Volume Patterns - Stopping Volume Yesterday
Stopping Volume pattern yesterday forewarned of turning point. The Emini closed down heavily today - down 46.25 points at 1,457.75. Tuesday's post about trading with multiple time frames explained why we were looking for a turn down. Then yesterday we got a Stopping Volume pattern with higher volume and lower range, showing that professionals were taking profits. You can read more about the Stopping Volume pattern here.
Stopping Volume Chart Pattern
The chart below is just a recap of the expected Hilbert Sine Wave crossover in the 135 minute time frame. Having the Stopping Volume pattern in the higher (daily) time frame added confirmation to this likely turning point.
Sine Wave Turn Coincides with Stopping Volume Pattern
Wait for Stopping Volume pattern to halt the drop
Where to from here? My other oscillators - Trading Index (TRIN) and Smart Money - have now turned over. However, they are nowhere near over-sold yet. Time to wait for this final move to "Complete" and look for exhaustion volume patterns before going long.
Volume Chart Patterns - The Essential High Churn Pattern
The Emini closed down 1.00 point at 1,558.75 on Tuesday. In yesterday's Emini commentary we said that "No Demand" and "High Churn" patterns tend to appear at market tops. Well today we got the "High Churn" day. The chart above shows the 3 patterns circled - NoD stands for "No Demand" and Ch stands for "High Churn".
"High Churn" days occur when the volume is relatively high but the range is small. You can read more about "High Churn" patterns here. In the volume indicator on the Emini chart above, high churn bars are colored green and volume climax bars are colored red.
My best guess is that the Emini will fall over the next couple of days until it reaches support. The first level of support is around 1,540 with the second level of support close by at 1,530. Keep in mind the COT data shows the Professionals are very bullish and so any weakness in the market might be short-lived.
Volume-Based Patterns - The No Demand Pattern
The Emini closed virtually unchanged at 1,559.75 on Monday. Volume was below average at 1.1 million contracts traded. We have now had 2 days in a row with "No Demand" volume patterns ('NoD' on the chart above).
"No Demand" volume chart patterns occur when the Emini makes a new high, but on lower volume and smaller range. In addition, I like to see a close in the lower part of the day's range. The basic TradeStation EasyLanguage code is as follows:
H > H[1] and H > H[2] and V < V[1] and V < V[2] and (Range < Range[1] or Range < Range[2])
A lot of technical analysts believe that top and bottom chart patterns are symmetrical or are a mirror-image of each other. A typical "proof" of this assertion is that given a chart with no time or price axes, a trader would not be able to tell which way up the chart should be. My research disagrees with this view.
The Emini tends to make bottoms on high volume but tops on low volume. In addition, bottoms are made quickly whereas tops are made slowly. "No Demand" and "High Churn" patterns tend to appear at these market tops.
My best guess is that the Emini is currently making a short term top. Longer term there are two opposing forces. The latest Commitment of Traders report was very bullish. On the other hand, we are approaching a seasonally very bearish time for the market.
Stopping Volume chart pattern marks the low of the day
The Emini closed up 8.75 points at 1,535.75 on Thursday. Early today we got large buying volume coming into the market. The chart above shows the Stopping Volume and Doji Candlestick patterns. These coincided with a cyclical low turning point on the 135 minute time frame.
The Composite Trend Oscillator is over-sold and yet to turn up. However, because of the volume pattern and cyclical turn my best guess is that the Emini will continue to rally. We have retraced to the 50% level (1,536) of the last down swing and so we'll probably see selling early on Friday. If I'm right, this selling volume will be absorbed and the Emini should rally higher.
Wednesday's short position was closed out at 1,525.00. We made 10 points (profit target) on the first contract and 28 points on the second contract, giving us an average of 19 points be contract. Assuming you trade US$8,000 per contract, that's a 11.8% return. We're looking to enter the next long trade at 1,533.00.
Friday 25 May 2007Emini Daily Update: Churning Volume
The Emini closed up 5.50 points at 1,517.25 on Friday. Leading into the long weekend, volume was light at only 0.9 million contracts traded.
The chart above shows a 45 minute chart of the Emini with volume and volume patterns added. Thursday's trading ended with Stopping Volume followed by a high Churn bar. This appears to have stopped the last downward swing and coincides with an upturn in cycle-based oscillators (Hilbert Sine Wave).
We're short from 1,529 and took profits on half the position at 1,519 (10 point profit target). When trade resumes next week, I expect the Emini to test the 1,512 to 1,515 level before starting another upswing move. In any case, a break above 1,519 would signal the beginning of the next upswing.
Emini Daily Update: No Demand Volume Pattern
The Emini closed down 4.75 points at 1,488.25 on Monday. Volume was low at only 0.8 million contracts traded and a 'No Demand' pattern signaled (labeled 'NoD' on the chart below). Let's see if the Emini closes Friday's gap - I'm watching 1,481.75 closely.
Emini Daily Update: Stopping Volume Pattern
The Emini closed up 1.75 points at 1,454.50 on Monday. Today was another quiet day with a daily range of only 5.50 points and 0.6 million contracts traded. Investors and traders must be taking an extended break over Easter.
The Emini is starting to move into over-bought territory. The Composite Trend Oscillator reading has reached +55 on a scale of -100 to +100. In addition we had both Stopping Volume and Larry Williams Oops patterns today. Check out the chart below.
The Stopping Volume pattern is one of my favorites for highlighting possible turning points. You can read more about it here. This is the first sign of weakness in this latest up move. But we'll need to wait for confirmation over the next couple of days.
The Larry Williams Oops pattern shows non-professionals were overly bullish at the open and allowed professionals to take some profits. You can read more about it here. However, the Emini barely closed below yesterday's high and so selling was not wide spread.
Good luck Emini trading over the next couple of days.
Friday 16 March 2007Emini Daily Update: No Demand Volume Pattern
The Emini closed down 4.50 points at 1,399.00 on Friday. Three charts to wrap up the week - two short term and one medium term.
The first chart above shows daily Emini bars with volume plotted below. Volume has been declining for the last couple of days while the Emini has made new highs. Friday's volume actually made a No Demand pattern (labeled 'NoD'). Previous No Demand patterns are also shown.
The second chart above shows my composite Trend Oscillator. This combines my four trend oscillators (TRIN, Open-Close, Smart Money, Hilbert Sine Wave) into one indicator. The oscillator peaked last week and is now declining. However, it has only just broken the +100 level and has some way to go before signaling an uptrend.
The last chart is a longer term measure of Emini direction - Commitment of Traders and Emini weekly bars. Firstly, the Commitment of Traders has turned positive with a +1.1% reading. Secondly, the COT Oscillator has bottomed at -105. This suggests the Emini is bottoming. Check out the previous time this happened back in October 2005.
In summary, expect more Emini weakness in the short term. However, the 1,375 level may well hold and provide support for a further up move in the medium term.
Good luck Emini trading next week.
Tuesday 30 January 2007Lack of Volume a Worry
The Emini closed up 7.50 points at 1,434.25 on Tuesday. We got the break upwards anticipated yesterday but there was not much conviction with only 0.8 million contracts traded. In addition, the largest volume traded was around 10:30am with an upward climax-like bar. The Emini then dipped and closed on the highs, but that action smacked on profit taking and a lack of buying demand subsequently.
The chart above shows the Emini with a proprietary indicator (Secret #1) which measures volume traded and range. High levels are shown with red daily bars and low levels are shown with white daily bars. Typically, market tops show a lack of demand and white bars - for example in mid-November.
What was worrying today was the lack of demand in the middle of an advance. I know that the Fed meeting will have traders standing aside until market direction becomes clearer, but the lack of market conviction has me cautious and taking profits early.
Tuesday 16 January 2007Volume Churn at Highs
The Emini closed down 2.00 points at 1,438.75 on Tuesday. Low volume day with only 0.7 million contracts traded and very small range of only 5.75 points. As a result the Volume Churn was high. Take a look at the chart and Volume Churn explanation below.
NoS = No Supply (bullish) pattern; NoD = No Demand (bearish) pattern
Am I alone looking at Volume Churn?
The chart above shows a histogram of Volume Churn below the daily Emini bars. To me, churn seems such an obvious market measure, but I've never come across it in any trading books I've read. Just to recap:
Volume Churn = Volume / Range
Volume Churn can be calculated on any time frame, but I pay particular attention to daily charts for futures (and weekly charts for individual stocks). The vertical bars are colored red when the Volume Churn reading is higher than the last 20 bars. Again, thanks to TradeStation EasyLanguage this is easy to code and appears automatically. Periods of high churn usually occur when the market is changing direction - either at tops of bottoms. The red line superimposed on the Volume Churn bars is the long term average reading.
No demand pattern too
We also had a No Demand pattern today. This occurs when a new high is made but the market closes near the lows on low volume and low range. Conversely, a No Supply pattern occurs when a new low is made but the market closes near the high on low volume and low range.
This pattern signals little appetite for taking prices higher or lower and often occurs near significant turning points. Again, this pattern is plotted automatically in TradeStation as a text object - below the bars for the bullish No Supply pattern and above the bars for the bearish No Demand pattern.
Trend oscillators have now become overbought and two of them have started to turn down. In addition, we have some exhaustion patterns with high Volume Churn, No Demand price pattern and NASDAQ closing down while the Dow was up. We could be close to the completion of this final Wave 5 up move.
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