Sep 282012

We have had a bit of range expansion in the last week but the anticipated minimum range for the coming week is only about 24 points minimum in the ES Emini S&P 500 Futures. This area is bounded by 1424 to the downside and 1448 to the upside. That is a minimum.

We finished the week in a bit of a breakout mode as Friday was characterized by a D shaped profile inside the previous day (below left). This is somewhat of a breakout mode.  Let's take a look:

Nindicator Value Profiles

Nindicator Value Profiles

Note we are closing the week right at the high volume node on the composite chart (on the right). As a result, we have a breakout mode inside a larger breakout mode.  There are quite a few reports next week so it gives us some chance for departure from the current area on the chart. Let's take a look at a 5 day composite profile to see if it gives any hints as to what that direction might be:

5 Day Nindicator Composite Profile

5 Day Nindicator Composite Profile

In the above 5 day composite we can see the high volume node for the week is 1432. We have a bit of a bimodal B shape to a b distribution here.  Clearly the trend is down and we tested up into the low volume node on the chart at the 1444 level. We are only 10 points below this node, but we are also in a market with daily ranges that are only in the 34 point range.  Let's look at the Weekly and Monthly Cycle Charts for more:

Weekly and Monthly Cycle Charts

Weekly and Monthly Cycle Charts

We can see on the weekly chart we are beginning to test lower. with the various cycles on the Nindicator Stochastic, MACD and Momentum shifting southward.  We can see the range is increasing in recent weeks and this often forebodes downward movement as I have written about in a number of previous posts. Note also that the weekly volume is actually slightly above average; something that is quite rare lately. The Monthly is still up however, and with decreasing ranges.  Therefore, we have a bullish  monthly cycle chart and a bearish weekly one.  As a result, some more downside is expected.  Note the stochastic on the weekly chart. There is a bit of a hook on this tool that was set off this week. Note the red dot followed by upward movement and then a reversal back downward this week. I have written about this pattern in other articles as the Nindicator Stochastic Hook. I love this pattern on intraday charts.

This sort of top down analysis where we analyze one chart with respect to another is a great way of contextualizing charts and analyzing a market's bigger picture and understanding that context into progressively lower time dimensions is very powerful way of analyzing charts on any adjacent time frames. We also do this on an intraday basis from longer term 30 minute multi-day composite profiles and then into the single day profile and then into the 5 minute profile for example.

This move downward this week actually commenced with a bull trap that surely messed up a LOT of traders with a long bias. This occurred on Tuesday. In the morning of this day, the market began to break upward. This was followed by am abrupt 30 point descent into new multi-week lows. This price action established a change in trend and left a lot of bull traders holding the bag for it. This is the patterning that can make for sustained moves.

I am thinking we might see a bit of upside this coming week  but we will turn downward and test lower.  Much of the ordering of this sequence will be driven by reports, and we do have a full schedule of reports this coming week.

Today (Friday) we had the Chicago PMI turn southward (a reading below 50). This is a leading indicator of a contracting economy. Durable good was also way below expectation. As a result, further downward sentiment will be easy to come by if there is another contraction oriented (and below expectation report).  Expectations have been high, so it shouldn't take much to push the market lower. So, using some caution and trading retracements to the downside may not be a bad overall strategy.  I will of course be providing Emini Market Open Reports each day on Youtube and the Emini Value Area Reports daily on the blog, so sorting this pout should not be too tough.

This week, NinjaTrader tested and approved the Nindicators for use by their customers. So all this is coming together nicely, and Nindicators will be available shortly. I have some other stellar products in the works that do not fall into the category of indicator tools that will be coming out following the release of Nindicators.

Well, that is about what I have for you this week-

I wish you a wonderful weekend and a great trading week in The Coming Week!

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