Friday, February 29, 2008

ES Market - 02/28/08

Today's session produced a Narrow Range 4 and 7 day (NR4 & NR7) as the market bounced between the Upper Standard Deviation and Lower Standard Deviation of the Nearest Extreme of the Daily Range. The market found support just above 1360, which is also the upper boundary of a support shelf developed over the last 9 trading days. Weak buying interest prevented the market from trading higher than the Standard Deviation resistance.


The third Friday of March is Good Friday, which means that the ES Contract will expire on Thursday, 03/20/08 - Quadruple Witching Day. Contract rollover will occur on Thursday 03/14/08.

The market tends to be bullish the first half of March, and finish weak following expiration. The next FOMC meeting is on Tuesday, 03/18/08, with the announcement at 1415 ET. The market may be anticipating another rate cut, which is currently being priced into the market. However, the recent market enthusiasm maybe short lived.


Wednesday, February 27, 2008

ES Afternoon Session - 02/27/08

The Equities Market lead the futures in showing weakness via the NYSE Advance - Decline Line. The Indicator traded below the mid-day pivot low, while the futures was still testing the upper limit of the mid-day range. This turned out to be a good shorting opportunity.

For timing, a good place to short in a weak market is when the TICK trades up near the +500 area.


ES Morning Session - 02/27/08

The morning session demonstrated some interesting Divergences between the ES Futures, TICK and TRIN. As the ES Futures was testing the morning lows, buyers entered the market at the 0930 ET Open at 1374. As the ES Futures traded below a 1000 ET pivot low, the NYSE Advance - Decline Line was making a higher divergence low.

The TRIN indicated some bullish tendency by making lower "closing" highs at the same time. On the same chart, you can see that the ES Futures spent most of the mooring on the bullish side of the 0930 ET Open challenging the Upper Limit of the Nearest Daily Range Extreme Average.

Also notice the formation of a Bullish Gartley Pattern confirmed by the Divergent Indications.


Bearish Gartley Pattern

Not a perfect Bearish Gartley Pattern, but close enough.


ES Confirmation Indicators - ADV-DECL, TICK, TRIN

With the ES Futures in a tight trading range during the morning session, the NYSE Advance - Decline Line was showing some bullish tendencies by making higher highs and lows. When the ES Futures traded past the morning high pivot, the Advance - Decline Line confirmed the move, and made higher lows as the ES Futures tested the morning pivot high for support.

The TRIN also confirmed the move to the upside by making lower highs and lows, and staying below its 10 period EMA ( on a 5 Minute Chart). As the ES market formed a head and shoulders formation in the afternoon, which also occured near the Average True Range Upper Limit, the TRIN indicator started making higher lows, which is a bearish indication.

During the morning trading, the TICK indicator stayed above the zero line most of the morning.

Monday, February 25, 2008

Bullish Gartley Pattern


Morning Session - ES (02/25/08)

The 1000 ET Existing Home Sales Report scared the short sellers and encouraged the long buyers, causing a market reversal from the first 30 minutes of bearishness. After the report, the market confirmed buying opportunities on corrections back to the previous high pivots.

However, the market started to show weakness when it reached 1364. The NYSE Advance - Decline line after 1100 ET started dipping below previous high pivots. As of this writing, the market is trading at the 0930 ET open of 1354. We will have to wait to see how the market trades after 0100 ET.

In the chart above, notice how the market has traded both at the upper and lower limit of the Nearest Daily Range Extreme Average, as described in a previous post. This typically happens when the market trades in a narrow range for the morning or even the entire day. Also notice that the market reversed on the upside at the +1 Standard Deviation of the Upper Average of the Nearest Range Extreme.

Sunday, February 24, 2008

Statistical Open Range and SpreadSheet Analysis

For the ES Futures, 70% of the time, the 0930 ET open is much closer to one of the Daily Range Extremes (High or Low) than the other. Currently, using a 10 day average, the nearest Daily Range Extreme is + or - 6.25 points from the open, with a + or - 3.5 Standard Deviation. The furthest Daily Range Extreme is on average + or - 17 points from the open.
The illustration above shows this relationship to the 0930 ET open.
The nearest extreme is usually identified in the first 30 to 60 minutes of trading. This information is a good way to determine the bias of the morning trading activity, and a way to define risk and reward for a morning trading opportunity.

This information can be updated daily with a Spread Sheet Analysis. A lot of information about the intra-day market can be studied with only the Open, Low, High and Close with the Date as the input. Above you can see the "Smallest Distance from the Open" and "Largest Distance" analysis on this Spread Sheet example. I typically use the 10 Day Average, but the Contract Average can also be used.

The illustratiion above shows how other info such as Daily Range, Open - Close Relationships and Average True Range can be studied.

And as shown above, the Floor Trader Pivots can be easily calculated.

With a little imagination, other relationships can also be studied.

Friday, February 22, 2008

ES Trending Versus Forming Base

On 02/21/08, the market found resistance at a previous resistance area, and trended down all day. In the top chart above, notice how the NYSE Advance - Decline Line formed lower highs as the ES futures market tested previous pivot lows. A characteristic of a downward trending market.

In contrast, the bottom chart above shows the ES market forming a base in an area of previous support. As the ES market tested pivot lows, the NYSE Advance - Decline Line formed highs lows, indicating that selling pressure was decreasing in the equity market forcing the futures to form a base of support. Not shown on the chart is a rapid uptrend into the close of the market.

In the Base Forming Scenario of the bottom chart, you should consider liquidating short positions.


Thursday, February 21, 2008

Morning Session - ES (02/21/08)

On the 60 Minute Chart above, the market once again found resistance at the upper range of the Equilibrium Zone that the market has been trading in for the last 7 trading days.
In the first hour of trading, the market failed to trade above the -1 Standard Deviation of the statistical opening range, which is the mirror image of what happened yesterday. The market then traded down to the lower limit of the open range, which indicated a short bias for the morning. We then got a 62% correction, which just happen to also be the 0930 ET open price. After that, we got the last leg of the standard three wave move.

Cumulative $TICK Indicator

The Steenbarger Cumulative $TICK Indicator is a continuous accumulation of $TICK values. If the close of the $TICK is above a 10 day average, the difference between the close and 10 day average is added to the cumulative total, and if the close is below a 10 day average, the difference between the close and 10 day average is subtracted from the cumulative total.

The top chart shows the Cumulative $TICK Indicator for 02/20/08.

The bottom chart is the EasyLanguage Code for the Cumulative $TICK. The code is setup for a 1 minute chart. I find that it works best formated with 30 days of data.

When equity shorting required an uptick before being allowed to short stocks (Uptick Rule), the long term average of the $TICK use to hover around 300. With the elimination of the Uptick Rule, the average is now very close to zero.

The Cumulative $TICK Indicator agrees closely with the $TICK Moving Average Indicator described in an earlier post as long as the long term average is close to zero (see chart below with both indicators applied).


Wednesday, February 20, 2008

Morning Activity - ES (02/20/08)

Once again, the ES market found support neat the 1340 area. The market tested the upper end of the Value Areas formed from 02/07/08 to 02/11/08, and bounced to the upside.

The Statistical Near Extreme Average Range is relative to the 0930 ET open. Currently, it is the open + / - 6.25 ES Points. The yellow lines are the averages plus and minus 1 Standard Deviation.

Even though the $TICK remained relatively negative all morning, the bears could not trade the market below the Support Zone.

The ES market did not trade below the - 1 Standard Deviation line, and continuously tested the upper near extreme average. Point of Control was formed at 1342. After forming a series of higher lows, the market broke to the upside.

Another market tell was the fact that the NYSE Advancing Issues - Declining Issues was making higher highs and lows all morning.

Now the markets waits for the FOMC Meeting Minutes at 1400 ET.


Treading Water - ES

Five Days between 1340 and 1370.

Tuesday, February 19, 2008

ES Market Symmetry

In the chart above, notice the 16 point Initial Wave formed in the morning, followed by a 62% mid-day correction and then concluded with a 16+ point final Impulse Wave in the afternoon. A good example of an almost perfect market symmetry chart. In the morning formation of the Initial Wave, the market demonstrated a short bias by creating a lower pivot low than the pivot low formed overnight.

The mid-day correction also formed an almost perfect three wave market symmetry formation. After the initial wave is formed, look for a 62 to 50% correction followed by a final Impulse Wave, whcih should be almost equal in length as the Initial Wave. Also look for $TICK confirmation.

Above is the final third wave move following the mid-day correction. Again, look for $TICK confirmation.

Saturday, February 16, 2008

Friday (02/15/08) Observations - ES

In the 60 Minute ES Futures chart above, the market has traded within a Primary Equilibrium Zone from 1400 to 1320 for the past month. Within the Primary Zone is Secondary Zone 1 from 1365 to 1340, which has provided support for the past 4 trading sessions. The market is currently trading in a range called Secondary Zone 2 from 1365 to 1340.
According to the Stock Trader's Almanac, the next week and a half is statistically bearish. The two areas to watch for support in a bearish environment is 1340 and 1320.

In the ES 5 Minute Chart above, the statistical open range relative to the 0930 ET Open is from 1338.75 to 1350.75, with the open being 1344.75. The lower half of this statistical range just happened to also be the upper boundary of Secondary Zone 1 described above. The market on Friday tested this lower support area twice, creating a double bottom, which then attracked buying in the afternoon. This reversed a day and a half correction, leaving the close above the Point-of-Control of 1345. Friday's market created a large volume support area from 1338 to 1345, creating what the Daltons call a "b" formation. This area will probably be tested again next week.

The Cumulative $TICK Indicator confirmed the afternoon buying spree. Notice the cup and handle formation.
Additionally, Friday was a Narrow Range 4 and 7 day.

Friday, February 15, 2008

EasyLanguage Code for $TICK Moving Average

Here is the TradeStation Easylanguage Code that produces a $TICK MA (see Top Chart Above) similar to what Brett Steenbarger has in his NYSE TICK post (Second Chart Above):

Inputs: AvgLength ( 5 ), Price ( ( H + L + C ) / 3 );
Vars: Avg ( 0 ) ;
Avg= XAverage ( Price, AvgLength );
Plot1 (Avg, "Average" );
Plot2 ( 0, "ZeroLine" );


Longer Term View - ES Futures

The top chart is the 60 Minute chart of the ES Futures. We are currently in the middle or Pivot Point/Point of Control of an equilibrium zone between 1400 and 1320. For the last three days, the market has bounced between the 76% and 62% Fibonacci levels of an up leg that started in late January. Short term sees support at 1320 and resistance at 1400. Notice the formation of a short term wedge. Breakout of this wedge may give a clue to larger term market bias.

On the second or daily chart of the S&P 500 Index, the market is below a large resistance zone between 1500 and 1400, which has been created in the last 7 months. It will require something significant for the market to break into that resistant equilibrium zone.


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Thursday, February 14, 2008

February 14, 2008

Relative to the 0930 ET Open, the ten day statistical range of the closest daily range extreme is the Open + / - 6.25 points for the ES Futures. The daily bias, 70% of the time, can be determined if the market trades beyond this range. From the open, the market tested the short side of this range, and remained below the 0930 ET open for the rest of the morning, while Bernanke spoke before the Senate Banking Committee. The bulls gave up after 1100 ET as the market traded to the lower range of the ATR.
The Short bias after 1100 ET was confirmed by the down trending NYSE Advance - Decline line and NYSE Up Vol - Down Vol indicator.

And confirmed by the down trending Cumulative $TICK indicator.

Tomorrow, the Empire State Mfg Survey has a consensus of 5.75, Import and Export Prices has a consensus of 0.5%, Industrial Production has a consensus of 0.1% for Production and 81.4% for Capacity Utilization and Consumer Sentiment has a consensus of 77.0.


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