Pre-market / After Hours ES PA....The hidden gem uncovered

There can be some good stuff when news hits afterhours particulary when Asia and Europe (more so Europe) is open and the US market afterhours globex market follows but not to the same degree. Let's say the market is correlated 85% typically but the move in the US is only 30% of the European market move. Well then you can sell the pops or conversely buy the dips in the US pretty comfortably or at least with tighter stops.

The pre-market moves more than intraday for the same reasons the market crashed this last week----liquidity vacuum---and that is an edge too in so far as look at the bounce we had off of the extreme low on Thursday. Having said that I hate trading afterhours because of the lquidity issues and also because it moves so slowly then ---smack---just like the gut-wrenching drop this week.

Anyways just send a check to me at.....

 

Overnight ES...

Years ago, the volume in overnight ES was puny. 1s and 2s on the DOM.. often only 10 contracts, total, shown in the 5 prices. Not really tradable >5 lots.

Now, however, you can trade 50-100 lots nearly the same as RTH. Therefore, overnight trading is just "normal". Nothing special.... European Dip Dogs are the same as US Dip Dogs.

Traders follow either RTH, or All Session charts, some both. S/R on either is a legit as on the other.

 

May 5, we're still very much in a "buy the dip" mentality and we're experiencing a normal post-earnings pullback in a relentless uptrend. That night ES sold off from 3am thru 4am to test the previous support level (1168) and found buyers 6 ticks lower, enough to drive price back to the 1174.50 pivot high, where it failed to break out and sold right off again. Second try, 1166.50 didn't hold and following a double top and a series of LH/LLs, that flags a likely new low. By the time the market officially opened, we'd washed out 10pts lower on a climactic volume move, which in this bull market has been a strong buy signal.

So even though we had a long downtrend leading into the open, there were also strong reversal signals - on a 5-min chart we had 6 legs down, vs the usual 3 or 4 in a trend, a climactic final push (and I use the term "climactic" relative to previous price action; obviously this word was seriously redefined Thursday), price getting near what was a previous major resistance level and should now hold up very well as support, and the big money coming into the open with the "buy the dip" mentality that's been working like magic for over a year.

 

How do you define 'leg' because I counted 7 pushes down.


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There were actually so many that I threw 6 out there because some seemed too shallow to count

 

I figured I was being kind of anal.

 

That's why they call it technical "anal"ysis

And on that note, I'm gonna go out and play now before my eyes turn permanently red and green!

 

How to read my charts: (15 minute charts)
20,50,200ema's =blue, black, and orange lines
Dotted lines = pivot points

First day is April 30th, and the next day is May 3. We have Sunday night PA thrown in there, but it doesnt matter as its considered part of the after hours PA.

Lets look at the chart of April 30th. Reason why I'm using this day is we have clearly defined legs down. The black lines I have there are the consolidation areas where price has spent the most time. They are support ranges. These different support ranges mean different things. And price could react differently act each level depending on conditions.

S/R areas = 1191-1193, and 1199-1201ish. I say ish guys. I'm not really looking for exact to the tick areas right here, b/c I'm just doing examples.
April 30th pushes down all day. We know this much. The after hours action denoted by red lines denote a leg up. As it begins pushing down it fails to breach new lows. Now look at my arrows. We are putting in Higher lows. Are we putting in higher highs ? eh, somewhat but its messy. But you’re going to find we have messy action often premarket. The key thing to think about here is follows:
Say you are a short from yesterday. When will you get scared and take profits ? What type of action must you see to cover ? Look at pre-market action. If price was so bearish, how come we didn’t breach new lows on that red line with the arrow after the leg up ? Why are we putting in HL’s ?
So
1) we have HL’s being put in
2) At the open, we have uptrending EMA’s (except for the 200ema, I will discuss this at a later point)
What does the 1191-1193 band of resistance mean ? Well this leg is where we’ll hit resistance. This is NOT Monday morning QB shit. Go back to ANY down day, and take a look where the last leg occurred. If price is pushing up, it will, 9 out of 10 times hit that band of resistance and push down. Also, a considerable push over this band means we’ll have a short squeeze. Why ? b/c a lot of accumulation / distribution occurred at this level. A push over these prices means a large majority of shorts will cover here, and new buyers will come in.

 

Lets look at the April 16 into April 19th action.

April 16....all day down day without any legs or consolidation until the end of the day. We'll throw this band of s/r btwn 1189-1193.

In this specific case the leg up was created at the end of the day. We see price putting in messy lower lows. EMA's are trending down practically the ENTIRE after hours / pre-market day. When we get a few bars close to the open. We start pushing up.

What was one of my rules ? If EMA's are trending down and we're putting in lower lows yet price trends up at the open, what is supposed to occur ? A reversal is supposed to occur. B/c all those people that were bearish premarket haven't forgotten !

Where do we expect the reversal to occur ? At the first band of resistance.... the 1189-1193 area. PS, the resistance band is large, but thats why u have other tools to help u gauge where the top will be..... i'm not getting into those.

Take a look at the chart.... Reversal immediately in the AM.

 

Lets take a look at Joe's case. This is a messier chart. No, there are not clear higher lows or lower highs etc being put in. But the main thing Joe account for in my system was S/R areas.

First we need to add our first band of support / resistance. This band is obviously in the end of day consolidation area.

Yes, look at that action. Slowly trending up, but it can't push over that upper support area. This looks like an extension of that consolidation range to me, right ?

Well what happens pre-market ? We push down to new lows ! The extension of the consolidation continued the trend. And there were NO clear HH's or LL's here pre-market. We do not look at your 1 min charts pre-market. Too slow. 15 min charts only bud !

When the market opens, you are very far away from the EMA's, and you open right near the pivot. I'm not even going to get into trading this area, as I'm not going into setups here.

Instead, I'll point out a simple fact. Our extended consolidation broke down, and we have downtrending EMA's. Normally, we would not pay attention to these downtrending EMA's b/c it didnt occur all after hours / premarket. But my analysis above makes it a good setup. So what happens ? What was one of my rules ? If the market pushes up immediately when you have downtrending EMA's, very often we see a reversal ?

Where does this reversal normally occur ? At the next leg. Where was the next leg ? 1172 band of resistance. Wow, this really is easy stuff, huh ? lol