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Was today's price action predictable?
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Was today's price action predictable?

  #11 (permalink)
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Was today's price action predictable?

I am of the school of thought that the market price and it's local history best represents the meaning of most sentiment information, i. e. that everyone, with all the important information votes, and we see the results as price. Thus I look for "predictable?" changes in market direction with "interpretations" of recent price behavior.

For example in the TF, which does appear to often lead the market to the upside, we have "double bottoms" which can, at times, be useful in seeing a turn in the market. Longer term the TF has a possible "double bottom" on the 7/6/10 lows and the 8/25/10 lows, near the 585 level. More locally one can see a "double bottom" with the lows on 8/24/10 and 8/25/10.

In the ES we also see a double bottom formed on 8/25/10 and 8/27/10, with Friday's low being made after the 10:00 announcement.

Another condition that can occur near "double bottoms" is symmetric moves. In the TF there was a move of about 24 points off the lows of 8/25/10, and yesterday we had a similar symmetric move off the 10:10 lows of about 24 points. If one was looking for that symmetry then trading off Friday 10:00 lows in TF ( 594), might be easier with direction (up) and likely extent of move (24 pts) in hand.

In the ES, once Friday's low was in place, assuming some symmetry off this perceived "double bottom" would give a trader direction (up) and likely extent of move (about 24 points).

Of course this is a game of probabilities, sometimes it works. But the combinations of the earlier mentioned divergent move in the TF, combined with "strength off previous resistance" in the ES, and the fact that these double bottoms work better when they follow bigger declines, like 80 points in the TF and 60 points or more in the ES, then perhaps the shift in probabilities was enough to be predictable.
lows, and the 8/24 and announcements. A turn in direction off a previous resistance point can lead to strong local moves. Once that low was in place there was a "predictable?" direction for a trade.

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  #12 (permalink)
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Moderator Note
I think it's great we're getting some price action discussion, but lets not forget we already have a price action thread and I don't want to end up with two threads on the same topic -- Big Mike



Link to price action thread

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  #13 (permalink)
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Big Mike View Post
Moderator Note
I think it's great we're getting some price action discussion, but lets not forget we already have a price action thread and I don't want to end up with two threads on the same topic -- Big Mike



Link to price action thread

Mike


I don't see this thread as a price action thread. In my mind price action has nothing to do with prediction. I would even go so far as saying as price action has everything to do with price dynamics not prediction. I know Fat Tail is found of Fibonacci projection and all its dérivés but when you think about it, it's all based on prediction, ie, where could price bounce or reverse. A true price action reader does not rely on such predictions as he's mostly interested by keeping his risk low and price dynamics. All else is pure speculation. You don't need to make extensive studies of Support/Resistance levels to win money. In fact, there is a whole industry around these levels which in my mind are not a requisite to make money. The search for key levels belongs to a top down approach while using a bottom up approach you do not need to rely as much on this aspect as price will reveal what is important as you move forward during the day provided you know what to look for as it occurs. In my mind, a bottom up approach to trading is superior to a top down approach.

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  #14 (permalink)
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Indeed, my idea for this thread was more about sentiment indicators, but I chose the wrong heading, so no problem for me if this thread is closed here.

I will come back to my sentiment idea via another thread.

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  #15 (permalink)
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Fat Tails View Post
Indeed, my idea for this thread was more about sentiment indicators, but I chose the wrong heading, so no problem for me if this thread is closed here.

I will come back to my sentiment idea via another thread.

Perhaps we should just re-word the thread title. Let me know of a new thread title and I will update it, and no need to close the thread that way if its really not a discussion on price action.

Mike

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