Price, (Volume), Support, Resistance, Demand, Supply . . .

I'm interested in price and price movement as a manifestation of the dynamics of buying and selling pressures and how the results of all this determine support and resistance and trend. This isn't about indicators or Level II or Gann or Elliott or Wolfe or Fibonacci or moving averages or "channels", which is not to say that any or all of those things may not be perfectly wonderful and may be signposts on the road to riches. But they are of no interest to me. And there may be like-minded individuals to whom they are of no interest either. If so, this thread may provide shelter and sustenance.

Be pleased to contribute what I can, but as I'm nort sure what you mean by the 'ignore feature' I'm going to go right ahead and ignore it.

You might want to take a look at the 'No Indicators Revisited' thread on the index forum as well, but that doesn't always run true to its title and it's pretty dead at the moment.

How about a really simple statement of what the relationships are between these aspects?

Support and Resistance are points where respectively, Demand overshadows Supply and Supply overwhelms Demand. That would assume no other direct or indirect manipulation of the price - just straightforward buyers & sellers.

High, lows and particularly round number points are likely SR points (especially decade points).

Recent High/Low points also act as SR points. Current day, previous day, weekly, monthly, 52wk Highs & Lows.

Where the bunny hits the mincer is when we look at the relationship between Price & Volume.

DBP, you're an expert on this, why don't you give us your take on it?

GirlPower said:

How about a really simple statement of what the relationships are between these aspects?

Support and Resistance are points where respectively, Demand overshadows Supply and Supply overwhelms Demand. That would assume no other direct or indirect manipulation of the price - just straightforward buyers & sellers.

High, lows and particularly round number points are likely SR points (especially decade points).

Recent High/Low points also act as SR points. Current day, previous day, weekly, monthly, 52wk Highs & Lows.

Where the bunny hits the mincer is when we look at the relationship between Price & Volume.

DBP, you're an expert on this, why don't you give us your take on it?

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You're on the right track, but allow me to make a few modifications.

S/R are not points where demand overwhelms supply or vice-versa. They are rather points or levels or zones at which the movement of price might be affected due to the fact that price was affected there earlier by demand overwhelming supply or vice-versa. In other words, a swing high occurs because supply overwhelms demand, at least for the time being, but one cannot assume that a swing high is going to act as resistance simply because it's a swing high. It must also act as resistance in order to be resistance. If it doesn't, then it isn't. Again, this is not to say that highs, lows, round numbers are not potential S/R. But they are not actual S/R until they actually provide S or R.

As for the expert part, I'm just looking for the truth, and I've learned that the truth is to be found in price. Understanding the behavior of price is the real trick.

dpb

I'm surprised you found the No Indicators Revisited "primarily about indicators". It's far from that and it's very much along the lines you're advocating. Maybe worth you having another look from the start of the thread - if you can ignore the odd aside, deviation, argument and even the odd indicator that is

Not averse to pursuing on a different thread tho'.

Just to add to your thoughts. If the price reverses at a resistance level it can be either that new supply has come in or that demand has been withdrawn - presumably you look to volume to tell you which?

barjon said:

dpb

If the price reverses at a resistance level it can be either that new supply has come in or that demand has been withdrawn - presumably you look to volume to tell you which?

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If the "resistance" level has demonstrated that it provides resistance and price reverses there, it could be doing so for either of the reasons you suggest. Volume provides a clue, but since volume is only trading activity, one has to look at the relationship between volume and price. If, for example, there's a lot of activity and price is difficult to budge, then one can assume that demand is insufficient to outdo supply. That may not be the case if buyers can trigger short-covering, but you play the hand you have. OTOH, if there's not much activity but price rises anyway, one can assume that there is at least some demand, but not enough selling interest -- yet -- to curb it.

But I suspect you knew all of that already . . .

dbp,

Yes I am also interested in your work on this as I am also a member of your Yahoo forum and I am pleased to see that you have decided to post on T2W again. Have you asked for the same on ET or is this exclusive to T2W ?

barjon,

There is a lot of talk about Elliot on the No Indicators thread especially at the beginning as well as ratios and I guess that dbp wishes to discount those as well in this discussion.


Paul

How does support equate with accumulation and distribution with resistance if at all?

S/R are not points where demand overwhelms supply or vice-versa. They are rather points or levels or zones at which the movement of price might be affected due to the fact that price was affected there earlier by demand overwhelming supply or vice-versa. In other words, a swing high occurs because supply overwhelms demand, at least for the time being, but one cannot assume that a swing high is going to act as resistance simply because it's a swing high. It must also act as resistance in order to be resistance. If it doesn't, then it isn't. Again, this is not to say that highs, lows, round numbers are not potential S/R. But they are not actual S/R until they actually provide S or R.

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This is so similar to my view its nearly disturbing . If this bird can get off the ground and stay simple as it should then im keen to debate and hear other folks ideas on price action.

regards

all the threads i have read go a mile away from the topics and back again. this is somtimes fun and somtimes boring .......... just like the markets.

i don't believe this type of communication can ever be different even with the ignore list.

girl power, did you bop them on the head?

Rognvald said:

How does support equate with accumulation and distribution with resistance if at all?

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I guess it depends on what you're doing with what you're learning about S and R in whatever action is taking place on whatever chart you're studying. S and R don't necessarily have any special meaning during the process of accumulation (or distribution) unless you're planning on trading them, but that's not something I'd choose to do. Though this may not be what you intended to ask . . . :?:

dbphoenix said:

"Igonore" enables you to avoid posts from people you've chosen not to attend to.

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The problem with that is that while some people can be real jerks sometimes, they can also be extremely lucid, helpful and generous at others. I'd prefer to take the time & effort to sort the wheat from the chaff. You never know. (I reserve the right to completely agree with you on this issue in a few months time ).

In other words, a swing high occurs because supply overwhelms demand, at least for the time being,

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Is a swing High a move up? In which case, wouldn't that be demand overwhelming supply? You're going to have to bear with me if I'm all about-face DBP, I'm new to this.

Rognvald said:

How does support equate with accumulation and distribution with resistance if at all?

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If a price area is acting as support, does that not mean it's 'relatively' low in price, which would make it ideal for accumulation.

Similarly, wouldn't resistance normally indicate relative high price, therefore excellent for distribution?

As with all S/R points following on from DBP's responses, they are all 'local' and therefore relative, but isn't that ever all we have to play with - i.e. what's happening right now?

Rognvald, am I missing some nuance that you were trying to provide?

Rognvald said:

How does support equate with accumulation and distribution with resistance if at all?

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When insiders determine to accumulate they could put in an order to purchase all shares at a particular price. Every time the price returns to this area inside buying will surface providing support.

i.e. If following their initial purchase the price moves upwards they may induce selling with the aim being to return the price to their original purchase price.
We would expect this to continue until accumulation is complete, at which point the mark up phase begins.

By doing this the price area where the insiders wish to accumulate acts as support.

Reverse the above for distribution.

Did I understand your question correctly?

Vorpal
Yes - thank you

GP
No nuances in that. Sorry if I have acquired a reputation for nuancing.

Dbp
Hi - thanks for your reply. The question was just as stated. I hope this thread with a judicious use of "ignore" will stay on your chosen topic. Discipline and restraint is not the strong suite of many browsers (that is to say ruminants )

Rognvald said:

Dbp
Hi - thanks for your reply. The question was just as stated.

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Then both S and R are elements of both the accumulation and distribution processes. That probably doesn't answer your question, but it's the best I can do given the way in which your question was stated.

I agree about accumulation occuring at a price due to "institutes" wanting to buy big vol at price x, with the help of MM's.... however, on idecies, I think accumulation occurs in a band where the market in general ( the big boys) prepare for a move.

ChartMan said:

I agree about accumulation occuring at a price due to "institutes" wanting to buy big vol at price x, with the help of MM's.... however, on idecies, I think accumulation occurs in a band where the market in general ( the big boys) prepare for a move.

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Where it occurs isn't as important as how it occurs and how long it takes. Generally, "accumulation" that takes place quickly won't take enough supply out of the picture to enable a move that is significant enough to generate more than a paltry profit, if any.

The problem with pure price/volume analysis is not being able to split buy volume from sell volume systematically, you can only do it by studying the day's trades and it's prone to error. If I'm wrong there, someone let me know. In looking at price/volume alone, how can you know or at least get a feel for buy/sell volumes within the single volume figure reported?

I looked at 10 years EOD of one UK big cap and found no relationship between t-1 price movement and volume movement and t0 price movement (perhaps a very slight tendency for price to continue downwards if previous day's price was down and volume was up, but probably insignificant). It was a crude analysis however, in preparation for something finer which I'm working on).

In practice do you end up concluding that the high volume candle/bar at the bottom of a dip meant buys kicked in and added to the existing sells giving high volume overall, AFTER the event? During the event you could as easily assume it was sells increasing to accelerate the down move. Early thoughts on this and quite basic.

blackcab said:

The problem with pure price/volume analysis is not being able to split buy volume from sell volume.

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Blackcab, you're going to have to help me out with that one. I thought for every Buy there was a corresponding Sell?

blackcab said:

The problem with pure price/volume analysis is not being able to split buy volume from sell volume systematically, you can only do it by studying the day's trades and it's prone to error. If I'm wrong there, someone let me know. In looking at price/volume alone, how can you know or at least get a feel for buy/sell volumes within the single volume figure reported?

I looked at 10 years EOD of one UK big cap and found no relationship between t-1 price movement and volume movement and t0 price movement (perhaps a very slight tendency for price to continue downwards if previous day's price was down and volume was up, but probably insignificant). It was a crude analysis however, in preparation for something finer which I'm working on).

In practice do you end up concluding that the high volume candle/bar at the bottom of a dip meant buys kicked in and added to the existing sells giving high volume overall, AFTER the event? During the event you could as easily assume it was sells increasing to accelerate the down move. Early thoughts on this and quite basic.

Click to expand...

Volume in and of itself is reflective only of trading activity, such as the number of shares traded. In order to know whether it is indicative of demand or supply, you have to look at the results of all this activity, i.e., the effect on price. In other words, there is no such thing as "buy" volume or "sell" volume; there is only volume, since a buy cannot take place without a sell (or vice-versa). What makes price move up is not the buys in and of themselves, but the demand.

As to high volume at the bottom of a dip or W or rounded bottom or whatever, again, it depends on the effect on price. If there's a lot of volume and price doesn't fall, then you can assume that the selling is exhausted and that aggressive buyers can buy the bounce, or that more conservative buyers can begin the accumulation process, depending on the context. If volume is high and price continues to fall, then selling is not yet done and buyers are not willing to do more than take shares off the hands of panicky sellers; they are not, in other words, anywhere near ready to pay a premium to stop the decline. The fact that the volume is high, however, suggests that selling is near an end.

Of course, "high" is relative and has little meaning unless it is placed within the context of a chart. One man's selling climax is another man's continuation unless one looks at the forest.