The Emini closed up 13.00 points at 1,409.00 on Wednesday. The range was still high at over 20 points and so was the volume at over 2 million contracts traded. This indicates there is still a good deal of selling volume that needs to be absorbed. But the Emini was up and today's low was 9 points above yesterdays climactic selling low – the professionals are buying.

Volume Indicator (Emini daily)

We need confirmation that all the sellers have sold before a stronger upswing. This confirmation will come with either a high Volume Churn (low range) day or a spike down on low volume. Neither have happened yet and so expect the market to continue to test the lows around the 1,400 level.

The chart above shows the daily Emini bars with Volume Indicator and Volume Churn plotted below the price action. Remember, Volume Churn is Volume divided by Range and we only had an average reading today.

Good luck with your Emini trading.

The Emini closed up 9.00 points at 1,443.25 on Wednesday. The Fed meeting announcement lit a fire under the market and we saw a new high of 1,446.75. My profit target got hit on the way up – thank you very much – but my conservative call yesterday meant I missed a further 8 points of profit potential.

Profit taking set in at the end of the day with a classic Volume Climax and Volume Churn pattern. With professional selling coming in above 1,444 the market will find it hard to advance without re-grouping first.

Volume Indicator (Emini 81 min)

The chart above shows an 81 minute chart of the Emini. Again, I use 81 minutes because there are exactly 5 of these bars in an Emini trading day. The Volume Climax and Volume Churn patterns are automatically added by the magic of TradeStation EasyLanguage and some simple code. I define Volume Climax and Churn as follows:

        Volume Climax = Volume x Range

        Volume Churn = Volume / Range

The Fed meeting announcement caused a surge in volume and range on the penultimate bar of the chart – Volume Climax. The professional sellers then took hold and stopped the Emini rising further. With high volume and narrow range the Volume Churn reading then spiked. The result, a classic Climax & Churn pattern.

Other considerations

Other reasons I'm not confident of a further advance for the time being:

• The last 2 days have seen the Dow making stronger advances than the NASDAQ
• Possible Trading Index (TRIN) divergence pattern with a new high but weaker TRIN reading than 24 January
• My Smart Money indicator is behaving very weakly and has not risen above 0 for the last 7 trading days

Good luck with your Emini trading.

The Emini closed down 17.00 points at 1,429.25 on Thursday. What a roller coaster couple of days! The trending phase of the market is definitely over and we are now in a cyclical phase where the market tries to decide which way to trend next. Let me show you how the Volume Churn indicator can help to highlight market turning points.

Volume Indicator (Emini 135 min)

The chart above shows 135 minute Emini bars plotted with the Volume Churn indicator below. I use 135 minute bars in this case because there are exactly 3 of these bars each normal trading day – morning, lunchtime and afternoon if you like.

Remember Volume Churn is simply Volume divided by Range. High Volume Churn at market highs signals a large number of sellers coming in and preventing prices rising any higher and so limiting the bar's range. High Volume Churn at market lows signals a large number of buyers coming in and preventing prices falling further and so also limiting the bar's range. High Volume Churn is shown with red histogram bars and also text automatically plotted on the chart.

Looking back at the last week…

• On Friday (19th) we had 2 high volume churn bars, signaling the market had sellers coming in and preventing the market rising.
• Then on Monday morning (22nd) the market collapsed – a nice short trade if you caught it! But then during lunchtime and Monday afternoon volume churn was high again, signaling buyers were coming in and preventing the market falling further.
• We then had a 2 day rally during Tuesday (23rd) and Wednesday (24th). At the end of Wednesday we had high churn again, signaling sellers coming in and preventing the market rising.
• Then today Thursday (25th) the market collapsed – another nice short trade if you caught it!
• Now, once again, this afternoon we had a very high volume churn reading. Chances are, the Emini will find it hard to fall further with buyers coming in between 1,425 and 1,430.

Although today felt like the bulls finally capitulated, all is not as it seems:

• High Volume Churn at the end of the day showing buyers coming in
• Despite the sharp drop in the market the Trading Index (TRIN) was only neutral at 1.41 (range -100 to +100)
• Climax down day with 1.4 million contracts traded, the largest volume traded since 1 December 2006

With the bond market in decline and professionals heavily short (Commitment of Traders) I still believe the prolonged up trend in the Emini is over. So time to trade the cycles.

Good luck with your Emini trading.

The Emini closed unchanged at 1,438.25 on Friday. Opening gap up and distribution day today, particularly on the NASDAQ index. Expect weakness on Monday and we'll have to see how far this goes. Discussion of volume churn, bonds, oil and Trading Index (TRIN) today.

Volume Indicator (NASDAQ daily)

The Emini gapped up 3.50 points on the open at 1,441.75. The market then continued to crawl slowly higher eventually reaching a high of 1,444.25 at 10am. The market then retreated steadily all day, reaching a low of 1,437.50 and eventually closed unchanged at 1,438.25. Range was low at only 6.75 points and volume just below average at 0.9 million contracts traded.

Classic Larry Williams Oops pattern today. Gap open up, then fell through yesterday's high of 1,440.00, which would have been the short entry point, then continued lower. The usual exit would be a bailout – first profitable open – so Monday's open, assuming it's below the entry point of 1,4400.00. The pattern takes advantage of over-anxious non-professionals trying to enter too late in the trend. This patterns work out particularly well when the market is over-extended.

NASDAQ distribution at highs

The daily chart above is of the NASDAQ index, which closed at 2,457. Not quite a reversal bar on Friday, which would have required the close to be below yesterday's close, but it doesn't look healthy! I swear that looks like a double top. And the NASDAQ and Semiconductor indices have both been under-performing the Dow. Typically these move up first in a new uptrend and then at tops they are weaker than the Dow.

Of more interest is the histogram plotted below the daily bars. This is "churn" or volume divided by range. As you can see it was the highest since mid October. I color the bars red when they are at the highest level in the last 20 days. No particular significance of 20 days – just a typical cycle length for the Emini.

High churn in mid-October and mid-November both led to declines. And now we have high churn in mid-December. There's that 4 week period of 20 trading days – like I said, just a typical stock market cycle length.

Bonds, Oil and Trading Index

Other confirming indicators:

• Bonds got slammed down on Friday after jumping up as response to CPI
• My Trading Index (TRIN) oscillator, that measures momentum, is overbought
• Oil prices making higher lows – $57 in November, $60 at beginning of this week, now at $63

Good luck with your Emini trading.

The Emini closed up 13.75 points at 1,402.25 on Wednesday. We passed the 50% retracement level of 1,395 today with surprising strength. So was Monday a "one day sell off"? Time to time a closer look.

Volume Indicator (Emini daily)

The Emini gapped up 4.50 points at the open and stayed up. It made a shallow low at 1,392.25 and then kept going. The high was 1,403.50 and eventual close at 1,402.25. Range was large at 13.75 points and volume above average at 1.3 million contracts traded. A "gap range day" showing surprising strength.

Emini Volume Indicator

The chart above is an ordinary daily chart of the Emini with volume indicator histogram. Now TradeStation does a stupid thing on the last bar with daily volume not updating until the open of the next day – so you'll have to trust me with the volume information. But Monday's volume was 1.5 million contracts, Tuesday's volume was 1.4 million contracts and Wednesday's volume was 1.3 million contracts.

We have now retraced all of Monday's fall. But what is of most interest is that it took double the volume to go the same distance. The bulls had to work harder because there were willing sellers. We're now sitting under the congestion of the last top, a place where you're likely to find more sellers. I don't think it looks good for the bulls. But let's take a look at the other evidence.

I can find plenty of negatives

First the negatives:

• NASDAQ and Semiconductor indices were weaker than the Dow – they usually lead in an uptrend
• Trading Index (TRIN) was weak for the last 2 days
• Last 45 minutes of today's trade showed high level of churn
• Commitment of Traders is at most bearish level since January 2005
• Oil appears to have bottomed and is turning up
• My trend oscillators are down but leveled out today

And now the positives:

• Bonds are strong

That's it – that's all the positives I can find on my analysis. We'll just have to wait and see – that's what makes trading fun (and difficult).

Good luck with your Emini trading.

Consolidation at the highs today. The Emini closed up 0.50 points at 1,405.25 on Monday. Small range day today with no clear direction. Everybody is expecting the market to tread water this week given the upcoming Thanksgiving Holiday.

Volume Indicator (Emini daily)

The Emini opened down 1.50 points at 1,404.75 than started to rally after the first 45 minutes. A high of 1,408.00 was reached quickly and this level was exactly the high of last Thursday. Profit taking after lunch saw the Emini drop quickly to the low of 1,401.25 from which it bounced up again to close at 1,405.25. Three round trips! Very hard for the day traders. Range and volume were both below average at 6.75 points and 0.9 million contracts traded – but churn is at quite high levels.

Range and Volume Indicator

The chart above shows my Secret #1 volume indicator that combines range and volume. We have now had 3 consecutive days with very low ranges and low volume. Contraction like this is shown with white colored daily bars. Expansion days are shown with red colored daily bars. Leading up to the Thanksgiving Holiday, trading this week is expected to be light. But at some point this contraction will be broken.

If I look at my trend oscillators they have now turned up again and we have the NASDAQ again leading the Dow. But tread carefully at these over-extended levels.

Good luck with your Emini trading.

Highest volume indicator churn ever today. The Emini closed up 3.5 points at 1,405.00 on Thursday. Three days of distribution and a Doji candlestick pattern as well today. Read on to understand volume indicator churn.

Volume Indicator (Emini daily)

The Emini opened up 4 points at 1,405.50. The low of 1,402.00 was made early in the day and the high of 1,408.00 was made at lunch time. The Emini eventually closed at 1,405.00. Range for the day was only 6 points but volume was above average at 1.1 million contracts traded.

Emini volume churn defined

In the chart above I've added an indicator of volume churn. This is defined as volume divided by range for each day and is plotted as a histogram below the daily bars. As you can see today's reading was 184,000 – this represents the number of Emini contracts traded per 1 point of range. This is the highest reading on the Emini ever!

Today was also a Doji candlestick pattern, where the open and close were very close and in the middle of the day's trading range. This pattern typically represents indecision and is the usually found almost exactly mid-trend or at the beginning or end of trends.

Multiple distribution patterns

On Tuesday we saw high-volume exhaustion with over 1.5 million contracts traded. On Wednesday we closed in the middle of the range on above average volume. Today was extreme churn with above average volume and very small range. All of these are signs of distribution with professionals selling into market strength.

Update on trend oscillators – all high and turning down just slowly.

Good luck with your Emini trading.

Volume indicator exhaustion pattern today. The Emini closed up 9.75 points at 1,397.75 on Tuesday. Extraordinary day! After yesterday's post we were long and made excellent gains; hope you did too. The mixed signals of yesterday have now resolved themselves and give a clearer direction. Very important post – please read on.

Volume Indicator (Emini daily)

The Emini opened up 3.25 points at 1,391.25. The market immediately sunk to a low of 1,383.00, the low end of our trading range identified over the last few days. The Emini then took off in dramatic fashion. It broke the top of our trading range, reached a high of 1,399.25 and eventually closed at 1,397.75. Range was huge at 16.25 points and volume at 1.5 million contracts the largest since the low of 19 July. The chart above shows this extended up move since July. Check out the reading in the volume indicator below the daily bars.

Volume indicator exhaustion and going against the crowd

These volume indicator and range signals are extremely important and mark exhaustion or a blow off move. The volume climax on 19 July marked the beginning of this extended uptrend. I believe the volume climax we saw today marks the beginning of the end to this uptrend. Don't expect the Emini to collapse straight away, but the next swing will be down. There will probably be a final fifth leg to this rally into December, set up by this next down swing.

Commentary about the market was universally bullish wherever you went today. Be very cautious going forward. We may well see a gap up overnight and open above today's high of 1,399.25. In this case, it will set up a classic Larry William's Oops pattern.

Trend oscillator update

Three of four trend oscillators have now turned down – the Trading Index (TRIN) oscillator is still pointing up. However, the TRIN reading was rather anaemic today given the size of the move. Remember, these are leading indicators and so don't expect the market to start moving down straight away.

Good luck with your Emini trading.

Low volume advance today. The Emini closed up 3.25 points at 1,388.00 on Monday. Lucky call from Friday's analysis as we headed higher today but within the 1,380 to 1,394 range. Will we go higher?

Volume Indicator (Emini daily)

The Emini opened down 0.75 points at 1,384.00 then staged an impressive rally up almost 9 points all within 45 minutes. The market then went nowhere for the rest of the day and closed mid-range at 1,388.00. Volume was again very light at 0.9 million contracts traded, as seen on the chart above. But range at 9.75 points was much larger than expected with this low volume. The same pattern was also seen on the NASDAQ and DOW indices.

What does this mean?

The 1,390+ level has now been reached 7 times in the last 14 trading days. Only 1 of those days resulted in real profit taking – that is, closing up on high volume. There is obviously resistance at this point – but the more this level is tested, the more the selling volume will be absorbed and we will break though.

Trend oscillators still confirm the uptrend. My Secret #2 oscillator is the only one to have turned down at this stage. The Trading Index (TRIN) oscillator turned up again today – it tends to be the most volatile of the trend indicators, so this is not unexpected. As mentioned yesterday, my Secret #3 oscillator based on Smart Money is looking over-extended, but has not turned down yet. Cautiously long today.

Good luck with your Emini trading.

Continued low volume and range today. The Emini closed up a fraction at 1,359.25 on Monday. The market was very quiet today because of the Columbus Day holiday. We are expecting a breakout move but the question is in which direction?

Range and Volume Indicator (Emini daily)

Consolidation in the market leads to breakout moves

Today was the third consecutive day of very low volume and range. The indicator I use to measure volume and range I've called my Secret Weapon No. 1. It's plotted on the chart above and labeled Secret 1. Daily bars with low values are painted white and bars with high values are painted red.

Today's reading on this indicator was zero and readings on Thursday and Friday were both below the lower threshold value of 10. Typically at medium-term market tops both volume and range contract and this indicator shows white bars. However, some caution is required because today's reading is artificially low due to the Columbus Day holiday. In addition this indicator should never be used on its own – combine it with other non-correlated indicators to identify high probability turning points.

Include other indicators in your assessment

Supporting the argument for a breakout to the upside are the following:

• We are in an uptrend and trends continue until they are exhausted
• The NASDAQ rose today while the Dow hardly moved
• Bond prices are greater than they were 20 days ago
• Crude oil prices are in a downtrend
• We had a bullish long-legged Doji candlestick pattern on Friday

Supporting the argument for a breakout to the downside are the following:

• We had Trading Index (TRIN) divergences on Thursday and Friday of last week
• Today the Hilbert sine wave completed its pattern (note: read more about this on later posts)
• Bond prices fell sharply on Friday

But in this case …

The two lists are quite evenly matched and so I'll wait to see how the market develops during the day. Remember though, consolidation in the market like this usually leads to large breakout moves that can be very profitable.

Good luck with your Emini trading.