Wed 16 Apr 2008
The Failed Auction Revsited
Posted by ray under Written Plan
I thought a great place to start the blog after Mumbai would be the ES. I have two issues on the line:
- My comments on the the Failed Auction at 1372. (http://tradingsuccess.com/blog/failed-auctions-a-behavioural-parameter-of-the-market-profile-297.html)
- My comments that tonight’s CPI will exceed expectations (http://tradingsuccess.com/blog/more-of-the-same-293.html)
Let’s take a step back and review the longer term price action. Figure 1 shows the 12-m swing (Yearly Trend). We have a potential Upthurst Change in Trend Pattern that needs a bearish monthly bar to complete the signal - we’ve had a close below the Primary Sell Zone but the rejection lows to date mean the change in trend pattern is incomplete until the market negates them. A monthly close at or below 1270 would do that.
Figure 1 12-M S&P
Figure 2 shows the 18-day and 5-day swing (monthly and weekly trends). At ‘C’, we had a 5-day Upthrust Change in Trend pattern that projected an 18-day line turn up to at least the Primary Sell Zone and more probably a move above 1395(basis cash). The market reached the Primary Sell Zone and turned down.
Figure 2 18-d and 5-d
The Failed Auction at 1372 (basis June) expired yesterday - recall that Market Profile Theory suggests we ought to see a Failed Auction’s price within 5-trading days. The fact that we did not, suggests that the market has more downside.
The dual failure - the failure to move above 1400 and the ‘Failed, Failed Auction’ - suggests to me that we’ll close below 1270 in April.
Figure 3 shows the 80-minute ES M8 chart. Note that the average volume for down moves in this last swing has been around 250,000.00; however the average move up’s volume has been about 163,000. This suggests the up moves have been short covering rallies. If this proves correct, I’d expect any rally to be held by 1354 (basis June).
Figure 3 80-minute ES
For tonight, if I am right about the CPI, then we should have a new directional move down to the minimum target: the Primary Buy Zone 1274 to 1256 (basis Cash). If I am wrong, and the market comes in within expectations, I’d be looking at the day structure to see if I can add to my shorts - but given we are in the middle of congestion, it is unlikely that I will. Finally if the CPI comes in lower than expected, I’ll drop my stops down to breakeven less brokerage and slippage.
April 17th, 2008 at 2:33 am
Ray
Your say:
If I am wrong, and the market comes in within expectations, I’d be looking at the day structure to see if I can add to my shorts - but given we are in the middle of congestion, it is unlikely that I will. Unquote
By your analysis, there was a failed Auction as the market did not touch 1372 within 5 days, ie by Tuesday this week.
It was a high risk trade if taken in the middle of congestion and this morning, I see the ES closed near to 1372 ie 1371.5.
April 17th, 2008 at 3:06 am
CNBC Cashflow Wed 11am - 12 noon on Apr 23 2008
MEMO
Mentor Ray has been invited back on the 11th hour of Cash Flow (11am-12pm) on Wednesday April 23 2008 by CNBC Singapore.
You can watch live during the times mentioned or if you miss it, the session will be recorded and accessible at CNBC Asia Videos on the net.
Unfortunately, Ray’s session with CNBC Mumbai last week was not recorded by the Mumbai branch.