Just a quick post today on the Hilbert Sine Wave. My primary time frame for swing trading the Emini is the 135 minute chart (exactly 3 bars per trading day). On Monday we got a cross-over in this time frame and the completion of the down trend move. See the chart below.

Hilbert Sine Wave 135 minute

I have written before on these Hilbert sine wave "complete" moves. They signal the end of a trend move which is usually followed by a retracement and a return to cyclical trading patterns.

The key point is my post on Friday about Stopping Volume and strength returning to the Emini market was too early – I should have waited for the 135 minute Hilbert sine wave to cross and this down trend to "complete".

Good luck with your trading.

The Hilbert Sine Wave crossed on Friday and signaled a cyclical turn down. The 135 minute chart is my primary time frame for swing trading the Emini. In the last year the 135 minute Hilbert Sine Wave had been invaluable in identifying turning points. Here's Friday's chart:

Hilbert Sine Wave on 135 Minute Emini Chart

Emini cycle highs and low played out nicely from the end of August to mid September. Then we had the Fed Rally that took us into a Trend mode. This Trend moves typically ends with a pull-back followed by a Completion move. These Completion moves are labeled "END" automatically using TradeStation code.

The Completion move does not mean we're in a down trend now. Far from it. Looking at the higher time frames (daily and weekly), we continue to be in an up trend. However, it does mean that tradeable Cycle moves should return to the market.

Given we're in an uptrend the Cycle Lows should be better entry points than Cycle Highs. But I'll still take the Short signals that the Hilbert Sine Wave gives.

Hilbert Sine Wave (Emini 135 min)

The Emini has already retraced 50% of Tuesday's drop. Monday's close was 1,542.50, Tuesday's close was 1,520.00 and today's close was right in the middle at 1,531.00. In yesterday's Emini update I guessed that the correction was not going to be very severe. Right now it looks like it was a one day event.

Will the rally continue? My primary time frame for swing trading the Emini is the 135 minute chart (exactly 3 bars per trading day). In that time frame we're about to have a cross-over in the Hilbert Sine Wave. The chart is shown above. My best guess is that the cross-over is early and we will retrace and consolidate tomorrow.

The Hilbert Sine Wave (courtesy of John Ehlers) has done a remarkable job at catching turning points in the Emini. A long string of successful trades is discussed in this post (10 out of 10). In the chart above you can see the first 5 turning points are nailed, although the last 2 did overshoot with early cross-overs. You can read more about John Ehlers and the Hilbert Sine Wave here.

Hilbert Sine Wave (Emini 27 min)

In Friday's post we were expecting a pull-back trade based on the John Ehlers' Hilbert Sine Wave on the 27 minute Emini chart. We got the pull-back but it came with a slight overshoot, shown on the chart above.

The next time frame up, 45 minutes, had the same pattern and nailed the turn exactly. Check out the chart below. We're also about to see an upward turn in the Sine Wave which would signal a "Complete" pattern in this time frame – and an end to this down trend move.

Hilbert Sine Wave (Emini 45 minute)

We're short from 1,523.25 and took profits of 10 points on half the position at 1,513.25. Yes, we took some "heat" on this trade – 8 points worth. But you have to be able to stand the volatility without it knocking you out of a good trade prematurely. That's the way I trade at least. It doesn't suit everyone and I'm sure there are traders out there who nailed the exact turn at 1,531 (take a bow IndexTraderBlog).

Anyway, open profits on the second half of the position stand at 18 points, in after hours trading, and stops have been lowered to break even. The question is what to do now – take profits or wait and see if the Emini falls through 1,503? For me the most interesting part of Tuesday's trading was the volume – 2.4 million contracts traded, according to TradeStation data. This is huge, almost two and a half times average.

Volume Indicator (Emini 135 min)

The chart above shows the volume was largest during the last 135 minutes of trade, when the Emini dropped 20 points. This should have been a "test" down into recent lows and resulted in smaller volume if supply had truly dried up and the market was ready to move up. Instead we got almost panic selling. Frankly, I'm in two minds – I'd like to take profits but we could easily fall off the edge and drop below 1,500.

The Emini closed up 3.50 points at 1,492.75 on Tuesday. Large volume buying came in during the first hour and a half of trading and the Emini bounced off the rising trend line at 1,482. Check out the daily Emini chart below – remember all the trend lines are drawn automatically and not added after the fact.

Trend Line (Emini daily)

Going forward the 1,482 level will be critical. If we continue to trade above this level we are likely to see a Hilbert Sine Wave "Complete" pattern (similar to an Elliott Wave 5). This pattern is repeated again and again in every market and in every time frame.

First we get a Trend Break (either up or down). This is followed by a Pull Back in trend which then finally resolves with a "Complete" move. The end of February sequence is annotated on the chart below as well as the current Trend Break Up and today's Pull Back.

Hilbert Sine Wave (Emini 135 min)

Good luck trading this week and watch the 1,482 level closely.

The Emini closed up 1.50 points at 1,448.50 on Wednesday. Volume was very low today at 0.8 million contracts traded and the 1,451 level provided resistance for a second day. However, a cyclical turning point has been reached in the John Ehlers Hilbert Sine Wave indicator, shown on the chart below. Volume will probably be low again tomorrow with the Easter break and there might be some profit taking.

Hilbert Sine Wave (Emini 135 min)

From a technical perspective the Emini looks very strong. The Composite Trend Oscillator, mentioned in the last post, is still pointing up. We've had a trend line break with gap up. The Emini is sitting just under 1,451 and looking able to close the previous gap down in late February (1,451 to 1,460). Lastly, the US Dollar has strengthened against the Japanese Yen, showing overseas investors willing to buy US financial assets.

However, the Emini trend could change next week. By mid-week the Composite Trend Oscillator will be in the over-bought region. The Bond market has been in a downturn for the last 3 weeks and the Emini is over-valued against Bonds. In addition, the middle of April is usually quite weak from a seasonal perspective.

Good luck Emini trading.

The Emini closed up 9.75 points at 1,401.75 on Wednesday. The Trading Index (TRIN) bullish divergence discussed yesterday worked out. The Emini found resistance around the 1,380 level and eventually closed up on high volume.

Read the original Trading Index article here.

Hilbert Sine Wave (Emini 135 min)

The chart above shows John Ehler's Hilbert Sine Wave on 135 minute bars. The Emini has now made a "Complete" pattern. This signals the end of the trend move and the beginning of a cyclical trading phase. Note the Sine Wave nailed the low.

The trend move started with a breakout, labeled "No Pattern BO" and circled. Then there is a strong trend move – Elliott Wave 3. Next a pullback in trend, labeled "FirstPB" and circled – Elliott Wave 4. Finally an exhaustion move or Elliott Wave 5, labeled "Complete" today.

Good luck with your Emini trading.

The Emini closed up 12.00 points at 1,417.50 on Thursday. Pullback on lower volume today and a cyclical top approaching on the John Ehlers Hilbert Sine Wave. Volume on the Emini today was only 0.9 million contracts traded.

Hilbert Sine Wave (Emini 135 min)

The chart above shows the Hilbert Sine Wave oscillator on 135 minute Emini bars. There are exactly three 135 minute bars in the trading day. The Sine Wave oscillator is about to make a cyclical top. This is usually the final leg of a trend move which I normally call a "complete" move.

The trend downward started last Monday 26 February 2007 with the break below support at 1,464 and shown with a white dot. These trend moves usually finish with a final thrust down signaled by a cyclical turn. It doesn't always work out this way – sometimes the market continues higher for a final exhaustion move. So let's see what happens tomorrow.

Good luck Emini trading.

The Emini closed up 3.75 points at 1,437.00 on Friday. Inside day with high churn, neutral Trading Index (TRIN) and unable to break resistance at 1,438 today. The Hilbert Sine Wave pattern that started in August finally "completes" today. Check out the chart below.

Hilbert Sine Wave (Emini daily)

FirstPB = First Pull Back and Complete = Trend Completion Pattern

Previous posts have gone into some detail about John Ehler's Hilbert Sine Wave oscillator. The pattern I see repeated again and again in multiple time frames, on multiple securities is shown on the chart above. It has several parts:

1. Breakout into trend mode – the oscillator crosses and signals a cyclical turning point but the market continues in the direction it has being going (in August the Emini kept on going higher)
2. Trend advance similar to an Elliott wave 3 – the oscillator lines refuse to cross and the trend mode is confirmed (lasted all the way from August to December for the Emini)
3. Trend mode ends with a correcting Elliott wave 4 pattern that finishes with a cyclical turning point – I label these points "FirstPB" (or First Pull Back)
4. Finally the whole pattern ends with an Elliott wave 5 and a cyclical turning point that I label "Complete"
5. After the move has "completed" it can sometimes continue further until exhausted but at this stage the market has moved from trend mode into cyclical mode and stays in cyclical mode until another trend starts with another breakout

The patterns are all added to the chart automatically using TradeStation EasyLanguage. Too complicated? Maybe but it helps me identify when cyclical indicators are more likely to work than trend with pullback indicators.