Quick Draw

On our small time frame trading today we are short the S&P mini from the open. Going for a move into value. (www.tradeinwaves.com)

The Morning After

So yesterday we finally had some selling. Not that that is unusual. Looking at a daily chart we should expect some overall pullback in the market around these areas. I was looking at some profile distributions this morning and it looks like the market is doing some balancing. Today I don’t expect to much but I do notice that the internals are strong at the moment. I was very particular about watching the opening print this morning to see if it held. This is a strategy I am using on an automated system. Basically what we had was the opening print get tested and give way. I then short looking for the midpoint of yesterdays value area. It just about made it but then volume dried up unusually low so the position came off. If volume stayed I would have kept the position on but when volume on this futures contract dies down in the first hour that low my system pulls it. So it is what it is. Small gain. As long as it’s not large losses I am fine with that. It;s a good thing also because the opening print was tested again and gave way to some upside. I would not be looking for shorts again unless we get significantly below that opening print again.

You can see the opening action outlined in this profile chart.(learn more at – www.tradeinwaves.com)

With Breadth Like This Who Needs To Stick Around?

When we have such weak signals at the opening bell as we did today we have to immediately looks at some of our market internals to get and idea of what the overall market is setting up for. OS today for example we had some very weak overnight trading. At the open we nibbled on a short position and from tat point it was smooth sailing. The internal I am watching is the advancers/decliners. Take a look at my chart below. With numbers this weak it's very difficult to even consider at reversion trade up, even on the smallest timeframe. So if you took a nice trade from the open and caught some of the downside I would just be happy and walk away. The skew of the market is still very negative and the only other trade we would normally be waiting for is a possible scalp long when we get some positive slope. However with the internals being this weak I am not even going to consider that at this point. I'm just going to take what I got and wait things out here.(www.tradeinwaves.com)

Way To Find A Strong Price Level To Keep And Eye On When Trading

As the market develops I use a very simple way of drawing support and resistance levels that tell me where the mean reversions should pull price to. When price gets to these levels it’s then that we are noting failure or support. This is method is super simple. below is a chart example. Basically you start regression lines at key swing points. If you do not know what a key swing point is, we will talk about that more in the chat. Just remind me. Anyway see in the chart how I started the regression from the key swing points. Now look at where these “slope” lines intersect. That is where I draw a horizontal line as a mean level for the two swings. Now when price gets to that point we are looking for a bull or bear winner on the tape. Get it? (learn about these trading techniques at www.tradeinwaves.com)

Things I Looked At In My Browser

http://personalmba.com/

http://finance.bi.no/~bernt/gcc_prog/

http://www.verticalsolutions.com/strategies.html

http://www.nabaztag.com

http://www.tradeinwaves.com

When And Why To Exit A Rally

This is a common question in the live call room and it has no clear cut answer. See the thing is that each trader has a different style and so for each trader the level to take profit and get out of a rally will always vary. I have heard many different schools of thought but my best advice is to just do “what works for you”. In other words just because I exit with certain criteria does not mean that you should or that Bob should. I make my calls in the live room based on what I am doing and how my fund operates and generally we are in the school of thought of being consistent rather then trying to get every single tick on the table.
So let me share with you why this morning I recently exited the futures market from a day trade near the open. Bottom line was simple that we had a nice run and that at this point we where a few SD away from the mean. The higher away from the mean of the move we get the less the probability becomes of more forward or upward movement. The second thing that alerted me to exiting was the fact that we are now trading above our initial balance. (email me if you want to know more about IB). Look at the chart above and you will see how this YM futures contract was trading above it initial balance area after a very strong uptrend. In this type of opening action usually the IB will be a good bracket for the days action and so I exited all positions. Now if the market continues to take off so be it. We still had a fun ride.(www.tradeinwaves.com)

Happy 4th

First let me apologize for not writing sooner. I have been working on automation and back testing a lot and been super busy. The good news is I have come up with some great ideas that I will share.
Its right after lunch here and the markets have slowed a lot. After the first 45 minutes of trade today volume really started to slow. If you got the bigger move down today then great. However I want to focus on something I did today and that worked out if you had not hit the move down. I basically waited for a long time for the smallest timeframe I watch to start making significant(email me to define that more) higher highs and higher lows. I then took a very conservative long position. However I had not intention of holding. From this chart you can see what I did was looked at the last significant push down and looked at the distribution(outlined in blue). Normally you would get me looking for the long to move at least across the distribution but today since volume dried up so fast I only looked for the midpoint. As you can see it just barely made it and I was back flat. I’m auk with this . A little pocket change to keep the fund in the green on a otherwise down day for the index’s.
Have a good weekend and I will write more next week.

NYSE ADV and How It Can Help

A really simple internal that I like to look at each day especially on the open is the NYSE advancers. Today is a good example of how it can help. This morning I was eyeing MEDX as a bullish movers. As some of you know I use an opening strategy that looks for movers on the open and is a very short term position. MEDX was on the list this morning. I am still looking at it but I have not entered. I also used the ADV to keep me out of the long side on the futures. So how? well simply looking at the number at which the ADV opens. Let say off the cuff that an open under 800 is usually a bad sign, but under 500 is a really bad sign for the bulls. An open between 900 and say around 1500 is pretty regular and would usually yield a reversion type trading day. An open above or close to 2000 is very strong. So if you look at this chart you notice that it has been around the 300 mark since the open. This tells me to be very selective on and long positions, and in fact usually I will use this warning to stay flat. I also will not fight the low level reading in terms of the indexes. Until we see the indexes get back over the opening print and the ADV stop hanging out this low, the long side is not a consideration. So we sit and wait. (http://www.tradeinwaves.com)

Tricky Trade

One thing I talk often with traders about when showing them how I look at the markets is the idea of different time frame traders meeting each other at key levels. So what am I talking about? Well its just a matter of keeping in mind that investors and traders are both in the markets with different gam plans. Some folks are in it for weeks at a time, some are in it for swings of 3 or 4 days. Others are in for minutes or even seconds at a time. What happens tho at times is that the key levels that a smaller timeframe trader are looking at will line up with a key level that a longer timeframe trader is looking at. When you have medium, longer, and short term traders all meeting up at a key major level , let's say a 200 MA just as an example then we get a fair amount of congestion. Why? Well let think about it. Let's say we our medium term has defines and up[trend and decided to buy a pullback and hold for three days. they will wait till they reach the next swing high level and then decide to hold the position of take profit. Our longer term trader is already in a position and has been for a few weeks and is thinking about taking some profit at the next swing high. So a few days goes by and we hit our swing high level. The medium term trader takes his or her position off as they intended. The longer term folks start noticing some action from these med term folks and also begin to unload. hey let's not forget out day traders who are typically against the longer term trend. they notice these other timeframes creating action and they jump in on it and start taking short term trades. All of a sudden what we have are three totally different timeframes fighting it out at the same key level. The longer term folks are still waiting to see what up. the medium term folks might have a second wind and decide to get back in. And day traders are turning in both directions just waiting for some bigger timeframe to take the reigns so we can get a decent push. All this congestion and crazy back and forth can g on not only for minutes, but for days. SO this leads me to the chart here. This is the S&P emini chart. I ramble above to make a point here in the chart. What I want to point out is how the last few days of trade have been in really tight ranges. Trade has been holding high levels but value areas have been shifting back and forth. Looking a market profile
shows us this. In the bar chart we can take note that the levels we are at are indeed levels that multiple timeframe may be looking at. But just to single out a timeframe I did draw in a slope analysis from a monthly point of view. that is seen in the chart by the green downward sloping vwap line and green linear regression line. the fact that both of these are heading down does tell us that the monthly timeframe is still in bear mode and we should keep that in mind before we get to overly excited about the past few weeks of market strength. You can see that the monthly vwap is only slightly higher so if we do hold up I would expect a test at that level and at least some pullback to let off this steam. Will this happen this week? Who knows but the idea is to have a game plan and be ready to execute.

With A Range Like This Who Needs To Hold Em

The last few days of trade have been overall much tighter ranges then we have been getting in this past 3 months of trading. Looking at this market profile chart you can see this by noticing that the value areas are small. This is by the way a clear sign that the market is at a decision point. I still am expecting more of a pullback in this recent rally on the daily timeframe but the fact that these levels are not just getting smacked down sais it is not finding the bearish sellers that it once was at key levels like this only a few months back. hmm ..
Anyway from a day-trading point of view. I got whipped around looking for bigger moves the past two days. After realizing how tight these ranges are I decided to attack with a different approach until we get out of this chop. So today my approach has been to take most if not all my profit off at my first targets. No need to hold em in a tight range like this. So far this approach is working well.

Between a Rock and a Value Area

looks like it is toying with testing both Friday and Thrusdays value area. Whichever area price makes it way into I expect a move across.

premarket advanced ANDS,NYNY,KPPC,TSFG,HBAN,DISH,HOGS,IBCP,PETS,IPSU

Good Morning Markets

Jobless claims surprised and futures are showing a very strong open.However I am hearing a lot of funds talk about shorts so careful today.

Most advanced pre market: $VNDA,$VICL,$PLAB,$HBAN,$LHCG,$ATRC,$FITB,$THQI,$PLCE...

Head up Bernanke speaks today as market opens

Go Market Go

After doing some calculations last night I had placed my line in the sand in the ym chart at 8383ish area. I was looking for this level to hold the market down on any test with the bias to try to at least test some of the untouched point of controls lower. Overnight the market did test lower but with the earlier news about jobs the market took a nice pop and got through my line. Now I have to just wait and see how the market reacts at the open but right now the bulls have proven they still have the ball.

About Balance

Not much to say about the market in the last 24 hours other then that it seems to be in balance and holding itself up. It really just a matter of time and then we should see at least a test of the downside value areas. I am looking around 8220 in the mini Dow futures for a test. I will say that I am a tiny bit surprised that we did not get a test yet. However I would have expected more bull interest today if the market really wanted to just look over the reversion. The longer it hangs out here the more the probability becomes of a test of lower value area.
This chart shows how the market has just been in a tight range around the developing value.

No Short?

We opened way above value right .So normally you would think we are looking for a reversion or a short trade. Many mean reversion newbies get confused by this. ALthough we do believe the market is mean reverting to some degree that does not mean the timeframe we are looking at is in that process all the time. SO one way I like to see if my timeframe is totally off is to look at internals. My smaller timeframe intervals did show some point of fatigue. But look at the NYSE tick below. No real weakness at all. This tells me that the timeframe I am looking at(day or smaller) is not the timeframe that is currently holding the market. SO I step aside and let those short signals fade away into the dark. We really need to see a pullback that doe not hold to start thinking about the other direction. Will it happen , YES. Today Probably, right now?, Probably not.

Balanced Market - Am I At The Circus?

Here is a look at how the futures are trading about an hour into trading. I am still holding a small long QID position which is and inverse to the market . So overall my bias is still to take this market down for a test of yesterdays value . I have my stop very tight at we are in a balanced area and anything can happen here. It’s just a matter of who wants it more now. Notice the balance in the chart below right on the flat regression line and on the high volume in the profile.

In Between Value

I have a few mixed signals this morning before the bell. Normally I like to look at my volume profiles and regressions to see in what way the market may be pulled during the morning session. However, more often then not the market like to settle itself down before the open at it's shorter term midpoint and wait for the day to start. Indeed this is the case today. You can see from this chart that we are sitting at a midpoint and waiting. Let me point out that it looks like we will open right smack down in the middle of our MP value area so let's expect the market to test value extremes for the first part of the day. Note we do have a double distribution yesterday so that may keep price bouncing back and forth.
more at www.tradeinwaves.com

Current Heatmap

A Market A Market

Good morning. Looks like futures are going to be down on the open. We have a lot of earnings today as well as some news from a Citi meeting that could be a topic. Putting all that aside I want to look at how the futures are setting up from a more statistical approach.
What caught my eye today was this chart. We we have here is that a the blue line or midpoint of a regression up to the most current tick lies above the highest volume node(red line). this indicates that price should want to pull itself back up and at least try to get back into value. Does this always happen? . But for the last few weeks of trading this has been the case and so I have to take it into consideration today.
I will be looking for any signs of upside rally on the smallest of timeframes to try to get on this side of the trade. Here is the thing. I will not be looking for this price to move across this value until I see it get above the lower green line and start trending with interest up. Any ground below this area will be a shakeout territory. I will try to update more on how this is playing out after the bell.

Delta What..

The overall market internals have been weak the entire day. I have been watching the NYSE tick chart most of the day for more positive sentiment but so far nothing. That being said I have noticed that this last TPO bar(blue) is showing a positive delta. This is the most positive delta reading on the days profile so this could be a sign that buyers are stepping up. I will wait to see how this closes and if it holds the positive number.
(coutesy www.tradeinwaves.com)

overall weakness

I was looking at 7904 as a testing ground on the YM futures. That level would have ben the completion of a move across a swing value area. This level did provide support but not enough to cause a smaller-timeframe rally. this tells me the market is weak from the get go. Also looking at the NYSE tick we see that hardly any positive readings. If you even thinking longs here I would wait it out before jumping aboard.

You know sometimes things do not always work out and as traders we have to let that be as it may. No use in wondering “what if”, “why didn’t I”, “I should have”. Really it holds no value to wonder these things. It took me awhile to get to the point in which I could look at a situation in a trading day with a grain of salt. That was the day I got my mental health back. Just kidding. Anyway today was a good example of this for me. I was long a QLD trade. And in the chart below I had a second chance to get back in after taking a premature exit. The box represents a point a which the market failed to hold itself down and I should have been in . Well as you can see I missed a nice move. Here is the thing tho. Who cares.. The rest of the day went well. I stayed with my plan and I learned even more today. So overall a good day . So rather then wonder about the if, ands or buts, just be happy we can trade again tomorrow.

We got stopped on the long we had been holding. I am currently holding a longer timeframe short now by being long QID. From the chart here you can see the value area I am looking to see price break out to the upside from in order to give up my short.

Break Even Maybe?

Getting Ready For fresh Week

It is Sunday night. time to get ready for another week. I usually start by loking at the longerterm charts. Like for instance I am looking at goog, citi,and the index futures on weekly and daily charts. I will note key levels from these charts based on both a bar chart and a market profile composite. Another thing I like tohttp://www.blogger.com/img/blank.gif start looking at is how overseas markets are .

QLD Trade

We got a nice QLD trade off this afternoon. Entering around 29.47 and taking it for about 40 ticks. I want to point out her tho that I took the signal and planted my targets based on the YM futures chart. Another example how one market can lead to signals that can be used in another market.
You can follow my tweets at www.tradeinwaves.com

A Late Start

I was not able to make the open today due to a meeting but I am just checking in with the markets now. From the YM market profile chart I see that so far today has been a typical 80% rule regression. We opened,tested higher ,got back to value and then tested to the other side of yesterdays value area. This is a typical regression. So what does it mean going forward today. Well it tells me that the market is in a mean reverting mood today. So I will use my value areas and midpoints as entries and exits.

Closing the Value Gap

I have been talking online about the fact that we have had room below based on the gap in value areas from 4.01.09 . From the market profile chart below we can see that we finally have closed that value area gap. today the market tried to get into the 4.01.09 value area and was rejected so let's wait for another test tomorrow to make a plan of attack.
(www.tradeinwaves.com)

Going Nowhere Fast

Notice we are staying right in the channel of what is a developing value area. Not a good place to take trades.

Looking At The tick

During the opening bell I was watching this 9 second tick chart. I have it zoomed in enough to see some of yesterdays values. You can see from here how weak this makes todays open look. ALl very strong tick reading to the downside. This is a good signal to take a short position. However since it is the open and we know the market likes to test certain areas quickly on the bell we will move stops fast and take part of profit off as soon as we get some green. Then sit tight and wait for the tick to show some strength and how the market reacts to that.

A Market That Goes Nowhere

Today's trading range was small and on some super lower then normal volume. Where is everyone? I have no idea. This does not mean it was a wash of a trading day tho. We actually had a few decent trades and some that just went nowhere. We where able to get a piece of the v bottom around the 9:50 mark on the chart below. Which is really 12:50 for EST. However we took profits and and when we got to the bottom of our self proclaimed value area (the red line which is based on a regression channel) we noticed the market start to rotate. this is the point at which we took a few trades that just went nowhere. Small losses but still what I wanted to point out an learn from this was the fact that you can see these profiles in the blue boxed area rotating. If you note that the value area from profile to profile never really pushed higher or lower but distributed itself right inside for a few about 54 minutes. this based on the low volume was a very good signal to just step aside. This is why we took very small positions and used smaller stops knowing that the bigger move we caught earlier would still keep us in profit on the day.
www.tradeinwaves.com

Look Out Below

looking at a Market Profile Chart we see a lot of room between the value areas from 4.01.09 and today. So this implies a decent amount of room down for price to revert. Looking at this chart of todays MP we see if looks like the rotation is about to go negative and test the lows of the day.

Weakness Spotted