TPP Total Market Sync (TMS) Continuation Pattern: Part 3

Part 3 : Continuation Pattern (click on chart to enlarge for greater detail)

This post is the final part in our three-part series highlighting TradePilot Pro's proprietary Total Market Sync (index of indexes).

Today's focus is Continuation Pattern (sell example)...Let's get to the details:

First of all it is assumed that price is in an established trend (bullish or bearish)...This example price is in an established downtrend with the following conditions applying:

1.) Price < 34 ema and 34 ema < 200 ema
2.) Price < Market Midpoint (intra-day bull/bear line in sand)
3.) Price <= Continuous Volume Trend (VWAP)

The conditions above are fairly easy to see but there is a bit more observation before a trade setup and entry appears. Typically following an initial breakout from a prior level price will find a temporary stopping point where it consolidates so market participants can re-assess current valuation. If there is indeed a "shift" in value to lower levels (in this example) then price will "continue" its current down leg until traders agree upon a new level of "fair value" forming new support.

So how do we enter?

It's during the temporary consolidation phase that we check the above conditions to determine if they are still valid. If they are we are looking for an entry in trend direction when the 8/13 ema begins spending more time beneath the 34 ema (see chart for additional detail). We are not looking for the perfect entry here, just one that keeps us in-sync with trend. Look for trade entry within the Coil Finder Zone...this will provide a level where specific risk parameters can be measured for position sizing. The best timing of the entry is when the 8/13 ema "kisses" a downward sloping 34 ema (see chart)...which will typically precede a break of the consolidation pattern and the primary trend accelerates further. Profit targets are calculated by TPP traders (moderators)...Volatility Trailing Stops are preferred in managing a winning position.

Our goal at TradePilot Pro is to offer subscribers premier unbiased market intelligence and trading guidance combining over 35 years of financial industry experience.

If you are interested in learning more about what TradePilot Pro has to offer, you are cordially invited for a FREE TWO-WEEK TRIAL to the TPP real-time e-mini trading room simply by sending an e-mail request to freetrial@tradepilotpro.com and request a temporary password.

You can also follow us on Twitter for live intra-day trading updates @ http://twitter.com/tradepilotpro

Good Trading

Webinar Thursday June 4, 2009

TradePilot Pro will be conducting a Webinar co-sponsored by Zaner Group LLC Thursday June 4, 2009 at 4:15 pm EST.

Topics to be covered include:

Market Structure and Symmetry
Cycle Trend Analysis
Volume Analysis
Balance Chart
Total Market Sync (TMS)

and much more...

All attendees will receive a complimentary free two-week trial to the TPP real-time e-mini trading room to learn more about our trading methodology.

To sign up for Webinar go to: https://tradepilotpro.ilinc.com/register/jhcjctj and fill in required fields.

We look forward to seeing you

Sincerely,
Joe Baker and David Dube

TPP Total Market Sync (TMS) Buy Structure: Part 2

Part 2 : Buy Structure (click on chart to enlarge for greater detail)

Previous post focused on the Total Market Sync (TMS) Sell Structure and specific criteria for identifying entries and management. Please review that post to refresh your knowledge.

Today's focus is Buy Structure...Let's get to the details:

As always, the first consideration for the trader is to identify the major, intermediate, and minor support and resistance (S&R) levels. Trader must know where their "edge" is going to come from and prepare for the opportunity. Knowing S&R levels is a critical piece of information. TradePilot Pro distributes "Daily Pivot Levels" pre-opening for the ES, NQ and YM identifying all the important zones.

In today's example Major Support in ES was between 878 - 880 price zone. Notice that when price reached that level there was a "response" from buyers to that important level. The TMS which is an "index of indexes" responded as well by forming a "double bottom pattern" suggesting that all markets were accepting this price zone as support. The trader is now on alert for possible long trade opportunity once the TMS fires a buy signal. Below we will list specific criteria that trader should be looking for to confirm that a long position can be taken...Please refer to chart for additional annotations and clarity.

Buy Structure Criteria:

1.) Price transitioning from red to green perhaps with yellow caution bars
2.) Green price bars with 8 ema crossing 13 ema from below (early warning signal)
3.) Green bars continue to strengthen and 8/13 ema cross 34 ema from below (confirming strength)
4.) 34 ema typically has troughed and is now sloping higher
5.) 8,13,34 ema's cross the 200 ema from below which is the "golden-cross" (price accelerates higher)

Trades can be considered at 8/13 ema cross or when 8,13 ema cross 34 ema. Trade entries can vary for individual trader but TradePilot Pro typically prefers buying pullbacks within an uptrend. Please refer to prior post for explanation using the Coil Finder for fine tuning entries.

Utilizing the Total Market Sync as a decision making tool can increase trader's odds of successful trade outcomes. There is an old saying "don't fight the tape"...Well we at TradePilot Pro say "Don't Fight the Total Market Sync"...and it will serve the trader well to adhere to that rule.

One last thought: "There are old traders and there are bold traders...but there are no old bold traders"...because those were the ones that fought the tape. Learn to read price action and structure and you will live to be an old successful trader.

The last in this series (part 3) on using the TMS will focus on Continuation Trades.

Our goal at TradePilot Pro is to offer subscribers premier unbiased market intelligence and trading guidance combining over 35 years of financial industry experience.

If you are interested in learning more about what TradePilot Pro has to offer, you are cordially invited for a FREE TWO-WEEK TRIAL to the TPP real-time Emini trading room simply by sending an e-mail request to freetrial@tradepilotpro.com and request temporary password.

You can also follow us on Twitter for live intra-day trading updates @ http://twitter.com/TradePilotPro

Good Trading

TPP Total Market Sync (TMS) Sell Structure: Part 1

In the next few posts we will take a more detailed look at the TPP Total Market Sync (TMS) which is an "index of indexes" and the various Buy and Sell structural patterns that are formed repeatedly and with a high degree of success. One word of caution to traders implementing strategies using TMS..."Don't Fight the Total Market Sync".

Let's proceed with Part 1: Sell Structure (click on chart to enlarge for greater detail)

First consideration is to identify major, intermediate and minor support and resistance (S&R) levels. Traders must know where their "edge" is going to come from and prepare for the opportunity. Knowing S&R levels is a critical piece of information. TradePilot Pro distributes "Daily Pivot Levels" pre-opening for the ES, NQ and YM identifying all the important zones.

Once the trader has identified the S&R levels then it's onto observing how the TMS responds to those levels. In today's example of Sell Structure price (green bars) rallied higher in the early morning session only to encounter stiff resistance at the 15 minute 200 ema (intermediate resistance). Now if there is to be a price rejection at this level (which we don't know for sure...that is why we observe the action), then there are some specific criteria that will need to take place before the trader can take action. We will list criteria below...please reference chart for additional supporting commentary.

Sell Structure Criteria:

1.) Price transitioning from green to red perhaps with yellow caution bars
2.) Red price bars with 8 ema crossing 13 ema from above (early warning signal)
3.) Red price bars continue to weaken and 8/13 ema cross 34 ema (confirming weakness)
4.) 34 ema typically has peaked and now is sloping lower
5.) 8,13,34 ema cross below 200 ema which is the "death-cross". (price accelerates lower)

Trades can be considered at 8/13 cross or when 8,13 ema cross 34 ema. The entry method can vary, so it is up to individual trader how entries are handled. One method TPP utilizes is using the TPP Coil Finder (see lower subgraph). The Coil Finder is basically a temporary price plateau or congestion level that offers the trader entry zone with limited controlled risk. Once the lower edge of coil is breached price typically accelerates in direction indicated by TMS. Price targets (not shown here) are dynamically projected by room moderators.

If you want to learn more about TradePilot Pro, please send an e-mail to freetrial@tradepilotpro.com and request FREE two-week trial to our real-time ES e-mini trading room. We will be happy to provide you with a temporary password.

Good Trading

Sector Rotation Turning Defensive

In our prior post we made the case of Nasdaq's relative performance influence versus SP500 and concluded that given Naz's recent weakness the long awaited correction in price may be in the offing. Well, the correction has indeed begun, and initial target expectations are 875.00, with further downside thereafter.

In an earlier post we showed how to objectively judge the quality of the rally by paying close attention to the various sectors exhibiting leadership. In a healthy rally the pro-growth sectors should maintain leadership, such as Consumer Discretionary, Technology, Industrials, Basic Materials while sectors such as Healthcare, Utilities, Consumer Staples which are defensive in nature should be laggards. Since the March lows we showed that in-fact this Sector Rotation Model relationship has remained intact...Until this past week.

The leadership role has totally reversed this past week with economically sensitive sectors selling lower, while defensive sectors taking the leadership role. This combination suggests that there is further downside to go with this correction as big investors continue to sell all rally attempts in order to lock in recent price appreciation. (Click on chart to enlarge)

Our goal at TradePilot Pro is to offer subscribers premier unbiased market intelligence and trading guidance combining over 35 years of financial industry experience.

You are invited for a free two-week trial to the TradePilot Pro real-time e-mini trading room by simply sending an e-mail to freetrial@tradepilotpro.com and request temporary password.

Good Trading

"So Goes the Nasdaq...So Goes the Market"

As the saying states: "So goes the Nasdaq...So goes the Market" This simply means that when the Nasdaq 100 Index is stronger relative to SP500 Index, the overall health of the markets are good and higher prices tend to be the result. So it is important for traders to keep a watchful eye on the relative performance of NAZ versus SP500. One simple way is to create a Relative Performance Chart or Ratio Chart between the two indexes.

The chart above shows the relative performance of the Nasdaq 100 ($NDX.X) and SP500 ($SPX.X) going back three years. Now why look back three years and what is its importance if I trade intra-day you ask? Well, it's simple...Any knowledgeable trader worth his (her) salt always keeps track of how different markets are performing relative to the market he (she) is trading whether intra-day or on a swing basis. The markets today are globally linked so it's critical to know how markets inter-act on a relative basis to develop an effective intra-day trading plan to capitalize on disparities.

Classical chart analysis can be done as effectively on ratio charts as they do on traditional bar charts. You'll first notice the the ratio chart (again...we are comparing NDX v SP500) that price carved a significant Inverse Head & Shoulders Pattern during 2006. This suggested that Nasdaq would take a more pro-growth leadership role and investors should begin to overweight technology stocks. The Blue waves indicate NAZ outperformance and Red waves underformance versus SP500. The waves are very symmetrical defining the rising channel pattern You'll notice that when the ratio hit the upper channel line Nasdaq entered a period of underformance and subsequently the markets corrected.

Fast forward to present day...Nasdaq has shown extraordinary leadership since the March lows with the ratio exceeding the upper channel line. Last week Nasdaq began to lose leadership and underperform the broader markets...Semiconductors were especially weak and that group needs closer observation for continued weakness or renewed strength.

Conclusion: With the Nasdaq beginning to exhibit relative weakness and market seasonality ( "Sell in May and Go Away") this could be early signs of a beginning correction that many pundits have been calling for. We can never know for sure, but one fact does remain as supported by historical evidence..."So Goes the Nasdaq...So Goes the Market"

Good Trading

"Sell The Fact"

Well, the final details of the Banking System's Stress Test have been released after a perfectly orchestrated "leaking of the results" this week by the government. Today was "Sell The Fact" day right on cue. The Sectors that have been leading the charge higher became the downside leaders in today's controlled liquidation. The table above shows the various SP500 Sectors and Industry Groups filtered on a 15 min time frame. The only sectors in the green were defensive groups such as Healthcare, Utilities, and Consumer Staples. All others were squarely in the red lead by Regional Banking which succumbed to profit-taking . None of this action should come as a big surprise to traders given the meteoric rise these past eight weeks.

As mentioned in earlier posts, keeping watchful eye on sector rotation gives the astute trader early indication of where the big money is flowing, hence developing profitable trading strategies.

The chart below displays the TPP TRIPLE SYNC, which monitors the Total Market Sync on three time frames for confluence of buy and sell signals. The strongest signals are when all three time frames fire simultaneously, which they recently did on Wednesday May 6th. TradePilot Pro members were alerted in real-time of the SELL SIGNAL during session trading and were able to begin properly positioning the short side for today's imminent sell-off.


Good Trading

Sector Analysis

The Bull Keeps Stampeding! Many pundits keep claiming that the move off the lows is nothing more than an a "bear market rally". Well whether this rally is a bear rally or the start of a new bull off a cyclical low history will write the final outcome. For those of us that trade on a daily basis must see the current action for what it is and not what we want it to be to fit some pre-conceived mold of our view (a.k.a. Bias).

That said, the spreadsheet above highlights the Dow Jones Industrial's Component Stocks on the right side and the S&P 500 Sector and Industry Groups on the left side. Additionally, the columns also show whether the particular instrument is Bullish or Bearish and the length in terms of days. It is clear that the major sectors and industries remain firmly bullish albeit overbought in length and technical condition, but there is no denying the strength of the recent rally.

How much further can price move higher without a significant correction nobody has a clear answer. As traders we must continue to take our signals from what the markets are telling us, hence keeping watchful eye on the bullish or bearish condition of the various sectors and industries is most important.

Good Trading

Cycle Trend Buy Setup w/Con-Ex Divergence

The above chart shows another example of how to combine the Cycle Trend signals with Divergence Analysis to increase the probability of a successful trade outcome. Early morning price weakness continued from prior session to challenge major support at 863.00. Buyers then took charge and bought up all the current supply creating Con-Ex (Contraction-Expansion Oscillator) Divergence. The TPP Cycle Trend correctly identified that the current down cycle to be ending and issued a Buy Alert. The astute trader should be now considering initiating a new Long position at major support given the combination of Cycle Trend Buy alert with Con-Ex divergence. OK...All we need is the "trigger" to enter the trade long. The previous post shows the 610 tick chart which is the execution chart most widely used by TPP members. It also fired off a Cycle Trend Buy at the 863.00 level confirming major support. Profit targets are at the Wave Price Targets WPT's displayed on the chart. ( click on chart to enlarge ) This Cycle Buy signal was worth approximately 10 points from entry to exit which was the opposing Cycle Trend Sell signal at high of day.

Combining Cycle Trend Buy and Sell signals with divergence analysis can improve the risk/reward of trade setups. Of course as with all trading there are no certainties, only probabilities. Traders job is to choose favorable trade setups and control initial risk.

Good Trading

Combining Cycle Trend and Value Chart

This post will focus on combining the TPP Value Chart (VC) with TPP Cycle Trend (CT) to help increase the odds of a successful trade outcome. We are talking probabilities here, not certainties. The TPP Value Chart displays trend as an overbought/oversold oscillator. Trend inputs can be customized for Directional Movement, Ergodic, or EMA values. The tick bars change color based upon which trending condition is in effect at the moment. These can change quite rapidly on very micro time or tick frames, so it is best to view them as reference. When price pushes to +8 traders view this as over-valued and -8 as under-valued, hence price continues to oscillate between these value parameters in a never ending battle for control. As with any oscillator divergences occur and provide the trader with solid trade opportunities.

The TPP Cycle Trend seeks to identify specific "turning points" in price swings. It is a simple yet effective buy and sell indicator that alerts the trader to a possible end in the current swing. When combined with the VC divergence analysis the trader can increase the odds of a profitable trade outcome.

Click on chart for larger and more detailed view of commentary.

Good Trading

TPP TOTAL MARKET SYNC

The chart above is the TPP TOTAL MARKET SYNC (TMS). This is a proprietary chart that was designed as an "index of indexes" so the trader can enter and exit the markets more effectively by capturing the majority of a price swing. It is has been said time and time again..."DON'T FIGHT THE TAPE". So why do so many traders in-fact do just that? I don't have the answer.

Trading "in-sync" with the markets will greatly improve the odds of a successful trade outcome when managed properly. The best part about TMS is its simplicity of interpretation. Designed similar to a traditional bar chart it lends itself to market structure and moving average analysis.

I have highlighted a buy trade which captured a 6 point move in the ES simply by using TMS along with traditional trade management tools. Click on the chart for a larger view with detailed comments.

Given the complexity of markets it is often better to Keep It Simple (KISS Method). This is exactly what the TMS is designed to provide the trader.

Good Trading

Cycle Sell Signal Trade Setup

Today's entry will highlight a Cycle Sell Short Setup that we identified in real-time during Thursday's session in the TPP Chat Room. This was a brilliant divergent short setup indeed. During much of the open range price action chopped around with no real directional bias. It wasn't until buyers pushed price to new marginal intra-day highs that sellers responded aggressively, setting up a shorting opportunity for traders.

As you can see from the chart above, as price pushed to new highs there was no corresponding momentum to support the move creating a negative divergence. At the same time there was a Cycle Sell Signal that nailed the high of day confirming that a short trade should be considered.

Sellers continued to push price lower until the open gap was filled. Brilliant trade indeed!!

Sector Rotation Model Explained

The chart above depicts the graphical relationship of the Economic and Stock Market Cycles based upon Sam Stovall's theoretical model of Sector Rotation. It's generally accepted the stock market leads the economy by 6 - 9 months. In other words, it "discounts" future economic activity. More specifically, certain sectors tend to be outperformers on a relative basis while others are laggards. The Sector Rotation Model gives investors a template upon which to identify what point in the "cycle" the economy and stock market are and which sectors are most likely to attract investor funds.

The green arrow represents the economy and red arrow the stock market. The sectors that comprise the SP500 are overlapped above in a very specific order. Currently the economy is considered to be in FULL RECESSION and MARKET BOTTOM (potentially). If that assumption holds true, then the Sectors that should see relative strength at this point in the cycle are TECHNOLOGY, FINANCIALS, CYCLICALS and BASIC MATERIALS. The laggards should be CONSUMER STAPLES, UTILITIES, HEALTHCARE and ENERGY.

If you examine the previous posting labeled Sector Performance you will notice that those specific Sectors that are modeled to be outperformers at this point in the cycle are indeed leaders as the Market is attempting a bottoming process.

It is important for the trader to keep close watch on the performance of these various sectors going forward as they will in effect give us the "temperature" of the markets and the economy's future.

Industry Group Performance

Our previous post below took a look at the nine sectors and their relative performance versus the benchmark SP500 index. The chart above breaks down those sectors to Industry Groups in order to closely examine where the strength and weakness is concentrated. We noted that Consumer Discretionary Sector was an outperformer since the March lows...A closer look details that Retailers and Homebuilders have indeed been strong relative performers along with Banks. These three groups have been the weakest since the August 2007 highs, so it's not surprising that they are the first to show strength at this point in the cycle. Technology was highlighted to be an area to consider placing new investment funds. Internet and Semiconductor Groups are also showing relative strength, so it's not surprising that Nasdaq Composite has been a leader since it represents the main core of the Technology Sector.

As stated in previous post that the trader would be well served keeping close watch not only on the broader sectors but also on specific industries within the SP500 index.

S & P 500 Sector Performance

The above chart displays the Nine Sectors that comprise the S&P 500 Index and their relative performance versus the SP500 benchmark. The Bears have maintained that the current rally from the March lows is nothing more than a typical "bear market rally", while the Bulls have been quietly optimistic given the damage that has been done. A closer examination of the sectors provides the objective trader a realistic view (not subjective) of the underlying strength and weakness in the SP500.

"Not All Sectors are Made Equal". Typically at market bottoms the sectors that should lead on a relative basis are Financials, Consumer Discretionary, Technology, Industrials and Basic Materials. As you can see from the chart above those are exactly the areas that have exhibited the strongest relative strength during the current rally. The more defensive sectors such as Healthcare, Utilities, Energy, and Consumer Staples should be laggards. Again, this is the case.

So, the jury is out whether this rally is nothing more that a "bear market rally" or the beginning of a new Bull Market. It is important to the trader to keep close watch on these nine sectors when price action does pullback and the current rally ends, as that will be a tell-tale sign regarding the bull/bear outcome.

TPP Balance Chart

Friday (4.24.09) had all the makings of "Fed Day". Overall trade was quiet yet progressively positive as traders anxiously awaited the details from Fed regarding the banking system's "stress-test" methodology. It was "buy the anticipation, sell the announcement", followed by "buy the drop and sell the pop" type action. Program trading kicked in as price moved from fair-value to extreme discount up to extreme premium. In the end, the S&P closed near its high for the session.

Though we admit this type of volatility can be challenging to trade, we at Trade Pilot Pro (TPP) follow a disciplined approach to trading. The above chart is our core Balance Chart which provides the trader with all the critical levels needed to make intelligent knowledgable trade decisions. The sub-graph labeled TPP Cycle Trend is our proprietary buy and sell filter. As you can see on the chart the Cycle Trend accurately identified profitable trade opportunities without getting whipsawed by the algorithmic programs.

THINK!

I am your constant companion. I am your greatest helper or your heaviest burden. I will push you onward or drag you down to failure. I am completely at your command. Half the things you do, you might just as well turn over to me, and I will be able to do them quickly and correctly. I am easily managed; you must merely be firm with me. Show me exactly how you want something done, and after a few lessons I will do it automatically. I am the servant of all great men. And, alas, of all failures as well. Those who are great, I have made great. I am not a machine, though I work with all the precision of a machine. Plus, the intelligence of man. You may run me for profit, or run me for ruin; it makes no difference to me. Take me, train me, be firm with me and I will put the world at your feet. Be easy with me, and I will destroy you. Who am I?

I am a *HABIT* !!!

Catching Bottoms and Tops

Ok, ill let you in on a really big trade set-up I use

READY

Look at where the market was and look at where it is going, you can not break this rule under any circumstance!

Ok now that you did that.

Place a trade in the direction that it is going, this is where it gets hard, it is kind of like seeing the “forest through the trees”

After you place the trade, now I mean only after do you start to make money, this is where it get’s even harder to do.

You see we all want to be right and prove the market wrong, and say I got the bottom tick and this is a very scary thing to do
But we will risk everything to do it so we can justify our hard work and time we spent studying the markets and if you do actually get the bottom tick, it will be nothing more than (POSITIVE RE-ENFORCEMENT OF DESTRUCTIVE BEHAVIOR)

DON’T WORRY YOUR NOT ALONE.

The sad part of this is that it is a terminal disease traders never recover from, trying to catch a top or bottom in any market or stock will ultimately end up in ruin for all traders,
please understand THIS IS A LOSERS GAME, in fact it has nothing to do with trading at all it has do with our Lack of self worth and our own perception of how we judge ourselves, we want to be right more than we want to make money.

So when you are trying to call market tops or bottoms take a moment of pause to “THINK” why am I doing this, is it to make money ? or prove something to myself or someone else.

Trading Bias: Is it worth it?

What does a having a Bias do for trading anywayHaving a bias is the tendency to give greater weighting to information that supports our own theories and beliefs, while minimizing disconfirming information. People have a natural tendency to filter information in a way that favors their preferred views, we see what we want to see, we hear what we want to hear, in short form we will only look for the opinions from those that our like our own, we then make it a self fulfilling opinion, and if we are wrong we can blame the other party for there miss-calculation or we can release ourselves from taking responsibility, a destructive pattern that traders do almost 100% of the time

How do we break this pattern?

Stop listening to so called experts, who for the most part don’t even trade and we ourselves spend more time analyzing the markets then they do, we have our money at risk, why would we follow the opinions of others, do we know they have there money at risk, NEVER have we seen there accounts, NOR do we know them personally, NOR do they care if we loose money, NOW Makes you wonder why?

Losing traders have these biases.

TPP Cycle Trend ES 15 min

The above chart shows the TPP Cycle Trend buy and sell signals on the 15 min chart of the ES. Support is at 823.25 pivot. The current structure is a symmetrical AB=CD pattern. You can also see the Wave AB is defined by a smaller degree symmetrical ab=cd pattern. The symmetry has been near perfect with cycle buys and sells firing at the pivots.