Neutral Day, Bullish Confirmations – December 8, 2011

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[B]“Currently it seems like a mission impossible for the bears to keep the markets at the lows (despite the news), while buyers are still eager to buy every dip, which will probably remain the prevailing theme for the time being.”[/B] Frank -Tradingtheodds.com

[B]“Let’s all be honest – this is just fun foreplay as bulls and bears line up for the last big trade of the 2011 which will be the market’s reaction to next headlines from Europe starting with the ECB tomorrow morning and headlines from the Euro summit for the remainder of the week. From the price action, especially over the last two days, it is clear that the market wants to hold here and overtake the 200 day but hasn’t been able to do so yet with the level of uncertainty, fear and hope that continues to strangle the market like a tightly-wound Christmas scarf.” [/B]Charles Kirk – The Kirk Report

Nothing much has changed on a closing basis. But on top of the above quotes, Wednesday’s action confirmed again that large players are eager to buy below or at the intraday VWAP and at the VWAP anchored at the 11/30 opening gap. After filling Monday’s opening gap –which reduces the risk of a new sharp pullback – and bottoming just below the anchored VWAP, the first buy programs kicked in but with a concerning negative divergence from the RT 20DMF. This was positively resolved by a RT 20DMF breakout at 3:00 PM after IWM found new support on the intraday VWAP. The usual EOD selloff from day traders left the 20 DMF net neutral for the day.

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I found also very positive that IWM bottomed without breaking the (65,5) volatility stop on the 30-minute chart which often offers an excellent reward-risk entry point within a sound uptrend.
The higher volatility has strengthened both the first support and resistance clusters and the balance of power is now 3-to-2 in favor of support holding and resistance breaking.

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The evolution of IBD’s accumulation/distribution ratings is strongly biased in A and B ratings versus D and E and is another confirmation of institutional conviction.

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In daily stage analysis, the percentage of stocks in accumulation and mark-up stages is growing fast and our positive reward-risk analysis for buying all intraday dips remain valid.
Billy

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Looking at the A/D, breadth, and 15, 30, 60, and 240 minute $TICK reading, a price reversal would seem near. I wonder what the intra-day MF shows?

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[QUOTE=nickola.pazderic;19151]Looking at the A/D, breadth, and 15, 30, 60, and 240 minute $TICK reading, a price reversal would seem near. I wonder what the intra-day MF shows?

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Looks ready to turn up for an afternoon rally. Stabilized from 13:00 pm without any negative or positive divergences.
I may be wrong of course but we are back near the very strong support cluster.
If they close above intraday VWAP, today's bottom buyers will be winners.
Billy
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If we break the horizontal support, at about 42.8, decisively, I would estimate heavy selling.

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Today is one of those examples where the 20DMF appears to be trying to find a bottom (according to Billy's chart above) and yet the $TICK continues to plunge lower.

No reversal in view. Either Draghi killed all large players plans or today is a shakeout and this final hour will be key.
Billy
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[QUOTE=Billy;19156]No reversal in view. Either Draghi killed all large players plans or today is a shakeout and this final hour will be key.
Billy
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Indeed, this was the risk-off liquidity pull that I really expected to happen Tues or Wed.

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Now that the expanding terminal top has broken to the downside, the first bounce is typically sold and the market heads lower to the target, then bounces. Just one potential scenario...

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Here they go, at last! Shake-out scenario panning out for now.
Billy
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[QUOTE=Billy;19160]Here they go, at last! Shake-out scenario panning out for now.
Billy
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Assuming the scenario holds to the close, can you point out the tell-tale signs in the 20DMF True chart?

Trader D

This reversal put a stake it in for me. The one minute charts are deceiving. It happened in a humanly impossible burst.

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[QUOTE=TraderD;19161]Assuming the scenario holds to the close, can you point out the tell-tale signs in the 20DMF True chart?

Trader D[/QUOTE]

[B]"I do not know! We are only test-flying this new RT airplane. No flight simulator is available yet!"[/B] - Pascal Willain

I was so proud of myself for dipping a toe in at 3:10... and then along came 3:39....

It looks like lot of buyers came in at 3:59, didn't they?

[QUOTE=nickola.pazderic;19162]This reversal put a stake it in for me. The one minute charts are deceiving. It happened in a humanly impossible burst.

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We have all the symptoms of a major reversal indeed. VWAP was resistance early and for the first time at the last hour rally attempt. Some large players tried to buy at the lows but larger players were waiting to sell in ambush at VWAP. We are now right on support cluster. Let’s see what the robot settings will tell us tomorrow.
Billy (licking my wounds)

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[QUOTE=ilonaross;19164]I was so proud of myself for dipping a toe in at 3:10... and then along came 3:39....

It looks like lot of buyers came in at 3:59, didn't they?[/QUOTE]

Ilona, in all likelyhood, only day-traders covering their shorts.

There’s no shame in buying a good reward-risk setup, especially when the ETF has dropped exactly one ATR which is a “normal” volatility retracement.
Billy

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Billy,

It looks like Bob’s prediction happened regarding the failed bounce. May I ask if you were stopped out of your discretionary trade today? I say this as I’m still holding on and have indeed added to my TNA discretionary position this afternoon. I’m using the robot stop which seems so well positioned, however I’m curious to know if you were perhaps using the (65,5) volatility stop or something else on the discretionary side. Here’s hoping my wounds have a miracle cure and I don’t fall off the operating table tomorrow. Thank you for any comments. Always appreciated.

Dave

[QUOTE=Billy;19163][B]"I do not know! We are only test-flying this new RT airplane. No flight simulator is available yet!"[/B] - Pascal Willain[/QUOTE]

Understood, thank you for following up. Based on the action, it looks like we should equip the test pilots with open-ready parachutes :)

Trader D

[QUOTE=davidallison@shaw.ca;19167]Billy,

It looks like Bob’s prediction happened regarding the failed bounce. May I ask if you were stopped out of your discretionary trade today? I say this as I’m still holding on and have indeed added to my TNA discretionary position this afternoon. I’m using the robot stop which seems so well positioned, however I’m curious to know if you were perhaps using the (65,5) volatility stop or something else on the discretionary side. Here’s hoping my wounds have a miracle cure and I don’t fall off the operating table tomorrow. Thank you for any comments. Always appreciated.

Dave[/QUOTE]

Dave,
I agree that Bob’s liquidity watch is the best I know and I am hoping like everyone else that he can soon become more RT active again.

I am still in my discretionary TNA trade and like you I don’t see a better stop than the current robot stop at 71.02. The 50 dma just rose at 71.09 and brings further cushion before a potential worst-case hit. Of course a sell signal from the 20 DMF is my other fail-safe stop.
As I said previously, barring being stopped out, my trade is intended for the “long run” and until stage analysis tells me to sell. Therefore, the volatility stop is way too short-term for such a trade. I am also a very aggressive trader and used to psychologically weather temporary large drawdowns when confident in a long term setup. I am aware that this may not be so easy for everyone.
That’s why we have the robot. And once again it proves to be a much better performer than my smartest discretionary trades!
Billy

[QUOTE=TraderD;19168]Understood, thank you for following up. Based on the action, it looks like we should equip the test pilots with open-ready parachutes :)

Trader D[/QUOTE]

And bike clips !

Trev

I just realized that TradeStation jumped into the illiquid March 12 contract for the ES yesterday...a full week ahead of schedule. Accordingly, I re-did the liquidity chart (higher = less liquid). At the approximate time of posting yesterday of 3:15 pm EST, readings would have been elevated, but did not take out prior trailing month highs until closer to the close.

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It seems the market has no patience and will not wait long to try another escape from the box.

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