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This is what I saw after failing to put in a HH. Note increase in volume and what I saw on buy/sell study...fast selling . I sold the break near swing low of 3179 (got slipped)I had targets of y-day's VAH (1.3157) and possibly y-day's POC (1.3139). It didn't quite reach them...covered at 3162.
I've been a little (OK, a lot) side tracked lately. There hasn't been much going on here since the two big swings of Tuesday and Wednesday but I believe this dog is still on the hunt. Tuesday's move carried the CASH market to 1.3200 to the tick and I believe the decline in OI is "normal." Everyone looks for the door during a "200 point" move winners, losers, strong hands and weak hands. Chalk it up to balancing out positions. Getting a peek at the COT Report will be interesting this week I cannot imagine what those figures will reveal, but by looking at the increase in OI on Wednesday I'll go out on a limb here and predict the COT data will show Large Specs continued to decrease their short positions. The bomb shell Wednesday that railroaded the up move appears to be a flash in the pan. These two Volume Profiles from Tuesday and Wednesday look like an inverted matched set. I believe this is a good example of a "Down Day" using the structure of the Volume Profile built on the "Up Day" to ease the market down, (just my opinion). As I'm posting these charts the "Big E" is trading within a handful of ticks of Wednesday's POC. Thursday's preliminary data is posting a further decrease in OI but I believe this is the weak shorts that entered Wednesday during the US session with wild dreams of huge profits and expectations of a continuous slide into the abyss. Shorts are probably rethinking their positions as the market keeps testing higher levels almost 100 points off Wednesday's lows.
This is the weekly profile since Sunday evening from the lows on this chart it appears price action is slowly putting together a little 125 tick trend.
To be absolutely clear, I am a small trader. Small traders have always been an "open book" to professional traders. The behavior of small traders is so predictable it doesn't take long to see what I've described earlier that Large Spec (large traders) "eat their young," (Small Spec...small traders). One of the characteristics of a small trader is his belief that he can only afford to win. Small traders take more heat on losing trades than professional traders for many reasons but I believe the pain of taking a loss and the desire to be proven right by the market tops the list. Last week I posted this chart of the April 09, 2013 COT data and said I hoped to add further comments, these are those comments.
The first thing you may have noticed on this chart last week is I had high lighted the data for the Small Spec. The Net Short positions held by the Small Spec appeared to have flat lined, even though the market went up 283 points! To make a point I'm going to dig deeper into this simple COT chart.
From the close of the previous Tuesday (4-2-13) to the close on the day this data was compiled (4-9-13) the market moved 283 points. This chart shows Large Spec might be "turning a corner" here. This theory is based entirely on the data of this chart and needs much more analysis to make such a claim, but this is part of that analysis. From 4-2 thru 4-9 the net short positions of Large Spec dropped by 14,843 contracts, during that same period the net short positions of Small Spec dropped by 170 contracts. This COT data signifies that 99% of Small Spec thought holding net short positions was still a good idea! Only 1% decided to stand aside. In comparison 23% of Large Spec headed for the door. Why? Do Small Spec have deeper pockets? Do Small Spec have more resources? Or are they simply the Dumb Money, I believe the latter.
The Tenacity of Small Traders, This Week
This week the Large Spec reduced their Net Short positions by another 21,094 contracts or 42% and the Small Spec reduced theirs by 20%. IMO, that last 100 points against the "little guy" was two fold, first it revealed that his threshold for pain was at 1.3100, and second, his short covering provided some of the buying fuel for the up move from 1.3100 to 13200. Of course the next day the move to 1.3200 evaporated and further analysis will be needed before we get another peek at next weeks COT data. As always, the question is where do we go from here? FWIW, I'm still bullish, but there are levels that are beginning to concern me and I'm watching them like a hawk. I hope to follow up with one more post before Sunday night, time permitting.
Many traders dismiss COT data because they believe the 3 day lag of its release deems it questionable or even useless. I believe with conscious effort and study getting a read and keeping that read of the market between the COT release dates isn't that difficult. I consider the COT data a spectre that oversees my analytical efforts and skill. I enjoy trading the market and I enjoy analyzing the market. If I can keep my finger on the pulse of the market and juxtapose my views to those of the COT data on a weekly basis and remain within a level of consistency, I feel I'm on the right track. Obviously the range prices moved from the Wednesday open thru Tuesday's close contains ALL the data on the COT report. If readers have taken any interest at all in these posts of longer term analysis they may have noticed the number of contracts held "open" (OI) usually exceeds the average volume traded each day, often multiplies of that. These "open" contracts represent both buyers and sellers, this is an important fact to remember. As an example, if there are 5,000 "open" contracts resting on even and price approaches,it is possible that 10,000 traders are preparing to get involved in the market. The task therefore, IMO, is to locate where these "open" contracts are resting in the market, who's holding them and identify the levels that would force the holders to exit, in other words, who can the market inflict the most pain on. If you subscribe to my theory of the Small Spec as I do, it is obvious they don't give up easily. This is a snip of the COT report when the Open Interest in the Euro was at it's unprecedented high, I've circled the OI in red. I would guess, most intraday traders unknowingly traded through this historic event without a clue of it's happening.
This is the updated Open Interest chart. I know it is getting pretty ugly but this project is temporary and I don't want to redo any of this. The 81 point range of Friday that tested the area above 1.3100 and closed near the lows still drew traders into the market willing to initiate new positions, according to the Preliminary Bulletin of Friday's trading OI ticked UP +483 contracts. A note here: This "ain't much" and the final report may lower (or raise) this number, but until that happens,,, it stands.
I believe all eyes were on Boston the second half of this week and this market rotated in anticipation of closure to this horrible event. In my previous post I thought the COT data identified a pocket of resting Small Spec at 1.3100. Friday this sleepy market came alive when that level was breached. This Volume on price chart shows the high of Friday reached up to an area that may come back into play. This area between 1.3130 and 1.3150 (green lines) paused the market on the way up and paused the market on its way back down. Friday's probe of this level retraces again a range this market has traded in and through for 2 weeks.
If I'm looking for traders that are in the market right now I use the volume on price study, If I'm looking for traders that I believe have been in the market for a week or two I use the time on price study. This chart is time on price, of course most Small Spec long term positions are at or near whole numbers but I believe this chart shows where traders "had the time" to enter positions. It is my belief position traders are not sitting on the edge of their seats when entering positions, they let the market do the work, savvy traders enter orders days in advance and let the market come to them. Comparing these two charts may offer a different view of the same area on the chart, remember OI is relatively constant, but volume often fluctuates dramatically.
Just a Quickie before this market starts trading. The two levels I'm watching are 1.3000 and 1.3200. The 1.3050 level has been hammered on since this project began, and supported the market every time. Another probe lower searching for weak longs may prove to be to much, and trade around 1.3000 could get especially intense. However, traders positioning themselves for the GDP numbers on Friday may lift this market before or after an honest test below 1.3050. IMO, another "wake up call" above 1.3100 and that area of the 30s could spark a "mini panic" and fuel a move above 1.3150. From that level the slightest sneeze could turn into a full blown "Perma Bear" short squeeze. I'm looking for an increase in OI and trade in ranges of sub 100 points as we approach the GDP numbers. But then, if the YEN goes ballistic and trades on 100 .... GOD HELP US ALL!
If the Bulls are serious about turning this market the 50% retrace of the up move is a sweet stop to enter. Today is once again "snapshot day," after the close the COT data will be extracted and put on the shelf until Friday. But the OI data is available now and Friday's numbers were increased from 400+ to 600+. Yesterday (Monday) the market traded in a 70 point range on both sides of the battered and bruised 1.3050 level on low volume and basically went nowhere. As this sideways trade churned throughout the day, the Preliminary data for Monday's trade shows OI increased by 4023contracts. Obviously, these 4000 new open positions are all "North" of 1.3019 (Monday's low) and "South" of 1.3089 (Monday's high). This morning's London rally up to 1.3090 probably shook out more than a few weak hands, but another run back up to 1.3050 might cause some traders to take profits and rethink their positions. If this market does move back to 1.3050,, I believe every tick above that will add pressure to the short traders. 1.2950 is obviously the next level to look for support, but this is the first real encounter with 1.3000 and Yesterday 4000 traders went long at the close! This could be an exciting session.
This week offers all kinds of stuff for the "Talking Heads" and gurus to spew out among the masses of sheep that keep their ears and eyes fixed on the cable channels. A 87 year old President who, after less than a day in office said he'd resign if, "you guys don't fix this (paraphrased)!" And the ECB rate cut conversation didn't die, the one that put the brakes on the up move last week. But I believe the talk of Euro sliding to 1.2900 before the "rate cut" brought traders off the bench and getting short the 6E after hearing all the numbers out of Germany. It is no secret small public traders are usually the "Johnny come lately's" when moves start to develop, IMO, they setup this rally. How far will it carry, I don't know but if we test above 1.3100 I wouldn't be surprised to see volume numbers at the end of the day North of 350,000.
Open Interest rose Friday, Monday and Tuesday to 220,000, I believe this was an agreement in direction. Tuesday's rise of more than 4000 contracts near the 50% retrace level had "late comers" stamped all over it. I believe Wednesday's drop in OI was profit taking by some and feeding more shorts to the public when the brakes started dragging on the down move and 1.2950 failed to give way. FWIW here are the charts. Jobs numbers today, GDP tomorrow and I believe it's not to soon to consider NFP next week! Yes, it's been a month,,,, News to News. One note: the exit is a close below the lower 20 period band, you can see it is slowly rising, as it does risk is diminishing, (more on this later ).
. I sold the break near swing low of 3179 (got slipped)I had targets of y-day's 
The 81 point range of Friday that tested the area above 1.3100 and closed near the lows still drew traders into the market willing to initiate new positions, according to the Preliminary Bulletin of Friday's trading OI