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DTs Pre Market Prep

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19th June

Volume was relatively light yesterday and the 1648.75 level held. We went a tick through it in the Globex session as of typing this (7:30 am EST). I imagine quite a few people had that area as a target for their long trades, so I wouldn't see the bounce off that area as bearish just yet. In fact, people getting neutral means they can buy again at these levels whereas longs from lower down are more likely to sell the higher we get. A case of needing a bit of selling before we can go back up.




The bounce off the area in the Globex session isn't that bearish either in my opinion.



All we have done overnight is rotate around yesterdays value area. We went a tick through 48.85 but that's it. I expect this to be tested today. It could be 6 ticks through and fall away but I favor bulls jumping in if we push through with conviction.

To the downside, we did build a little base around 1632 before moving up and I think 1620 is still a major line in the sand. The weekly R1 at 1640.25 did appear to act as support yesterday morning and so it's also worth keeping an eye on.

Of course, all this is in isolation of the FOMC rate announcement due at 12:30. There's also no news other than crude inventories. As such, this morning at least could be very quiet. If the first few minutes are quiet, it'll probably stay that way till 2PM unless we break 1648.75.

As for the FOMC - I have no expectation or bias. My only plan is to be flat when it comes.

Weekly Levels
Range 1618 -> 1649
Value 1633.25 -> 1648.50
Weekly Pivot - 1620.75, Weekly R1 - 1640.25

Daily Levels
Range 1632.25 (globex)/1634.00 (pit) -> 1648.75
Value 1641.50 -> 1648
Globex 1641 -> 1649
Other - 1620, 1632, 1640, 1648.75

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20th June

This pre-market prep is a little earlier than usual. When we have 8:30am EST news, I tend to wait till the news is out of the way before doing the prep. Not today though.

We had a big move down yesterday after the Feds announcements. We didn't get to test the 1648.75 level before the drop and we fell short of testing the 1620 level too. We did get to 1622 as we got into the cash close.

Today we have Unemployment numbers at 8:30am, Flash Manufacturing PMI at 9am and then Consumer Confidence, Home Sales & Philly Fed at 10:00am. We have dipped down below 1610 in the Globex session so far and below us we have levels at 1595.50 and 1591.25. We can expect these levels to at least cause a bounce as shorts take profits if we carry on down.



We can see the drop is significant. We don't know how much of this is short term speculation or long term re-positioning. Volume was not exceptionally high yesterday. We can see that recently prior large drops have been followed by responsive buying and we've made the ground back in a day or two. If this is mostly short term speculation, then we have a lot of buying ahead of us as these shorts close out.

I'll let the news play out, that could trigger an all day move or it could be just a blip. When we get to the 9:30 open, I will initially be looking for responsive buying to move us back into yesterdays range. If we do move down, then I will have my eye on the volume. If it is exceptional, then I will presume it is "other timeframe" sellers re-positioning after the FED move and I'll be less fussy about trade location and just jumping on board a short. If we do drop with volume, there simply might not be a good pullback to short and so you either stay out or jump in.

One other reference point of interest is on the monthly chart:



You can see we've been "one timeframing up" on a monthly basis. In other words, each month for the past 7 months have made higher lows. Last months low is at 1576. If we breach that to the downside, we could be looking at a longer term downtrend.

Weekly Numbers

Range 1605 (and dropping) -> 1649
Value 1628 -> 1648.25
Weekly S1 - 1599.75

Daily Numbers
Range 1622 -> 1649
Value 1632 -> 1646.50
Globex developing-> 1623.50
Settlement 1623.75, 1595.50,1591.25. 1620

In short. There is quite a lot going on. It'll probably pay to be patient today.

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DionysusToast View Post
If we do move down, then I will have my eye on the volume. If it is exceptional, then I will presume it is "other timeframe" sellers re-positioning after the FED move and I'll be less fussy about trade location and just jumping on board a short. If we do drop with volume, there simply might not be a good pullback to short and so you either stay out or jump in.

Good plan. How was the execution?

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Big Mike View Post
Good plan. How was the execution?

Mike

Note that I only trade the ES morning session. I also scale out and my first scale is 1 point. Subsequent scales are set by what levels are around & the overall volatility. On a regular day about a point apart. On a volatile day 6-8 ticks apart.

1) Off the open, we came down to 1605.50, bidders stepped up and absorbed the selling. I got long at 9:31:29 @1606.25. It was a ballsy trade and after seeing the 'hold' but it was based on the scenario that buyers could step in off the open, it did go up but struggled and I pulled my targets into 1 point.

2) Then we made a move down, which was quite aggressive. I figured that failing to go higher on that push up meant that sellers could now control it for the day. At this point the TICK was bearish and volume was above average but it was only 9:34 and so a bit early to start calling out what sort of day it would be.

We went thru the ONL and got a pullback to it. The pullbackj was 8 ticks which is pretty standard on the ES and it held there, so I shorted 1605.25 at 9:34:45. I scaled at 4 ticks & 8 ticks. at 9:41, it became evident bulls were taking it again and the rest I got out @ 1603.50. I was pretty happy with that exit in terms of managing the trade.

3) Then up through the open again with a big push up in terms of volume, ticks and delta. We went through the open and then started to pull back. We came back to towards the open and I went long just before the open at 9:48:29 at 1607, with news coming up at 10:00am. I got 1 point fairly quickly, then as we came down towards my entry, I took some off at +1 tick as I wasn't seeing the sort of pop I wanted into the news - I would have expected the next leg up to be 10-12 ticks. I left some on at +8 ticks thinking I could cut before the news and I was pretty lucky to get filled there before it came down.

Then we got the news and that was the turning point. One of the things concerning me about the action so far was how little liquidity there was. Instead of 1000's on the DOM at each level, there were hardly any levels on either side above 1000. It has been thin the past few weeks but only on the first 2-3 levels.

4) After the news, I took a small trade at 1602.50 - just 1 lot and just above the pit session low. There were signs it was holding and the cumulative delta still looked pretty bullish (TICK was bearish though) it just blew through me and a market order got me out 7 ticks below. Not slippage - just the speed the market blew through me and my reaction time. I literally didn't have time to get out.

I watched the next few swings - very large for the ES and mostly because there was relatively little volatility. I play thick markets because I consider them lower risk. I don't get along with thinner markets and the ES was looking pretty thin to me. It's not something I do well. At this point I had profits on the table and I decided to not participate for the rest of the day because of the liquidity.



What is interesting is how the delta moves up there even after the market turned down at 10:00am. The ES doesn't do this often and it's more indicative of thinner markets like CL.

The Average Tick and Relative Volume looked like this:



In terms of how I did. Whilst I didn't make out like a bandit, I'm happy with the decisions I made.

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DionysusToast View Post
In terms of how I did. Whilst I didn't make out like a bandit, I'm happy with the decisions I made.

OK, so 17 ticks or so per contract? On a day that over 40 points?

Don't get me wrong, please. You made more than I did today, because I sat on the sidelines and didn't make any trades as I don't particularly do well in strong trend days.

But man... I am glad I am not a scalper. Ever since I decided to abandon that, and move back to larger time frames, things are just so much more... relaxing! Not to mention more profitable.



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Big Mike View Post
OK, so 17 ticks or so per contract? On a day that over 40 points?

Don't get me wrong, please. You made more than I did today, because I sat on the sidelines and didn't make any trades as I don't particularly do well in strong trend days.

But man... I am glad I am not a scalper. Ever since I decided to abandon that, and move back to larger time frames, things are just so much more... relaxing! Not to mention more profitable.



The nice thing amount the market is there are a million ways to make money. Unfortunately, there are about 100 million ways to lose it!



Mike

Fair comments Mike but I think you are making a judgement on a very small set of data. Certainly in terms of taking one days trading and saying that it is a less profitable way to trade than some other way. I ended up sitting the day out precisely for the same reason you did in the end. I just took a few shots at it in the process because I thought there was a good chance of finessing my way into a runner. The lack of liquidity merely stopped me from taking another shot at it.

I stand behind the premise of each trade in terms of having potential to turn into a runner. Is there one specifically that you think was a pure scalp with no chance of running?

The idea is to get into a position and then let the scaling work for you in terms of maximising the number of ticks.

The scaling gets you some profits banked early on and de-risks the trade. The refined entries also help de-risk the trades. All of those trades were taken with a view to the move running more ticks than they did. Any one of those trades could have lasted the rest of the day. Turns out they didn't. A trade at 9:31 will often have you in position for 2-3 hours and it might have you out in 2-3 minutes! Most of the time it's done by 10:30am.

It really doesn't matter if the ES moves 40 points on one day. It moves 10-15 points most days and most intraday traders will be set up to take advantage of the rotations within that. I don't think that too many ES traders will be trading a 5 point range one day and then getting 40 points the next. Most traders are perma-faders who would have been buying that all the way down.

Anyway - don't take this as me being upset, I think it's a good discussion to have and would like to hear more on it.

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DionysusToast View Post

What is interesting is how the delta moves up there even after the market turned down at 10:00am.

I saw you mentioned this somewhere else (maybe a presentation of yours), but was not sure why this could happen, now as you mention it again, why do you think this happening?


Big Mike View Post

But man... I am glad I am not a scalper. Ever since I decided to abandon that, and move back to larger time frames, things are just so much more... relaxing! Not to mention more profitable.

Hey Mike, what time frame do you use, and do you use multiple time frames?

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ghl123 View Post
I saw you mentioned this somewhere else (maybe a presentation of yours), but was not sure why this could happen, now as you mention it again, why do you think this happening?

It tends to happen in more erratic, less liquids markets.

The mechanics of that move on the ES where delta went up as price moved down is that people were going short with limit orders. Whilst the majority of traders with market orders were longs, limit orders were absorbing that buying. Now - the odd thing about yesterday is that the quantity of limit orders generally was extremely low but as I mentioned this does occur more in less liquid/more volatile markets. So absorption should have stood out a mile.

For the "thinner market theory" - take a trader like myself that lets it get to an area and then goes in with a market order on the ES. When it gets to my spot if I see a sign that it is being held but at that point, if I am right, it is almost pointless to try getting in with a limit order 'cause the more right I am the less likely I will get a fill.

If I were to trade CL, there would not be such a need to hit into a trade with a market order even with my style of trading because the extra volatility would most likely see you swept into a position if you went in with a limit order and got a few ticks price improvement.

So - yesterday on ES, it would have been one of 2 things:

1 - Sellers quietly absorbing the buying with limit orders on the offer.
2 - Just a feature of the increased volatility/reduced

If it was number 1, then they were pretty damn stealthy about it. Here's the footprint from that period:


Hard to call, really. If that was people quietly offloading to unsuspecting buyers - they did an absolutely fantastic job about doing it subtly.

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June 21st

A big move down yesterday and lots of volume - 3.6 million contracts which is indicative of longer term re positioning.

We did fall short of the 1576 level (last months low) and so we are still one timeframing up on a monthly basis.



If we zoom in a bit:



We can see that we have moved back up to the 1595 area overnight, which is effectively the break-down point in terms of breaking down from the longer term range. This may be new longs profit taking or it might be prior support becoming new resistance.

In terms of the profile:


The Globex value area is within the value area of yesterdays pit session.

The order of the day today is:

- see if we manage to stay in yesterdays value area or if there really are sellers in the high 90's
- if yesterdays value area breaks then we are looking at yesterdays low and last months low. We may well probe through 1576 6-8 ticks looking for sellers. If there are none there, I expect a swift move upwards. If sellers are there, I expect another decent drop.
- I think the chances of getting shaken out of any trade taken at 1576 are high.

To the upside I'm looking at the levels we set on the way down - 1595, 1607.25, 1620

Weekly Levels
Range 1577 -> 1649
Value 1611.75 -> 1648.75

Daily Levels
Range 1623.50(globex)/1609(Pit) -> 1577
Value 1587.75 -> 1608.75
Other - 1595, 1607.25, 1620

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Big things are coming this summer. I wonder for how long gold will be suppressed though, until investors will realize it is even better safe heaven than US dollar. And stocks have a long way to fall to revert to the mean...

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