Tale of the Tape

In our previous post we questioned whether the recent pullback was 'just a correction or the beginning of something deeper and sinister?...The answer will certainly be revealed in due time.' Well, it took all but the next trading session to have our answer. Concerns about Global Sovereign Credit particularity the countries of Greece and Spain was the catalyst to hammer stocks and futures in today's session.

Tale of the Tape

Dow Industrials: -268.32
S&P 500 Index: -34.17
Nasdaq Composite: -65.48

Below is today's action in pictorial format as a picture is worth a thousand words.

Correction or Something More?

At the close of trading last Friday it seemed as though you couldn't even give away S&P contracts fast enough which capped a week of long liquidation along side shorts pressing. At the start of this week there hasn't been a real seller in the house, so price has rotated right back up to "key resistance" residing at 1100's. Is the Market "bi-polar" or is it just an "over-crowded trade". We suspect a bit of both with an Average True Range at 21. But hey, who's complaining? Isn't this exactly what intra-day traders clamor for?...Volatility!...All Day Baby...All Day.

Is this just a correction or the beginning of something deeper and sinister? It's either the best buying opportunity or best selling opportunity...The answer will certainly be revealed in due time.
In the meantime, as intra-day traders, we will continue to read the market generated data objectively, remain flexible and open-minded in our decision making.

The S&P e-mini March contract has only been able to generate one, yes one positive delta day in the past nine sessions. The past two sessions alone where price has actually rallied off lows have netted consecutive negative delta readings...Certainly not the response that bull market moves are made of...But we won't read too much into it at this point, though we are cautious on the long side and continue to favor lower prices in the near future.

Below is S&P e-mini Profile Graphic with some key price levels for Thursday's Session. Price was able to close in the upper three day quartile, so that gives the bulls a slight advantage. They still need to prove that they can get price above the 1100.00 level and keep the auction alive. Above the 2-day highs and price has a decent chance to revisit the 1107 handle, which is the January Midpoint. Below the 1091's and price could rotate back down to the mid to lower 80's. So either way our game plan is to remain flexible and open to directional cues from Big Money.

Good Trading

Bulls Fail Test

As mentioned in our previous post, the key price hurdle for the bulls was to regain 1091's which represented the 3-day midpoint and hold that ground...Neither happened. An early rally attempt on the bulls part found more than willing and albeit aggressive sellers. We counted eleven(11)Sell Programs within the Initial Balance period that prevented the bulls from further upside progress. When it became apparent that the bulls were losing, fresh new bear short sellers entered the fray only to force existing bulls into further liquidation by the end of the session. We've been highlighting that the Net Daily Delta has continued to be negative, and by Friday's session settlement the cumulative count exceeded -500K, without even one positive day reading. Now that's some selling.

The chart below is the TPP Balance Chart...It is our "Core Chart" that we use daily in the trading room. All the key levels an intra-day trader requires are dynamically calculated giving the serious trader key information upon which to make intelligent trading decisions.

If you are interested in learning how we integrate the Balance Chart with our Methodologies, you are invited to a FREE Two-Week Trial to the TPP Trading Room. Please visit our website at www.tradepilotpro.com and fill out Free Trial Form.

Good Trading

Continued Long Liquidation

"Float Like a Butterfly...Sting Like a Bee"...Muhammad Ali (a.k.a. 'The Greatest')

The Bulls have certainly been stung by the "Bee" this month and they have been stampeding for the exit. Does anybody even remember the the term "liquidation" over the past six months? Well, it's back and in a huge way...After breaking multi-day range support level at 1125.00 it's been nothing but "sell...sell..sell". This week has seen some bit of price stabilization between 1080.00 support and 1100.00 resistance...But is it enough to turn the momentum around? We are skeptical...The bulls will need to prove it given the fact that the last five days has seen continued high volume with negative delta readings. (see chart below)

First major hurdle for the bulls is to prevent further price deterioration and then auction price above the 3-day midpoint residing at 1091's and keep it there...A large hurdle indeed given current market momentum, but as we all know, anything is possible.

Key Support Zone remains 1075-1080
Key Resistance now is at 1100.00

The 10-day Average True Range is now 19.50 and we anticipate the current volatility to continue offering traders an abundance of "profitunities".

Be Flexible...Know Your "Edge"

Range Day

Monday's Auction was a near perfect Range Day which saw price containment within well defined price distribution of the Initial Balance (1st Hourly Range) of 1099.00 - 1090.00. Price gapped up early only to fade quickly back to Friday's settlement price before attracting buyers...Price auctioned back into the IB Range and found two-sided action for the remainder of the session. Range Day trade is fairly well defined but can be gut-wrenching for the amateur which calls for fading the "edges". One of the most successful ways to handle this is to trade responsively at the +- 2 Sigma Levels (standard deviations). At TradePilot Pro we refer to this as "fade the raid to get paid"...The chart below is the 30 min TPP Delta which clearly highlights the key levels to consider trades..i.e.+-2 Sigmas...which offered the trader a well defined "reversion to the mean" profit opportunity.


Key Reference Zones:

Initial Resistance: Monday's Pre-market high at 1103.00
Secondary Resistance: 1109.00 then, 1119, 1126.00

Initial Support: 1085-1086 November / January lows
Key Support: 1080.00


Good Trading

Anatomy of Long Liquidation

Happy New Year and Welcome Back to the TradePilot Pro Blog.

We have been on a six month hiatus from blog postings as we have been diligently working on our newly designed website www.tradepilotpro.com. Please stop by and take a look around...Be sure you sign up for free two-week trial to our S&P e-mini trading room where we discuss market action and trading profitunities in real-time.

VOLATILITY IS BACK! Finally...As every day trader knows price movement is required in order to have opportunity to profit or what we call "PROFITUNITIES".

Our first post for the new year is entitled "Anatomy of Long Liquidation" and the best way to present this is through visual chart annotations shown below. To set the stage, price had been stuck in a multi-day range very near 50% retracement levels that marked the 2007 highs to the 2009 lows. The Bulls tried many times to expand above this level in order to attract "new buyers", but there were "no takers". So with too many "bulls" the market had become "overcrowded"...Well the seasoned trader has seen this movie several times before and frankly it's a bad re-run and we all know the ending...It's bad for the bulls. No different in this case this past week, as the overcrowded longs were forced into "Liquidation".

Our movie clip starts on 1/15/10 on a test of the multi-day range support level at the 1125-1127 zone. Follow the sequence of chart annotations and see how the movie ends for the bulls...Discretion Advised...It's Not Pretty.