Big drop over the weekend finally bottomed out after half an hour of trading. Nice example of why it's a good idea to wait and see what happens during the first hour of trading. The drop comes close to the 7400 target mentioned a while ago...but is it close enough or is there more to come? The day continued with a solid steady rise up to 7680 before a 100 point drop into the close, developing an expanding triangle which infers more volatility around the corner. CCI ended up divergent at the close, but that's not uncommon. Difficult to see where some upside will come from...
Volume study. Analyse the volume peaks and density for the buys(top) and sells ( lower). It can be see that there is correlation between vol peaks and peak/trough price action. Notice how as the up tick volume ramps up and the down tick volume decreases, the price has to go up and vise verca. See at the double top, the buy volume is already in a down trend, and the sell volume is into up trend.
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So the move continued,I have to say, against expectation.Will this be the end of the move though? The upside has touched the uptrend resistance line and RSI and CCI peaks are dropping off. There has also been 4 slope changes in this move.Having broken out of 7750 in a bull triangle, the target 7850 was easily broken, so maybe we can find support tomorrow no too far away.
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A quick check on ES futures shows a nice rise in almost uniform 10 point steps from a base of 815. Clearly the two volume charts show that the upticks are far stronger than the downticks. At the end of the day we see a volume climax at the peak that indicates a top. Interesting taking a look at something other than the DOW. I wonder what it has in store in the way of secrets? The staircase 10 point steps are certainly one to remember. I wonder if they will be the same on the way down?.....Will volume hold some untold information? Time will tell. It's not easy to cram in all the fib points on the breaks but a quick glance shows good conformity.
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A drop to 7800 support and then another attempt at 8K that fell well short with a divergent top and the resultant drop falling through the 100 MA signalling a switch to short. This tried to break back up, but bounced down off the 100MA at 7880, to finally drop into the close ending at 7756. More down tomorrow to 7700?
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After a brief opening rally to 7900, the DOW dropped to test 7700 again before rising into the close to finish down 50 or so. This has the feel of a bottom to me.... but no hard evidence, just a feel for how it looks. Maybe I'm wrong. Looking at a 10 min chart, it could be that there is an inverse H&S developing ...if so, we'll be off.This would take us to 7900 and beyond. I guess 7700 has to hold. If the inverse H&S fails, It's a long way down. On the other hand this could be a bull flag ( 10 min chart), giving a target of 8200.
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ES Futures separated volume for second part of the day.A couple of points on volume, and one is a time extension of the other. During a single cycle uptrend ( the smallest uptrend that has no significant pullbacks) when a volume peak occurs, you will have one more tick in which to get out at the optimum point with maximum profit.The peak can only be found when the current tick's volume is less than the previous one. This is where it is essential to have a "tick clock" that will enable you to analyse the volume growth in "quarters of a tick". If, at the halfway point, the volume is less than half of the previous period, you can estimate that the full period volume is going to be less and thus exit the trade. ( you could also use a quarter tick estimate..)The opposite is true for down trends.
In the major up trend from 18:24 to 20:08, you can see that the "final volume peak" was 4,400, compared to 4800. There was also in intermediate lower peak too at 19:48 with a peak of only 3000.
Don't get greedy here... the final peak at 20:08 would have only got you another half a point...but you would have suffered the stress of seeing a 6 point pullback. Remeber how all good things come in three's.This rally had a negative divergence in the four peaks, but getting out on the third would have been no disgrace. You're not out to prove you can get out on the very last peak..you're out to bank a sensible profit, using all your skills to capture it. Volume watching is going to help do that.
In the major up trend from 18:24 to 20:08, you can see that the "final volume peak" was 4,400, compared to 4800. There was also in intermediate lower peak too at 19:48 with a peak of only 3000.
Don't get greedy here... the final peak at 20:08 would have only got you another half a point...but you would have suffered the stress of seeing a 6 point pullback. Remeber how all good things come in three's.This rally had a negative divergence in the four peaks, but getting out on the third would have been no disgrace. You're not out to prove you can get out on the very last peak..you're out to bank a sensible profit, using all your skills to capture it. Volume watching is going to help do that.
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Martin - there must be times when you think you are writing to yourself! Can I just say thank you for maintaining this excellent commentary. Every member of this BB must have learned something thay can use themselves, so please keep the charts coming.
