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

[dbphoenix]

For now the sellers are stopped at current levels and the buyers will have to prove if they have the resolve to push the prices higher.

Better. A "show me" attitude helps to put you more in control.

 

[SOCRATES]

What ARE you saying to them now DB Phoenix ?

The object of the excercise is to be right, consistently right and not to go round the houses discussing biases. Biases are what have to be avoided, not by being prepared but by being impartial.

It is the future that is of primary importance and not necessarily the present or even the past..

Tuning into the future above all else is the desired ideal mental state required.

 

[samtron]

I think I would go along with DB on this, focus on the present (and the past), by doing this in a very intense way (ie in the zone), and with enough experience your subconscious can very often "reveal" the future......of course this has no connection to fortune telling!

 

[dbphoenix]

For now the sellers are stopped at current levels and the buyers will have to prove if they have the resolve to push the prices higher.

And they didn't, which carries its own message. This is why buying the hammer, as lovely as a given example might be, is such an aggressive move, esp for those who are slow to shift their focus, and why Wyckoff counsels waiting for the retest (which also helps to avoid trading against the trend).

In any case, 2050 is a far more important test for the Naz. Anybody know why?

--Db

 

[skinstg]

Those who are interested in the interpretation of price movement, the relationship of price and "volume" (i.e., trading activity, not inventory), and how all of this interacts with support and resistance would have a tough time finding a better example than the movement of the major U.S. indices over the past two-three months, particularly yesterday.

The question now is what the probabilities are from this point of an upmove or a downmove. I hope that those who've read this thread have a handle on this by now. If not, analyzing the movements during this period may help to tie up whatever loose threads there may be.

--Db

This is my understanding of where we are, using the S&P
1 - Weekly Chart - Momentum is clearly lessening, as evidenced by having to fan the blue trend lines, and also by having to flatten out the red supply lines - meaning that supply is coming into the market at relatively lower & lower levels. Trend is still up, however there is a potential trend change at hand, as the last blue trend line has been broken to the down side.

2 - Daily Chart - Again we can see from having to fan the 2 red trend lines that momentum to the upside is lessening.
In the A-C area, we have a healthy uptrend, the uptrend is broken in the C-D area however bulls would probably be calling this a normal correction, as volume is relatively low in this area.
Price reverses at D, slightly above the previous swing low, this too would still be bullish as we have a higher low.
Bulls hit there first problem area in the D-E zone where price makes a lower high and this should be the first major warning sign for the bulls. Also worrying should be the very high volume day around the 19 September, which failed to propel price to new highs, looks like a lot of distribution is going on.
Price turns up again in the latter half of September, which forms a nice coil (blue lines). Shortly after E price falls through support in the coil.
The current question is will price hold at current levels, being the level of the swing low formed at end June.

And to me that is also the significance of 2050 in the Nasdaq, it is the bottom of the potential resistance zone & last major swing low prior to the high.
If this level is broken to the downside, the trend would officially have turned down (at least by my definitions....)

All criticisms welcome

 

[dsn]

.....In any case, 2050 is a far more important test for the Naz. Anybody know why?

As noted above the Daily shows 2050 as a prior low with S formed on solid vol. As 2100 has broken this is the next potential S to watch.

The significance of this area is emphasised on the Weekly - the previous 2 attempts to rise through it having been driven back by high vol. selling. We are now above it again, so if S now materialises and price moves up that could be v. bullish, as a lot of people who have sold at this level over the last 4 years would then start coming under pressure to buy.

 

[dbphoenix]

This is my understanding of where we are, using the S&P

All criticisms welcome

Very nice. Makes so much more sense when one reads the chart from left to right rather than right to left . . .

--Db

Incidentally, skinstg has been maintaining a journal for five months now . . .

 

[dbphoenix]

as a lot of people who have sold at this level over the last 4 years would then start coming under pressure to buy.

That's it, in a more immediate timeframe. Swing highs and lows can and often do provide S/R, but among the more important S/R levels are those at which the greatest number of people have the most to win or lose. Price spent 15 weeks at this level (+/-) this year. That represents a lot of trades. If price can't hold here, an awful lot of people will be under water, and they'll be concerned. This is essentially the same dynamic represented by the "head and shoulders", though most people focus on the pattern rather than why the pattern formed in the first place, resulting in their not knowing what to do with it.

For future reference, this is also why climactic tops and bottoms of swings often don't provide S/R, because so few trades are taking place at those points (which is why the reversals occur in the first place).

--Db

 

[dbphoenix]

Did this for myself, but it may save somebody else some time. I suppose one could consider it to be part of what is shaping up to be a tops 'n' bottoms arc, the last post of which was #505. Anyone having gone short based on the subject of that post would be putting the last few posts into a different context than someone who hasn't read that far.

Hope those who believe that volume is a crock have done well . . .

--Db

 

[erierambler]

This is my understanding of where we are, using the S&P
1 - Weekly Chart - Momentum is clearly lessening,
2 - Daily Chart - Again we can see from having to fan the 2 red trend lines that momentum to the upside is lessening.
In the A-C area, we have a healthy uptrend, the uptrend is broken in the C-D area however bulls would probably be calling this a normal correction, as volume is relatively low in this area.
Price reverses at D, slightly above the previous swing low, this too would still be bullish as we have a higher low.
Bulls hit there first problem area in the D-E zone where price makes a lower high and this should be the first major warning sign for the bulls. Also worrying should be the very high volume day around the 19 September, which failed to propel price to new highs, looks like a lot of distribution is going on.
Price turns up again in the latter half of September, which forms a nice coil (blue lines). Shortly after E price falls through support in the coil.
The current question is will price hold at current levels, being the level of the swing low formed at end June.


All criticisms welcome

Yes , very nice indeed!

erie

 

[RUDEBOY]

DB. I wouldn't go too big on volume. How do you know how the volume is split? What is the psychology behind it? You can not deny it, sometimes volume does not live up to S/R.

 

[dbphoenix]

That's the subject of this thread (and a couple of ET threads) and has been addressed many times. If you have specific questions about specific posts, I'll try to clarify. But I just don't have the time to start over every time somebody asks these same questions. One chief reason why I assembled my book.

Sorry.

--Db

 

[RUDEBOY]

It's O.K. mate.

 

[chump]

Just completed the trend the trendlines on the Dow for you.

 

[dsn]

.............the more important S/R levels are those at which the greatest number of people have the most to win or lose. Price spent 15 weeks at this level (+/-) this year. That represents a lot of trades......

I don't generally look at horizontal volume display as I think it's usually possible to get the gist of what's happening from a standard PV chart. However, the attached illustrates the point with regard to the 2050-60 area over the last year.

 

[blackcab]

among the more important S/R levels are those at which the greatest number of people have the most to win or lose. Price spent 15 weeks at this level (+/-) this year. That represents a lot of trades. If price can't hold here, an awful lot of people will be under water, and they'll be concerned.

That seems to assume two things: that a high proportion of the positions opened at that level are still open, and that the most significant level for holders of those positions is that level itself, i.e. breakeven, rather than, say, targets based on prior S/R, fixed dollar targets/stops, time stops, TA-derived signals that trigger in the meantime, etc.

If those assumptions were valid then the above quote would be the natural conclusion, but how do you gauge whether they are valid? If the great majority of positions opened at that level were closed in the meantime then those traders wouldn't care about that level now, at least in terms of their current positions. Any thoughts on how you can gauge this?

 

[chump]

Blackcab,
I think that is an excellent point. Unfortunately , this 'recency' effect is not one I have yet resolved to my satisfaction. It would be good to see a post from someone who has.
However ,in the chart above it seems reasonable to suggest that the first area in question that occurred is now separate from the second area by a a huge downtrend and I would be inclined to say that the majority of that activity from the former area has been 'washed'. However , the 'real' has nothing to do with psychology does it ? . In other words if traders still associate that area with decline then will that prevail if prices now move back into it. Putting that into context ...last time prices moved into that area in a a downward trend interest rates were also heading down and not up so will institutional support be available in that area ?
Further discussion on 'recency' and S&R would be useful ..for me at least.

 

[Aleph Sigma Chi]

That seems to assume two things: that a high proportion of the positions opened at that level are still open, and that the most significant level for holders of those positions is that level itself, i.e. breakeven, rather than, say, targets based on prior S/R, fixed dollar targets/stops, time stops, TA-derived signals that trigger in the meantime, etc.

blackcab - these aren't assumptions. These are basic mechanics of the market - or more properly, the people in the markets.

 

[Aleph Sigma Chi]

Further discussion on 'recency' and S&R would be useful ..for me at least.

chump - recency is relative to your timeframe. What was ages past on a 5min chart is still very much a living entity on a daily. Don't forget in which timeframe the big money is playing.

 

[chump]

I thought I had implied time and indeed 'big money' in my comments re institutional money and interest rates across time....I agree what someone trading a 5min bar thinks of an area depicted last year is immaterial. Perhaps I am still looking for more information on this than there actually is.Wouldn't be the first time.