Dow Intraday charts 25/08 29/08

[ChartMan]

I hear what you say Rosso, and I agree to a point. The longer time a pattern takes to develop, the better. But define 'time'. That's the crunch. I've defined an Intraday top pretty precisely as being a 3 pk ND that occurs across a minimum of 25 minutes. The next time frame is on the 10 min charts where you have correctly identified divergent reversals. These need to be analysed over a number of occurrences to see if a rule can be developed for that time frame. The unreliable divergences that I sometimes make reference to is the EOD time frame where we are looking for a major reversal.Because there are not many ( 3 this year?) it's difficult to establish a rule. Attached is a chart from June 30th major reversal. I was watching this on the 10 min chart and trying to call the bottom. As you can see, there was a couple of false starts. Where could you have been certain that the bottom was THE bottom? One has to have patience and apply the rule of higher low and higher high by way of a confirmation. This happens quite a while after the real bottom.
Now if you're trading timescale is in the order of buy and hold, one can take a stab at the divergent bottom and enter a trade, knowing that there may well be a draw down of X points, but have the certainty ( if that's possible) that the divergence WILL deliver.
So now you see my dilemma. I am looking for a major reversal bottom, that can be traded on an itraday basis that does not result in a draw down and that's where the problem lies. If you look closely at the bottom around 12th March this year, the long divergence led to an intraday rise of over 200 points.
PS One more point. It's all well and good defining these divergence rules that work, BUT one has to define the rules of failure as well.......

 

[ChartMan]

10 min chart showing divergences and the newly established parallel trend line.

 

[ChartMan]

Classic case of evaluating a drop below the 100MA whilst long? Hold or sell? Use the 10 min up trend support line as the final decision. Here, the drop was 16 below the 100MA and the trend line was exactly 20 below the 100MA, but that was a sheer fluke.
Triangle target is from the open triangle, that broke at 9360 with a mouth of 30.( 9370 to 9400). That failed to penetrate 9360 so an opportunity to take a long...... closing at the nd top just before the bell and the sting in the tail.

 

[rossored]

Okay, CM, good argument.

Would you agree that it is fair to say that the longer term divergences always deliver though? It's just a matter of where you take a shot at the divergence, correct? And how big your.....er, bank balance is if you happen to be in a bit early.

I'm now in the fortunate position of trading YM (and hoping to move to ES shortly), so the market only needs to move one point in my favour and I'm at breakeven. Hence, I find I'm getting a bit ballsy (and this will no doubt cost me dearly at some point) of scalping off anything from 2 points upwards on the peaks of even the slightest intraday ND top. However, I've found (particularly this week) when tied in with the longer term ND's that it occasionally pays a pretty big dividend - I was short on Thursday from the 9350 area...

A phrase I've heard lately which I think applies here is "In trading, as in fencing, there are the quick - and then there are the dead".

Anyway, your charts, as always, are a lesson in humility. I, for one, was convinced that the markets were closing early yesterday so knocked off at 7pm and went out....

 

[peedee]

Chartman, i took a rough average of the overall volume for the dow yesterday, at any period it worked out at about 300,000. If you understand what im on about, where do i look on your charts for spikes wether resistive or supportive. I would like to start looking at your dow charts it seems there is a lot of information to be gained from them. Cheers, Peedee.

 

[rossored]

Excuse me butting in, 300k? Er, are you sure about that Peedee? I dont think the Dow traded much more than about 25k all day yesterday, and I think in most peoples opinion volume on the Dow is a waste of time anyway. Where did you get those volume figures from?

Still, having said that, if you think you've found something you can trade on, then go for it.

 

[peedee]

Marketvolume.com, i just took an average from the left hand side of the chart. I knew this post would go pear shaped. Peedee.

 

[peedee]

Rossored, what did you get for the daily total, 213,846,800, just to make sure ive got the same hymn sheet as you. Cheers, Peedee.

 

[rossored]

Peedee, I think the volume figures you are looking at are the sum total of all the stocks traded on the Dow for yesterday, whereas most TA is run on the number of contracts traded for that particular market, hence your total figures of 213,000,000 plus and mine of only 25k.

 

[peedee]

With that in mind, which figure would be best to evaluate the market condition. Peedee.

 

[rossored]

CM and others advocate using market volume on ES ( emini S&P ) to confirm trading decisions taken on the Dow or emini. Volume in this instance, as I say, is based on the number of contracts traded, not the volume of shares traded within companies on that index. Someone else may have an idea how the number of shares traded could be used, I dont know. I'm still learning (ie on the bottom rung of the ladder) about volume myself.

Without subscribing to a data supplier though, such as MyTrack, I dont know where you can get volume on ES on an intraday basis.

As I said though, if you think you've identified something using share volume that would help you trade the Dow, then give it a go.

 

[peedee]

Im very novice, but there is going to be a difference between trading contract volume and stock volume. If you break the dow down into individual companies, then depending on what the heavyweights are up to thier volume is going to have a greater impact. Peedee.

 

[peedee]

Anyway Rossored, i would have liked to follow CMs thread but now i dont think is possible. Peedee.

 

[rossored]

OMG I give up...

Peedee, please feel free to follow whoever's thread you like. It's a free country. I was just trying to answer your question.

 

[ChartMan]

DOW vol is a waste of time . You must use S&P 500 futures - ES. I agree Rosso, longer term TA nearly always delivers on the basis the longer it has been in force, the more likely it is to deliver or break, depending on what your TA is showing.
Setup ES Vol on Sierra to show 2 colour vol. One for up ticks , one for down ticks.Now get DS clock to show seconds elapsed ( http://www.dualitysoft.com/dsclock/?about&version=1.4)
Now, Skim uses market depth to show her the real volume action. We can nearly get this with Sierra, ES Vol and DS clock seconds. Watch the seconds clock and see the Vol. rollover at 00:00 . Now watch the volume counting against time. On big moves, you will see the volume going up in "blocks" of 100's. This is the big boys buying( or selling) 100 + contracts. That means only one thing. On small moves, you will see the volume counting up in ones and twos and the odd tens.

 

[Skimbleshanks]

IB's trading platform does in fact have seconds displayed, although you may have to squint a little to see it. So I use one of the clock displays (similar to ChartMan's link) to make it large and easy to see.

If you are new to looking at volume as an indicator to help trading decisions, use the 1 min chart on the Dow, and wait for a small pennant to form. Just by watching the volume suddenly increase you will know when the pennant will start to break.

I spent one summer creaming the SB companies just using this strategy - seeing the large increase in volume meant I could enter a trade with the bias in my favour before the SB companies switched the bias. Then they got wise and I had to change my strategy.

Once you see that volume happening, you may find it easier to see it happen at other times during the day.

You cannot see the big boys take their positions by watching price, only by watching volume.

 

[rossored]

Just in case anyone else has had trouble with CM's link to a clock download, here is another one (about 1/4 way down the page, called TimeLeft) which is a free, 1.33Mb download and gives a stopwatch function, time and a few other customisable features. Runs on all Windows platforms.

http://download.com.com/3150-2350-0.html