Jul 242012
 

The Value Area Report is a daily trading plan based on Auction Market Theory, Market and Volume Profiling techniques for the S&P and Russell Emini Futures (the values in these reports can easily be adapted for SPY [*10] and SPX markets [small premium adjustment]).   Even if you do not use this type of analysis, you should know about it, because large numbers of very well capitalized traders use this approach. As a result, it is likely in your best interest to know and understand it. I have written about these techniques here: http://markettradersjournal.com/volume-profile-analysis/ and elsewhere in this blog.  I also advise reading the notes for both markets as they are related markets. Differences between them can provide clues to what is really going on (though I do not cover cross market analysis in this report). The report is for use on the date posted above based on profile numbers from the trading day before.

For the Emini S&P (ES) Futures:

Overall Outlook:

Today we closed slightly above value with a random B type distribution that is wider  and lower than yesterday.  This is bearish but is a formation is associated with continuation.

Bull Scenarios:

If we open above 1342.00 look to buy at 1342.00 or 1338.00 areas.

If we open above 1348.50 then this is even more bullish and may cause a runner to the upside started by stops being hit.

Bear Scenarios:

If we open below 1332.25 look to sell at 1332.25 or 1338.00 areas.

If we open below 1332.00, then this is even more bearish and may cause a runner to the downside started by stops being hit.

Neutral Start Scenario:

If we open between, 1332.25 and 1342.00, then ranging is more likely.

Always be cautious of the impact of reports that come after the open of the day.

Special Observations:

Notes:  There is a virgin point of control at the 1371, 1312.75 and 1328.75 levels.  Watch for potential reversals at these areas.   We are in a region below the composite HVN at 1349. Trading above this area is technically bullish, below is bearish.

 

For the Emini Russell (TF) Futures:

Today we closed in value with a random B type distribution that is wider  and lower than yesterday.  This is bearish but is a formation is associated with continuation.

Bull Scenarios:

If we open above 776.00 look to buy at 776.00 or 772.00 areas.

If we open above 779.70, then this is even more bullish and may cause a runner to the upside started by stops being hit.

Bear Scenarios:

If we open below 770.90 look to sell at 770.90 or 772.00  areas.

If we open below 770.90, then this is even more bearish and may cause a runner to the downside started by stops being hit.

Neutral Start Scenario:

If we open between, 770.90 and 776.00, then ranging is more likely.

Always be cautious of the impact of reports that come after the open of the day.

Special Observations:

Notes:  There is a virgin point of control at the 762.80, 789.40 and 800.40 areas.  Below the 789.50 region is bearish.  Above this is technically bullish.

 

Remember to check the Open Report on the Nindicator YouTube Channel just before the open of the day (you should subscribe so you are notified):  http://www.youtube.com/user/Nindicators?feature=mhee

Compare this report and the Open Report with your own analysis.

Note: These reports may vary a bit from Nindicator reports as they may under various circumstances use slightly different calculations.

  2 Responses to “Value Area Report for 7/24/2012”

  1. Hi Rob,
    Can you clarify the following for me:
    1. What is the significance of VPOC? How is it different from a POC? When the market penetrates through this point headed south or north – what is the significance? Does it suggest continuance or reversal?
    2. How is the VPOC different from IBP on an intra-day basis? Does the VPOC set a precendent or trend for the days to come for the market or does it influence sentiment in any way?
    Thanks
    MJ

  2. Thanks for starting the topic. A VPOC is a virgin point of control. VPOC is a point of control from a previous day that price departed from. It is similar to a gap on a chart in that they are often revisited as the market establishes value through the touching, or testing of various key points or levels. A POC is a point of control. Typically, these are tested the next day. The POC, is of course, the level on the chart in any given day that has the most volume associated with it int he center of the value area. If you consider the POC from the viewpoint of value on any given day, it represents value. If we open away from that, it means one of two things. Either there is a change in perceived value and further departure is likely or we will return to it. This addresses the latter part of your first question. The trick is in determining which is more likely and establishing a risk situation that is hopefully worth it for the potential reward.

    An IBP or, Initial Balance Period, is similar in form to a value area and is based on the first hours range alone. I believe many traders make decisions based on this (first hour) range. For example, you can trade departures from it, or attempts to return to it. Often the IBP low or high will be tested, say on a down day before heading lower. However, an IBP is not based on volume or time at price as it is with a value area. So, it should not be confused with it. It is just another way of looking at a range. Often, you can look at this range as a measure for potential breakout. If it is narrow, then we might expect to break from it. If it is wide, we may range trade. These are just rules of thumb however. You have to take into account what is driving the market and the volume patterns that are setting up etc. At least this is what I prefer to do; using the context that is provided by the IBP and or value area etc.

    I believe traders know the VPOCs are there, so the closer we get to them, the larger the group that believes we will go there becomes. Assuming this is true, medium scale price reversals, or sometimes fairly large scale reversal may occur at or around these levels. I do not believe there is any precedence associated with this. Once hit, the levels are past tense. Then we go to the composite charts to see where multiple day volume clusters might influence price movement.

    Some days, we get a VPOC right on top of a high volume node on the composite. This happened today on the Russell. and we (to my surprise) went all the way there today. Any time there are multiple points that can act as a magnet price like this, the more traders, as mentioned above, will be likely to believe it will go there. This of course leads to fulfillment of prophesy :-)

    I encourage readers to get more conversations going on the blog. Thanks for posting!!

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