1. The pattern is what matters, not the values, though if the bar interval is too small, the volume may be essentially patternless, though this isn't a point I'm prepared to argue. 2. I always watch the ES alongside the NQ since they're symbiotic. It's a form of insurance that I'm not seeing only what I want to see. If I see disconnects, I back off. 3. One would think that volume levels were important. I've always thought so. But when it comes down to demonstrating this value, that's not quite so easy. There are considerations other than volume level, e.g., where are you? If, for example, you "hit" important R pre-market, when volume is crap, the short is still likely to be good simply because of where you are. And there is also the issue of what you want to do. Volume considerations are different according to whether you want to enter, manage, or exit. If, for example, you're already in the trade and just managing it, all you want from volume is that it not get in your way. Unusual price movement does not require big volume. However, it attracts attention by virtue of being unusual, which might then attract the volume (yes, that means that price often precedes volume). Therefore, depending on your risk profile, it can pay to focus on what price is doing, then anticipate volume, planning ahead as to what you'll do if the volume doesn't appear. 4. Not really. Low volume would mean low demand. High volume without price advance would mean strong demand that's being swamped by supply. Either way, the result is a falling price. This is one reason why I like to blend candle pairs in my head at price extremes.
The first step for a trader is to determine the current trend of the market. The second step is to determine one's place in the current trend. The third step is to determine the proper timing of one's entry into whatever it is he's trading. I'm posting this because I said I would, but it's anything but clear-cut. 1. The current trend of the market is down, but only within a narrow timeframe. If one backs off aways, the state of the trend is debatable. This can create problems even for daytraders. 2. If we are to stick with the current trend, however, our place in it is pretty much the same across markets. First note that none of the demand/supply lines that have been drawn over the past couple of weeks have been confirmed. In fact, the lines that were most recently drawn suggested a return to lateral support. Neither the ES nor the YM reached those levels, which is a sign of strength. Yes, the YM did stop at a round number, but it's common for there to be at least some overshoot. Here there was none. And though the NQ did reach minor support, it also stopped short of more major support just below. This means that these lines must be rotated upward again, at least tentatively, and at least for the time being. Lateral S/R, as always, is the 500lb canary. Second, the volume on the bounces was fine, but not imoressive. And Friday resulted in shooting stars all round. This gives weight to the probability of a return to the downside. There is also the issue of there being a shorter distance from support to resistance than from resistance to support in a downtrend, making long plays problematic unless taken quickly at support. It's difficult to avoid making calls when evaluating these charts, but it's essential to address the market day with an open mind. Given the okay but not great volume on the bounce and the shooting stars at the tentative supply line, our "place" in the current trend appears to be at resistance, with the direction of least resistance being down. Again, this is not a call, but rather an assessment of where we are located within support and resistance in the current trend. 3. Again, strategy and tactics are left up to the individual.
Never forget that markets are made up of people. Think constantly about what others are doing, what they might do in the current circumstances, or what they might do when those circumstances change. Remember that whenever you buy and hope to sell higher, the person you sell to will have to see some opportunity at that higher price in order to be induced to buy. -- J. Peter Steidlmayer
032904 There's not a whole lot of interest to say about today. Pre-mkt upgrades and M&A news (i.e., manipulation) boosted prices toward higher levels of resistance. Trading was primarily professional. Donnie Daytrader either jumped on, or he didn't, according to his own strategy/tactics. Therefore, rather than waste a day, I'd rather do what I'd ordinarily do for myself, which is note whatever there is to note about today, which isn't much, and put my time to more valuable use re-visiting the dailies. The "signs of strength" which I noted on the ES and YM over the weekend turned out to be prescient since the market rose. But charts are definitely a what have you done for me lately phenomenon, i.e., just because the YM and ES stopped short of more serious S (dates for each are noted below the line), that engine requires stoking, and price won't run forever without help. Volume today on these two was okay, but not impressive. Volume on the NQ, which DID reach serious S, was downright light. Donnie Daytrader may be smart enough to recognize the hook within the lure and cautious enough to bide his time biting the big one. The only confirmed supply line in the YM is the first one, beginning at 10700 (the demand line, beginning at 10400, is, again, a hypothetical, drawn parallel to the supply line). The only confirmed supply line in the ES is the first one, the lateral at 1160. The demand line here is also confirmed, the lateral at 1120 (technically, the diagonal demand line beginning 2/24 is confirmed, but that's assuming that the originating point means something, but since the demand is simply drawn parallel to the supply line, that particular juncture may just be coincidental). Since the demand/supply lines are therefore largely tentative still, the laterals take center stage. Here there is more commonality amongst the three indices, at least over the last thirteen trading days. The ES and YM dropped out of their trading ranges two days after the NQ continued its downtrend below S at 1450. They all rallied at the same time, they all consolidated at the same time, they all "gapped" down at the same time. But where the NQ found expected S, the YM and ES, as already noted, stopped short. Since there was no discernible price S at those levels, the ES and YM spent three days finding some (the NQ was already sitting on S). Having found it, for whatever reason, they then all began a rally to . . . what? First possibility, as mentioned yesterday, was the first, tentative, supply line. That was too thin. As for the next of these, at least with the YM and ES, they meet the first laterals, at 10300 for the YM and at 1120 for the ES. The NQ, however, is already past the first lateral (at 1435) and is already at the next, at 1450. At this point, the outlook for the ES and YM aren't quite the same. The ES seems to have worked its way through the congestion of week before last, but it's got one hell of a lot to work through between 1120 and 1160, though there is somewhat of an air pocket between here and1135m, caused by that marubozu on 3/10. The YM, on the other hand, has much clearer sailing all the way to 10400. The NQ is facing a hard slog beginning right here, all the way to 1500. I postulated yesterday that the direction of least resistance was down, and given all that these indices have to chew through in order to break for daylight, that's still the case. However, the NQ has made a higher swing high, and the YM looks as though it might do the same thing momentarily. If all of that occurs, then finding R will be much like a bunch of people wandering through a darkened room with flashlights. The NQ will be reaching its downtrend line at about the same time that the YM reaches the bottom of its old trading range and the ES reaches the midpoint of its old trading range. In other words, all of these are facing important R, but the character of the R is different for each. Isn't this fun?
Hi db Wow! Great post. A quick question -- what led you to the conclusion that trading today was primarily professional? What struck me today about ES was how once volume got into gear price started to go a little goofy. ...and yes this is fun JT
Non-stop, steady buying, no pullbacks, no pauses, just marching up to a target, then nothing. I wasn't there, of course, so I can't guarantee anything, but if Donnie Daytrader were pushing the string, it would not have been so mechanical.
It sure as hell is..... I would like to ask you about the high volume occurring in GE the last seven days and wondered if there is something one could derive from the action? Such as temporary signs of accumulation or support. In reading Neill , he mentions that people are attracted to volume and price action and also this is when distribution can take place after a top , on the way down. GE has been considered a bellweather in the past and the volume has been extraordinary. erie
Accumulation is a lengthy process that takes place during basing. As for the volume, if heavy volume continues after a stock has fallen and it doesn't fall further, it's likely that the supply/demand balance is shifting toward the demand side. There may be churning, but it's important that the price stay right where it is. If the demand/supply balance has shifted toward the demand side, and if volume continues to be strong, one can expect price to rise. If it doesn't, then another leg down may be more likely. Volume is the effort. Price is the result.