12/23/2010 Spotting a long trade with the volume ladder

Hello Trader,

Its been a boring holiday trading week so I had plenty of time to prepare this blog post. I have been using the volume ladder more often in my trading to spot entry and exit points. This post will describe my method by outlining a long signal from yesterday's trading. I haven't been trading the market much because of the low volume and practically nonexistent volatility. In fact on a side note, I would be buying puts to hedge any long exposure you might have because protection is dirt cheap right now. The VIX had traded as low as 15.50 this week!

Getting back on topic now... In order to learn how the volume ladder works I read the thread at BigMike's Trading Blog, and watched the seminars. Then every night I looked at the swing lows and highs and examined the volume ladder during those time frames. What I found was exactly as described in auction theory books such as James Dalton's Markets in Profile.

For those that haven't read the book or aren't familiar here's a brief (and rather crude) example. First you need to see Price acting as an advertising mechanism and the merchandise on sale are ES contracts. Now imagine an ES contract as a reposed Ferrari at auction. When the car comes up for bid they start at 50k. At first, everyone's hands go up because it would be a steal! As the auctioneer keeps blurting out higher and higher prices, fewer hands remain in the air. The auctioneer, talking faster and faster edges the price up to 150k, and there are only ten hands remaining. 200k he says frantically, 3 hands. 250k! He shouts as his face turns red. Down to 2 bidders. 275k! He screams. SOLD!

That last guy got the car. But what if the auction didn't end there? If it kept going what do you think would happen to the price? Furthermore, lets say there were a million Ferrari's up for auction. If this was the case (as it is) then the cars would sell for the highest price people are willing to pay for them given the laws of supply and demand. In other words, there would be a balance.

The market works in a similar fashion. If it is not trending it is trying to find a balance. Part of our job as traders is to find that last guy willing to buy or sell, and take the other side of his position. The theory being that price will return to the balance where the most contracts where traded and likely to the opposite end of the range (where the most hands are going to be up).

Looking at the volume ladder will show this theory in action. First observe the tick chart on the far right corner of the image above. You can see that buyer's responded to lower prices at the support zone (zones are provided my eminiplayer.net)at around 2:23 PM EST. An aggressive trader would try to fade the extreme but a move conservative trader would likely enter on a pull back. Let's assume the latter. You can see in the bottom panel of both charts that cumulative delta continues to improve as price pulls back to the moving average. At first price seems to find support at 1250.75, but how do we know to take a long?

Let's look now at the volume ladder on the left. 1250.75 is the dash blue line. The fist test attracted 162 contracts, which you can see in the bottom left box on the ladder. The second test only 100 contacts were sold at the bid, AND a huge block of buyers stepped in. They picked up 2,169 contracts at the ask. That's your first clue. The third test only a mere 110 contracts sold at the bid. You can begin to see selling drying up. Price responds by moving higher and the cumulative delta continues to improve leading into the fourth and final test of our level. On this last test of 1250.75 you can see that ONLY 3 contracts traded! Flashback to our Ferrari auction.. The guy that sold those last 3 contracts is the winner of the action.

Now can you see how to spot when selling is drying up? Fewer and fewer contacts trade at that price (fewer hands going up) until the selling (or buying) just shuts off. The entry on this trade could have been 1251 with the first target at the Volume Point Of Control, where the most trades took place. That level I marked with a white arrow is 1252.50. As you can see the contract did trade back to that level, in fact slightly higher. This quick scalp could have netted you six ticks or $150.00 on two contacts. Not bad for 15 minutes of work!

In the future I'd like to do more of these posts. I have found market profile and auction theory to be a huge help in my trading. I will continue to use the blog to document my learning and share setups and ideas with everyone else. Thanks for reading, I appreciate any comments and I love to connect with fellow traders so feel free to email or Skype me. I hope everyone has a safe and Merry Christmas and a Prosperous new year. Take care

-Nate

11/16/2010 Highlighting some set-ups

Good evening traders,

I just wanted to highlight some simple setups on the ES that occurred today. These are as much for my reference as they are for yours.

The first trade marked on the chart was a nice short trade that you had to be quick to catch in real time. Price rebounded off support early but was unable to continue higher. The cumulative delta showed buyers drying up and then sellers taking the reigns.

The next marked trade is a long. You can see the big spike down in sellers and then buyers begin to enter the market again. This would have been an aggressive trade considering the steep down-trend at the time. If you waited you got a safer entry the second time around.

The third marked trade showed divergence on the delta and some strength showing up in the Stochastic. This was a textbook trade. If only I wasn't at the dentist, I would have been a few $100 richer!

The fourth marker isn't as obvious as the last three. Sellers did enter the market but that wasn't as clear on the Delta. I took this trade because the entry at the time was a low volume node and the stochastic was overbought. The volume point of control was below us and this area had been support earlier in the day.

The fifth and final marker was pretty straightforward. Divergence on the delta and stochastic. I tweeted my entry at 1173.50 live. It was a sloppy entry and the trade moved against me 4 ticks right off the start. As a result my confidence was a little shaken and I cashed out for 6 ticks. Stupid move in hindsight. I left 4 points on the table. I don't feel bad about it though because my trade plan is to be finished by 3:30 EST. So, that's 6 ticks I wouldn't have otherwise gotten.

Sometimes its OK to break the rules, as long as you know you are doing it and adjust your risk accordingly.

I hope these set-ups help you in your trading. Thanks for reading the blog and following on Twitter. I like getting emails from people and don't mind helping out other traders. If you need an indicator for NinjaTrader, or something explained just shoot me a message or Skype me. I'll do the best I can. I don't consider myself a pro by any means, but I believe communicating with other traders is a great way to learn. Do you agree?

-Nate

11/09/2010 EminiPlayerZones Review

Good Evening Traders,

The chart above is today's five minute ES. I added the Emini Player Zones to the chart. You can get these zones at www.eminiplayer.net. I have been a subscriber to the service for about two and a half months now and I really like it. Along with the player zones, members get a daily trade plan and market analysis. For $50 bucks a month. Can't beat that!

Today's priec action was a much needed pullback. On the 60 minute chart ES had been poking above its top Bollinger band since Friday. That kind of momentum can not be sustained for ever ($600 billion QE or not)!

My trades Today were so-so. I missed the morning sell off but managed to get a good long from 1217-1219. the Initial Balance low was a great entry for short but I was waiting for price to continue higher to the VPOC, which at the time was around 1220.50. I was late on the entry with a short at 1216 and covered at 1214. I took a long at 1212.75 right at support zone and sold at 1214. I was expecting more downside but it was time to leave the screens and pick up my daughter so I missed the final swing low, but you can see it lined up well with the EminiPlayer support zone.

My personal Opinion is that the pullback is over for now. We have $160 Billion in POMO coming in just the next few weeks. The "buy the POMO days" trade has a level of complacency about it that I find astonishing. By now everyone has seen the statistics, the market has made the vast majority of its recent gains on these days. If the pull back is not over and we get another sell off tomorrow I'd expect the Gap at 1197.25 GAP to be a good target. What would be really cool is if this whole move up was just a giant fake out and the market fell back down into the 1179 balance area! That's highly improbable, but a man can dream...

Have a good night everyone and thanks for reading the blog. Click the adds please to help me out. You can follow Eminiplayer on twitter @eminiplayer and me @infectedtrader. Good luck tomorrow,

-Nate

11/3/2010 Not much to report

Sorry to readers of the blog. I know it has been getting neglected lately. I plan to do updates more often once life cools down. You can still follow me on Twitter @infectedtrader every day . See you all soon!

-Nate

10/21/2010 Failed Auction

Hello traders,

Today was a failed auction. That means that prices ticked slightly above previous high's and then reversed. This is very bearish and will likely send us back down to the bottom of the recent trading range. I'm not going to rule out a move to the low 1140's in the ES. This scenario will be even more likely if price Breaks below 1155.00.

The number one thing supporting this market is the "Bernanke put". There are six more POMO auctions to be conducted by the FED in the next 6 weeks. A recent article I read on Zerohedge.com said that the FED is actually running out of bonds to buy! Traders I have been talking to say that quantitative easing 2.0 isn't going to be announced until after 3rd quarter GDP numbers. In my mind its a done deal though. Most traders believe that the expectation of more liquidity has baked in about 50-100 points in the S&P's. That kind of market drop during election season would be a nightmare for the ruling party. Keep that in mind.

Overall the market behaved as I expected today. following the levels I outlined yesterday. We topped out at 86 and found support at 67. The latter being the mid point of yesterday's rage and the the weekly range dating back to the 11th of October.

My trading today was poor. I took one long trade this afternoon buying one contract at 77 and another at 76. Price moved to within one tick of my two point stop before reversing. I was lucky to get out of the trade with a profit. My entry was horrible and I did not have the proper feel for the market today. I was supposed to be studying for my mid-term exam in Strategic Management and just wanted to make a quick profit. After I took my profits I shut it down for the day and hit the books. In the book Trading in the Zone Mark Douglas says "When in the zone trade, when not, Don't". I think that book paid for itself today. Good luck tomorrow traders, and thanks for reading.

-Nate

10/20/2010 Up Auction In Tact

Good evening traders,

First let me preface this article by saying that I am not an expert in market profiling. This blog is very much about me learning and I learn best by writing things down and applying them in real time situations.

The chart above is for the last two trading days with market profile attached. I used the free GomiMP indicator to create these charts in Ninja Trader. You can find the indicator in the Ninja Trader Forums. Low value nodes (LVN's) are marked with a red line, High value nodes (HVN's) are marked with a green lines, and the value area is between the two blue bars (VA). I highlight the point of control (POC) as the white bar on the profile.

Yesterday's closing price was below value. With the gap up open this morning my immediate expectations were for buyers to bring price back up to yesterday's value area. The open went just as expected and yesterday's POC gave a good short entry. Profits could have been taken as we approached yesterday's LVN and the opening print. Buyer's once again stepped in drove price above yesterday's range. after a brief rotation the market resumed higher breaking out above yesterday's high. At this point long targets were the LVN from 10/18. That price was 1179.00 and provided numerous opportunities to short throughout the afternoon. The market closed towards the mid point of it's value range and I expect higher prices tomorrow.

Some areas where I would like to do business on the buy side tomorrow are 1169.00-1171.00. There is a confluence of today's value area low, the LVN's at 1169 and 1171, and yesterday's POC should dry up the selling.

Judging prices above is a little more tricky because I have to rely on other people's charts. I do not have data back to the beginning of May. If any readers have tick data back that far back please feel free to donate it to me! From what I can see (posted on chart.ly and other sources like twitter) there is resistance at 1186 area and an open gap from May 3rd at 1089.50. Those would be area's for me to take profits on long positions and possibly initiate a short.

Like I said at the beginning, I'm not an expert on Market Profiling. I am reading, learning, and applying what I already know. The blog will help me keep tract of my progress and add more transparency to my trading. I post live trades on twitter. They are not recommendations to buy or sell anything. Thanks for reading the blog. Please help me out by following the blog and clicking the adds. It only takes a second. Good luck tomorrow

-Nate

10/19/2010 Market Notes For Tomorrow

Hello again traders,

I am going to jot down some thoughts for tomorrow before bed. First of all I expect it to be a slow day. we have no econ news and after a big move like today's the market tends to balance within a range. speaking of range we are near the bottom of the one that has been forming since the beginning of October.

Again the bears are out in force. On the financial entertainment TV (CNBC) talking their books. The bears have the whole mortgage putback/fraudclosure thing going for them and today's news concerning the NY Fed & others suing Bank of America adds some fuel to the flame. However the bulls have the possibility of $100 Billion a month of quantitative easing in their corner. Personally my bet is with the bulls! $100 billion a month is a lot of money! And we all know that somehow these banks will weasel themselves out of this mess. They managed to do it every time I don't see how this will be any different. Just play the end of the world card again and they can get whatever they want!

Now as I was saying... we are towards the bottom of the recent range and we should get a little churn in the upper 1150's and the 1160's. I would like to short the 1169-71 area on first touch and if price can get over 1176.00 it would be a major victory for buyers.

On the downside we don't have much more meat on the bone. I'd buy yesterday's RTH low if prices get that far but I doubt we'll get that test with practically no catalyst. It would be a great buying opportunity if we did though. The 20 day moving average should be near 1156 and swing traders will be placing bets.

Tomorrow is going to be about trading the extremes. I'll be watching earnings reports, the dollar (which had a big move last 2 days), and the VIX for clues. I am having a good week and I am looking to preserve profits. Good luck tomorrow everyone.

-Nate

10/19/2010 Market Delta vs. Investor RT

Good evening traders,

I have been having a lot more success lately. My win percentage is over 70%. I'm sure its just a luck streak, but I think I owe a lot of my successes to implementing market profile and auction theory in my trading. I purchased the book "Markets in Profile" and signed up for eminiplayer.net. I have added the Gomi delta and market profile indicators to my charts in Ninja Trader and watched about a dozen webinars on market profile in the past week. My take: You could recognize all the patterns, memorize a bunch of setups, have $5,000 dollar indicators, but its all worthless if you don't understand market profile.




Well now I'm trying to take things to the next level. I am prepared to invest in a new market profile software to run on a new computer that I just added to my setup. I have narrowed it down to Investor RT or Market Delta. Anyone who reads my blog and has one or the other please comment on your experiences and help me decide. I also created a thread over at Big Mike's Trading Forum . Right now I'm leaning towards Investor RT and DTN IQ feed for data. I'll write some brief market commentary later. After my little one goes to bed. Enjoy your evening everyone, and thanks for your help.

-Nate

10/11/2010 Range Day

Good evening traders,

Bloggin from the couch tonight cause of my sprained ankle. today was a range day by all measures. I wanted to due a Range day blog post cause I haven't done one since this blogs inception.

Here are some of the dynamics of a range day. I ripped them off from Brett Steenbarger's blog Traderfeed Hopefully he doesn't get pissed but if he is honest about helping people learn to bank coin in the market then he shouldn't care about my rinky dink blog biting his material. Its actually really good stuff and I want to catalog it here for my own reference. Lets see what Brett has to say ...

1) Advancing and declining stocks running close to even;
10/11/10
Advances 1,678 (53%) 1,243 (45%)
Declines 1,383 (43%) 1,421 (51%)

2) Price oscillating around a relatively flat volume-weighted moving average
10/11/10
ES futures mid point was 1162.50 until the final 15 minutes

3) Mixed performance--no distinct themes--among currencies, rates, and related asset classes;
4) Mixed performance among stock sectors; Today's heatmap shows these two points perfectly


5) Reduced volume on the day.
10/11/2010 102,731,872 SPY traded. vs average volume of 200 million.

A few more things I wanted to say about range days is that the VIX is usually lower or muted and so is options volume. Both of those attributes appeared in today's markets. Also price should end at or near flat for the day.
10/11/2010 S&P gained .01 % today . 'nuff said!


I hope this post will help your trading. Bookmark it if you have trouble trading these types of days. My hope is that traders out there become better by sharing though sharing of ideas and giving up some time every night to help out the community. Thanks for reading!

-Nate

10/07/2010 NFP report preview

Good evening traders!

You all get an exclamation point today :) because tomorrow is the non farm payrolls number. One of the biggest econ reports of the month. Goldman Sachs says the number will be -50,000 jobs with a .1% rise in unemployment. would that be bad? good? who knows ! A bad number could mean more QE (quantitative easing) or a good number would mean QE is working and all will soon be well. anyway you cut it I'm willing to bet the market goes higher. Its really just a crap shoot though! I will play the hand I'm dealt and you should do the same. In the meantime I'm going to construct a few scenarios.

First is a bad report. In this case I'll prefer shorts down to 1134.50 where we have a gap fill. we may get a pause at yesterday's low and again around 1141.50. I'll try to do business at those levels

On a good report we could break over today's high in which case I would be less likely to take longs given the run up in the markets. I would try to short 1168.00 and if I fail there then cover and re-short at 1173.00 where we have very significant resistance on a composite profile dating back to April.

The last scenario involves the relationship between the Dollar and stocks. Traders please consider this: The Dollar and SPY are nearly a perfect inverse correlation the past 3 weeks. One up 2% one down 2%. A poor NFP number may stun the Dollar and send stocks higher. Or the inverse, where the Dollar strengthens on good numbers but stocks fail to rally because of the Dollar strength. The more I consider the recent correlations between these two markets the more I find this scenario to be the most likely for tomorrow.

The plan:
Pay close attention to the USD and VIX to see if the risk trade is on or off.
Wait for markets to settle after the data has been released.
Trade where you want to trade, don't force your will on the markets.
preserve capital!

Have fun and good luck tomorrow !

-Nate

Also I am on Skype now so if you want to chat send me an email, I'd love to hear from you.

10/06/2010 Reflation Trade

Good evening traders,

I mentioned two days ago the reflation, inflation, quantitative easing trade will push the markets higher. I underestimated the amount of money the Fed would be buying. I learned today the Federal Reserve is now the second largest holder of US government debt. They are monetizing $11 Billion of bonds a week !

Stocks will go higher but physical commodities will certainly out perform. watch gold and oil especially. They have new gold E-mini contracts that allow you to buy 10 ounces of gold at a time. That's way to small for hedging. The speculators will flood the gold market and major dislocations will begin. A'la $150 a barrel oil .

Gonna make for some good trading this fall...

-Nate

10/04/2010 More downside to come?

Good evening traders,

In response to the title of this post... I doubt it! Well at least not much more. We still have an open gap at 1120.50 and I wouldn't be surprised to see that get filled in the short term. We need to be vigilant of outside market factors when we trade. This could be the regulatory environment, overseas conflicts, anti-business legislation, and moves by the federal reserve. We are all familiar with the the first few but its the last one, the Fed, that remains a mystery to many traders.

While the Federal reserve has no authority to operate in the primary markets, (such buying $USD futures, or $SPY options), what they do during market hours can still have a huge effect. How huge? Consider that we recently learned one "fat fingered" trader at Wadell and Reed caused the "flash crash" with a mere $4.1 Billion in E-mini contracts. Now consider that the Federal Reserve will buy in at least $800 Million worth of bonds from the heaviest part of the yield curve tomorrow (9/30/2016 – 8/15/2020). Banks want to trade in their crappy yielding paper in favor of the higher yield in stocks. A good auction might push close to $2 billion worth of capital to primary dealers. Add broad index ETF buy-ins seen at the beginning of the quarter, and I believe big money will be chasing stocks higher.

Complacency is key here. Wait and watch the market 5 minutes following the close of the auction. I have seen this market run up EVERY POMO DAY this year. While I don't have the numbers in front of me, I know another blogger actually crunched them and that statement is statistically in my favor. We hear everyone say "This time is for real" "Sellers are in control" or my favorite "We are in wave 4 of a 1,3,5 ABC pattern". Just be vigilant. Its stupid to fight the Fed, the banksters, and all those who have a vested interest in the market going higher.

We have a decent Econ Calender this week. Culminating with the Non-farm payroll report. I'm excited to trade it. Make sure you are following the blog, and on Twitter, and that I'm following you too. Email or comment below and as always, Thanks for reading!

-Nate

P.S. Here is the link for the Outright Treasury Operation Schedule
http://www.newyorkfed.org/markets/tot_operation_schedule.html

9/28/2010 Over Trading

Hello Traders,

Hope you all had a profitable day! I walked away with a measly 10 ticks. However I screwed up big time. Wondering why?? Because I over traded. Half of my profit was eaten up by commissions. I realize my mistake though. I'll work in the future to minimize my trading by only taking trades at pre-defined, low risk areas. Let's go over the trades, the losing ones are circled in white.

On the first losing trade I tried to fade the initial support area at 1037.50 and support failed. I took a 6 tick loss and looked for another long around the Globex low at 1131.50. The counter trend move netted me a point and I went running before consumer confidence came out at 10:00am EST. I completely missed the long off of 1128.75. That would have been the trade of the day! During my next two trades I was fighting the Federal Reserves POMO auction. I kept trying to fade previous support levels but the money printing machines were too much to handle and kept driving prices higher.

In the afternoon session I expected price to roll over. I took a short too early and got stopped out for another 6 tick loss. After the double bottom that formed I should have known better than to short. Then, of course, price reverses and goes my direction. I was not very happy about that trade. On the next trade I lost a point because of another missed entry. Except this time I wasn't going to let the market run away without me. Once enough shorts were on board they squeezed them hard, giving me my best gain of the day, a 2 pointer. I got out before the 1140.00 IB high only to watch price continue to move in my favor. Everyone was eying 1144.50 as a potential target and momentum carried the market to 1146.00 which was the overnight high. I got short at 1145.25 for another quick point. I didn't want to overstay my welcome with 10 minutes left in the cash session.

Over trading is just plain dumb. I know better than to be making that kind of mistake. I'm very disappointed in my trading to say the least. Some levels to do business tomorrow are the Globex high from Sunday 1149.75, and the open gap at 1147.75 on the upside. If prices fall below 1136.00 I'll look for longs around today's low 1128.75 and then the open gap around 1120.

Good luck tomorrow everyone!

-Nate

9/24/2010 One Trade One Loss

Good evening traders,

Hope you all had a good trading day! I took one trade for a loss of a point. Tweeted it too. Being focused on my Quant Methods class wasn't helping so I just left the screens on and watched.

You ever just watch your DOM sometime? It does some really wierd stuff from time to time. Orders will just pop up, then quickly go away. I'll watch the contracts on the BID go from 4k-12k+ in about 3 seconds then go away again! Comments on that topic are welcome

I'll be trading more tomorrow and Wednesday because school is out until Thursday night. Tomorrow I'm watching the 1130-1132.00 price range for buyers to step in. That level puts us at the mean of the volume profile from last week. It also lines up with a few daily trend-lines that could get some swing traders on our side. Until we break out of accepted Value Area I'll be adding to my current profile for analysis. Good Luck tomorrow !

-Nathan

09/24/2010 I Had A Good Day

Good Evening Traders,

I had to get at least one blog post in this week! I have been super busy studying for licensing exams, not to mention my normal course load, and my 5 year old daughter! I still take classes at University of Pittsburgh twice a week at night. That's one of the great things about trading; You have the free time to do what you want! I don't want to get too confident sounding so lets get to the trades.

The first long hit the target almost within 5 minutes. I was feeling confident and shorted initial resistance and gave a point back immediately. that's when I realized it's going to be a trend day and shorts are counter trend only. I like to lighten up the counter trend positions and look for shorter price targets. You can see I only traded one contract on my next two short positions. I also closed them out for one point. So then you are asking why did I trade 4 cars on the final trade?! Here I'll tell you; It was the weekly high and I had been waiting all morning to short it! After that big winner I was feeling pretty pleased with my performance. I took home $512.50 before commissions and junk.

Just to critique myself on a few things. First, I should have taken more trades with the trend today, and second I feel like I over-traded. If you have any other critiques please feel free to post a comment. Also take a look at my twitter posts (bottom right corner of the blog). I usually tweet my trades before I make them, however sometimes I'm too focused on the charts to play that game. Twitter makes me more cautious. It makes you think twice. I ask myself "Is this a trade I want to tweet?" and if I'm not feeling it, then I usually pass.

I'm off to see Wall Street 2 tonight. I hope you guys enjoy your weekend. Please follow me on Twitter, Facebook or where ever it is you choose to express your narcissism! And as always, thanks for reading!

-Nate

09/13/2010 One Trade One Target

Good Evening Traders,

I have been busy studying for my licensing exams so I haven't been able to post much lately. This morning I traded the September contract. Some traders were already using the December contract but I like to wait to switch because there isn't enough data to calculate my indicators properly.

1124.00 was a resistance area I identified in my research last night and given the lack of responsive buyers at the open I was positive it would be a great short. Price had moved to the top of the regression channel and the stochastic was way overbought. When 1124 was rejected I initiated the trade. I also tweeted it LIVE on my twitter account @infected1172.

I'll be back on trading tomorrow morning so make sure to follow along and maybe we can make some money together!

-Nathan

8/31/2010 More To Come...

I am starting a new job tomorrow. This means I should have more time to devote to trading and the blog. Here's hoping !

-Nate

8/24/2010 COVER SHORTS

Good morning traders.

just wanted to make note that the target area for shorts 1050's has been reached. look to get a good price and cover shorts today. you can always re-apply any positions if the market breaks support. Have a nice day!

-Nate

08/12/2010 Sellers now in control

Good evening traders,

Lets start this post by stating the obvious, sellers are now in control. Looking at the charts you can see the clear double top where I drew the red line. In previous posts I pointed out the 1128-1131 level for an upside target. Bernanke and our friends at the Federal Reserve had nothing good to say yesterday and now we find price reversing. And rather strongly. If I had a "trading magic 8 ball" it would say "all signs point to bears"!

We have a heavy economic calender ahead, which means more choppy waters for the markets. Tomorrow we have Michigan Sentiment, CPI, and the all important Retail Sales. Each one is a potential landmine. We also know that GDP is going to be revised lower due to the massive trade imbalance. Those are the fundamental reasons for the markets to continue to sell off, now lets look at the technical...

Tonight's chart is marked with horizontal support and resistance lines. Shorting rallies is the play now. Price has closed below the 20 and 50 day moving averages, lower Bollinger bands have expanded, RSI is now below 50, and the MACD has crossed it's signal line. Also note the MACD histogram is negative and volume has picked up confirming the move has a good push behind it. I would like to initiate shorts in the 1099-1105 resistance area which should coincide with 20 day moving average. My initial target is 1056, then if prices punch through that level I'll look for 1040.

I want to add some comments on the structural deficiencies with the economy but I procrastinated in doing this post and its late now. Maybe tomorrow! Keep an eye on the key levels I noted above and follow along with my game plan. Maybe we can make some $MONEY$ together! Good Luck

-Nate

08/06/2010 We are Screwed

Sorry to bring the pain but..

Tomorrow is Fed day and I honestly think that whatever they say at this point doesn't matter anymore. We are screwed. The whole thing just feels like its coming unraveled.

I have gotten a better grip on reality working for the non profit CareerLink in Pittsburgh. I see it every day. People my age got duped into a degree in business management, communications, sociology, or dance. They are in over their heads in unmanageable debt, live at home, and work as barristas at Starbucks or waiters at some Darden restaurant. Just waiting for that C level executive position they were promised to come along... Constantly deferring that Sallie Mae loan until it does

Meanwhile the family guy who had a cushy job as midwest director of human resources found that he was no longer needed to push paperwork in circles and invent make work "projects" for his department. His 401k is toast. His kids college expenses are bankrupting him and he has HELOC'ed himself up to his bloodshot eyeballs. He lacks the will to get re-trained and re-enter the most competitive job market in History. Oh, and he is in his 60's with NO retirement money saved.

As a country, unions have bankrupted us, corrupt politicians have sold us down the river in 8 year cycles, and there is a dog and pony show going on over there in the corner to distract us from the 100's of trillions in unfunded liabilities.

They can only keep the charade going for so much longer. I can't help but feeling it's gonna be sooner than later. Remember this though, They will never run out of money but what They will run out of is confidence. They have certainly lost mine.

-Nate

8/2/2010 Just Stay Long

Good Evening Traders,

Something is wrong with my Ninja Trader and it won't display my charts. Zen fire had some kind of screw up last night and my platform hasn't worked well since. I have been busy with my day job and unable to focus much attention on the matter. My job is scheduled to last for 12 weeks and this is only the second. I wish I had more time to make a longer post tonight but I don't. And my charts are screwed.

Basically, just stay long, or take longs only. I was looking for 1128.00, The June high, and it looks like we might get that test tomorrow. Don't expect it to break through easily. Although most indicators are pointing higher this is going to be a closely watched price point for many traders and I wouldn't be surprised to see big market participants try to fade these levels. A close above 1131.23 on the $SPX would be a monumental success for the buyers in my opinion.

Thanks for tuning in and sorry for the brevity, hopefully I'll be back in force tomorrow

-Nate

7/30/2010 Divergence Trade

Good Evening Traders,

I hope everyone had a productive and profitable week! As expected, The market got off to a good start but as the week progressed price started making lower lows and lower highs. I still think that the June highs are a probable target, 1128.00 on the ES. However a lot of technical indicators are beginning to roll over. Its not like I put a lot of trust into indicators but they can become self fulfilling sometimes. Especially in these low volume, high frequency, algorithmic trading times! Maybe, if we can hold above support a few more days the squiggly lines on the chart might align in such a way that the machines decide to buy again. I will do a look at the intermediate term Sunday, for today I wanted to post a simple divergence trade from this afternoon

I was on an assignment and not home to trade, but the 15 minute chart would have alerted me to a great opportunity. Fading the gap down open was the play. I was looking at people's tweet's and seeing how everyone else traded today. A lot of people took the early long and I think it's neat to see all the different methods coming to the same result. I drew white lines on my 15 minute chart to show the divergence in the stochastic and the MACD. Price lined up almost perfectly with the low of 7/23 indicated by the blue horizontal line. Drawing support and resistance lines is a crucial part of trading for me. It really helps me spot the most probable place to take trades.

This divergence trade played out perfectly and that's why I wanted to make it my post tonight. It should make a great reference in the future. When I learn how to on Blogger I'd like to be able to add a category to each post. Like "divergence trades" for this post, or "breakout trades" as another example. This way I (and you) can review all the different trades and how they performed, or which ones didn't perform and why. I'll be working on that this weekend as well as annotating a new daily chart to be posted Sunday night.

Thanks for reading everyone and enjoy your weekend!

-Nate

7/26/2010 Money Management Saves The Day

Good evening traders,

The market played out pretty much as predicted yesterday. First resistance at the 1109.50 Pivot gave us a nice pullback. Then we got a nice divergence off the double bottom at 1104.50 which also happened to be the overnight session high. Funny how those things work out huh...? See if you know these key levels in advance you already have an edge. Let me tell you, I tried trading breakout strategies in the past and then I read somewhere that the big money fades those moves. They were right. I was constantly buying at the high and selling and the low. Now every night I review the charts for possible support and resistance levels and only initiate trades at those levels. You can follow along and make some MONEY too.

On to tomorrow... Price still has to overcome resistance at 1112.50 and I think it will in the next session. I would really love to short the high of 6/22 at 1114.50. Above that is a cluster at 1118ish and another at 1122. Those are areas I will look at for pullbacks. I strongly believe we will see the 1128.00 peak before the intermediate trend reverses. You don't need any fancy mathematics or crazy indicator schemes to figure this stuff out, just look at the charts and draw trend-lines. Its astonishing sometimes how simple it can be.

My trades today include one loser and one winner. As I said last night, I wanted to look for the pivot 1109.50 for the first pullback. I wasn't at my desk when we initially touched it. I thought I could go short and didn't exercise any patience at all with my trade. My money management rules say I should be within one point of the recent high or low before executing a counter trend trade and I wasn't. I got stopped out (not surprised). No big deal though because I got another chance to short and a much better setup the second time around. I tweeted my entry @infected1172. A couple minutes later, the trade went all the way to the bank (again not surprised).

Today's lesson is to stick to the plan and practice sound money management. See, if I only risk one point to make a profit of two points, then I can be wrong 50% of the time and still make $MONEY$! That's simple math right there. You don't need a finance degree from Pitt to get that :)

I know for a fact that I won't be trading tomorrow, but I will be watching the market on my phone and keeping an eye on those key levels. You should too. As always, Good luck

-Nate

7/25/2010 Bullish Signals Begin to Confirm

Good Evening Traders,

I hope everyone had a productive weekend. I am using Stock Charts annotating tools for the first time tonight. I hope the chart is easy to read and helpful. I'm starting a temporary job on Monday and wanted to make weekly projections using a longer time frame in case I am unable to post as often this week. I used Stock Charts and not Ninja Charting because Zen Fire does not store enough data to do relevant calculations on a daily time frame. I wish they did but you get what you pay for I guess :) (it's free!)

I'm going to explain the signals I see starting from the top down on the chart. First the ADX. ADX is similar to the Sine Wave indicator I use on Ninja Trader. When the two ADX lines cross there is a change in trend. Notice the lines cross in March confirming the uptrend and then again in May confirming to downtrend. The similar setup is our fist clue that a new trend is about to emerge.

Next I see the Bollinger bands have expanded and price bounced off the center band nicely. The 50 day EMA and 200 day EMA have been penetrated to the upside and the 50 period is above the 200. You can see by the simple trend-lines I drew that the downward trend has been broken and the horizontal resistance has been overtaken at 1099 with a close above that level. In addition to the trend-line violations, price has formed a higher low and a higher high.

A stochastic value above 50 is bullish and the upward slope is also positive. But I try not to look too much into the stochastic. Its good for identifying tops and bottoms in a range bound market but sucks for capturing trends. It could remain pegged at overbought or oversold for a large duration of a trend. Take a look at the MACD though. The Histogram has ticked up and the MACD line is about to cross above the zero value. When the MACD went last went negative it was "flash crash" day.

The last time all these indicators lined up the market began its correction. I still believe that long term the market will go lower. Honestly I believe that the best investments are gold, shotgun shells, canned food, liquor, and cigarettes (long, long term). In the mean time, I expect responsive buying until we get up to the June high of 1131.

There is a lot of bad news now behind us. The oil spill is over, European bank stress tests are done, Greece seems to have their stuff in order, and the "Invisible Hand" will want to juice the market going into the fall elections. So plenty of reasons to think like a bull (at least for now).

I may trade ES tomorrow if I get home early enough OR if I am up early enough. If I do I will be looking for initial support at 1101 area then resistance areas at 1109.00(pivot), 1114.75(6/22 high) and further down the road, the June highs. ES got to 1128.00 in June. There is about 25-30 points of upside to work with. I favor longs, at least for this week! Good luck everyone make some $$

-Nate

7/22/2010 Conflicting Time Frames

Good Evening Traders,

I'm Expect the volatility to continue into tomorrow because price is in a key area on many conflicting time frames right now. For instance, we just popped over the 50day MA on a daily chart with rising MACD histogram. Also, the 60 minute chart has a bullish histogram and upward sloping MA's. However the 15 minute chart is still somewhat bearish. MACD has turned down and the histogram is below the 0 line. Also there is a bearish divergence with stochastic making a lower low and price a double top today. Stochastic is also about to cross below 50. With Amazon stock down $12 in after hours we may struggle a little at the open.

I took a trade this morning when I shorted the pivot 1093.75. It was counter trend so smaller profit target. I got one point on two lots. entry was at price 1092.50 at time 10:54 am and exit at price 1091.50 at time 10:59 am. The 1200 tick chart was producing some great trades in the afternoon. A short at price 1094.75 time 3:21 pm which was good for 2 points and a long at price 1085.50 at time 3:39Pm which was also good for 2 points. The significant thing about these trades are that they occurred right where they are statistically most likely to work, at key support or resistance levels. Do your homework. or just copy mine ;)

I updated the 15 minute chart with new levels for tomorrow. There is a hidden resistance level at 1099.50 that doesn't show up because it didn't occur during cash hours. That is the overnight high that was touched three times during 7/14 and 7/15. Keep an eye out for that level. I think if buyers can get things moving early tomorrow they might be able to convince some shorts to cover and it could feed on itself. Or maybe someone will wake up and realize the economy is about to be in the toilet. Who knows, just trade what they give you. Good luck people

-Nate

7-21-2010 More Volatility To Come

Good Evening Traders,

What a wild day! Early on the market came up to the gap fill at 1086 then pulled back to the initial support level of 1076. After a brief bounce, Fed chief Bernanke (who used to whisper fund managers to sleep in fall 2008) caused the market to wet the bed. Price finally found support near 1060 and is now trading again in the bottom part of the weekly range.

Only thing I can be sure of at this point is more volatility. Especially with earnings coming through. Also, I like to think that when The Fed needs to sell Billions worth of Treasury Bills they go out and spook the stock markets. Thereby driving people out of equities and into bonds. Note the Ten Year plunged to a shocking 2.86% today. I will be keeping an eye on the bond markets as well as Gold, which also took a beating today.

I updated my 15 minute chart with new support levels on today's high and low. I noticed they line up well with other swing high's and lows like the double bottom that formed on 7/19, and the opening price on the gap down 7/16. These are the levels I will be looking to initiate trades at tomorrow. Hopefully I will get to trade all day distracted! For added flavor I drew diagonal trend lines showing the triangle we seem to be forming. Thanks for reading and good luck tomorrow!

-Nate

7-20-2010 Bears Ambushed

Good Evening Traders,

Bears got Ambushed today by Apple earnings and some rumor about the fed lowering rates at the discount window .25%. I Wasn't here to trade today and I'm actually glad I missed it! My performance is admittedly poor during trend days because my system usually looks to fade extremes in price or sentiment. The best way for me is to use the indicators to buy pull pullback and trade with the trend. The largest reversal price had was after the opening gap filled at 11:30 Am est. There was a great chance to re-load long at 1060 and get in on that big move up!

Tomorrow morning I'll be looking for a brief test of support and further upside if buyers can get it over the 1084 resistance. If support at 1076 fails price may continue to consolidate above 1070 which would be strong support below. If buyers can keep price over 1070 into the close it could be signally more upside potential.

Good luck tomorrow, and hope my chart is useful

-Nate

7-19-2010 Key Intermediate term Levels

Good Evening Traders,

This evening I wanted to present a longer term chart for everyone's consideration. When the chart makes a daily high or low and it corresponds to a previous high or low I draw a BLUE horizontal resistance line. If the market touches the line and reverses two times or more over a long period of time I highlight the line GOLD and make it thicker and easier to see. The gold lines are the most important support lines in my trading.

For example look at the gold line at 1057.00. It was the high of the gap down open 6/29/2010. Then it was the bottom of a gap up opening on 7/8/2010. It acted as support again that day and the market rallied. Now 6 trading days later the price falls exactly to the 1057.00 line and reverses. Now you can tell that's a significant level! If you prefer looking at a volume profile chart, you'll notice 1057.00 is clearly an area of acceptance in price. different methods same result. Point is to know these levels in advance so you can anticipate when prices may reverse. The market is a lot more likely to reverse at one of the lines rather than at a random point where buyers and sellers haven't traded very often in the past.

Talking about today's market... It was pretty much a neutral day. You could have expected that after all the fireworks on Friday. I hear a lot of hedge fund managers had their weekends ruined (via zero hedge) ! Regardless of the slow market, price did reverse and begin to make some headway in the afternoon. In the overnight session ES traded down to 1058.50 and reversed. I will be looking for that area as support tomorrow as well.

Buyers will be in control if they can get the market back up into the gap over 1076.00. But if sellers can push it down below 1057.00 its not going to have much support until 1040 area! Basically "Watch out below!" I try to keep the blog mostly about trading, but considering the headlines and crappy econ numbers out recently I am bearish going into this week. Maybe some good earnings will save us... who really knows just trade the charts. The rest is pretty much noise

-Nate

7-19-2010 One Trade One Winner

Good Afternoon Traders,

I wanted to make a quick post before I had to take my little one to the doctor. I was looking for the market to be churning around down here between 1060 and 1068. After the first strong bounce off support I looked for a pullback in price. When we got a nice one at 11:45 am est, I waited for the stochastic to cross and sine wave to paint blue and entered the trade. I also "tweeted" the trade on my twitter account @infected1172. since it was counter trend I use a smaller profit target, usually 6 ticks. When the stochastic looked to be forming a divergence I got out with +5. So 5 ticks on 2 lots = $125.

I will be back this afternoon after some errands. Might not make any more trades If my daughter still isn't feeling well. Look for an update tonight with key support and resistance levels along with a few trade ideas I'll be looking for tomorrow. Thanks for reading.

-Nate

7/15/2010 One Loss One Winner

Good evening traders,

The Market continues to be stuck in the same range as the last two days. All major support and resistance lines are still in play. In last night's post I mentioned that the market could fall to the 1075-1076 area if 1084 support was broken and that was exactly what happened. The Philadelphia fed survey came in way below expectations and buyers pulled the plug.

I started stalking a long when we neared support. As you can see on the following chart I was a little too early on the first entry but all was well in the end. The stochastic formed a divergence and when the sine wave painted blue support I pulled the trigger. The trade ran for the full two points but I only got 7 ticks. Anxiety was my downfall today if you couldn't tell !





One of the most important things about being successful in the market is proper money management. I only ever risk one point on my trades and I look for a target of two points. This is great because you can be wrong 50% of the time and still make $$$ !

Going into tomorrow I'm going to be very cautious. In fact I doubt I will trade at all. CPI is at 8:30am EST and you never know how the market is going to take the news. We closed pretty much unchanged on the day. It seems like the big money wants to see the numbers tomorrow before they put on a position. Volume has been fairly light all week, but it is summer. After CPI is released the big boys will be headed to the Hamptons and the market will likely chop around the rest of the afternoon. If you have to trade tomorrow just be careful not to over-trade. Get your money and get out. Good luck everyone

-Nate

7/14/2010 Neutral Day Wrap Up and Key Levels

Good Evening Traders,

As promised, I uploaded the 1200 tick chart. I marked the trades in white. today was a consolidation day or a neutral day. Whatever you want to call it, buyers and sellers were about even and volume was light. True to my prediction in the last post, the market made a rally into the close. It wasn't exactly parabolic but you can tell that the buyers wanted to close positive on the day (7th day in a row).

There were no divergence trades on the day. Around 2pm est there was a divergence on the stochastic but the sine wave was painting red and not blue, so no trade there.

As far as key levels, they are pretty much the same as yesterday. Just look at the 15 minute chart I posted earlier. I would be cautious on a break below 1084. There isn't much support until the 1076 area. The value areas on a volume profile chart are 1087, 1091-92, and 1074 below. I could post a volume profile but my charting has a copyright clause and I don't want to get involved with that!

As I am typing this (9:30 pm est) the market is trading around 1090 so we aren't getting many clues leading into tomorrow. Making a prediction for the open is a fool's game. I'll wake up tomorrow and do the same thing I do everyday, trade the price action. Good luck

-Nate

7/14/2010 Resistance Becomes Support

Good Afternoon Traders,

I wanted to make a post on how I find support and resistance levels in the market. The chart above is a 15 minutes candle chart with a MACD and Stochastic. I draw horizontal lines at gaps and at significant highs and lows. I leave the lines on the chart until they are no longer relevant. Its almost scary how often the market pulls right back or runs right into a previously drawn support or resistance line.

Resistance becomes support on the way up and on the way down, it's the other way around. The market is clearly in an uptrend now and as the saying goes "the trend is your friend". Longs are the trades I wanted going into today. Shorts for scalps only.

Today I was looking for a long around the gap test at 1084. Futures tested this line twice and both times rallied off the support. Its 3pm as I am typing this and I wouldn't be surprised to see us go parabolic into the close! Lets see how it goes. I'll update later with the 1200 tick chart to show you how my system spotted the entries.

7/13/2010 One and Done

Good afternoon Traders,

Imagine this for a second; You walk into a casino and put a five down at the blackjack table. The dealer gives you a Queen of Hearts and an Ace of Spades. Blackjack! You just won twenty bones! Now you turn around and walk right out of the casino and don't come back until the next day. Winning in the markets requires the same mindset! As soon as you are up for the day, walk away from the table. Then watch your account grow!

Today's trade was pretty straightforward. Short high, cover low. If you did your pre market homework you would have known that 94 would be initial resistance. That was also today's pivot point. I waited for the stochastic cross and kept an eye on the order flow. Buyers ran out of momentum and as soon as the sine wave painted a red dot I went short. Got a great entry too at 1093.50. The two point target was achieved in about 18 minutes.

Two points on two lots = $200. After the trade I went to the gym and now I'm going to pick up my daughter from daycare. Enjoy your day traders and look for an update tonight with key levels for tomorrow's trading day.

-Nate

7/12/2010 One trade

Today only saw one really good trade. The entry was at 2:06 at a price of 1074.50. this was a Simple stochastic divergence trade. price makes a higher high but the stochastic did not. The entry occurs when the red dots are painted. The two point target was achieved.

On a larger time frame, responsive buyers were present at the 1066-1068 area and as long as that holds the momentum remains to the upside. Its been a slow grind higher for more than a week now and there is no sense in fighting the trend. Good luck tomorrow traders.

-Nate

7/12/2010 UPDATES

I have been neglecting the blog for to long. I am going to attempt to make daily updates for a number of reasons.

1. It keeps me honest in my trading and I feel more accountable for my actions
2. Its educational for me and you. I retain information better when I write it down or teach it to others
3. Keep sharp. Its easy to get lazy. In trading, fitness, or life in general. adding the blog to my daily routine should help keep my focused.

I have been posting charts and trades on my Facebook. From now on I will send them to the blog. The market is moving as I type. Expect an update later

5/7/2010 Katy Please Stop

Watching Katie Curric report on the stock market is like getting my teeth pulled..

Listen Katy, the US Treasury redeemed nearly $600 billion in T-Bills in the month of April..However in these FIRST FOUR BUSINESS DAYS OF MAY ALONE they redeemed $144 billion in T-Bills!!!! Annualize this number Katy!! We are printing money hand over fist to support this PONZI SCHEME of a nation.. Now Katy let me ask you, what better way to raise demand for Treasuries than to stage an equity selloff??! BINGO! Spread rumors of greek contagion, scare people out of stocks and into treasuries. Its ok though we can't expect the average viewer to notice that the 10 Year was trading in the lower 3% range today. Just tell them someone hit "Billion" button in stead of the "Million". They will believe that..

Notice that last post calls a short about 95 S7P points ago. If I was a position trader with a 500k balance in my account I would be taking the rest of the year off on that call

4/28/2010 Good Short

Good evening traders,

The market looks ripe for a short in my opinion. we retraced back to the 61.8 Fib level right to the tick 1192.00.

First target would be 1186.00 then yesterday's lows 1176.50.

set the stop above 1195.00. Use extreme caution. Every dip has been bought since February this time may be no different.

Good luck

Nathan