Thursday, December 3, 2009

Thursday 12/03/2009 - Market Review

I noticed the Blog has gained a few new followers. Welcome to the Blog and I hope we can collaborate and improve each others understanding of the markets!

It's worthwhile to go over today's market action to connect the Key Levels posted last night with today's price action. Lets start from the open and go through the day step by step (this is an exercise I do everyday on my own after market close):

  • Market gapped up 2.75 pts at the open and extended beyond the Globex High and hit 1117, which served as resistance and we got a strong rejection at that level.
  • Selling pressure accelerated once price broke down through the mid-point and VWAP (Vol Trend).
  • 1108 was posted as the Key Initial Support level, and price bounced up from 1108.25 to 1111.50 (3.25 pts).
  • Break of 1108.25 took us to 1105.50 (2.75 pts). 1105 was also posted as a level, and my bias was bearish below 1105. The first bounce off 1105.50 took us to 1109.25 (3.75 pts).
  • Price rotated down again and hit 1105.25 (1105 level working beautifully here). This time we got a strong bounce up to 1110.75 (5.50 pts).
  • 1111 area was the Mid-Point and price remained below this area rest of the day. One of my trading rules states: "If Price is less than Mid-Point; Only take Shorts unless Price is rejecting a lower area of support such as the Lower Value Area."
  • Price was then range-bound between 1107.25-1110.75 (3.50 pts). We had a cluster of VPOCs in the 1107-1108 area.
  • Around 2:20 PM (cst), price broke down through the first hour low on accelerated momentum. Last night's post called for a bounce on first touch at 1100.25, but given the time of day (late afternoon), I'm not surprised that we did not get a bounce. Typically, if price is below the initial balance (1st hour low) in the afternoon, it has a tendency to close at or near the lows.
  • The next level after 1100.25 was 1097, and we closed at 1097.50. Price is currently trading at 1098.50 in the Globex session.

    Review the following annotated 5-minute chart and see how the day played out. If today's price action surprised you, then it could be a sign that you need to come better prepared. I hope this post clarifies some of the concepts I utilize, and connects the nightly key levels to actual price action.

    ES 5-Minute Day Session Chart for 12/03/09

    1. Fantastic review and very helpful. Action tomorrow has me looking at 1084-1086 as strong confluence of VPOC there and a significant number of stops just below on this most recent runup.

    2. Thanks Randi! This is something I do every day but I don't post it to the Blog on a daily basis because I'm sure it would get repetitive since I look at the same areas every day.

      With the NFP report out tomorrow morning, we will probably get some nice swings. On the bright side, with the recent market action between 1067 and 1117, the levels are pretty well defined. Good luck tomorrow!

    3. Very nice recap of the day......Do you have support and resistance levels for the bullish or bearish senarios for tomorrow...I see you say the levels are well defined but I am not sure where I can find them. Thank you again for sharing your trading techniques.

    4. Charlotte - just posted the Levels and Scenarios for tomorrow.

    5. Great review! Curious to know why you were bearish below 1105. I was also leaning towards the bearish side below that level, and was wondering if our leanings were similar for the same reasons.

      I was bearish below that level because it was a breakdown below LVNs over the past 2 days with little to no volume underneath. Thus, I was thinking for a possible thrust downwards after that point.

      That similar to your reasoning?


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