Oscillators - What happens when 3 non-correlated oscillator signals converge?
The Emini got thumped today, closing down 22.50 points at 1,520.00. The 3 non-correlated oscillators featured had all peaked in the last couple of days.
Oscillator #1 - Trading Index (TRIN)
The chart above shows the Trading Index Oscillator. It is based on TRIN data from the NYSE and NASDAQ and uses volume and the number of advancing/declining issues, not price. The Oscillator peaked on Friday and turned down on Monday, giving an early signal. This is one of my most reliable and useful oscillators. You can read more about the TRIN Oscillator here.
Oscillator #2 - Hilbert Sine Wave
The chart above shows John Ehlers' Hilbert Sine Wave. This oscillator is based on price and extracts trend and cycle information from any data stream. The fast line crossed below the slow line on Friday. This oscillator can signal too early and so I use a break below the previous bar's high or low for an entry signal. You can read more about the Hilbert Sine Wave here.
Oscillator #3 - Smart Money
The chart above shows my "improved" version of the Smart Money Oscillator. This oscillator analyzes market activity in the last hour of trade. It is the slowest of the 3 oscillators, however, it doesn't suffer from whipsaw signals. It peaked on Monday and then turned down today - a good confirmation signal. If you read some of my previous articles about the Smart Money Oscillator here, bear in mind that I recently improved the code to give sharper peaks and clearer signals.
So 3 oscillators, all based on different data (non-correlated), all turning within a day or two and we get a 22.50 point move.
Where to from now? My best guess is that this correction will not be very severe. The latest Commitment of Traders Report was very bullish and professionals will take advantage of any panic selling. Good luck with your Emini trading. Like this article? Sign up for Free Email Updates or subscribe to the RSS Feed.
Composite Trend Oscillator shows Emini is overbought
The Emini closed down 1.75 points at 1,546.00 on Monday. Volume and range were both well below average today at 0.8 million contracts traded and 7.25 points respectively. The gap left between Thursday and Friday has still not been filled.
The chart above shows the Composite Trend Oscillator. This indicator combines my favorite trend oscillators (TRIN, Open-Close, Smart Money Index) into a single indicator. Today's reading was +144 and shows the Emini is overbought.
We're at a critical juncture in the market. Friday's high was less than the high made at the beginning of June. In addition, Friday was a high Volume Churn day, showing profit taking. Crude oil has broken above $68 and the Emini is overvalued against the Bond market. All bearish signs.
However, on the positive side, the latest Commitment of Traders Report shows Professionals are still long and the strong US Dollar versus Japanese Yen shows foreign investors have been buying into US markets.
The Emini seems trapped between closing the gap at 1,542 and touching June's high at 1,559. My best guess is that we'll need to see some form of blow off volume before the market starts the next downward leg. Like this article? Sign up for Free Email Updates or subscribe to the RSS Feed.
Emini Daily Update: Smart Money Just Turned
The Emini closed down 2.25 points at 1,512.000 on Tuesday. Below average volume at 0.9 million contracts traded and below average range at 9.00 points. We had a gap down and initial sell-off that lasted 45 minutes. Then the Emini rallied most of the day until it reached resistance at 1,514.
The Composite Trend Oscillator continued up today and reached +114. However, the Smart Money Oscillator turned down as you can see on the chart below. The Smart Money Oscillator is usually a little slower than my other trend indicators to turn, so I'm interested to see how things turn out tomorrow. You can read more about my version of the Smart Money Oscillator here.
Please Note: I've improved the EasyLanguage code to give sharper turning points and the indicator is no longer called Secret#3.
Quick update on John Ehlers' Hilbert Sine Wave. We got the "Complete" pattern mentioned the other day. The Sine Wave has headed quickly below zero and should cross again in the next couple of days.
Good luck Emini trading and remember the Fed announcement tomorrow afternoon. Like this article? Sign up for Free Email Updates or subscribe to the RSS Feed.
Emini Daily Update: Smart Money About to Turn
The Emini closed up 1.75 points at 1,419.50 on Monday. The market continues to bounce between 1,410 and 1,424 on above average volume over the last 2 days. My four trend oscillators are almost all over-bought but yet to turn down.
The chart above shows my version of the Smart Money Index, labeled 'Secret 3'. As you can see it caught the last upswing nicely, turning before the Emini bottomed. It has now reached a level of +222, the highest level since April 2003. However, despite being over bought it is yet to turn down.
The chart above is a little out of my usual commentary but I thought might be of interest. It shows the Shanghai Stock Exchange Index over the last 3 to 4 months. Two weeks ago we had the Chinese market collapse with a 9% downward move. Since then the market has retraced two thirds of this loss, all in the space of 5 days!
Trend moves followed by retracements like this are often symmetrical. We could see another downward leg of similar magnitude to the original 9% move, which would take the Shanghai market to below 2,700. This continuation move would no doubt have an impact on the Emini and maybe see us retest the 1,380 level.
Friday 9 February 20074 Leading Trend Indicators
The Emini closed down 11.00 points at 1,442.75 on Friday. This large range, high volume move now confirms the next down swing has begun. I've been waiting for this since the beginning of the month.
I thought it might be helpful to compare the timing of signals from my 4 trend indicators. So here are charts showing each of them with turning dates so you can judge for yourself how "leading" they are.
And apologies for so few posts over the last week - I'm snowboarding in Japan.
Trading Index (TRIN) Oscillator - Turned down Thursday 1 February
John Ehlers Hilbert Sine Wave - Turned down Monday 5 February
Open Close Indicator - Turned down Tuesday 6 February
Smart Money Indicator - Turned down Thursday 8 February
Good Emini trading.
Smart Money Index Yet to Turn
The Emini closed down 2.00 points at 1,420.50 on Tuesday. The market has bottomed, as anticipated last Friday, and so far support at 1,415 is holding. However, we're yet to see a significant breakout to the upside. Update on the Smart Money indicator today. Check out the chart below.
Smart Money indicator
The Smart Money indicator (my version called "Secret 3") is shown on the chart above. We've reached a heavily oversold value of -112 on Tuesday. The last time we saw such an oversold reading was mid July 2006, at the beginning of the last uptrend. This indicator usually starts to move early with trend changes, but because there was some profit taking at the end of yesterday's trading the indicator has not turned up yet. Disappointing.
In addition, Emini cyclical indicators on the 81 minute (5 bars per day) and 135 minute (3 bars per day) time frames are about to turn down and so we might have to wait for a break to the upside. The overnight market is also showing weakness. However, my overall analysis still points to a trend change and a final upward Elliott wave 5 move.
Apple's iPhone
The NASDAQ is showing strength and it will be interesting to see if Apple will lead the broader tech group higher. Today saw record volume on AAPL and a close within cents of its record high - all driven by their announcement of the iPhone.
If AAPL closes down tomorrow then today was a selling climax and that volume was profit taking. But if the advance continues, new highs will follow and other tech stocks could follow. If you haven't seen Steve Jobs' iPhone presentation then check it out on www.Apple.com. As a die-hard Treo user I'm itching to see if the touchscreen keyboard is as good as he made it look.
Smart Money Still Down
The Emini closed up 8.50 points at 1,428.75 on Tuesday. Low volume bounce today but all trend indicators are still down. Check out the Smart Money indicator chart below.
The Emini opened up 0.75 points at 1,421.00, made a quick low at 1,420.75 then raced ahead in the first 30 minutes. The market then settled down and slowly ground higher for the rest of the day. The high reached was 1,429.50 and the close was just off the high at 1,428.75. Range for the day was close to average at 8.75 points but volume was very low at 0.3 million contracts traded.
All my trend indicators turned down after 16 December and although they are reaching over-sold levels none have turned back up. Today is likely to be just a low volume bounce before new lows are made and large buying volume comes back into the market.
Smooth Smart Money indicator
The chart above is of the Smart Money indicator, labeled Secret #3. Just a recap, this indicator measures professional activity by comparing the last hour’s trade with the rest of the day. As we’ve said before, the professionals or “smart money” trade later in the day, while non-professionals are more active at the open. The beauty of this indicator is that it leads the market and the turns, indicating trend change, are very smooth with little whipsaw action.
The indicator signaled Emini weakness in mid-November and mid-December. It also picked out good buying opportunities in this extended up market at the beginning of November and beginning of December. The Smart Money indicator readings at these turning points were -61 and -47. Today's reading was only -23 and so we might have a couple more days to go before reaching true over-sold levels.
Downward Break
Sharp downward break today after a very quiet Thanksgiving Holiday week. The Emini closed down 19.50 points at 1,383.50 on Monday. Finally got the break we were looking for. Hope everybody was short and made good profits today. Smart Money indicator discussed below.
The Emini opened down 1.25 points at 1,401.75. Almost immediately the market traded down heavily, there were no pullbacks and the market reached an eventual low of 1,382.75. The Emini then closed on the lows at 1,383.50. Range for the day was 20.0 points, almost double the daily average, and volume was very high at 1.6 million contracts traded.
All my trend oscillators have now turned down and what we are seeing is a down move (4th wave) that will set up the final (5th wave) up leg during December. The chart above shows my version of the Smart Money indicator - I call it my Secret Weapon No. 3. I haven't shown this indicator since the middle of October. As you can see it started to turn down mid last week and added to the mounting evidence of the end of this last uptrend.
Smooth Smart Money indicator
What next?
The Emini closed on the lows and buying volume was not very convincing at the end of the day. There is likely to be some consolidation after this large range day, but I don't believe a final low was put in today. We’ll have to see how tomorrow pans out and if we get a further downside move before a significant retracement.
Friday 13 October 2006Smart Money Turns
Market advances but Smart Money turns. The Emini closed up 2.75 points at 1,373.50 on Friday. The market continued its advance today but with only a small rise and weaker volume. Are the professionals taking profits?
Follow the Smart Money
In previous articles I’ve mentioned the importance of tracking professional buying and selling. For example, the Larry Williams Oops pattern identifies professionals taking advantage of non-professionals at the market open. Then there's my Secret Weapon No. 2 indicator that uses the difference in opening and closing prices to quantify professional and non-professional market activity.
Today, I’d like to introduce another indicator that measures the professionals. Instead of using the opening price or differences in open and close prices, it uses the last hour of trade to gauge professional buying or selling.
We can do better than the Smart Money indicator
This idea is not a new one and an indicator already exists that compares the first hour’s trade with the last hour’s trade. This indicator is called the Smart Money indicator and refers to non-professional trading during the first hour as “dumb” money and professional trading during the last hour as “smart” money. I've taken this indicator and refined it further to get what I believe is a better measure of market swings.
The mathematics of my Secret Weapon No. 3 indicator are not easy to explain without going into some detail. Besides, I'd rather keep it to myself. However, I can tell you that I just use the last hour’s trade rather than both the first and last hour of trade. Anyway, the indicator is plotted on the chart above and labeled Secret 3.
This is one of my favorite indicators because it turns in advance of the market. As you can see, over the last couple of days the indicator has begun to turn down and shows that professional buying pressure is declining and they are taking profits. Let's see how this indicator does in predicting the market over the next few days.
Don’t use this indicator alone
Remember, combining a number of non-correlated market indicators and patterns will help you identify high probability turning points.
Do a Google search for Smart Money indicator to get more information.
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 | |
