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DTs Pre Market Prep
Started:May 28th, 2013 (09:53 AM) by DionysusToast Views / Replies:131,283 / 914
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DTs Pre Market Prep

Old July 20th, 2016, 08:45 AM   #841 (permalink)
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20th July

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We've probed the top of the range overnight. No signs of a break yet. Yesterday we just traded 1.1 million contracts.

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We have a very narrow value area so far this week, so I'm sticking with the same plan - play around the range till we have a clear break.

This range should not hold much longer - it would be rare to be in such a range for 7 or 8 trading days. We should pop out of this range, shake out the positions of traders in the range and then put in a run in one direction or the other. Failure to do that will probably mean we are looking at a summer slow down - but I think it's too early to call right now.

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The daily profiles don't help at all really, just confirm the range and that the overnight "pop" to the upside isn't anything new so far.

Plan
- Market is in a range - waiting for a breakout.
- look for absorption at the extremes, around 68.00 at the top now we have pushed up, around 51.50 below. As with all ranges, we have to live with the fact it could fall short or poke through and turn around
- If we do have a strong push up, look for the market to fall back to 2160.75 (developing weekly VAH), if that holds, expect volume to the upside.


Weekly Numbers
Range 2151.25 –> 2167.25
Value 2155.25 -> 2160.75
S1 – 2130.75, R1 – 2169.75

Daily Numbers
Range 2151.25 /2152.25-> 2158.50 / 2161
Value 2153.50 -> 2156.50
Globex 2155.25 -> 2167.25

Settlement – 2158.75

Key Levels: 2110.75 ,2096, 2090.75, 2012.75, 1957.50, 1910.75, 1824.50, 1795.50

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Old July 21st, 2016, 08:11 AM   #842 (permalink)
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July 21st (page 1)

Over the next week, the main theme on US Index Futures and indeed, all other markets, is going to be analyzing overall market participation. There’s a number of reasons this should be the focus of our Analysis.

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This is the daily chart of the eMini S&P500 Futures, as we can see, like all index futures markets, the volume has been declining. Yesterday we traded just 1.1 million contracts. Possible explanations for this are:

- Uncertainty on the behalf of short term speculators. After all, we have been in a range since mid-March and the market moved up 60 points in just a few days. Often, we see lack of participation because everyone else is waiting to see what everyone else is going to do.
- We are seeing the start of a Summertime Slowdown.

If it’s the former, we’ll shake this off and expand the range. We may start swinging between 2100 and 2200 for a while. If we do, we should still see decent participation and decent enough ranges. If it’s the latter, we will have to change approach to trading. For some that will mean becoming a range trader and some would be better off moving to a thinner market. For example a US index trader might move to Nasdaq Index Futures or Euro Currency Futures.

In some ways, consolidation after a move is a good thing. Value traders call it price acceptance – saying that people like these prices and want to trade here. Still, if people liked trading here, we’d expect to see a few more of them!

Volume Expectations

So right now, where is participation coming from? Well – we all know that the majority of trading on most days is short term speculators. HFTs are short term speculators. Then we know that some days we see a lot of institutional re positioning. The volume we see now indicates that it’s not large institutions trading this market.

As usual, we have the usual suspects that could increase speculative volume. Scheduled economic news, unexpected news (good and bad), a technical breakout from the range and right now – earnings season. The earnings season occurs four times a year and is when US public companies publish their results. This kicks off mid-January, mid-April, mid-July and mid-October. There’s not much gap between earnings seasons but there’s a lot of insignificant companies reporting too. Alcoa is one of the first major companies to release earnings (11th July) and from that point we see more and more earnings out per day. The season then tapers off but does not have an official finish. So the bulk of major announcements started from 11th July. Right now, we have hundreds of companies reporting each day.

Earnings are announced before the open (impacting pre-market trade), after the close (impacting post-market trade) and then you have a few outliers than report in the middle of the night. No-one is allowed to report earnings during the trading day. There’s lots of sites with earnings calendars out there, like this one on Yahoo Finance:

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So what’s your point?

There’s lots of stock day traders that play earnings announcements. So this does bring volume into the market. More importantly, on any day where a major company like Apple is announcing. If there is a surprise in the results, we can get a big boost in participation in the index futures. I guess it’s considered an economic event if a company like Apple significantly beats or fails to meet sales/earnings expectations.

When we look at the drop in volume right now, we have to consider we are in earnings season. It doesn’t seem to be helping much. At this time, don’t just keep an eye on scheduled economic announcements. Keep an eye on general financial news to see if any major company had a big hit or miss. Then you won’t be surprised if volume comes into the market as a result.

Index Futures Scenarios for the Coming Days


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Above we have 2 market profiles. On the right is this week. We can see that this week we have most trade distributed from 2153 to 2161, then we have another smaller distribution above that. The scenarios I see playing out for the rest of the week.

Yellow – we fall back to the top of the lower distribution (2161 area), that holds and gives speculators confidence to take it higher.
Red – we move back through 2161, and just rotate (and maybe extend) around the weeks range.
We could of course lazily climb up but I would expect that to be lower participation as there’s been no test & hold.

Index Futures, Daily Profiles

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Yesterday, we can see a nice move up off the open and then consolidation from 2166.25-2169.75. As of writing, we are still trading in that area overnight (the small profile on the right). So our first “tell” will be whether that consolidation area holds or not. From a daily perspective, a pullback to 66.25 also seems like a decent place to see speculators jump in if it holds.

How was Yesterdays Volume?

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This chart shows how much volume we were trading at the time of day compared to the 60 day average. It was declining, which basically means less participation as the day progressed. We ended up half a million contracts below average.

Contd....

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Old July 21st, 2016, 08:13 AM   #843 (permalink)
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July 21st Contd...

How was Yesterdays Liquidity?

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Pretty thick for the S&P500 index futures nowadays. So we have more liquidity. More limit orders at each level and less volume (less market orders to eat that liquidity). This is why we are see the market so sluggish.

Yesterdays Swings

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Yesterday we had a probe down and failed to get to the close (pink dotted line). We then had a few good upswings up with 6, then 7, then 6 tick pullbacks (red arrows). One of those pullbacks was back to the open (white dotted line). In retrospect it looks like we had some decent entry opportunities to the upside but with the low volume and overall low delta, I think that if you didn’t trade the upside, it was a decent decision. We got up to the overnight high (dotted blue line) and then moved sideways. Had we moved down, we’d have expected 6/7 tick pullbacks on the way down.

The good thing is that we can see we had players playing the “regular” levels that speculators play on the index futures. If we missed these levels yesterday because we presumed it would be a sloppy range, we can be alert for them today. The range is expanding to the upside, but I think it’s to early to say that we have left the range and aren’t going to see successively lower volumes over the coming weeks.

So all eyes on that.

So what’s the plan?
- Look for a move back to 2161, look for good upside participation if it holds. Look for the market to continue the weeks range if it holds.
- Look also for a bounce at yesterday afternoon range 2166.25-2169.75
- Be aware that speculators seem to be playing intraday levels again so watch yesterdays high/low, value high/low and overnight high/low (numbers below)
Watch for overall pace of the market and any early volume building that would indicate a range day

Weekly Numbers
Range 2151.25 –> 2169.75
Value 2153.75 -> 2161.25
S1 – 2130.75, R1 – 2169.75

Daily Numbers
Range 2155.25 /2158.50 -> 2169.75
Value 2164 -> 2169.75
Globex 2166.25 -> 2169

Settlement – 2167.50

Today only 2166.25, 2161

Key Levels: 2110.75 ,2096, 2090.75, 2012.75, 1957.50, 1910.75, 1824.50, 1795.50

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Old July 21st, 2016, 08:24 AM   #844 (permalink)
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July 21st Contd...

How was Yesterdays Liquidity?

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Pretty thick for the S&P500 index futures nowadays. So we have more liquidity. More limit orders at each level and less volume (less market orders to eat that liquidity). This is why we are see the market so sluggish.

Hi Pete. I don't frequently watch the ES but I seem to remember these days we have an average of 400-600 resting orders at each level.

How would you explain the liquidity increase in the above picture?

Thanks

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Old July 21st, 2016, 08:33 AM   #845 (permalink)
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Hi Pete. I don't frequently watch the ES but I seem to remember these days we have an average of 400-600 resting orders at each level.

How would you explain the liquidity increase in the above picture?

Thanks

Market slows down in the summer time. We have fewer market orders, so my guess is:

1 - market makers have less risk so they can bid/offer more size
2 - you actually need to trade larger size to make money in a smaller range
3 - everyone knows it slows, down so because of 1 & 2 it's a self fulfilling prophecy

Happens most summertimes though.

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Old July 21st, 2016, 10:30 AM   #846 (permalink)
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July 21st Contd...

...

Yesterday we had a probe down and failed to get to the close (pink dotted line)...

Settlement was 2158.75 and price hit 2158.5 which was a swing high from the p-day and a single at 2158.75.

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Old July 21st, 2016, 12:50 PM   #847 (permalink)
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Settlement was 2158.75 and price hit 2158.5 which was a swing high from the p-day and a single at 2158.75.

Well spotted - thanks for that!

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Old July 22nd, 2016, 07:05 AM   #848 (permalink)
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22nd July

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Volume still low, 1.3M - we did make new a new high by 2 ticks in the overnight session prior to Thursdays day session but the day session just stuck in the range.

Yesterday we were looking at 2 scenarios:

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The red one seems to be in play - we got to the bottom of the range and are now working our way up, possibly filling in the area between the 2 profiles.

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It's not really a good trade in the middle even from a weekly profile perspective because even if we can say "we are travelling back to the highs", we still have a large distribution from 2153-2162 which could suck us back in. Once we clear, that we don't have much room to highs. So from a weekly perspective, it makes sense to wait till it hits the extremes.

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The daily profile doesn't help much because we are in the middle of it. Obviously a trip to yesterdays high puts us close to the top of the weeks range and a trip to the lows puts us near the bottom of the weeks range.

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Yesterday we were looking for a bounce at 2166.25-2169.75 - and that's what we got. More importantly, we can see plenty of speculators were watching that area. We can see we had a couple of attempts, could not get through it and then we can see a big drop in delta (red arrow), with poor pullbacks (yellow arrows) that had low volume and relatively little delta shift.

Plan
- Don't play in the middle unless there is a good intraday VP area to play off.
- Wait for an extreme, we can see speculators are still around, so let them do the initial work and try to get in on a pullback if the extreme itself is a bit too busy.

Weekly Numbers
Range 2151.25 –> 2170.25
Value 2153.25 -> 2162.25
S1 – 2130.75, R1 – 2169.75

Daily Numbers
Range 2153.50 -> 2168.50 / 2170.25
Value 2155 -> 2165.50
Globex 2156 -> 2164.50

Settlement – 2158

Key Levels: 2110.75 ,2096, 2090.75, 2012.75, 1957.50, 1910.75, 1824.50, 1795.50

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Old July 25th, 2016, 08:22 AM   #849 (permalink)
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25th July

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Friday we didn't do much of anything but overnight, we've managed to break the high again - without a lot of conviction. Volume has been low overnight, so looking to see if there's any levels that might interest people as we come into today.

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We have 2 distributions from last week with 63.25 between them, so on any move down I'm watching that area first. Other than that, on the lookout for a move into last weeks value area and a move to the opposite end of it.

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We can see Friday day session was completely within the overnight session. Not a great place to trade at all. I'll also be watching Fridays high on any move down so that really makes the area 64.50 down to 61.50 (Fridays Value high) and area of interest, a lot of levels there (mid point discussed above AND the weekly VAH).

Plan
- Not expecting much based on overnight volume
- if we move down and can hold between 61.50 and 64.50, I think we should get a tradeable run to the upside
- if we move up off the open, I'm watching last weeks high and the overnight high as hurdles
- expectation is low, so no trade for the first 15 mins unless we get a large concentrated area of volume from overnight. Expecting low participation and if so - looking to fade high volume area.

Weekly Numbers
Range 2151.25 –> 2170.25
Value 2153.25 -> 2162.25
S1 – 2156.75, R1 – 2174.25

Daily Numbers
Range 2153.50 / 2156 -> 2164.50 / 2168.50
Value 2157.50 -> 2161.50
Globex 2163.75 -> 2172.50

Settlement – 2167.50

Key Levels: 2110.75 ,2096, 2090.75, 2012.75, 1957.50, 1910.75, 1824.50, 1795.50

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Old July 26th, 2016, 06:00 AM   #850 (permalink)
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26th July

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Still in the range! 1.8 million contracts traded yesterday and the range was just under 12 points, so something on the table for the patient.

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Yesterday we had


Quoting 
Other than that, on the lookout for a move into last weeks value area and a move to the opposite end of it.

We haven't quite made it to the value low from last week but we did make it as far as the prices we traded the most. We are now trading back up, we may stop at the value high from last week or we may just fill in to last weeks high. So from a long term perspective, it's a little tricky and I'll not factor it in till we get to last weeks high.

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Looking at the shorter term picture, we tested Fridays day session low. If we can break that today, we may get some decent participation to the downside. To the upside, it's less clear as we are in the middle of the range.

Plan
- Watch for a test of Fridays low. If it breaks look for continuations down if volume is decent and if volume is weak, fade the move.
- If we have no downside test and grind up - try to find an intraday level to go long off. I'm not very excited about that and would not be expecting much from any trades as a result.
- Yesterdays high/low are worth watching too as are the usual intraday levels but I'm not that excited about trades in the middle of the longer term range.

Weekly Numbers
Range 2151.25 –> 2170.25
Value 2153.25 -> 2162.25
S1 – 2156.75, R1 – 2174.25

Daily Numbers
Range 2155.75 -> 2167 / 2172.50
Value 2156.25 -> 2160.75
Globex 2158.25 -> 2164.75

Settlement – 2162.25

Key Levels: 2110.75 ,2096, 2090.75, 2012.75, 1957.50, 1910.75, 1824.50, 1795.50

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