Gentle Trader

Archive for February, 2010

After an extended holiday, here I am with a nice example of market makers running stops. This happened on Friday’s session.

Low volume lead price into recent low, which was taken out. We got a spike in delta right below the low (desperate sellers getting rid of long positions). After that, volume increased hitting the ask.

Major support levels for today are 1055 and 1050. In the up side, I would look at the 1072 LVN (low volume node) area.

Nice short setup. Price was pushed up without volume, and just above last higher high, a bunch of stops were executed in lots of big resting (limit) sell orders. Good market maker work!

Immediate resistance at 1072 and support at 1055. Building value around HVL 1064 during overnight session.

In a previous post, I talked about Gutmann’s way of defining the type of the day. What an incredible tool! Look at the levels in today’s session. Many periods in “buy mode”. In this mode, I tried to buy deeps at certain important levels. Worked really great.

Gutmann time pivot levels for tomorrow:

Weekly:

Levels for today.

Weekly composite volume profile:

This is only a preliminary study I’m doing in my research to identify medium term trend reversals.

Using 350k volume chart. Cumulative delta divergence indicated the possibility of trend reversal. Price confirmed the reversal in a triple top pattern. The 1100 level was an excellent region for shorts.

For those of you who doesn’t know the meaning of delta, I’m about to write an article about it. For now, I would say it’s the difference between the trades executed at the ask and the trades executed at the bid.

Using this concepts, trend is still down. Let’s see when/if the trend reverses this week.

There are many ways to determine if we are or not in a trend day. One of the best approaches I’ve seen is the one I found in Michael Gutmann’s book (The Very Latest E-Mini Trading). He uses a cumulative tick indicator that simply acumulates the (HI+LO+CL)/3 data of TICK data over the session. But what makes his approach unique is the fact that he estabilishes some key hours, that he calls time pivots, and calculates the average cumulative tick for that time pivot for the last 50 days. There are 2 numbers for each time pivot: one for what he calls a positive session, when the day ends with positive cumulative tick, and one for negative sessions, when the day ends with negative cumulative tick.

These time pivots levels are plotted, and  as the session goes, we can evaluate how cumulative tick is doing, comparing to these levels. As Gutmann always says, a chart is better than words. So let’s see the last session’s chart.

We can see in the chart above that at the the time pivots, CT (cumulative tick) was far bellow it’s average value. This give us the hint not to open long positions. Late in the day there was a huge short covering, but this could not be detected. As Gutmann says, this type of analysis would prevent you from trading against big trend days.

You can find more about Gutmann’s strategy on his book (The Very Latest E-Mini Trading) or in this article.

Support level 1050.75 reached during overnight session.