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The S&P Chronicles - An Amalgamation of Wyckoff, VSA and Price Action
Wyckoff and VSA principles at play in today's action:
No Demand (setup) (ND in a previous area of supply)
Effort vs Result - Wave (setup)
Climatic Bars?
Stopping Volume
Sign of Strength Bar
Superb Volume reading (histogram)
Hi @Feibel, thanks as always for your insightful analysis. You are my “go to” person for Wyckoff principles. In your latest edition, you wrote:
“Via the 5m chart from entry A, notice the volume subtleties; as we react volume increases, a healthy sign for our shorts, we try rally and price action is capped (unable to make higher prices) spreads narrow and volume declines this is also good for our shorts; these clues help us to hold our trade, it indicates/hints that sellers are in control”
On the surface, it appears that there are two contradictory ideas talked about in Wyckoff analysis. On the one hand, the concept of effort versus result deems a market rising on relative high volume as a barrier to movement and this would be a good thing for shorts as an example. However, on the other hand, a market rising on a lack of volume is also a good thing for shorts. This begs the question: How can both notions be true and desirable? It appears that they would negate each other and render both pointless. I would love to hear your perspective.
The most important factor with this method are the background conditions - we do not focus on the right hand side of the chart. It's to the left of the chart that sets the tone for the proceeding price action for potential setups (it gives context to the price action we have before us) Think of a jigsaw puzzle - all the edges have been completed and is roughly 4/5 completed (this would be the background conditions). The right hand side is the final 1/5, (remainder of pieces) we have structure in place and know where to place the final pieces (setups) If we ignore or have no understanding of the background conditions we are randomly placing parts of the jigsaw puzzle with no idea of the overall picture
If we rally to resistance with 3 strong bars, react to support, rally again with 7 bars and upthrust back to support, we have a story of weakness emerging. Demand is tiring or sellers are becoming active, with the addition of a sign of weakness the ''upthrust''. We react to support and try to rally again with 19 bars, yet unable to test the highs, in-turn producing the highest upwave volume - we would interpret this as effort vs result (background is of weakness)
Once sellers have been established and taken control its DEMAND that needs to proves itself, if we continue to react with increasing volume this is indeed a healthy sign for our shorts - indicates that sellers are still active. If we hit support and price halts, rising on very low volume this is excellent for our short positions as demand isn't present. We would expect buying from support, low volume, narrow spread, mid closing bars doesn't equate to buying of good quality, ''by dis-confirming demand we get the confirmation of supply''
In a nutshell we MUST take into consideration the background conditions - If we have a selling climax, followed by a spring and then rally rally on very low volume (which the market often does) this is strength and extremely healthy for our long positions, why? Supply has been eradicated via the major signs of strength in the background, as there is a lack of sellers - there is no upside friction, the buyers can push the market with very little effort
Hi,
I'm about 2 months in on my futures experience and this thread is excellent and really helping me understand basics of volume in S&P emini.
I've only read about 4 of the 16 pages, so will take me days to read all and longer to understand.
Many thanks Feibel for sharing your time and detailed work
Appreciate the kind words, support and feedback. I hope the Chronicles can continue to help, bear in mind that the concepts/principles in the Chronicles can be applied to any market in any timeframe (within reason)
Wyckoff and VSA principles at play in today's action:
Confluences (important structural elements)
Change of behaviour (setup) weak pullback, excellent background conditions
Pure Wyckoff analysis (swell in volume)
VSA Classic No demand (setup - picture perfect)
Shortening of the Thrust
Effort vs. Result
I have gone through your S&P Chronicles for some time and it helps me to understand the market.
Refer to your 03/10/2017 S&P Chronicle,
1)You draw a Demand Zone in the Daily chart. How do you get the prices(size) for the Demand Zone?
2)On the 3500 Tick ES chart, there are three pullback (red opaque highlight) after we get a New momentum high. Why you did not make a buy trade on the first or second pullback?
3)How do you define a weak complex pullback and simple pullback? Please give an example.
