Aug 312012
 

This last week was non eventful in the first several days. Then, we broke lower suddenly yesterday. This was followed by an abrupt gap right back up into the cluster from the earlier days in the week only to sell back off again.  Much of this price action is due to overnight overseas report releases and the FOMC and the issue of impending QE3.  Let's take a look:

Nindicator Value Profiles

Nindicator Value Profiles

You can see the crazy price action on the above chart. This action also induced substantial moves upside in the precious metals markets (which is indicative of fear in the marketplace).  I have set the composite so you could see the potential support areas; around 1387. We are still bullish above 1397, which is the high volume node on the composite.

The volume in this last week was scary low with two of the sessions trading below a million contracts on the ES Emini S&P 500 futures. That is just plain not healthy and shows a lack of interest.  It does not help traders much either, as these days have very contracted ranges as well. This trend of declining volume has been going on for about 3 months. Let's take a look at this chart:

Daily Volume Chart

Daily Volume Chart

The above discussed volume situation is also reflected in the daily targets on this market where the targets were hit on only two of the last 5 days.  If we extend into the night session, the targets were hit 80% of the time indicating it is taking a long time for development to occur. Either way, things are out of whack, and that is typically not bullish.

The US market continues to be a magnet and beneficiary of the worsening conditions in Europe's high unemployment and increasing inflation. As that money seeks a safe haven, if finds its way here where investors perceive their funds are safe(r).  This type of trading can be done overnight by monitoring news releases overseas and trading off the resulting volatility. This can be done pattern trading, by using volume, and or both.  Much of this money finds its way into the US markets overnight and analysis can be done on this basis.

Next week I am seeing a minimum target to the upside of about 1420 and to the downside of about 1387. These levels correspond to a number of computations that find some level of confluence at these minimum zones. The weekly range has contracted from 34.7 last week to only 26 points this week. I can remember times when this was a normal daily range. This further illuminates the lack of interest issue in these markets. Let's look at the cycle chart:

Weekly and Monthly Cycle Charts

Weekly and Monthly Cycle Charts

We can see the turning south in the Weekly chart on the three oscillators.  The Monthly has been turned over to mixed in this last Month as we toy with new multi-year high territory.

If I use the Nindicator Value Profile to analyze this week's price action, it looks like a big P shape with the high volume node at 1408. This shape suggests to me we may be testing lower in the coming week. Much of the randomness of this week's price action makes it hard to see just exactly where we might be headed as the 5 day cycles are all out of whack.  Often increases in volatility forebode a market decline.  The price action in the last 48 hours implies it. I will wait til next wee however to see how things start to shape up after this long weekend.

Declining range that we are seeing on our weekly chart is often a tell tale sign of a bullish market so I mention it here even with doubt (and in contrast to the shorter term increase in volatility and directionlessness).  A graph put out by the Philadelphia Fed this last week or so illuminates what may be coming down the line in the Fed's analysis of things. Here is the chart compliments of Michael Panzner:

Philadelphia Fed Diffusion Index

Philadelphia Fed Diffusion Index

I think this is why the FOMC comments this morning had so much tension behind them (Friday 8/31).  As for the graph, I will let it speak for itself.

Next week we have a full report schedule following a holiday on Monday. This is, not unlike this last week with the bulk of important reports coming out Tuesday through Friday. I will not enumerate them this week. Follow the Market Open Reports where I try to remember to go over them each day.

I continued working on my research into my price zone distribution theory. I have developed several trading methodologies off this approach / theory in this last week.

There is a webinar coming in the near term. It will be an overview of the Nindicators and some of their uses. This will be a high density webinar with a lot of information and trading concepts. The sales team will also be taking their website live and that release will be announced. So, stay tuned for more on the date and time of this high impact upcoming webinar.

The Nindicator programmers are building the installer for Nindicators right now. This will make it so it can be installed into your NinjaTrader with a couple clicks of a button. I will spend about a week training the sales guys. There will be some incentives for those of you who have waited for so long. I appreciate your patience, but working through details and making sure the product is right and secure etc. is more important than getting a product our there with errors etc. So, that being said, we will be releasing Nindicators soon and it should be coming together very soon. Again, thanks for your patience.

I have also gotten started on building a members area for the blog where I am already starting to post more advanced articles for qualified Nindicator users.

All this being said, it has been a busy time for me, so I am looking forward to a holiday weekend and wish you the very best over this coming weekend and new trading week.

Tonight is a blue moon which occurs only about once in every three years, so enjoy it's beauty :-)

Thanks for supporting the blog!

 

 Leave a Reply

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>


5 × five =

Commodity Futures Trading and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to Buy/Sell futures or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this web site. The past performance of any trading system or methodology is not necessarily indicative of future results.