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.