Fascinating GDX and Solid IWM Setup - July 13, 2011

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For a change, let’s start with the GDX setup evolution that I find fascinating from a multi-pivot perspective. The daily clusters developments since the robot entered at 53.26 on 6/23/2011 are providing all the hallmarks of a well-planned and organized accumulation campaign by floor traders and market makers. You may review chronologically the past daily clusters charts to see what I mean. The progression was calibrated to provide growing support and diminishing resistance within ATR bands each and every day without exception.

The total potential selling pressure ( 3+ 14) of 17 is now very easy to beat with the total potential buying pressure ( 17 + 19) of 36. And this on the day where SPP and QPP (56.61) were decisively conquered before a final attempt at breaking the 200-day moving average (57.77)! Don’t expect the professionals who accumulated with such an orderly program to become weak hands here. Once the 200 dma would be broken, their algorithms tell them that there will be no serious resistance during a run to QR1 (62.12). GDX was not driven by retail players so far and these will likely take the lead on a breakout of the 200 dma. The momentum that will follow will allow professionals to distribute for an easy profit on the way up.
Prior to the potential breakout, any pullback to near SPP/QPP (56.61) is a major buying opportunity and today’s limit entry at 56.90 is optimal for a successful trade.

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The robot could enter long IWM at the open (82.88) near the lows for the day and right above a massive first support cluster with strength of 25. Unless we live the end of the European banking system this week or some other political calamity, potential floor resistance is so meager that a quick retest of YR1 (85.68) is realistically in the cards. Our stop at 81.03 can only trigger after all supports would break loose, and a plunge to the 200-day moving average would become a most serious probability. Billy

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Hi Billy,

The equity curve of the robots is IWM trading with pivots, 1/3 RR? When we see a new signal from the IWM robot page, does it already with pivots and 1/3RR, do we need to figure out it ourself?

Cheers,
Ellis

--> don't know how to delete the post, but I got the answer from your old post - Tutorial Intro: Path Of Least Resistance, cheers.

Hi Billy,

I have been pondering this sentence and sense there is an important learning in here that I am not fully understanding.

You wrote this AM:

"The progression was calibrated to provide growing support and diminishing resistance within ATR bands each and every day without exception."

I understand what ATR means, and I think I understand that the MM's helped move the price of GDX above higher and higher strong/important resistance levels over the last few days; but what did you mean by "within ATR bands." I looked at ATR(20) on freestockcharts.com, and see ATR(20) from Jul 7 as 1.42, 1.39, 1.39, 1.43 and 1.50; and based on closing price.. calculate the ATR(20)% as: 2.52%, 2.47%, 2.50%, 2.49%, and 2.53% - Is this the ATR band? Are you saying that MM's moved to the next major pivot level when it was within the ATR(20)%?

Thanks,

Shawn

[QUOTE=shawn_molodow;14639]Hi Billy,

I have been pondering this sentence and sense there is an important learning in here that I am not fully understanding.

You wrote this AM:

"The progression was calibrated to provide growing support and diminishing resistance within ATR bands each and every day without exception."

I understand what ATR means, and I think I understand that the MM's helped move the price of GDX above higher and higher strong/important resistance levels over the last few days; but what did you mean by "within ATR bands." I looked at ATR(20) on freestockcharts.com, and see ATR(20) from Jul 7 as 1.42, 1.39, 1.39, 1.43 and 1.50; and based on closing price.. calculate the ATR(20)% as: 2.52%, 2.47%, 2.50%, 2.49%, and 2.53% - Is this the ATR band? Are you saying that MM's moved to the next major pivot level when it was within the ATR(20)%?

Thanks,

Shawn[/QUOTE]

Shawn,
The accumulation campaign algorithms do spread the large desired positions buying by adapting to daily volatility (ATR%) and liquidity.
Let’s suppose that you’re a large market maker and you want to buy 10,000,000 shares of GDX both for your own inventory and for some of your large institutional clients. That’s about a full daily average volume. Let’s say that your liquidity algorithms tell you that it’s okay to spread the buying over 10 trading days. Then your accumulation algorithms will program an average daily buying of 1,000,000 shares at the best VWAP for the full 10,000,000 shares position.
The last thing you want to see when your accumulation campaign is over is that the VWAP of your full position is higher than the actual GDX 10-day VWAP. The optimal way to proceed for the algorithms is to start the initial buying under heavy resistances when GDX weakness is maximal and to buy in the lower range of the ATR% each day. Since you’re a large buyer, you’re de facto the creator of new strengthening support areas within the multi-timeframe pivots. Your algorithms will continue to buy each day in the lower ATR% range and support areas will strengthen day after day attracting other buyers on these supports. When your accumulation is over, momentum is already building up significantly and the 10-day VWAP of your full position is now considerably lower than the actual GDX 10-day VWAP. You are sitting on huge potential profits.
The term “ATR bands” is not perfect, but that’s what I found best when writing my commentary.
Billy