Glad to hear it. If you're not already familiar with how to use Market Profile and volume distributions, you should learn. When a lot of volume trades at a price, you know that this will always act as a resistance/support level and if a trend slams into it, it will often start to chop. I have attached a picture here of what I mean... on my chart the yellow colored background indicates the levels where the most volume was traded... this allows me to see very easily where a trend is likely to pause. You can use Market Profile charts for the same thing, my setup just aggregates all the volume that exists in the bars visible on screen. If you had this, you would have known in advance that 1036 to 1038 would have been a likely congestion area.
jr07 is not too off with his short bias. I see we are bumping into quite some resistance in the monthly, weekly, and daily (SPY) around 106. I don't see the market going significantly higher. We'd need a huge blast beyond 108 before I doubt my analysis. At least we now know the "true" support area being today's low. Once this breaks after going slightly higher in the coming days, I'm going to reverse my trend following long position.
FB Do you know if volume on a 2x ETF that follows the S&P can be used as a proxy for market volume? I cant get volume from the S&P per se with my charting/data package J
The DOW is now at 9600, less than 5% away from a very big number at 10,000. Do you seriously think that they would let it get this close without making a push up to that level? Forget standard TA for the moment - this market is different because the manipulation factor is so strong. I'd be very careful about getting short below DOW 10,000 no matter what the chart is saying.
Well I've never traded ETFs so I don't know how well they correlate in terms of volume... someone else might be better suited to answer that question...
Yes, it will. And note that I am not making a prediction, simply cautioning that standard TA is not as applicable as some people think in this environment. If I had to bet, I would put a 75% chance on us reaching DOW 10,000 before this rally ends. That still leaves a fairly significant 25% chance that we top out sometime in the next couple of hundred points. Luckily I don't trade off of predictions and only trade short-term, so it makes no practical difference to me.
I also use ninja trader, what is the best way to add market profile to ninja trader at a reasonable cost?
There is a free indicator available here: http://www.ninjatrader-support2.com/vb/local_links.php?catid=1&sort=N&pp=15&page=4 It's called called dValueArea. It is a free implementation that maps out volume by price level for NinjaTrader. You can check out all the other custom free indicators as well. The one I showed you in the screenshot is called PriceVolumeHistogram.
Do you trade only the index through ETFs? GAZ has been going down since June 2008 and has just started to recover. That would have been an easy short. ABII would have been another easy short.