Thursday 25 September 2008

Volume Patterns and Turning Points

Sunday's post showed a cyclical top in the 135 minute time frame and said the downside momentum would likely continue. Well the Emini did fall to around 1,180 this week and closed the 1,219 to 1,238 gap in the process.

The Hilbert Sine Wave has now turned on the 135 minute chart and the Emini formed a cyclical low at 1,180. The momentum has now turned to the upside and should continue. However, any break of the 1,180 cyclical support would be bearish.

We're likely to get a confirmation on Friday of the Bailout Plan and this could be the fundamental news the market needs to be propelled higher. But after hours trading is weak and so I'm being cautious.

Emini Volume Pattern Image

Volume Patterns at Turning Points (Emini 135 minute)

The chart above shows the cyclical turning points on the 135 minute chart. It also has the Better Volume indicator (latest version) to show what the buying and selling pressure was. Turning points or reversals have a pattern that usually goes like this:

  1. Climax volume down showing exhaustion volume or capitulation
  2. High volume churn showing buyers entering and the trading range contracting
  3. Low volume showing lack of sellers and no down side follow through
  4. Climax volume up showing the start of a new move and shorts covering

Note that the last bar of the day showed high volume churn. This was traders unable to push the Emini through the 1,224 level, where there must be sellers waiting. Let's see if we can break that level tomorrow. Good luck with your Emini trading.


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