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ES and the Great POMO Rally


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ES and the Great POMO Rally

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  #801 (permalink)
 Private Banker 
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tigertrader View Post
As far as I'm concerned, the market is my enemy - it exists to fool me and take my money.

The more I understand and know about my enemy, the easier it will be to gain the advantage and defeat him.

It is said that if you know your enemies and know yourself, you will not be imperiled in a hundred battles; if you do not know your enemies but do know yourself, you will win one and lose one; if you do not know your enemies nor yourself, you will be imperiled in every single battle.

Besides, I'm house bound on the East coast, stuck in the periphery of Irene...

Well said, I agree with that 100%. Hope everything is OK out there with the storm.

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 tigertrader 
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Potential short...

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  #803 (permalink)
 tigertrader 
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The markets once again finished near their session highs after gains in European markets (especially Greece) the night before, set the table for today’s advance. Although the rally creeped steadily higher throughout the day, the relative lack of attendant volume, suggests the rally may not have sufficient strength to sustain a meaningful advance. On a technical note, the powers-that-be were able to settle the ES just above the August 17 high, which in the days of “turtles” would have signaled the trend followers to jump on board, especially going into the end of the month. However, bullish sentiment was a frothy 176 at 9:50 AM and closed the day at a still very bullish reading around 120, which has me on the alert for a bull trap.

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  #804 (permalink)
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Is it time to go short the world?

More doom and gloom every day. I think all it takes is a major "event", something in the US, bank collapse etc, and we'll see the beginning of the end. ES 666, here we come - again!



Seriously though -- and I'm one to trade what is on the charts, and not in my head -- this bullish move has to end. It's just pure bs and hyperbole. House of cards...

Mike

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 trendisyourfriend 
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tigertrader View Post
The markets once again finished near their session highs after gains in European markets (especially Greece) the night before, set the table for today’s advance. Although the rally creeped steadily higher throughout the day, the relative lack of attendant volume, suggests the rally may not have sufficient strength to sustain a meaningful advance. On a technical note, the powers-that-be were able to settle the ES just above the August 17 high, which in the days of “turtles” would have signaled the trend followers to jump on board, especially going into the end of the month. However, bullish sentiment was a frothy 176 at 9:50 AM and closed the day at a still very bullish reading around 120, which has me on the alert for a bull trap.

A friend of mine sent me this note early this morning before the session:

Monday confirmed Friday’s reversal and was a trend day up. However, the narrow range and overlapping 30 minute bars indicated an absence of "other time frame" initiating buyers. While overall volume was light (1.8 million contracts), the day was characterized by periods of selling which were met and overcome by buying volume. Even when selling volume was predominant, any selling effort was met by buyers and prices rose steadily higher throughout today’s session. The key is that the selling was met by buying, but not overwhelmed. Such a pattern is indicative of other time frame short covering and consolidation activity and has a bullish connotation.

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trendisyourfriend View Post
Such a pattern is indicative of other time frame short covering and consolidation activity and has a bullish connotation.

TIYF - thanks for this. I'm confused by this statement. My understanding of short covering activity (which I also viewed as being the case for Monday's controlled and low volume up trend) is that is has a bearish connotation because it takes future buyers out of the market. Market's climb a "wall of worry" due to existing shorts covering - when a bulk of existing shorts cover, they are no longer available to push the market up with their buying. Maybe you can instruct me here.

I was going to ask another question in this thread - my question is whether the current price action in the stock indices seems like a balance day is likely. I started the day with a balance day as one possible option for today's activity. After the strong move down and reversal followed by a failure to make a new high, I am favoring today's price action as leading to a balance day (or range day). When do other's on this thread make such a conjecture? Or would you even make such a conjecture intra-day in order to guide trading decisions.

I am hoping for balance here around these levels. I am looking for balance here followed by a strong breakout to the downside to retest the lows made at the beginning of august with possible extension to the downside. Obviously it is WAY too early to start this kind of reasoning but I want to be prepared if this scenario does develop. Comments?

thanks

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Liquidity was pulled prior to the 10AM report, so the market experienced a downdraft, however the bulls bought the break, which shows they are willing to step up to the plate. Fairly bearish sentiment readings currently, so I would expect the market to rally in the PM, but would be a seller around 1230.00. VWAP's slope needs to flatten out for this to degrade into a range day.

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 tigertrader 
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The debt-ceiling drama and the S&P downgrade of US debt pulled down consumer confidence, which fell a very steep 14.7 points in August to 44.5 for the lowest reading since April 2009. In anticipation of the negative report liquidity was pulled, and the result was a 13 handle downdraft that the bulls welcomed with open arms, driving the ES right back up in a 20 handle linear move, only to pullback 10 points, before consistent NYSE buy programs slowly ramped the market up another 18 points to the high of the day at 1218.75. The rally was not sustainable however, as it appeared that liquidity was pulled once again, and the market sold off 14 handles to close lower on the day and below the August 17 high, raising the specter of the previously mentioned bull trap.


We're heading into the news- heavy part of the week, with ADP Employment and Chicago PMI tomorrow, Jobless Claims and ISM Mfg Thursday, and Employment Situation Friday. Today was the third rally in as many days, beginning with the post Bernanke Jackson Hole speech, out-of- the hole rally, followed by the post Hurricane Irene “sleeper creeper” rally, followed by the post Consumer Confidence, out-of-the hole (once again) rally. And like today’s CC report, neither of these rallies seemed very convincing, nor inspired much confidence in the market’s upside. As they did today, the bulls will need to buy the dips on any disappointing news and rally on good news. Failure to do so , will allow the bears to gain confidence, reassert their control, and spring their trap on the bulls.

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 trendisyourfriend 
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The concept of the trap is a bit elusive has every minute someone is trapped in the wrong direction. The killing question is if you had to place a trade now and keep it opened for 10 days, what would you favor, a long or a short position ?

PS you can still flip a coin here to start at 50%: https://www.random.org/coins/?num=1&cur=40-antique.antonius-pius

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 tigertrader 
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trendisyourfriend View Post
The concept of the trap is a bit elusive has every minute someone is trapped in the wrong direction. The killing question is if you had to place a trade now and keep it opened for 10 days, what would you favor, a long or a short position ?

PS you can still flip a coin here to start at 50%: RANDOM.ORG - Coin Flipper


I'm obviously making a reference to trapped long-term players. As I stated we are entering the meat of the week, as far as economic reports are concerned. The way the market reacts in the next few days, may or may not set the tone, for the near future. The question is not, if I had to place a trade now and keep it opened for 10 days, what would it be? Because, I don't have to place a trade -right now. I'm more concerned with, what am I going to do, if the market does this? The burning question is, and always is, "what will I do if the market rallies/breaks to a certain level, or reacts to an economic report or news in a certain way. It is also important to be aware of what the market is doing in the present. What is apparent to me, is that large market participants are running the market up, (evidenced by the large amount of buy programs recently-cumulative tick@ 2yr high), then getting short, (evidenced by the large short positions held by large specs / COT report), and then pulling liquidity to allow the market to free-fall, ( as evidenced by the on again-off again bouts of liquidity and volatility). This kind of market action does not imply that there is any substance to the rallies, i.e.,long term institutional players accumulating a position. Eventually, the pump and dump will run it's course and the end game will be new lows. Depending on how the market got there, I would be a seller if the ES were to rally to the 1232.00-1234.00 level and if the market were to break before reaching that level, it would depend on the circumstances that led to a sell-off, and what levels either held or were taken out, that would dictate what I would do.

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 trendisyourfriend 
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tigertrader View Post
...The question is not, if I had to place a trade now and keep it opened for 10 days, what would it be? Because, I don't have to place a trade -right now. I'm more concerned with, what am I going to do, if the market does this? The burning question is, and always is, "what will I do if the market rallies/breaks to a certain level, or reacts to an economic report or news in a certain way...

The reason i formulated my question like this was because it is not always evident to synthetize your comment into actionable knowledge. Something similar to what Mirus is sending every day could compliment your analysis nicely:

This was for today prior to the opening.

Pivot: 1184

Our Preference
: LONG positions above 1184 with targets @ 1222 & 1230.

Alternative scenario: The downside penetration of 1184 will call for a slide towards 1167 & 1155.


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bANZAI bERNANKE!

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1180 price target by Friday, although they may take it up one more time, to shakeout the weak shorts, trap some more longs, and get shorter. Would still get short against 1231-1233.

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The market rallies as though all the problems that brought the steep decline for the past weeks no longer exist.

But I do wonder if it is this type of rallies that would draw in new buyers to sell the market down to a even lower level.

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 tigertrader 
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tigertrader View Post
The problem with technical analysis is that it can be very subjective and open to interpretation, which is a critical factor to keep in mind. It is the technicians and not the market itself, that perceives these abstract formations, assign significance to them, and then base their decisions upon this analysis, thereby fulfilling their prophecy.

In the first 2 charts, we can see a classic bear flag, followed by a bear pennant, both of which carry a strong implication of a bearish continuation in price. In the 3rd chart we see an interpretation of a diamond formation.

Diamond formations turn out to be continuation patterns the majority of the time, but can also be a reversal pattern, albeit less frequently than they are a continuation pattern, and more often as tops than bottoms.

Nevertheless, the market appears to be headed lower, unless of course - it goes higher, in which case the technicians will be calling the pattern, a diamond reversal formation.


Diamond reversal, it is...

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 trendisyourfriend 
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LOL - i just see a BIG 'W' formation in development.

Regarding subjectivity related to our analysis you mark a point but certain techniques are more prone to favor it. Namely, pivot points, Fibonacci studies, Elliot waves, patterns are all techniques that enter into this category. In fact, most techniques based on mathematical equations are prone to favor subjectivity. On the other hand, techniques that identify supply/demand objectively based on volatility and volume at price are less prone to subjectivity and consequently more reliable. That's my subjective opinion and i am sure open to dispute.

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 tigertrader 
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trendisyourfriend View Post
LOL - i just see a BIG 'W' formation in development.

Regarding subjectivity related to our analysis you mark a point but certain techniques are more prone to favor it. Namely, pivot points, Fibonacci studies, Elliot waves, patterns are all techniques that enter into this category. In fact, most techniques based on mathematical equations are prone to favor subjectivity. On the other hand, techniques that identify supply/demand objectively based on volatility and volume at price are less prone to subjectivity and consequently more reliable. That's my subjective opinion and i am sure open to dispute.

You have to read my original posts, #794 and #797, otherwise my last post is out of context.

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You have to read my original posts, #794 and #797, otherwise my last post is out of context.


I was just listening to a recording by Jim Dalton from 2000 in which he states that one of the hallmarks of a good trader is that they can tell you all the things the market COULD have done and didn't. His point was that it is important to understand the implications of what the market did, but it is equally important to understand what it could have done and did not do. This later type of analysis tells you a lot about the composition of the market's participants.

For instance, today could have balanced all day, or could have balanced early and then broken out to the upside with a continuation of the existing week-long trend up from the lows. Right now (3:30 est) it looks like the market balanced early and broke lower - perhaps closing on or near its lows.

I expected balance up here (betw 710 and 735 on the russell) and a break to the downside but I expected that the market would simply balance today and possibly break in response to the employment situation tomorrow. I am eager to see what tomorrow brings...

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 trendisyourfriend 
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Surly View Post
I was just listening to a recording by Jim Dalton from 2000 in which he states that one of the hallmarks of a good trader is that they can tell you all the things the market COULD have done and didn't. His point was that it is important to understand the implications of what the market did, but it is equally important to understand what it could have done and did not do. This later type of analysis tells you a lot about the composition of the market's participants.
...

I understand this point but again i think it is not necessary to go that far to make money specially if you just scalp for a few ticks of profit at a time. This later type of analysis as you wrote is more akin to developing an ability like playing a musical instrument. In that sense, it's an art. But hopefully, you can play good music without learning how to read it.

Most systems we see on futures.io (formerly BMT) are in that league. They are systems to scalp a few ticks here and there. They can be used without being too much concerned with the overall market context as exposed in this thread.

However, if you can develop this ability then i suppose it may open the door to a less stressfull way of trading and to more opportunities because you can plan ahead of time different scenarios. I am not there i can't tell for sure but this is how i see it at my stage as a trader.

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 tigertrader 
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Just a heads up for possible support - confluence of 50EMA and Wolfe target support, et al.

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 tigertrader 
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Support did not hold - new price target 1154.00.

Short @ ~1198.00 ( breakeven stop)

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 supermht 
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good job, tiger, I use wolfe wave too, one question,
suppose the dash line is wolfe wave patter, how do you define the dot target line? are you using the same angel of dash line?

thanks

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 tigertrader 
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To be quite honest, I'm still playing around with these formations - the symmetry has me intrigued. My projection is a guesstimate based on the pattern of it's counterpart. Just seemed like a logical place (off the triple top) to draw the projection line, but it may not turn out to be accurate. We shall see! I threw a bull pattern on the chart just for balance. It's amazing how they are all correlated and how the 50EMA plays a role in each one.

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trendisyourfriend View Post
In that sense, it's an art. But hopefully, you can play good music without learning how to read it.

Most systems we see on futures.io (formerly BMT) are in that league. They are systems to scalp a few ticks here and there. They can be used without being too much concerned with the overall market context as exposed in this thread.

However, if you can develop this ability then i suppose it may open the door to a less stressfull way of trading and to more opportunities because you can plan ahead of time different scenarios. I am not there i can't tell for sure but this is how i see it at my stage as a trader.

This post is right on TIYF - one of my (many) faults in trading is getting too locked into this kind of "big picture" reasoning and not just trading the chart and price action of the timeframe I trade (which is strictly intra-day). I do strive to develop the ability to "read the music" as you put it - I think that to break into the big, big money you have to develop this ability and I think it takes years of study. Alas, in the meantime, bills must be paid...

Seek freedom and become captive of your desires. Seek discipline and find your liberty. - Frank Herbert
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 tigertrader 
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1180 price target by Friday, although they may take it up one more time, to shakeout the weak shorts, trap some more longs, and get shorter. Would still get short against 1231-1233.


Right on target / 1154.00 next.

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 tigertrader 
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The Wolfe works on shorter time-frame charts also...

BTW: all lines were drawn before the 5 point was made, so it's very forward looking

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 tigertrader 
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"Obama Care Explained"




Let me get this straight . . . ...
We're going to be "gifted" with a health care
plan we are
forced to purchase and
fined
if we don't,
Which purportedly covers at least
ten million more people
,
without adding
a single new doctor,
but provides for
16,000 new IRS agents,
written by a committee whose chairman
says he
doesn't understand it,
passed by a Congress that didn't read it but
exempted
themselves from it,
and signed by a President who smokes,
with funding administered by a treasury chief who
didn't pay his taxes
,
for which we'll be taxed for four years before any
benefits take effect
,
by a government which has
already bankrupted Social Security and Medicare
,
all to be overseen by a surgeon general
who is
obese,
andfinanced by a country that's broke!!!!!
'What the hell could
possibly
go wrong
?'








Obama, you're Fired

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 Michael.H 
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looking for 125 area on the SPY for an entry. It depends on how the market reacts around there, then ill take a short. this is way too low for a short entry still. That capitulation i was talking about needs time to work itself out.


tigertrader View Post
I bet you we see 105.00 before we see 125.00


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Maybe... I just consider that a good entry point. If it gets there, great, if not, then ill figure out what to do then.

Well, we got to 124, which was close enough for a low risk short entry. So far Fridays action helped, and the trade so far is working out great. Good luck to all who are short.

BTW... I just wanted to point out, to everyone that said im too bullish when i kept repeating that you should buy the dips for the past year. I said when the time comes, the market will give an opp to go short, and ill take it. Well, here it is. Im short. You don't need to pick tops in the market.
Just gotta learn to be patient, and stop listening to cnbc. Ill try to check back sometime next week. Good luck everyone.

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 tigertrader 
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Well, we got to 124, which was close enough for a low risk short entry. So far Fridays action helped, and the trade so far is working out great. Good luck to all who are short.

BTW... I just wanted to point out, to everyone that said im too bullish when i kept repeating that you should buy the dips for the past year. I said when the time comes, the market will give an opp to go short, and ill take it. Well, here it is. Im short. You don't need to pick tops in the market.
Just gotta learn to be patient, and stop listening to cnbc. Ill try to check back sometime next week. Good luck everyone.

What's your point in quoting me? I didn't say the market wasn't going to rally and then fail. In fact, I did say it would rally and fail. I just said SPY wouldn't reach 125 on the rally - which it didn't. Last time I looked 124 was not 125.

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 tigertrader 
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What's Driving the Selloff?

The average stock in the S&P 500 is down 4.61% over the last two days. We wanted to see how a stock's performance during the 8%+ rally from 8/22 to 8/31 has impacted performance since 8/31. To do this, we broke the S&P 500 into deciles (10 groups of 50 stocks each) based on performance during the rally, and then calculated the average performance of stocks in each deciles during the current 2-day selloff.
As shown below, the better a stock performed during the rally, the more it has gone down during the pullback. The 50 stocks that went up the most from 8/22 to 8/31 are down an average of 6.40% since 8/31. Conversely, the 50 stocks that went up the least from 8/22 to 8/31 are only down an average of 2.28%. Investors have clearly been selling their winners over the past two days.





Bullish Sentiment Up Again

According to AAII's weekly poll of investor sentiment, bullish sentiment rose to 38.62% in the latest week. This now represents the fourth straight week where bullish sentiment has improved. It's hard to believe, but since S&P downgraded the AAA debt rating of the United States on August 5th, bullish sentiment has done nothing but go up.







Wake Me Up When September Ends

Below we highlight the average monthly performance of the Dow Jones Industrial Average over the last 50 years. As shown, the month of September has been the worst month for the Dow with an average decline of 0.79%.






Courtesy of Bespoke



There doesn’t appear to be a strong directional edge, but one thing that is evident in all of these Septembers is that there was high volatility. The 1966 instance saw the smallest range with the market moving a little over 5% from high to low. Six of the eight instances saw ranges of 9.5%+ in September. So I would not look for the action to dull this month.

Courtesy of Quantifiable Edges

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 tigertrader 
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Just a quick heads up:

in gold - double-top and an island reversal off the 2nd top. Pretty ominous looking!!!

in ES - the short position by large traders in the ES is at a 4-year high (see COT chart) and the ES is bouncing off major support @1140.00 value area (see 135min chart), so there is no telling how far the short covering rally will carry.

On the other side of the coin, the market is a discounting mechanism, and the smart money is very short the market. This should tell us something.

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 trendisyourfriend 
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tigertrader View Post
...On the other side of the coin, the market is a discounting mechanism, and the smart money is very short the market. This should tell us something.

What was more interesting was the nature of Yesterday’s trade (Tuesday). From the 9:30 double bottom, much buying was initiating in nature and with relatively uniform volume throughout most of the day. There was a mid afternoon pullback followed by a a high volume run up to the close. The day’s profile was elongated and closely resembled a trend day up. Volume was evenly spread through out the day with limited mid day consolidation.

Maybe this rally was due to some institutions too optimistic. On the daily chart (ES) we seem to be forming a bottom.

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 tigertrader 
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What was more interesting was the nature of Yesterday’s trade (Tuesday). From the 9:30 double bottom, much buying was initiating in nature and with relatively uniform volume throughout most of the day. There was a mid afternoon pullback followed by a a high volume run up to the close. The day’s profile was elongated and closely resembled a trend day up. Volume was evenly spread through out the day with limited mid day consolidation.

Maybe this rally was due to some institutions too optimistic. On the daily chart (ES) we seem to be forming a bottom.

That may all be true, but it is simply one day's price action. While I may harbor a short term bullish sentiment, the progression to intermediate term bullishness, would require the market to be accepted at higher levels, and the market's breadth, liquidity and leadership to improve. While we did see the potential beginnings of a turnaround yesterday, the probability of headline risk from Europe could derail the bulls' dreams, as it has so many other times in the past couple of months.

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 tigertrader 
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Hard to imagine this rally, as being anything but short covering, although there are a lot of shorts

DAX looks like complete garbage, and looks very vulnerable to any negative news - chart1

US $ looks relatively good, and is showing a divergence to "normal" correlations - chart 2

$VIX needs to get under 30.00 to signal confidence in the market - chart 3

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 tigertrader 
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In a matter of days, the ES dropped 90 handles from its 50% retracement ~1230 high last week, only to stage a powerful 65 point (72%) bear market rally which began yesterday afternoon and continued into today. While the reason du jour for the rally was an anticipated federal plan to create jobs ( see the POTUS’s speech this evening), and a relatively positive tone out of Europe, the fact that the short position of large traders was at a 4 year high, may have had a little more influence over why we rallied.

Advancing issues outnumbered decliners by about 8-1 on the NYSE and by more than 5-1 on the Nasdaq exchange. The S&P 500 Index has formed a recent series of higher lows, but recent gains have lacked great volume or leadership conviction, while the dollar is showing signs of having made a bottom and the $VIX continues trade above the 30 level. The Dow's 4.08% decline over the first three days of September was the fourth worst start to the month for the index going back to 1900, in what is the worst performing month of the year for equities.

ES now sits at 1200 which is near term resistance formed by last Friday’s pre-NFP trade and the VAh, after having filled the 1186 - 1200 gap. While short term, we could trade as high as the top of the channel near 1245-55, it's difficult to imagine an intermediate term rally developing from this early up leg. Increasingly, it looks like things are going to become worse in Europe before they get better, and it is doubtful if anyone in their right mind, would attach credence to anything coming out of Washington or Obama’s mouth.

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 tigertrader 
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The stock market has been swinging back and forth in wide ranges, moving from deeply oversold to deeply overbought and back again with extreme moves.Today it was the markets turn to take a tumble as the ES sold off 20points, and the bonds and the dollar rallied, after a benevolent Ben Bernanke failed to offer up any new plans to bolster the economy. Expectations had been running high for further monetary and fiscal easing, and if the market was disappointed by what Dr. Bernanke did or didn’t say, one could only imagine what the market’s reaction will be to what Obama will have to say.

The POTUS will address Congress later today with his $300 BB plan to stimulate both economic growth and job growth. It is hard to imagine that 3 years after the recession began, he would all-of-a-sudden, have a solution to what has been ailing the world’s largest economy for such a painfully long period of time. Perhaps he has been waiting for the right moment to unveil his plan and rescue the unemployed masses from their misery, or maybe he enjoyed his stint as the Tea Party’s George Chuvalo so much, that he kept the answer a secret from the American people? The answer is, of course, none-of-the-above; he has nothing. So, be prepared for the usual vacuous rhetoric and finger pointing from the leader of the free world.


As I mentioned yesterday, it's difficult to imagine an intermediate term rally developing from this early up leg, just as it is impossible to imagine anything positive coming out of Obama’s mouth. The ES rallied all the way back to ~1200 (basis Sept.) and the VAh, filled the 1186-1200 gap and failed, reverting back to the 50EMA. The dollar has continued to strengthen, along with the $VIX while the DAX hovers off it’s lows, and while the open interest shows a very large speculative short interest, which one should always be vigilant of; the smart money, is short.

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 Private Banker 
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Lol! This thread has become an adventure into financial journalism for Tigertrader. While I appreciate the continuous posts it seems that the original subject has become lost. I started this thread to discuss the Fed's POMO activity and it's influence on the ES e-mini contract as it was such an obvious game occurring. Now that the POMO has largely been discontinued with the exception of a few small(er) POMO days, I'm wondering the relevance on this thread now which is one reason why I've down shifted my activity here.

In any event, I just thought I would comment here as I'm confused as to what has happened with this thread and felt I would say something. I don't intend for this to have a negative connotation in fact, I would be interested in thoughts of a more dans la vent thread that is consistent with the market's current events.

Cheers,
PB

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 bluemele 
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The POTUS will address Congress later today with his $300 BB plan to stimulate both economic growth and job growth. It is hard to imagine that 3 years after the recession began, he would all-of-a-sudden, have a solution to what has been ailing the world’s largest economy for such a painfully long period of time. Perhaps he has been waiting for the right moment to unveil his plan and rescue the unemployed masses from their misery, or maybe he enjoyed his stint as the Tea Party’s George Chuvalo so much, that he kept the answer a secret from the American people? The answer is, of course, none-of-the-above; he has nothing. So, be prepared for the usual vacuous rhetoric and finger pointing from the leader of the free world.

There is only one cure. TIME. Time to forget how stupid we were. Time to remember how much more we liked it when things were better. Time to get unlazy. Time to pull our head out of our butts... time...

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 tigertrader 
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Private Banker View Post
Lol! This thread has become an adventure into financial journalism for Tigertrader. While I appreciate the continuous posts it seems that the original subject has become lost. I started this thread to discuss the Fed's POMO activity and it's influence on the ES e-mini contract as it was such an obvious game occurring. Now that the POMO has largely been discontinued with the exception of a few small(er) POMO days, I'm wondering the relevance on this thread now which is one reason why I've down shifted my activity here.

In any event, I just thought I would comment here as I'm confused as to what has happened with this thread and felt I would say something. I don't intend for this to have a negative connotation in fact, I would be interested in thoughts of a more dans la vent thread that is consistent with the market's current events.

Cheers,
PB


Back on topic, it is !

Sorry for perverting the true essence of the thread - there will not be any more market commentaries from me.

Excellent article on Bernanke's potential next steps.

http://www.peaktheories.com/docs/TWPSept092011.pdf

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 tigertrader 
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Back on topic again.

I wrote this before QE2, but it is just as appropriate today, as it was then.


The More Things Change, The More They Stay The Same


While walking to the post office last summer, I stopped into a vintage mid-century furniture store named Revival. I wandered into the store that day because I recognized the furniture from my childhood. They say, you can't go back, but for the moment, I proved the cynics wrong as I stepped into this kitschy store, and stepped back in time. My elation was short-lived however, as I realized the century being referred to was the twentieth, and that mid-century was in reference to the 1950's, the decade in which I was born. Newly classified a mid-century antique, I immediately wondered if I should be calling a cab, instead of making the round trip home on my vintage legs. I chose to gut-it-out though, and walk home, affording myself the time to contemplate a much simpler era.

It was a time when we kept our money in savings accounts, and kept tabs of our funds in passbooks. Americans drove American automobiles, women stayed home and raised the kids, and "Father Knew Best". Ozzie and Harriet, Andy Griffith, and Dick Van Dyke were not only the most popular shows on television, but icons of pop culture and symbols of the American dream. Kids played sports, (not video games) - people typed on typewriters, and everybody read the newspaper. However, the fifties' ideals were contradicted by a clear social and political dichotomy. Racial discrimination pervaded daily life, there was little concern for the environment, and the government adhered to a lunatic doctrinal framework which was the basis for a Cold War, that would soon bring our country to the brink of nuclear disaster.

While the Fed''s monetary policies of the 1950's are often criticized, the decade's economic performance contradicts the critics claims. Inflation, measured using the GDP deflator, averaged under 2.0 percent per year between 1952 and 1960, and it never went above 3.3 percent in a single year. Real GDP over the same period grew at an average rate of 2.9 percent per year, and the unemployment rate averaged 4.7 percent. While there were two recessions during this decade, the one in 1954 was exceedingly mild, and the one in 1958 was sharp but very brief. The Fed of the 1950's was obviously just as concerned, as today's Fed, when it came to controlling inflation, and the economic results of their actions, suggests they had figured out the essence of sensible policy. However, economic, social, and demographic factors were different in the 50's; people were big savers, frugal spenders, and were cautious about purchasing items on credit, even though credit was easily available. Oil was still cheap and abundant, and was produced domestically, not imported. Interest rates were relatively low, there was a trade surplus, and the dollar reigned supreme. It was the beginning of the baby boom, and it was the time when women began to enter the workforce.

There have been some encouraging trends since the 1950's; a heightened concern for civil and human rights, including the rights of minorities and women, and a growing concern for the welfare of the environment. Technological innovation dramatically increased our access to information and enhanced our lives, but concurrently created a digital divide. Our economy experienced tremendous growth and was integrated into the global economy, but progress inadvertently introduced problems that affected economic stability and quality of life. With the gross national debt now over 13 trillion dollars, a myopic federal government continues to implement short term solutions at the expense of future growth. Ironically, the same policy makers that originally created these problems, have often lacked either the political will or expertise to correct their mistakes. The Fed's treatment for our economic ills, has always been to lower interest rates and boost liquidity, a cure that may be far worse than the disease itself.

As a result, of these policies the American consumer's wealth has been destroyed because of the record drop in home prices and decimated retirement plans. Unemployment is still near 10%, and home foreclosures and bankruptcies are setting records, as over-leveraged consumers are increasingly squeezed by unaffordable home-equity loan payments, and rising food and energy costs. Even for those who qualify, credit is unavailable, and a declining dollar is reducing the consumer's buying power and causing a shift to other currencies for foreign trade.

2 years ago, fiscal stimulus from the bailout, artificially low interest rates, and the added liquidity provided by QE1 both enabled and forced capital to flow toward riskier assets. With risk mitigated by an acknowledged Fed put and a low yield environment that offered minimal returns on safer assets, the market responded with a 550 point rally in the SPX off the March lows.

But, shell shocked from the recent collapse of the equities market, the flash crash, and the dominance of high frequency trading, investors had deserted the equities markets for the perceived safety of fixed income, gold, and commodities. The retail trade is out of the market, as are the hedge funds, mutual funds; and the pension funds are next to go. All that is left are the indexers and automated traders, and the concentration of stocks they are trading is getting smaller and smaller. In essence, what's left of the equities markets, is solely a vehicle for technical traders and robots. It has ceased to function as reliable mechanism for price discovery and is decreasing in importance and functionality as tool for capital formation.

This has left the door open for the Fed, with help from the 18 Primary Dealers, to artificially ramp up stock prices. There is so much interference by the Government and the Fed that the markets have become distorted. The result is that people are afraid to allocate money to the markets because they can't get good information from the markets. And the more the government and the Fed meddles, the more money will flow out of the market and flow into less risky assets, or just sit on the sidelines.

In an effort to scale back the vast amounts of money it pumped into the economy, the Fed had begun to drain reserves by conducting reverse repos, proposed a plan for term deposits, and terminated it's security purchase program at the end of last March. However, they soon realized that while the market had rallied substantially, there was a tremendous disconnect with the real economy. The real drivers of sustainable growth; employment, corporate investment, housing, and consumer spending, were all lagging far behind.

Fed intervention through permanent open market operations was the immediate response to this situation, however it seems inevitable that further action in the form of an anticipated QE 2 is imminent. In my opinion, QE2 is going to be the mother of all fades, i.e., buy-the-rumor-sell-the-fact. The rally in equities in September was due to almost $10 billion dollars a week of Fed intervention, and institutional "front-running of the fed" in anticipation of a QE2 announcement on 11/03/2010. The more the market rallies ahead of the announcement, the more the easing is going to be priced into the market, and the harder the crash in equities that follows upon actual implementation.

In the past, such low interest rate/loose monetary conditions/central bank intervention, has resulted in bubbles due to the speculative excesses in riskier assets. Paradoxically,this rally is different due to the lack of investor participation and the predominance of government manipulation, but paradigmatically, the market may be setting up for potential price exhaustion, and the bursting of this de facto equities bubble. One caveat however - even though this rally may be significantly overvalued and overextended, it could extend even further as traders continue to price QE 2 into the market.

The Fed's over-reactive policies date back to the borrow-and-spend Regan years, through the doubling-of-our-debt Bush years, to what will undoubtedly be the redoubling-of-our-debt Obama years. It strikes me as ironic then, that the furniture store I walked into that day, was named "Revival": a new presentation of an existing theme. The Fed once again expects the American consumer to re-inflate the economy, but the consumer is already over-borrowed, over-spent, and broke. Besides, the banks aren't lending money; instead they continue to hoard cash and play the carry trade, borrowing money for next to nothing and investing it in government bonds.

So while the past abuses to the financial system, (culminating in the bursting of the sub-prime bubble), has structurally changed the global economic system, dealing with these problems have remained the same. We all understand, you can't go back, but we should also realize...the more things change, the more they stay the same.


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 kbit 
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Back on topic, it is !

Sorry for perverting the true essence of the thread - there will not be any more market commentaries from me.

Excellent article on Bernanke's potential next steps.

http://www.peaktheories.com/docs/TWPSept092011.pdf

Perhaps you would consider starting a new thread to post commentaries. I for one find your thoughts of value.
Kbit

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Lol! This thread has become...

I think one of you guys simply needs to start a new thread, it can just be called "ES futures" or "SP500 ES futures" or whatever. Keep the subject simple, then anything inside will be on-topic if it is related to the ES

I'd love to keep seeing the posts from tiger, you, and all you guys. But maybe the general chat about ES should be moved out of this particular thread so this thread doesn't become a catch-all for everything ES related.

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I think tigertrader does a good job in giving perspective of what's going on in the market. I don't know why your changing your mind about the posts you make. I also follow quantifiable edges, i think his stats are insightful, specially in the short term. All this stuff and everything thats going on is the direct result of POMO. So don't stop posting.

In terms of quoting you previously, don't get so upset. Just saying don't try to make predictions, that was the purpose. I know you said its gonna bounce as well, but just saying don't try to get too specific about where its gonna go, just go with it. Have fun with it. And keep posting and do what your doing if you want in a new thread. We can close this and ill continue to post in the new one if you all like. Just let me know or put a link in this one so i know where it is. Have a good weekend all.

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kbit View Post
Perhaps you would consider starting a new thread to post commentaries. I for one find your thoughts of value.
Kbit


Per your suggestion, I started a new thread, "Spoonalysis", where we can all feel free to posit our thoughts about the future direction of the S&P 500.

Maybe it's just me, but I do find it ironic that PB had no problem with ES market commentaries being published on this thread, when he was their author and he was disseminating the analysis. Therefore, I can't help but feel, that his last post was completely disingenuous and hypocritical.




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Per your suggestion, I started a new thread, "Spoonalysis", where we can all feel free to posit our thoughts about the future direction of the S&P 500.

Maybe it's just me, but I do find it ironic that PB had no problem with ES market commentaries being published on this thread, when he was their author and he was disseminating the analysis. Therefore, I can't help but feel, that his last post was completely disingenuous and hypocritical.




Well, if it is/was, then it doesn't matter. Not our place to judge others, nor does it provide any value to any of us.

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 Private Banker 
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Per your suggestion, I started a new thread, "Spoonalysis", where we can all feel free to posit our thoughts about the future direction of the S&P 500.

Maybe it's just me, but I do find it ironic that PB had no problem with ES market commentaries being published on this thread, when he was their author and he was disseminating the analysis. Therefore, I can't help but feel, that his last post was completely disingenuous and hypocritical.




Well, from the words of Jeff "The Dude" Lebowski, "that's like your opinion man"... My overall intent here was to keep things a little more on topic. It just seemed the direction of the thread was really morphing into something else. I didn't mind this for a while and I even contributed to some of this but felt this was starting to become pointless.

I'm glad you started a new thread as I think you do a good job with describing the daily events, etc. for those that are in need of assistance in understanding what's going on. I too, plan to start a new thread of a different topic.

Cheers,
PB

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I think the extra volatility lately in the markets translates into extra volatility with peoples moods as well.

We are all friends here, trying to help each other. Keep in mind written words via the internet are a lot harder to interpret than seeing someone in person and having the benefit of body language, or even talking over the phone and having the benefit of hearing inflections in their voice.

LOL! OK so just now I was searching for an appropriate image to attach to the post, something fun... and I found this one.... and even though it has a curse word (gasp!!!) I just couldn't resist.... lol!



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Big Mike View Post
I think the extra volatility lately in the markets translates into extra volatility with peoples moods as well.

We are all friends here, trying to help each other. Keep in mind written words via the internet are a lot harder to interpret than seeing someone in person and having the benefit of body language, or even talking over the phone and having the benefit of hearing inflections in their voice.

LOL! OK so just now I was searching for an appropriate image to attach to the post, something fun... and I found this one.... and even though it has a curse word (gasp!!!) I just couldn't resist.... lol!



Mike

I tried to reverse engineer your " message ", obviously with the intent to bring volatility at lower levels and keep the Great Pomo Dudes on board:

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redratsal View Post
I tried to reverse engineer...

Oh boy, what have I done?





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OK, back on track and on topic:

This link explains the market situation very well, IMO.
Hussman Funds - Weekly Market Comment: A Reprieve from Misguided Recklessness - August 29, 2011

If his analysis proves accurate, we'll see unbelievably lower lows.

Here's an excerpt:

"Historically, the typical bull-bear market cycle has produced a range of 10-year prospective returns in a band between about 7.5% and 13%. That band presently corresponds to a range for the S&P 500 index between 600 and 1000. A 10% prospective return is right in the middle, at about 800 on the S&P. Once you recognize that profit margins are in fact cyclical, that range is about right, as uncomfortable as it may be to contemplate. Jeremy Grantham of GMO estimates that fair value is "no higher than 950." A tighter norm for prospective return between 9-11% maps to an S&P 500 between 750 and 850.
Finally, while I certainly would not expect it in the absence of extreme macroeconomic upheaval, major secular undervaluation as we observed in 1950, 1974 and 1982 would presently map to about 400 on the S&P 500. When you think of "once in a generation" valuations and "secular bear market lows" - that number, not anything near present levels, should be what crosses your mind. I am well aware that even discussing numbers like these, given the present mindset of investors, is likely to be dismissed as utterly ridiculous. Frankly, I would rather risk the ridicule of those who pay lip-service to research, cash flows, fundamentals, and value than to pretend these outcomes are impossible, when the historical record (and even the experience of the past decade) strongly indicates otherwise."

Yikes!

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tomgilb View Post
OK, back on track and on topic:

This link explains the market situation very well, IMO.
Hussman Funds - Weekly Market Comment: A Reprieve from Misguided Recklessness - August 29, 2011

If his analysis proves accurate, we'll see unbelievably lower lows.

Here's an excerpt:

"Historically, the typical bull-bear market cycle has produced a range of 10-year prospective returns in a band between about 7.5% and 13%. That band presently corresponds to a range for the S&P 500 index between 600 and 1000. A 10% prospective return is right in the middle, at about 800 on the S&P. Once you recognize that profit margins are in fact cyclical, that range is about right, as uncomfortable as it may be to contemplate. Jeremy Grantham of GMO estimates that fair value is "no higher than 950." A tighter norm for prospective return between 9-11% maps to an S&P 500 between 750 and 850.
Finally, while I certainly would not expect it in the absence of extreme macroeconomic upheaval, major secular undervaluation as we observed in 1950, 1974 and 1982 would presently map to about 400 on the S&P 500. When you think of "once in a generation" valuations and "secular bear market lows" - that number, not anything near present levels, should be what crosses your mind. I am well aware that even discussing numbers like these, given the present mindset of investors, is likely to be dismissed as utterly ridiculous. Frankly, I would rather risk the ridicule of those who pay lip-service to research, cash flows, fundamentals, and value than to pretend these outcomes are impossible, when the historical record (and even the experience of the past decade) strongly indicates otherwise."

Yikes!

Thank you for bringing this back on topic.

Should the market continue as it has, I could certainly see price get down to this area. The big question is what Bernanke will do next. Many are predicting that the Fed will announce an Operation Twist like program that may have similar effects on the markets by the Fed selling shorter term maturities and buying longer term maturities with the intent of flattening the yield curve. This would most likely modestly raise rates on shorter term maturities while decreasing rates on longer term maturities. The net effect being to sell shorter maturities to the open market and buy the longer term maturities from the primary dealer banks. This would create a higher demand for longer term maturities and would have the primary dealer banks grab up these securities from the US Treasury auctions with the intent of flipping them to the Fed just as they did with QE I & II. They would then do what they do best with that cash which is to goose the market up.

My only qualm with this is that it is essentially attempting the same game with regards to stocks which raises doubts as QE2 had less effect on the market vs QE1 and investors could potentially recognize this as more of the same which wouldn't bring the rush to risk on again for an extended period as the past QE's did. The ironic thing with this idea (Operation Twist) is that Bernanke already conducted an analysis on the effectiveness of this program and stated that is was largely viewed as a failure.

This is just my speculation of course and I don't formulate any trading decisions based on it as I rely on Technical Analysis for the most part. But it is something to watch for going forward.

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 tigertrader 
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From the FOMC meeting:

"Participants discussed the range of policy tools available to promote a stronger economic recovery should the Committee judge that providing additional monetary accommodation was warranted."


Some argued that additional asset purchases could be used to provide more accommodation by lowering longer-term interest rates, aka-LSAP or QE3. QE2 did nothing to raise the rate of employment, nor did it help the housing crisis. All it did was create inflation and widen the wealth gap. Monetizing the debt (QE2) was a failure, so who in their right mind would consider doing it again?

As PB explained, some thought that increasing the average maturity of the Fed’s portfolio, would lower long term rates, without increasing the Fed’s balance sheet or reserve balances, aka-Operation Twist. Considering the fact that we already have record-low long-term rates, it hardly seems likely that this strategy would boost economic activity,

Another idea was to reduce the interest rate paid on excess reserve balances in order to help in easing financial conditions, aka-IOER. This might be helpful, but in of itself, is not the answer.

And finally, some argued that the Fed should do nothing. They argued that providing additional stimulus at this time would risk boosting inflation without providing a significant gain in output or employment, aka -Do Nothing. We all know this isn’t going to happen, because the Fed’s Keynesian logic dictates they add liquidity.

Whatever the Fed chooses to do or not to do, it is essentially a moot point. The monetary pumps are already flowing in Europe, and Europe’s equity markets have not responded positively.

The only way I want to be long U.S.equities, is if I am short European equities against them.

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 Private Banker 
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Private Banker View Post
Thank you for bringing this back on topic.

Should the market continue as it has, I could certainly see price get down to this area. The big question is what Bernanke will do next. Many are predicting that the Fed will announce an Operation Twist like program that may have similar effects on the markets by the Fed selling shorter term maturities and buying longer term maturities with the intent of flattening the yield curve. This would most likely modestly raise rates on shorter term maturities while decreasing rates on longer term maturities. The net effect being to sell shorter maturities to the open market and buy the longer term maturities from the primary dealer banks. This would create a higher demand for longer term maturities and would have the primary dealer banks grab up these securities from the US Treasury auctions with the intent of flipping them to the Fed just as they did with QE I & II. They would then do what they do best with that cash which is to goose the market up.

My only qualm with this is that it is essentially attempting the same game with regards to stocks which raises doubts as QE2 had less effect on the market vs QE1 and investors could potentially recognize this as more of the same which wouldn't bring the rush to risk on again for an extended period as the past QE's did. The ironic thing with this idea (Operation Twist) is that Bernanke already conducted an analysis on the effectiveness of this program and stated that is was largely viewed as a failure.

This is just my speculation of course and I don't formulate any trading decisions based on it as I rely on Technical Analysis for the most part. But it is something to watch for going forward.

As I had anticipated, the FOMC has revealed their next intent of stimulus for the deteriorating economy which is indeed an "Operation Twist" like program with the Fed to sell $400 billion worth of US Treasury holdings with a maturity of 3 years or less and purchase $400 billion worth of US Treasuries with maturities of 6 - 30 year maturities with the intent of flattening the yield curve. It's astonishing that the Fed would pursue this course of action as the last Operation Twist is considered to be a total failure. Even Bernanke concluded this in a research report he put out a few years back. This action has to signal the end of Bernanke's career as Fed chairman. The political pressure now on him and the continued dissensions within the FOMC point to a potential exit. He's been a complete failure in his role and has continued to do the wrong thing. His interview on 60 minutes a while back stating that he's 100% sure QE2 will work is just one of his many comical follies.

This announcement was a huge disappointment for equities and resulted in a nice drop in price across the board in all the indices. Couple that with today's announcement of Moody's and S&P's downgrades on several banks most notably, BAC, C & WFC put some serious pressure on the market. It was also a double wammy for the Codger of Omaha... The ES is still within a pennant formation but has also formed another head and shoulders within the pennant and is looking to be in big trouble. The USD broke through it's small bearish trend line and will probably look to test the last swing high in January of 81.635. Bonds shot up huge sending rates to below December of 2008's low as expected with this type of program. It will be interesting to see how much lower the Fed can push rates as they are at extreme levels.

Going forward, I don't think equities will benefit much from operation twist as I previously speculated and we may see some serious fire works should this H&S pattern play out. Additionally, we may be seeing the true signs that the Fed may be out of bullets and could continue to see weakness in risk assets for quite a while. One benefit to all of this is it has provided some amazing volatility and has created at incredible intra-day trading environment. I would imagine that this should stick around for a while.

Cheers,
PB

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As I had anticipated, the FOMC has revealed their next intent of stimulus for the deteriorating economy which is indeed an "Operation Twist" like program with the Fed to sell $400 billion worth of US Treasury holdings with a maturity of 3 years or less and purchase $400 billion worth of US Treasuries with maturities of 6 - 30 year maturities with the intent of flattening the yield curve. It's astonishing that the Fed would pursue this course of action as the last Operation Twist is considered to be a total failure. Even Bernanke concluded this in a research report he put out a few years back. This action has to signal the end of Bernanke's career as Fed chairman. The political pressure now on him and the continued dissensions within the FOMC point to a potential exit. He's been a complete failure in his role and has continued to do the wrong thing. His interview on 60 minutes a while back stating that he's 100% sure QE2 will work is just one of his many comical follies.

This announcement was a huge disappointment for equities and resulted in a nice drop in price across the board in all the indices. Couple that with today's announcement of Moody's and S&P's downgrades on several banks most notably, BAC, C & WFC put some serious pressure on the market. It was also a double wammy for the Codger of Omaha... The ES is still within a pennant formation but has also formed another head and shoulders within the pennant and is looking to be in big trouble. The USD broke through it's small bearish trend line and will probably look to test the last swing high in January of 81.635. Bonds shot up huge sending rates to below December of 2008's low as expected with this type of program. It will be interesting to see how much lower the Fed can push rates as they are at extreme levels.

Going forward, I don't think equities will benefit much from operation twist as I previously speculated and we may see some serious fire works should this H&S pattern play out. Additionally, we may be seeing the true signs that the Fed may be out of bullets and could continue to see weakness in risk assets for quite a while. One benefit to all of this is it has provided some amazing volatility and has created at incredible intra-day trading environment. I would imagine that this should stick around for a while.

Cheers,
PB

I don't think there is anything astonishing about Bernanke's actions, nor do I think his actions are contradictory to what he wrote in the research report you referenced. In fact, I really don't believe that Bernanke himself, thinks that increasing the average maturity (twisting) of the Fed's portfolio, would have any affect on the economy at all. Everyone who has studied economics, including Bernanke is aware that the last "Operation Twist" failed in 1961, and yes, he did reference this fact in that report which was about Fed policy alternatives during a zero fed funds environment. However, Bernanke stated in that report, "for credibility to be maintained, the central bank’s commitments must be consistent with the public’s understanding of the policymakers’ objectives and outlook for the economy" So what did Bernanke do? He chose the monetary equivalent of having one's cake and eating it too - printing money sans the unwanted effects of rising rates due to inflation. Nothing astonishing about that - he had to do something, and he had to send a message, as specious as it may be. The fact that his policy gun is out of bullets is a moot point and has already been fully priced into the market, and has ceased to have an effect on current volatility.

Sorry Mike, but blatant hypocrisy has to be addressed.

I’m not one to back down from a fight whether it is physical or verbal, especially when I am right. PB is guilty of doing, exactly what he criticized and chastised me of doing on this thread, i.e., writing a market commentary, only in PB’s case it was clumsily cloaked in Fed’s clothing.

And, to add insult to injury, he even abandoned his folksy, oh-my gosh approach to his commentaries, in an attempt to mimic (albeit unsuccessfully) my literary style and format, essentially parroting what I had already written.

Once again, it appears to be quite alright to embark on “adventures in financial journalism” as long as PB is the adventurer, and he gets to recount the tales. Unfortunately, his understanding of what is actually taking place, has about as much insight and depth as a report on CNBC.

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 Private Banker 
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I don't think there is anything astonishing about Bernanke's actions, nor do I think his actions are contradictory to what he wrote in the research report you referenced. In fact, I really don't believe that Bernanke himself, thinks that increasing the average maturity (twisting) of the Fed's portfolio, would have any affect on the economy at all. Everyone who has studied economics, including Bernanke is aware that the last "Operation Twist" failed in 1961, and yes, he did reference this fact in that report which was about Fed policy alternatives during a zero fed funds environment. However, Bernanke stated in that report, "for credibility to be maintained, the central bank’s commitments must be consistent with the public’s understanding of the policymakers’ objectives and outlook for the economy" So what did Bernanke do? He chose the monetary equivalent of having one's cake and eating it too - printing money sans the unwanted effects of rising rates due to inflation. Nothing astonishing about that - he had to do something, and he had to send a message, as specious as it may be. The fact that his policy gun is out of bullets is a moot point and has already been fully priced into the market, and has ceased to have an effect on current volatility.

Sorry Mike, but blatant hypocrisy has to be addressed.

I’m not one to back down from a fight whether it is physical or verbal, especially when I am right. PB is guilty of doing, exactly what he criticized and chastised me of doing on this thread, i.e., writing a market commentary, only in PB’s case it was clumsily cloaked in Fed’s clothing.

And, to add insult to injury, he even abandoned his folksy, oh-my gosh approach to his commentaries, in an attempt to mimic (albeit unsuccessfully) my literary style and format, essentially parroting what I had already written.

Once again, it appears to be quite alright to embark on “adventures in financial journalism” as long as PB is the adventurer, and he gets to recount the tales. Unfortunately, his understanding of what is actually taking place, has about as much insight and depth as a report on CNBC.

Come on guy... Are you serious?... Don't you have better things to do than get upset over a thread discussion? Hilarious...

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For what it's worth (and the risk of copy catting other potential posts), here's the upcoming Op Twist Buy/Sell schedule for the Fed.

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 Lornz 
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I might be mistaken, but I think I saw our friend Ben on the TV yesterday, @Private Banker...

Did you get as inspired as I did?

To sell short, I mean...

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 Private Banker 
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Lornz View Post
I might be mistaken, but I think I saw our friend Ben on the TV yesterday, @Private Banker...

Did you get as inspired as I did?

To sell short, I mean...

That was a pretty wild day. Bear market bounce I would suspect. I'm intra-day trading this chaos and I was long on that rip your face off rally in the afternoon but flattened out before the RTH close. That seemed like just another short squeeze. In retrospect, I wish I had established a swing position way back on 7/27 but have been getting some amazing intra-day moves in and have been able to sleep well at night.

Hope you're kicking some serious ass in this market! This is 2008 all over again but maybe more this time.

Cheers,
PB

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 Big Mike 
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ES looking to be ripe for a down move. I would think we should see 1070 again in pretty short order.



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 David_R 
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I would agree that the ES is looking weak. A couple charts with the wave volume applied.

D

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I would agree that the ES is looking weak. A couple charts with the wave volume applied.

D

@David_R could you do me a favor and post an ES chart with a volume setting of 327680 and so I can see the text volume numbers up on panel 1? This would match what I posted, I just would like to compare a bit.

Thx.

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@David_R could you do me a favor and post an ES chart with a volume setting of 327680 and so I can see the text volume numbers up on panel 1? This would match what I posted, I just would like to compare a bit.

Thx.

Mike

Mike,

You bet. Chart attached. I hope you can read all the text.

D

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 telco 
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Big Mike are you using Sierra Chart?

David_R Esignal 11?

Interesting charts.

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Big Mike are you using Sierra Chart?

David_R Esignal 11?

Interesting charts.

No, I'm using Ninja 7 and at times I post with TOS.

David

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Big Mike are you using Sierra Chart?

I use Sierra and MultiCharts.

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 Big Mike 
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If you put any weight on cumulative delta, trendlines, or vwap std dev bands ---- this seems like an excellent time to be short.



1220 is not out of the realm of possibility, that would be the 2nd deviation of a monthly vwap on this daily chart. So perhaps start a position at 1185 and be prepared to build on to it, looking for a first short target of around 1100 then 1080 and so forth.

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 Private Banker 
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Big Mike View Post
If you put any weight on cumulative delta, trendlines, or vwap std dev bands ---- this seems like an excellent time to be short.



1220 is not out of the realm of possibility, that would be the 2nd deviation of a monthly vwap on this daily chart. So perhaps start a position at 1185 and be prepared to build on to it, looking for a first short target of around 1100 then 1080 and so forth.

Mike

Hey Mike,

I would agree that the CD is diverging here. One interesting thing to take note of is take a look at the weekly chart interval around Jan 2008 - March 2008. We have a very similar pattern taking place right now. Should this play out, I would think we drift higher to the 1220 - 1230 area and then sell back off from there. I would think we test the 950 area at some point soon. This entire situation is mirroring 2008, it's pretty amazing.

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Hey Mike,

I would agree that the CD is diverging here. One interesting thing to take note of is take a look at the weekly chart interval around Jan 2008 - March 2008. We have a very similar pattern taking place right now. Should this play out, I would think we drift higher to the 1220 - 1230 area and then sell back off from there. I would think we test the 950 area at some point soon. This entire situation is mirroring 2008, it's pretty amazing.

PB, do you have any time frame for ES to test 950, weeks, months?

We are very near to 1220

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 Private Banker 
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PB, do you have any time frame for ES to test 950, weeks, months?

We are very near to 1220

Very difficult to say as I'm more interested in price levels vs. time periods. I honestly think we could get up to as high as 1250 but that remains to be seen. This is of course without significant market changing news which could come at any moment these days, lol!

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 Big Mike 
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I think we've put today's high in. But we will see. We are only 8 ticks away right now, so give me some leeway.

I would like to see this be the weekly high and monthly high as well.

Mike

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 Big Mike 
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@Private Banker,

I don't want to clutter this thread, but go look here:



This guy is basically predicting the end of the world. Certainly plenty to disagree with him on, but makes for some good debates...

I'd like to hear your feedback, just cuz I value your opinions. How much of what this guy says is looney-tunes?

You can reply in the other thread. If you don't have an hour to listen to whole thing, try to just hit the last 30 minutes, that is where he makes most of his Nostradamus predictions.

Mike

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 Big Mike 
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What I'd like to see today.





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 tigertrader 
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Three Strikes For the Fed?

Thursday, October 13, 2011 at 12:13PM

Courtesy of Bespoke


It has been three weeks now since the Fed formally announced its $400 billion Operation Twist program on September 12th. If early indications are a sign of what's to come, however, this will be the third straight time the Fed has tried and failed to lower long-term interest rates through the Treasury market.


The chart below shows the yield on the ten-year US treasury going back to September 2008. The red dots in the chart represent each time where the Fed formally announced intentions to buy Treasuries in the open market (QE1, QE2, and Operation Twist). As shown, following each of the prior two announcements, the yield on the 10-year rose by more than 100 basis points (bps) in just a matter of months. Following its most recent announcement in September, the yield on the 10-year is already up 36 bps.



While one could argue that yield declined ahead of each of the prior announcements due to the fact that each move was widely telegraphed, at face value it appears that the Fed's attempts to lower long-term interest rates have been futile.



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 Fat Tails 
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tigertrader View Post
Three Strikes For the Fed?

Thursday, October 13, 2011 at 12:13PM

Courtesy of Bespoke


It has been three weeks now since the Fed formally announced its $400 billion Operation Twist program on September 12th. If early indications are a sign of what's to come, however, this will be the third straight time the Fed has tried and failed to lower long-term interest rates through the Treasury market.


The chart below shows the yield on the ten-year US treasury going back to September 2008. The red dots in the chart represent each time where the Fed formally announced intentions to buy Treasuries in the open market (QE1, QE2, and Operation Twist). As shown, following each of the prior two announcements, the yield on the 10-year rose by more than 100 basis points (bps) in just a matter of months. Following its most recent announcement in September, the yield on the 10-year is already up 36 bps.



While one could argue that yield declined ahead of each of the prior announcements due to the fact that each move was widely telegraphed, at face value it appears that the Fed's attempts to lower long-term interest rates have been futile.




Interesting analysis....

Short term impact of purchasing treasuries : Drives up demand and therefore lowers interest rates, drives down exchange rate.

Medium term impact of purchasing treasuries : Both the increased money supply and the lower exchange rates are harbingers of inflation, anticipation of future monetary policy to contain inflation will drive interest rates up again.

It is a trade-off between the present and the future. I first heard about this when I read Grimm's Fairy Tales - I remember a soldier who concluded a pact with the Devil. The story was also told in a slightly different way by Goethe in "Faust". Actually, any pact with the devil is nothing else than a Ponzi scheme. In some fairy tales you may escape, but you never do in real life.

-> Politicians love Ponzi schemes because they want to be reelected, their notion of the future is delimited by the election period.
-> Bank employees are influenced by the bonus period, or on a higher level by their quarterly earnings announcements.
-> The Fed cures imminent problems by going short the future, this is why after 1929 it took about 20 years for the US economy to gain grounds again
-> Economists do nothing but simply describe what is happening and call it an S-shaped curve.

The driving force behind the pact with the devil is moral hazard, also known as the tragedy of the commons. Capitalism is currently under scrutiny, although it works very well. The problem is that market mechanisms do not account for the commons, so the commons are depleted. The financial crisis was just another way to deplete the commons, and the Fed is just reducing the impact by shifting some of the repercussions further into the future.

The pendulum will bounce back and interest rates will rise.

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 Massive l 
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I'm leaning towards a down day on Monday just based on the rally we had, however,
I'm still bullish until the chart tells me otherwise.

For shorts, I one play of a possible fade down to 1211 with /ES open on Sunday.
I won't be looking for a trending short until price is below Friday's action.
I will add to a short position with price below 1206.

For Longs I would like to see support around 1211 and a retest of 1220.
Insane to think about but not out of the question is a breakout above 1220.
I'm ready for anything.

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 Massive l 
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Price so far is on top of the profiles 3sd. Watch for support here (1220)
through the evening for a possible breakout during London open.
Lots of time still left but it's worth mentioning IMO
A break below it and look for the fade trade

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 Big Mike 
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My "medium sized" view:



Very little movement on delta so far. I would expect price to either rally upwards and re-test highs today or tomorrow, or I would expect a huge influx of new sellers to move price even lower. All I know is right now there is very little in the way of strong commitment from either side on this 30 point drop.

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 tigertrader 
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Big Mike View Post

Very little movement on delta so far. I would expect price to either rally upwards and re-test highs today or tomorrow, or I would expect a huge influx of new sellers to move price even lower. All I know is right now there is very little in the way of strong commitment from either side on this 30 point drop.

Mike

~1201.00 (RTH S2) to 1204.00 (weekly pivot) level is near term support. A sell-off below there could be fast and furious and take the ES to 1190.00, where I would expect the bulls to step in, en masse.

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 tigertrader 
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Market pullback stalled at Friday's VAlow @1208.75. ES must get above 1215.25 to mount a serious comeback.

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 tigertrader 
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OT article by Abigail Doolittle, attached.

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 josh 
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Here is a profile with areas of interest marked:

First a 9 day profile showing the 1180 to 1230 ish range:


Now just the last 5 days, the weekly profile:


Areas of interest below:

1216 - 1220 (weekly pivot, VAH, s/r for thurs/fri)
1207 - 1208.50 (vpoc)
1201 - 1204 (weekly S1, s/r from thurs/fri and prior week, low volume zone)
1185 - 1189 (pw-low, major support, VAL)

Longer term players looking at a 240m or daily chart will only see support around 80-85, IMO.

For above:


I don't see anything really until 1252-1259. Projecting beyond that I would venture a guess at 1290, but it's really pointless to look there right now IMO; we need more information.

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 Big Mike 
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@josh,

Please wrap screencast URL's in the screencast BBcode tag [screencast]url-here[/screencast]

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 josh 
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@josh,

Please wrap screencast URL's in the screencast BBcode tag [screencast]url-here[/screencast]

Mike

futures.io (formerly BMT) seems to have the most up to date forum software with all this kind of cool stuff, didn't know about that tag, thanks

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josh View Post
futures.io (formerly BMT) seems to have the most up to date forum software with all this kind of cool stuff, didn't know about that tag, thanks

hehe, it's not so much up-to-date as it is me writing custom code all the time and hiring programmers for custom projects.

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 Big Mike 
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Another big move up today.





This type of move just emphasis time and time again how important it is to trade what you see in front of you. Don't let external influences give you too much bias one way or the other where you think the market is vastly oversold or overbought, and that influences your decisions. If you are an intraday trader or a short term trader not holding positions for weeks, then you should really focus on what is on your screen and not on what the talking heads are babbling about.

Everyone is always afraid to miss the next huge move, the next huge sell off, whatever. Trust me, if we see a huge correction in the market there will be plenty of time to get short. Let's at least first have the Daily and weekly charts trading below their monthly and weekly VWAP before we start going heavy short

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  #886 (permalink)
 josh 
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hehe, it's not so much up-to-date as it is me writing custom code all the time and hiring programmers for custom projects.

Mike

Well, it is greatly appreciated. Thanks for the hard work and time and effort you put into the forum.

On an ES note, I did short the 52 as I had it as a resistance area in my chart. Unfortunately I accidentally closed half my position at BE (I don't recall doing it but I must have, as I looked down and saw that half my position was open). Then I got a little nervous, thinking that perhaps there was a problem with my broker connection so I closed the other half at BE as well. That would have been a nice counter trend down.

For the move up, I bought 40 at 10am, walked away for a few minutes with my stop at 39, and looked in horror as I came back to find price moving up without me. I sold the low tick of the retrace, and was too stunned to get back in. Add a couple of bonehead trades on top of that and it was a less than desirable day for me. But, there's tomorrow.

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 Massive l 
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This type of move just emphasis time and time again how important it is to trade what you see in front of you. Don't let external influences give you too much bias one way or the other where you think the market is vastly oversold or overbought, and that influences your decisions. If you are an intraday trader or a short term trader not holding positions for weeks, then you should really focus on what is on your screen and not on what the talking heads are babbling about.

Everyone is always afraid to miss the next huge move, the next huge sell off, whatever. Trust me, if we see a huge correction in the market there will be plenty of time to get short. Let's at least first have the Daily and weekly charts trading below their monthly and weekly VWAP before we start going heavy short

Mike

Well said! It's hard to do and takes a lot of mistakes to figure that out. At least for me it did.

I'm still long after buying 2 lots at 1235 and dumping one at 1248.
stop set below 1240 to absorb any London selling. We'll see...
I may look to short at 1238 if price decides to go that way
around 6:15am Pacific time.

Nice charts Josh. Love the low volume areas in the profile as pivot potential.

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 Massive l 
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I decided to take my last lot off the table at 1246
in anticipation of the evening fade.

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 josh 
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Massive l View Post
Nice charts Josh. Love the low volume areas in the profile as pivot potential.

Thanks Massive -- what is the blue line on your chart?

Mike, how are you liking OBV? I have been tempted on more occasions than I can recall to use volume charts, however what gets me every time is that I use volume in my analysis, and this eliminates volume as a variable I have used a simple "time per bar" indication as well, but it's just not the same.

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 Big Mike 
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josh View Post
Thanks Massive -- what is the blue line on your chart?

Mike, how are you liking OBV? I have been tempted on more occasions than I can recall to use volume charts, however what gets me every time is that I use volume in my analysis, and this eliminates volume as a variable I have used a simple "time per bar" indication as well, but it's just not the same.

I've been a fan for OBV for a long time. Just do a search for OBV and you'll find some old work I did.

Mike

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 Massive l 
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Thanks Massive -- what is the blue line on your chart?

That's the close shifted 1 day ahead

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 josh 
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That's the close shifted 1 day ahead

Is this just for the convenience of not having to look back for the prior day's activity? Or do you use it some other way?

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 Massive l 
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Is this just for the convenience of not having to look back for the prior day's activity? Or do you use it some other way?

I use it for s/r (confirmation for entry) and also time (divergence of today's price with yesterday's action for trend changes or trend continuation). This is if the market fades towards my lower support level. I still am looking for longs
until the market tells me otherwise.

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 josh 
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I use it for s/r (confirmation for entry) and also time (divergence of today's price with yesterday's action for trend changes or trend continuation). This is if the market fades towards my lower support level. I still am looking for longs
until the market tells me otherwise.

Very interesting--so do you look for things to happen at specific times of the day typically, or do you usually look for it only with respect to the prior day? In your chart for example, what might you be looking for around the time of the 2nd orange box?

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 josh 
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I will also tend to look long until the chart says different, but the only impressive volume today was the stopping volume that happened at 1252. Look at this daily volume for the last two days, breaking out of the range. Not exactly bullish, IMO.


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 Massive l 
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Very interesting--so do you look for things to happen at specific times of the day typically, or do you usually look for it only with respect to the prior day? In your chart for example, what might you be looking for around the time of the 2nd orange box?

I use it for both. That's around the New York S&P cash open. Looking to see how price opens compared to yesterday. Nothing special.

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 Massive l 
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I will also tend to look long until the chart says different, but the only impressive volume today was the stopping volume that happened at 1252. Look at this daily volume for the last two days, breaking out of the range. Not exactly bullish, IMO.

I agree....not very bullish. I'll look for demand tests around 1248 (today's POC)
and supply tests around 1240.

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 Massive l 
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My top resistance was on the money for a touch short if you were up! (1253)
That's one of my favorite low risk trades.

I went short at 1240 out at 1233 (2 days ago POC)



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