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.
www.tradeinwaves.com

ADV Line Chart

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)

Trading Timeframes Can Be Tricky

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.

The Target

Looking at this long on the QLD position. I am going to look to exit when the futures get to the high value area of 5/12 trading. Just a little more to go.

What Do I Do With This Tight Range Market?

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.

Stuck Between 2

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.

Before The Open

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

The Little Market That Could

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.

Talk 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.

Why 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.