An Emini trading system using 3 fundamental, non-correlated indicators … START HERE »
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.
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.
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.
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.
Good luck with your Emini Trading.
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
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.
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.
Good luck with your Emini trading
The Emini closed up 8.50 points at 1,437.25 on Wednesday. Record high on the Dow of 12,511 with very low volume. Fund managers are up to their usual end of year "window dressing" – and they'll probably try to keep it going until the end of the week. But watch out – we got a classic exhaustion pattern I call the "Get Out" pattern today. Read about it below.
The Emini gapped up 2.25 points on the open at 1,431.00. Then we almost had an exact replay of yesterday's action. A quick low at 1,430.50 then racing ahead in the first 45 minutes. The market then slowly ground higher to reach a high of 1,438.75 before profit taking in the last 15 minutes. The Emini eventually closed at 1,437.25. Range for the day was close to average at 8.25 points but volume was again very light at only 0.4 million contracts traded.
Volume has been steadily declining since the beginning of December. Low volume is expected around the Holidays, but the marked drop off in volume during the whole month is now clear. Check out the chart above with the declining yellow line above the volume histogram.
Today's action is a sign of professional profit taking. The Emini gapped up in the morning and stayed strong all day, but higher churn than the day before signals distribution. The exhaustion pattern I look for consists of:
The chart above shows occurrences of this pattern, labeled “GetOut”. If you use TradeStation then the EasyLanguage code is:
L > H[1] and V > V[1] and Range < Range[1]
Over the last 20 years on the S&P there have only been 61 occurrences of this pattern – about 3 a year. The pattern signals turning points quite accurately, however, back-testing long and short versions of this pattern only generates a profit factor of 1.49 (using entry on next open, bail out exit and relatively large stop loss). If you add an extra condition that the close be less than the open for short signals (and vice versa for long signals) then the pattern is invincible – but even more rare!
Professional "window dressing" may last until the end of the week but we have other signs of weakness in the Emini with bonds in a downtrend, the NASDAQ very weak and an approaching downturn in cyclical indicators.
Profit taking today. The Emini closed up 5.25 points at 1,389.00 on Tuesday. But watch out – there was profit taking by professionals going on. Do you know what pattern to look for?
Yesterday's advance continued today. The Emini opened up 1.25 points above yesterday's close at 1,385.00. Once again the market shot ahead in the first 45 minutes, then continued to grind higher and reach a high of 1,393.00 around midday. The professionals then stepped in and took profits and the Emini eventually closed 4 points off the high at 1,389.00.
Today's action is typical of professional profit taking. Range was below average at 9.75 points and volume was above average at 1.2 million contracts traded. The profit taking pattern I look for consists of:
The chart above shows occurrences of this pattern, labeled “stop”. If you use TradeStation then the EasyLanguage code is:
V > V[1] and Range < Range[1] and H > H[1]
Check out the daily chart of the NASDAQ and you can see the same pattern. Download the EasyLanguage code here.
Software Bug Warning: Occasionally on TradeStation tick charts a Stopping Volume pattern will be plotted where the bar's range is NOT less than the previous bar. This appears to be a TradeStation problem and luckily does not occur frequently. Thank you to Sam Beckers for pointing out this bug.
The intermediate trend started by yesterday’s strong advance appears to still be intact and today was just profit-taking mid-trend. However, if we break below 1,370, this could represent a change in trend and today’s action was part of forming a double top.
Update: The Stopping Volume code has been updated and improved. Read the most recent article that explains the workings of the TradeStation EasyLanguage code here.
Trading volume and range shrank to a new low today. The Emini closed down at 1,345.50 on Friday. This is the fourth sign of weakness that we've seen in the last four days. Keep reading below, and I'll explain how I use volume and range to find market turning points.
For a market to move strongly, either up or down, it needs fuel. This fuel is volume and the result of applying this fuel is range. By volume I mean the number of futures contracts traded, not open interest; and by range I mean the difference between the daily high and low (note: sometimes referred to as spread).
At market tops the fuel runs out and volume and range both shrink. Occasionally “blow off” moves can be seen, where volume and range are very high and price rises exponentially. This pattern is more typical of individual stocks rather than stock market indices. However, at market bottoms this pattern does work for stock market indices.
Volume is not well understood or interpreted in most market commentaries I've read. The difficulty lies in combining the volume reading with whether the market is trending or range bound, whether opening and closing prices are close or far apart, and whether the range of the bar is high or low, etc. Traditional volume indicators generally combine volume with the direction of the close and choose to ignore range. I prefer to combine the volume reading with range and ignore the direction of the close in my calculations.
The indicator I use is not easy to explain without going into some detail. Besides, I'd rather keep it to myself – for that reason I’ve called this indicator 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 my Secret Weapon No. 1 was zero and readings of this indicator over the last couple of days have also been very low. The fuel needed to keep the market moving up is running out.
When we combine this observation with the three other signs of weakness identified earlier this week, they show a bearish picture. If you remember on Tuesday we had the Dow racing ahead of the NASDAQ; on Wednesday we had a Trading Index (TRIN) divergence; and on Thursday a Doji candlestick pattern. All non-correlated market indicators that together show a possible high probability market turning point.
Following-up on yesterday's comment about not being able to generate a very profitable Doji pattern trading system – I did some more testing and found a pattern that did work reasonably well. The pattern I found consists of an up close, followed by a Harami Doji followed by an up close to generate a Sell signal. Buy signals are obviously reversed. Remember I'm defining an up close as the close being greater than the open. This pattern generated a profit factor of 5.0, using large stops and bail out exit, but only 44 trades in the S&P over the last 20 years. Today’s close was down so the pattern doesn’t apply for tomorrow.
Good luck with your Emini trading.
Copyright © 2006 - 2012• Privacy• Disclaimer• Terms of Use• Sitemap• Better Emini Trading