ES Footprint charts at the hard right edge

Jigsaw Trading · July 31st, 2013, 11:58 AM

Hi

I made a comment in my webinar that footprint charts are one of the few charts that are better real time than hindsight.

I took screen grabs of todays AM action in morning of the US session and I thought I'd share them and my thoughts/interpretation. Those of you who 'hang out' in the topstep equities room will have gotten this as it was going on.

This is the first screen grab I took. We'd come off 1688.25, 2 ticks above the globex high. On the left you can see a lot of volume traded at 87.50/87.75 - the red box to the left.

The red box to the right showed an area with a relatively high negative delta but where it made a new low but closed @ 86.50 pretty much giving those shorts absolutely nothing for their money. So at this point, we have late shorts below that got taken out., We also have 87.50/87.75 area shorts who got tested once but swatted the market down fairly sharply letting just 43 contracts trade 88 before selling it off again.

So - when they are defending an area, the flipside has to be a run for the doors if they get run over.

You can see on the footprint how very few contracts printed the bid up to 89.25. This was a quick move up, caused by those guys @ 87.50/87.75 getting out of dodge.

So now we look good to the upside. What we got was the market traded 8,396 x 8072 at price 1690/1690.25 we can see the market had a peek down through that before moving up to 92.25. Our downside line in the sand is 1690 purely because:
- lots of people traded there - 16k contracts @ the bid/offer
- the shorts amongst them are already out at this point
- we therefore have an area with a lot of longs committed that will probably (not definitely) be defended

So at this point, we can see that we are moving sideways. What we can also see at this point that delta on that last bar is -5,722.

To an extent, negative delta with no drop in price is a good thing. It means shorts are getting stuck. The problem is that if the bulls don't make any effort to push it up in a relatively short amount of time, it makes it more & more likely that the negative delta will consume buy side liquidity and move us down.

Jigsaw Trading · July 31st, 2013, 12:08 PM

So 20 mins of sideways action, actually felt like an hour. We actually stayed mostly within just 3 ticks for most of that time. 91.50- 92.00

In total - over 87k contracts traded @ those 3 prices and delta continued down. My expectation was a break either side would see stops, just because of the amount of people taking positions in that 3 tick range.

We got down to 1690 and we saw a lot of trading up and down 1690 - 1691. As expected - the area where those 16k contracts was defended. Look at the delta though.

And then it was game over. You can see when it broke, we moved down with relatively little trading. I was a bit late on the screen print on this one, so you can see the trades on the way down and on the way up. Anyway - it's still pretty clear where they gave up.

Jigsaw Trading · July 31st, 2013, 12:16 PM

So what next? Well we can see above the area at 90.25 & 90.50. What we see there is a lot of contracts trade. By now, the longs amongst them are out, so the shorts remain and we expect them to defend that area....

And next time there, we did the same again. Moved to that area where a lot of shorts initiated and are still likely there and it got defended.

Of course, just because an area gets defended, does not mean they will be successful. What it does generally give you is an area it won't run through in 2 seconds. You need to pick up clues as to whether it will be run again like:

- is it retreating from the area less & less
- the delta
- how many times as it hit the area

As for the delta during this time:

This is a good example because it helps show how delta is more of a bias tool but volume @ price is better for positioning.

ES Footprint charts at the hard right edge

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ES Footprint charts at the hard right edge