 950 test is probably not in the cards? Unless of course the commercials bail on the inventory they have been building since the probe to 900. Just curious what this would look like. The 900 area probably has some resting long inventory as intiated buyers took us out of that area AFTER commercial shorts unloaded their carried shorts from higher levels with limit orders at the 903-899 levels. How does one measure the new resting long inventory that was created from the initiated buying that took us out of the 900 level and from what levels specifically that the newly initiated longs will try to defend? This whole post is sort of one big question Trying to show where I am at get my head around Auction Market Theory.
The main thing I wanted to point out was, the price/order flow action at the CLOSE of one day in comparison then to the next days cash session open (was there activity at the EOD that can be used to set up a trade at opening of the next days cash session.....of course as long as the AH session order flow activity did not negate any potential "pressure" at the next days cash session open).
The one AFTER cash session open is the one to pay attention to (for a middle of the road intraday type scalp trade) once order flow returns to normal levels greater than typical AH session order flow......much higher probability set-up imo. Of course there are good AH session trade set-ups at times, but this "one days close looking to next days open" presented a good LONG trade set-up imo.
WOW....you are on "short final" with your thoughts here! You are definitely getting the Auction Market Theory aspects of the way this period has played out so far! You should measure the 899's bounce area as any other potential zone of resting inventory (of course knowing this will be a pocket of resting inventory WITHIN the current significant range of price lately). Take a look at the 899's to 803's and you will see a zone to be watched going forward.......lets see if we can work this area next week.