Wednesday 11 June 2008

Multiple Time Frames and Trying to Identify End of Down Trend

This last down move from 1,405 has taken me by surprise. I was hoping for a cyclical top turn on the Hilbert Sine Wave, which we didn't get. Instead the Emini broke into a down trend on the daily chart shown below (white dot).

The question now is when will the down trend end?

Emini Multiple Time Frames Daily Image

Multiple Time Frames: Emini daily

I use multiple time frames to try and identify the end of a trend. The same principles apply if you're day trading or position trading. I check one time frame up and one time frame down. I'm looking for either:

A cyclical turn in the higher time frame, or
An "end of trend" signal in the lower time frame
With volume confirmation (climax volume & high volume churn)

The time frames are a multiple of 3x different. For example, 135 minutes X 3 = 405 minutes, which is a daily chart. The higher and lower time frame charts are shown below.

Emini Multiple Time Frames Weekly Image

Multiple Time Frames: Emini weekly

The higher time frame chart, weekly in this case, shows we're still in a cyclical down move. The cycle low still looks a ways off as the Hilbert Sine Wave has not crossed the zero line yet.

Emini Multiple Time Frames Intraday Image

Multiple Time Frames: Emini 135 minute

The lower time frame chart, 135 minute in this case, shows we're still in a down trend move. Trend moves typically end with a counter-trend pull back followed by a final push in the direction of the trend. This final push is equivalent to an Elliott 5th wave. The Better Sine Wave plots an "end of trend" signal automatically on the chart.

Emini Volume Patterns Image

Volume Climax and High Churn (Emini 9 minute)

Today we had climactic volume down at the beginning of the day followed by high volume churn at the end of the day. High volume churn happens when the volume is high but the range is low - showing that buyers are absorbing the selling and stopping price declining.

My best guess is we'll get a bounce tomorrow morning based on this volume pattern. But hit resistance before we finally complete this down leg.

Good luck with your Emini trading.