The index futures are derivatives markets. The participants in the stock market do what they want when they want to without caring about the derivatives markets.
Ok. I'm only interested in trading futures because stocks have to many annoying rules (like wash sales and having to list each individual trade in tax time which takes forever).
Hi IronFist, Lol (I like the name of your image)... Big Bars dont suck if you are on the right side , So how do we get on the right side? What you are observering (Big Bars Suck) is referred to as a Breakout (BO) and the start of a new dominant trend. It is visible and you CAN know it is coming, If you know the sequences of price & volume as it travels through a 'cycle' (but you need a bit more than what is on your chart currently) Price travels in channels and channels overlap. Channels are composed of traverses. Dominant and non-dominant. This dominance is determined by volume. As you have drawn price bars in your diagram. Price was traveling in a dominant down channel and retraces toward the trendline (not visible in your chart). It failed to breakout (FBO) in its first attempt (as you have drawn) and was probably showing decreasing volume as it approached the TL. Then it resume its dominant traverse, but failed to create an expansion and to traverse the channel (price stopped going down). Price then reverse and heads for the trendline again. This time it Breaks Out (Price Spikes). If you are interested and have an example of an actual time chart (say 5M ES a good choice to remove noise) where this phenomena (Big Bars Suck) occurs post it and we can look at how price, volume, and channels can provide you this information of the pending end to a dominant trend and the start of a new dominant trend. Hope that helps.
You completely missed my point. The index futures markets are derivatives markets. The stock market is the prime market and the main participants in the stock market don't worry about the derivatives market. If a fund manager has to buy $200 million of stock they don't concern themselves about anything but the prime market. The fact that their buy program all of a sudden moves the indices a couple of points is no concern of theirs.
This is wrong. Most big traders trade baskets of stocks only in the same direction that the index futures and options are moving. They track the derivatives to stay in harmony with market sentiment and trend.
Oh wonderful. If the big traders only trade in the same direction that the market is moving then who got it moving in that direction in the first place? If the big traders only trade in the same direction that the market is moving then who gets the market to change direction multiple time a day? And what is it that the derivatives track?
VOL itself is useless unless you see what it does to price. for every buy there is a sell and vice versa, but there can me more buying pressure or selling pressure resulting in excess supply or increased demand.
When there is a huge price spike that's not news related generally it's somebody getting fucked. As far as predicting those spikes, just watch the level II and TAS of the stock and find a situation where you see people place their bets because of reason X, and then suddenly you see reason X becomes invalid, those people betting on X will have to cover their bets... at that point it's about who's quickest to notice the change and press the keys. What "x" is can change all the time, that is why traders must adapt constantly.
Let me rephrase: perhaps what I should have said is that a LOT (instead of most) of REALLY big traders trade USUALLY (instead of always) trade in harmony with derivatives. Ask a market maker or pension fund manager sometime if you get the chance. -------------------------- Simplistically put, to answer your questions, often it is groups of smaller to mid-size traders that get the market started in a direction as they tend to be the ones who try to pick tops and bottoms. Or it may be larger traders using say 1/10 of their position firepower as they nibble at accumulation or distribution. Then the small groups of really BIG traders either de-rail that move (by creating the support or resistance levels that make the market pivot intraday like you are saying) or else they too pile on in a big way, adding to their initial positions, which creates your high volume trend days in one direction. A lot of these very big traders watch the put/call ratio, VIX, ADV/DEC ratio, futures contracts, etc. which are all derivative in nature, before making really large commitments. As a small trader, I want to be on the right side of these large commitments, not counter to them. Therefore, generally speaking, I believe it is much better to buy individual stocks when the options and futures markets are trending up - and to sell them when the derivatives are trending down. As far as what the derivitives track, I'd suggest to go to the CME or CBOE sites for learning materials. Hope this helps.