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
Thursday, October 21, 2010
Wednesday, October 20, 2010
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
Tuesday, October 19, 2010
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
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
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
Monday, October 11, 2010
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
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
Thursday, October 7, 2010
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.
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.
Wednesday, October 6, 2010
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
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
Monday, October 4, 2010
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
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
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