How to trade the end of a trend move using John Ehlers Hilbert Sine Wave
The Emini closed up 19.00 points at 1,522.75 on Friday. Volume was very heavy at 2.0 million contracts traded - the largest volume since the low of 14 March 2007. On Thursday's post I said "We need to see the Emini bounce and then test today's lows before the next upswing starts." Got the bounce today, should get the test on Monday.
The chart above shows the Emini with 27 minutes bars (exactly 15 bars per day) and John Ehlers' Hilbert Sine Wave added. The break into a down trend is noted with a white dot (generated automatically with TradeStation EasyLanguage code) and then the move continues with no oscillator crosses.
Finally, we're about to get another cross of the Sine Wave oscillator. This is a pattern I call a "Complete" as it finishes the trend move. The same pattern can be seen on 45 minute bars. You can read more about this "Complete" pattern here, here and here.
We decided to go short at the end of Friday having seen this pattern form with Stopping Volume. We got short at 1,523.25 and have placed a 10 point profit target on half the position along with a stop loss order.
After the "Complete" pattern is finished the up trend is likely to continue:
- Composite Trend Oscillator has turned up
- Sine Wave has turned up on 135 minute bars
- Sine Wave is about to turn up on daily bars
- Crude Oil has weakened
- US Dollar versus Japanese Yen has strengthened
- Commitment of Traders report shows professionals are still long
Just a recap on last Friday's post about Trading Index (TRIN) divergence:
The chart above shows Friday's signal on the Adjusted Trading Index indicator (circled) and the corresponding Emini bar is marked (arrow). Any sign of weakness could have been used as an entry point, for example a break of the previous day's low. Following the signal we had a 40+ point decline in the Emini. These signals don't happen too frequently, but when they do they are worth following closely. Like this article? Sign up for Free Email Updates or subscribe to the RSS Feed.
Emini approaching John Ehlers' Hilbert Sine Wave turning point
The Emini closed down 17.25 points at 1,516.50 on Wednesday. We decided to take profits on our remaining short position in the September 2007 Emini contract at 1,532.00 for a gain of 22.50 points. This last trade has worked out nicely with half our position exited at the 10 point profit target and the remaining half exited after seeing exhaustion volume for a 22.50 point profit.
The chart above shows John Ehlers' Hilbert Sine Wave indicator which has been very accurate in timing the last few swings in the Emini. We're about to cross over (circled) and start looking for the beginning of an up move. However, we have yet to see climactic volume on the downside.
Although today's volume was heavy at 1.8 million contracts traded, most of that was in the early morning as the down move got underway. In addition the Adjusted Trading Index (TRIN) reading was -69 and did not reach extreme levels (< -100). So the Emini might not have bottomed quite yet.
How strong any upswing will be is the big question. Last week's Commitment of Traders reading was very positive. However, the bond market is extremely weak, as you can see in the chart above, and we've just passed the 20 day delayed turning point discussed previously.
In addition, the US Dollar / Japanese Yen exchange rate has just broken a significant upward trend line, circled in the chart above. This signifies a lack of confidence in US markets and overseas investors taking profits.
Remember Emini rollover day tomorrow and good luck in your trading. Like this article? Sign up for Free Email Updates or subscribe to the RSS Feed.
Emini Daily Update: End of Day Cycle Turn
The Emini closed down 0.50 points at 1,527.50 on Monday. The 135 minute chart above shows we got a cyclical down turn during the afternoon's sell-off. So we're short from 1,529.00.
The Hilbert Sine Wave tool pinpoints these turning points with remarkable accuracy. You can read about how it caught 10 out of 10 during last year's uptrend here.
A word of caution though, we're in a uptrend and so cycle down turns are likely to be made more slowly. The chart above shows the last cyclical down turn (series of white dots) took a while to form. Whereas the cyclical up turns (series of red dots) happened much more quickly. In the case of these slower down turns we could also see an exhaustion pattern, where the Emini over-shoots the cyclical turning point. We'll have to wait and see.
Good luck Emini trading this week. Like this article? Sign up for Free Email Updates or subscribe to the RSS Feed.
Emini Daily Update: Running Out of Steam?
The Emini closed up 7.25 points at 1,508.25 on Thursday. I'm getting tired of sounding like Chicken Little or the Voice of Doom. This rally seems endless and I keep seeing signs of weakness. Well it only goes to prove the old saying "trends always last longer and go farther than you expect them to."
Today we had lower than average volume and a small range of only 7 points, showing lack of demand. We should see a "Complete" pattern tomorrow with the Hilbert Sine Wave crossover. You can read more about this pattern in Tuesday's post.
Meanwhile the Dow powers ahead …
While the Russell meanders …
Emini Daily Update: Trend Oscillator Turns
The Emini closed down 18.75 points at 1,385.75 on Friday. Another high volume day with 1.7 million contracts traded, large range of 20.25 points and closed on the lows. Sounds pretty bad and all the weekend commentaries are talking about further falls. However, take a look at the following two charts.
The chart above is my composite trend indicator. I use 4 non-correlated, leading trend oscillators and combine them in this one composite Emini indicator. As you can see, it turned up on Friday.
The Smart Money oscillator, John Ehlers Hilbert Sine Wave and Open-to-Close oscillator have all now turned up. The only trend oscillator not to have turned up is the Trading Index TRIN oscialltor which is heavily oversold.
Remember, the objective of this blog and my swing trading is to identify Emini swing trades that last between 5 and 10 days. I have no idea where the market is going to be in 3 or 6 months time, but I focus on where the market might be at the end of this week or next. Also bear in mind that in down trends trend oscillators will signal up turns early and down turns on time.
The second chart above is a little more complicated - sorry about that. It shows John Ehlers Hilbert Sine Wave on a 45 minute chart of the Emini. Breakout trends are signalled with price fails to follow the turn points - as in the morning of 27 February.
Trend moves then usually finish with a final push - in this case labeled "FirstPB" (first pull back) and then "Complete". I have found that when price continues further past this "Complete" level it can reach an exhaustion level - labeled "Complete X" (complete exhaustion). Strictly speaking this happens when the "fast" (red line) in the oscillator passes above zero and price has continued further down.
So, we have the trend oscillator turning up and a 'complete exhaustion' pattern. Will the professionals step in on Monday after some panic selling and gap down open? Good luck Emini trading.
No Exhaustion Yet
The Emini closed up 9.75 points at 1,440.75 on Friday. Strong rally into the long weekend holiday after some profit taking on Thursday afternoon. Time for me to re-assess the market after taking profits and stepping aside on Friday. Also check out the new page all about the Trading Index (TRIN) and great indicators that can be built using the data. You can find the article here.
Red daily bar = Uptrend; Green daily bar = Downtrend
Emini direction?
The chart above best summarizes my thoughts on the overall market direction. This is the trusty John Ehlers Hilbert Sinewave plotted below daily Emini bars. We had the uptrend breakout on 18 August 2006 at 1,328.25. The dotted white line represents this level and is automatically plotted by TradeStation.
Since then a long Elliott wave 3 with no Sinewave crossovers (no cyclical component) until 4 January 2007. The dotted red line (somewhat difficult to see) at 1,416.50 represents this support level and is the beginning of a final Elliott wave 5. The completion of this move will be signaled when the Sinewave crosses at the top of its current upswing (or shortly afterwards).
The market certainly feels over-bought at the moment. Two of my four trend oscillators are at their highs. In addition, the bond market is not supporting the current uptrend and that's a worry.
However, none of my four exhaustion indicators have signaled a top. No Trading Index (TRIN) divergence, Dow NASDAQ divergence, price or volume pattern. And the Hilbert Sinewave and Smart Money oscillators are saying "not yet". So probably time to buy pullbacks, shoot for smaller profits and keep watching day-by-day.
New page on Trading Index (TRIN)
Spent some time over the long weekend writing a new page all about the Trading Index (TRIN) and some unique indicators that can be built using this non-price market data. You can find the article here.
Thursday 28 December 2006John Ehlers Sine Wave Crossover
The Emini closed down 3.25 points at 1,433.75 on Thursday. Small range, low volume, inside day. Although there was a cyclical top today the end of day buying may see a bounce tomorrow.
The Emini opened down 0.75 points at 1,436.25. The market was volatile making a "w" pattern - down, up, down again and then up again. The low was 1,432.00 and high was 1,438.00, making the daily range only 6.00 points. The market eventually closed at 1,433.75 after a relatively large volume rally at the end of the day. Total daily volume was below average at only 0.4 million contracts traded.
John Ehlers Hilbert Sine Wave indicator
We've had 10 profitable sine wave crossovers on the long side. Now if we're at the beginning of a correction down wave this is the first cross over on the short side. The Emini has been in a long uptrend since July which is a classic Elliott wave 3. This wave should end with a downside Elliott wave 4 that will bottom and then turn into a final blow off Elliott wave 5 to the upside. I believe this fourth wave has begun but is being held up by end of year "window dressing" by fund managers. Once into the New Year we should see this fourth wave to the downside proceed.
If you'd like to get the code for John Ehlers sine wave indicator click the image below to check out his latest book.
Hilbert Sine Wave 10 Out Of 10
The Emini closed up 11.75 points at 1,438.25 on Thursday. Explosive up move today and profitable cycle trade from Monday - that makes it 10 out of 10 and 132 points since 8 August. Follow up to Monday's post below.
The Emini opened down 0.50 points at 1,426.00, barely made a low at 1,425.75 then exploded out of the blocks. Huge first 45 minutes on very large volume - the most volume we've since in a 45 minute period since the beginning of this rally in June. For the rest of the day the market continued to edge up, reaching a high of 1,440.00 and eventually closing near the highs at 1,438.25. Range for the day was well above average at 14.25 points and so was volume traded.
Cycle indicator follow up
The chart above is a 135 minute chart of the Emini (day session only) - the same one used for Monday's post. I've squeezed up the bars a bit to show data since the end of July. Below the bars is the John Ehlers Hilbert Sinewave - an adaptive cycle indicator. Cycle lows are indicated with the red line crossing above the cyan line and vice versa for cycle highs. These crossing points are also indicated on the 135 minute bars with red and white dotted lines. TradeStation automatically draws a red dotted line at the cycle lows and a white dotted line at cycle highs.
On Monday we had a cycle low crossing and today we had a cycle high crossing. Entering on the first open after the up crossing (1,426.75) and exiting on the first open after the down crossing (1,436.75) would have netted 10.0 points profit. You would have had to take some heat during the trade - about 10 points worth - but it would have resulted in a profitable trade.
In fact, since 8 August there have now been 10 profitable trades in a row - total profits 132.25 points using the first open after the crossing points for entry and exit. An average profit per trade of over 13 points. Not bad stats considering the total up move since August has been 143 points (1,295 to 1,438). Each of these trades is shown on the chart above - enter at the red dotted line and then exit at the white dotted line. This isn't the holy grail but just shows the power of this cycle indicator.
Distribution under way?
The high volume and range today gave the professionals a great opportunity to take profits. This is a perfect overbought level to see the start of the Wave 4 correction mentioned yesterday. Look for signs of distribution over the next couple of days.
Click the image below to read all about John Ehlers latest book.
Setting Up for Elliott Wave 4
The Emini closed up 1.50 points at 1,426.50 on Wednesday. Wild couple of days after a very dull 5 days of consolidation. The long term trend pattern looks like it's coming to an end with a Wave 4 setup. Check out the chart below.
The Emini gapped up 5.0 points at 1,430.00 and profit taking immediately set in. The high was quickly set just 0.5 points above the open at 1,430.50 and followed by over an hour of selling down to the low at 1,423.00. The market then bounced up to retrace over half this selling range. Then the Emini tested the lows on small volume before some high volume buying in the last hour. The market eventually closed at 1,426.50. Range for the day was below average at 7.50 points and volume was average at about 1.0 million contracts traded.
Cycle indicator and Elliott waves
The chart above shows John Ehlers Hilbert Sinewave indicator. This indicator was used in my last post on a 135 minute chart to show this last cycle low. In this case the indicator is being used on a daily chart. The indicator has 2 benefits:
- It dynamically adjusts and usually signals cycle highs and lows early
- When price starts trending the indicator lines no longer cross, until the trend ends
As you can see in the chart above the last cross of this indicator was on 17 August, when the Emini changed into an uptrend pattern. I indicate these cross levels on the daily bars with the white and red dotted lines - these often act as support and resistance as the move continues.
These trend moves (Elliott wave 3) eventually come to an end with the indicator starting to show cycle swings again. The rise over the last 2-3 days should come to an end very soon, hit a high and then retrace (Elliott wave 4). Look out for this over the next few days.
Click the image below to read all about John Ehlers latest book.
Wound Up with Cycle Low
The Emini closed up 4.50 points at 1,426.75 on Monday. Total range over the last 5 days has been less than 16 points and the Emini is wound up and ready to break. Continued strength all Monday after some initial profit taking. So which way are we going to break?
The Emini opened up 0.25 points at 1,422.50, made a quick low of 1,421.50 then raced ahead in the first hour on large volume to hit a high of 1,429.25. The rest of the day was spent profit taking but the Emini stayed strong and closed at 1,426.75. Range for the day was below average at 7.75 points and volume was below average at 0.8 million contracts traded.
The market has consolidated over the last 5 days and today's close was just above the mid-point of this 16 point range. Large volume was traded during the first hour as professionals took advantage of over-eager non-professionals by taking profits. However, this was not followed by widespread selling - in fact, the Emini stayed surprisingly strong with small volume and low range bars. We're now set up for a break and a large range day - no doubt everyone is waiting for the Fed announcement on Tuesday afternoon to determine the direction.
Cycle low using 135 minute bars
The picture above is a 135 minute chart of the Emini. I use 45, 81 and 135 minute charts intra-day as they break the trading day into equal parts. The trading day lasts 405 minutes which is 3 x 135 minutes, 5 x 81 minutes or 9 x 45 minutes. The indicator at the bottom of the chart is John Ehler's Hilbert Sinewave - a cycle indicator.
This indicator has done a good job of signaling cycle lows during the market uptrend. Since 8 August there have been 9 crosses of this indicator and every one has resulted in a profitable trade. However, as the trend reaches exhaustion the likelihood that these signals will be successful diminishes. That will also be a good sign that the Emini uptrend has come to an end. In the meantime, just follow the trading signals and keep a tight stop.
Click the image below to read all about John Ehlers latest book.
Reader Comments
Emini Trading Tutorials
- A Better TRIN Indicator
- Better Volume Indicator - My Secret to Analyzing Volume
- "Big Money is in Big Moves" - Trading with Trend Lines
- Bond Market Analysis
- Commitment of Traders & Following the Professionals
- Emini Futures - The Facts
- Hilbert Sine Wave - Don't Trade Cycles Without It !
- Stopping Volume Pattern
- Trading with the Better TRIN Indicators
Emini Trading by Topic
- Bond Market (8)
- Commitment of Traders (55)
- Cycle Analysis (5)
- Doji Candlestick (5)
- Elliott Wave (1)
- Hilbert Sine Wave (16)
- John Ehlers (11)
- Larry Williams (5)
- Multiple Time Frames (2)
- Nasdaq & Dow Jones (6)
- Put Call Ratio (5)
- Smart Money Index (9)
- Support & Resistance (1)
- Trading Book Reviews (1)
- Trading Psychology (3)
- Trend Lines (19)
- TRIN Indicator (36)
- Volume Indicator (19)
- Volume Patterns (19)
Search
Recommended Sites
- INO-TV - Learn to trade - Online videos from dozens of trading gurus - Fantastic
- Interactive Brokers - Superb trading platform - Low rates - Global market coverage
| M | T | W | T | F | S | S |
|---|---|---|---|---|---|---|
| « Apr | ||||||
| 1 | 2 | 3 | 4 | |||
| 5 | 6 | 7 | 8 | 9 | 10 | 11 |
| 12 | 13 | 14 | 15 | 16 | 17 | 18 |
| 19 | 20 | 21 | 22 | 23 | 24 | 25 |
| 26 | 27 | 28 | 29 | 30 | 31 | |
