Wednesday 29 November 2006

One Day Emini Sell Off on Monday?

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.

Emini Volume Image

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

The chart above is an ordinary daily chart of the Emini with volume 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).

Click here to watch a video tutorial and download free code for the Better Volume Indicator. Good luck with your Emini trading.

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