Inventory Grab Alert 4/30/09!

stoneface · May 3, 2009

Quote from AMT4SWA:

You are looking for a negative divergence in the delta from 887.00 to 885.75 price highs.....you will NOT always get a delta divergence with a new retest of a recent high (as can be seen when the 887.00 high of the period in question was created during the AH session lower volume environment). Also, you want to be looking for initiated selling (SELLING that stops price from advancing.....SELLERS having more conviction within the traded volume than buyers).

You do not have to have a delta divergence every time a known resistance area (like the 887.00 area) is challenged again by price before you sell that area. While attempting to SELL a high retest, you would LOVE to see a negative divergence in the cumulative delta at that time (higher probability set ups).......you are just not going to ALWAYS get it. ....

There was very solid initiated sell activity as price action attempted to challenge the pre-open 887.00 high.....or I should say there was plenty of indications imo to take shots at selling in the 885's to 883's INTO the selling conviction. After that very good initiated sell reaction off the 885's traded, the buyers that day were UNABLE to challenge that inventory which created and rests in that zone (883's to 885's).

There are also other aspects of Cumulative Delta/Auction Market Theory which did come into play that day imo, but what I have shown here is enough imo to help for a better understanding of how I use the delta.
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That clears up a lot of confusion I had about CDV... Thank you for sharing!

AMT4SWA · May 3, 2009

Quote from fearless9:

Hello AMT4SWA:

I read your opening post carefully ... actually I was obliged to read it very carefully as you have an unfamiliar writing style ... well unfamiliar to me at least.
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***The part of my brain involved with creativity and written english has been over run by my mechanical/analytical side.....LOL!
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To be honest, in my first read I thought you had been schooled in the Jack Hersey method, but of course that is pure supposition on my part.
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***Ah.....NOOOOOOOOO!
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"On the 17th of this month we had our first proper test of this resistance zone"

Given your post is dated 05-01-09 01:22 AM, you may chose to give this a little further thought.
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***Nothing to give further thought too.......since the yearly low, the 17th of APRIL was the FIRST time we had price trade back to a zone of price I was watching as a potential resistance area.
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Anyway, let us put all that behind us as Monday approaches with alarming speed.

Am I to gather that when your posts are boiled down to their core, you are referring to trading simple support and resistance bands.
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***Yes to a point.....zones of support and resistance that work exceptionally well for me as tracked through my method of using cumulative delta....mixed in with my knowledge and use of Auction Market Theory.
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If so I will receive the good news with an enormous sense of relief.

Your cumulative delta photo will also be eagerly received as I passed through the cum delta phase some time ago having struggled miserably to turn it into a predatory advantage with only limited success.
In fact 50/50 is a ratio that comes to mind.
Imagine my horror when I discovered that it did not look unlike a similar period MACD.

Come to think of it, it was a sorry day in the house of f9 when I came to the glaringly observation that most indicators are clones of each other.

Silly really, because their parentage is the same and so what should have I expected.

Still, I await your chart with eager anticipation and I wonder what opportunities "short inventory and long inventory" have in store for us all this week.

Come to think of it, what ever happened to buying and selling ... perhaps this week I will accumulate and distribute ... next week I will "flog off and grab"

regards
f9
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Hope that helps..... ......at least some.

AMT4SWA · May 3, 2009

Quote from stoneface:

That clears up a lot of confusion I had about CDV... Thank you for sharing!
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No problem.

Damn I am tired from last nights trip, and now I see the futures market is already getting close to the Sunday open......:eek:

.......I love this $hit

riskfreetrading · May 3, 2009

AMT:

1. Could you please explain what is delta (no need to explain cumulative delta as it should be just a sum of deltas during a time interval)?

2. How is delta different then OBV (on balance volume)?

3. What is the effect of time interval size (bar size) on the conclusions from the analysis ?

4. There are also questions of terminology (inventory? inventory grab? etc).

Thanks

manlycure · May 3, 2009

Quote from AMT4SWA:

You are looking for a negative divergence in the delta from 887.00 to 885.75 price highs.....you will NOT always get a delta divergence with a new retest of a recent high (as can be seen when the 887.00 high of the period in question was created during the AH session lower volume environment). Also, you want to be looking for initiated selling (SELLING that stops price from advancing.....SELLERS having more conviction within the traded volume than buyers).

You do not have to have a delta divergence every time a known resistance area (like the 887.00 area) is challenged again by price before you sell that area. While attempting to SELL a high retest, you would LOVE to see a negative divergence in the cumulative delta at that time (higher probability set ups).......you are just not going to ALWAYS get it. ....

There was very solid initiated sell activity as price action attempted to challenge the pre-open 887.00 high.....or I should say there was plenty of indications imo to take shots at selling in the 885's to 883's INTO the selling conviction. After that very good initiated sell reaction off the 885's traded, the buyers that day were UNABLE to challenge that inventory which created and rests in that zone (883's to 885's).

There are also other aspects of Cumulative Delta/Auction Market Theory which did come into play that day imo, but what I have shown here is enough imo to help for a better understanding of how I use the delta.
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I realize that CD divergence could be contradictory to the price action that follows a retest. It's a "nice to have". The CD divergence at 885 is +6k in your chart (19k->25k) which is consistent with mine (395k->401k).

Regarding the delta intrabar reaction. Wouldn't you consider the third CD bar after 09:06 (~884 price level) to also present a similar seller reaction to the one you marked (second bar after 10:13, ~885 price level)? I do see that the sellers failed defending that zone, which I suppose means that it doesn't meet the criteria of a newly initiated (and held) resting sell inventory.

Missing from the picture is the per-tic delta. It looks like you're estimating the sell inventory (13k) from the CD across the newly defined sell zone.

Last but not least, is the delta zone (in terms of price range) solely determined by projecting the CD formation back onto the price chart?

Much appreciated!

D.

manlycure · May 3, 2009

Quote from rainman2:

here you go...
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Thanks, Rainman. Are you sure about your numbers? I see CD divergence of about +30k (vs. +6k in my chart and AMT's) at the 885 price level.

D.

AMT4SWA · May 3, 2009

Quote from riskfreetrading:

Thanks for your post.

Could you please explain your methodology? For instance when you write 'short" inventory, I am not sure I understand what you mean. For any short inventory, there is a long inventory established at the same price and date/time.

If you can explain it more, it would be helpful to learn from your explanation and expertise.

Thanks.
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It is all about who has the conviction WITHIN the traded volume flow.......who is IN CONTROL.

Initiated selling that is greater than initiated buying will cause price to drop.....that result will leave some of those sellers holding inventory that is now in the money (the ones who have not yet covered their now profitable positions). Since price has not yet challenged their sell entry price levels, the initiated sellers will continue to hold inventory as price trades lower (from the higher price levels from which they sold).

ONLY when price trades back to the entry price area of the initiating sellers (who are still holding some/all of their HELD sell inventory) will we see if these sellers are going to defend (sell again with new inventory) the price levels of their original initiated sell entries. .......so, is your head spinning yet???

AMT4SWA · May 3, 2009

Quote from riskfreetrading:

AMT:

1. Could you please explain what is delta (no need to explain cumulative delta as it should be just a sum of deltas during a time interval)?

2. How is delta different then OBV (on balance volume)?

3. What is the effect of time interval size (bar size) on the conclusions from the analysis ?

4. There are also questions of terminology (inventory? inventory grab? etc).

Thanks
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Here is some good basic examples of DELTA explained.............

"Delta = Buy Volume - Sell Volume
Buy Volume (Ask Volume) = volume that traded at or above the ask price.
Sell Volume (Bid Volume) = volume that traded at or below the bid price."

http://www.screencast.com/users/Mar...on/media/7b00202a-4afe-4e4b-96b2-ce36aa625930

OBV - http://stockcharts.com/school/doku.php?id=chart_school:technical_indicators:on_balance_volume_ob

*** The effect of time interval is minimal imo in regards to looking for delta divergences with price. For general use of delta intraday, the time interval is very flexible and can be set to multiple levels/settings which are in alignment with the traders style for trade entry determinations. Time interval changes do not really change the data shown through cumulative delta, which is an aspect that has always appealed to me.......the method is NOT timeframe DEPENDENT.

Much of the terminology I use is a byproduct/creation of the way I "visualize" the micro/macro Auction Market Theory process in my mind. (twilight zone music in background).

riskfreetrading · May 3, 2009

AMT:

Thanks. A clarification: I did not ask what OBV is (I know the definition). What I wanted to know is that you explain (with an example if needed) the difference between cumulative delta and OBV as you see it in your mind! So I am interested in how you perceive the difference (if any) in your mind, and not in individual definitions (though the pointer to the delta definition should be helpful).

From what I read yesterday, it seems to me that OBV and cumulative delta are the same thing? I am not referring to how you analyze things, but rather to the relative meaning of the two concepts.

Just that you know I like to good deeper into things, so feel free to go as deep as you can.

SoCalTrader619 · May 3, 2009

AMT would you be so kind as to post a chart of what you see at the 843's through the 839's as a potential support area?