Apologies for the lack of updates – just back from 2 weeks snowboarding in Japan. Couple of photos at the end of this post.
Here's how Volume Patterns signaled a high probability short trade and anticipated the reaction to Tim Geithner's speech.
Volume Patterns and Cyclical Top (Emini 135 minute)
The 135 minute chart above is a useful swing trading time frame. Each trading day is broken down into 3 bars and allows you to zero in a little closer to the daily action.
The Emini volume patterns that made this top and high probability turning point progressed like this:
- On Friday we had a continuation of the up move from the day before with 2 high volume and large range bars (Volume Climax). The Professionals need these high volume moves to dump their positions on the Amateurs.
- The last bar of the day was both a Volume Climax and High Volume Churn bar (magenta color) – signaling profit taking and new sellers entering the market thus reducing the bar's range.
- Then on Monday we started with a Low Volume up bar that showed there was a lack of demand and not enough volume to push past the 870 level.
- This coincided with a cyclical turning point on the Hilbert Sine Wave and all the pieces were in place for a high probability short trade.
Tim Geithner's speech on Tuesday was the catalyst for a panic selling move that led to a 40+ point decline. But don't be fooled – the Professionals set this one up. They were just using the speech as a news item trigger to cause a rush for the doors and panic selling by Amateurs. Poor Tim Geithner was the patsy.
Volume Patterns and 800 Support Level (Emini daily)
The real question is: "Were the Professionals using this as a buying opportunity?"
On Wednesday we had a High Volume Churn bar signaling profit taking by Short traders and new buyers entering the market. Tuesday's low and the significant 800 level held.
We're a couple of days away from a cyclical turning point, so I'm not rushing to judge. But if we get a Low Volume down bar soon it would indicate a lack of Supply.
Niseko Delivers Powder
On a personal note, just back from snowboarding in Niseko, Japan. Once again, Niseko delivered with great powder and absolutely no crowds! The Sub-Prime / Credit Crunch / Global Economic Meltdown has its upsides. The resort was empty compared to previous years and "For Sale" signs were everywhere.
On the Top and About to Go Back Country
I'm so lucky to have a wife who's game to go anywhere.
Good luck with your Emini trading.