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.

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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!!