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WEEKLY NEWSLETTER | ISSUE 8 SUNDAY, NOVEMBER 24th, 2013 STRATEGIES FOR TRADING IN HIGH FREQUENCY MARKETS Analysis Prepared By: www.FollowTheBots.com Algorithms Powered By: www.sceeto.com Published By: www.AlgoFutures.com
TUESDAY.............8
Mondays Recap | Tuesdays Reference Points............................................. 8 Daily Morning Briefings:............. 11 Wednesdays Reference Points... 12 Daily Morning Briefing................ 18 Wednesdays Recap | Thursdays Reference Points.......................... 19 Daily Morning Briefings:............. 22
WEDNESDAY..........12
1791. Building a base of support can take several days. Ideally, the market will spend time at the low before attempting to move higher. The ideal support candidate is the prior multiyear high at 1773. During the Read More...
THURSDAY ...........19
FRIDAY.............22
Thursdays Recap | Fridays Reference Points........................................... 22 Daily Morning Briefing................ 24 Intraday Market Commentary.... 25
ASIAN MARKET RECAPS....27 EUROPEAN MARKET RECAPS .33 ANATOMY OF A PULL BACK (VIDEO) .............36 HOW WE TRADED SEPTEMBER 25THS RETAIL SALES ANNOUNCEMNT (VIDEO) ...36 DAILY MARKET RECAPS....37
How We Traded Wednesday Sep-20ths Upside Surprise in Retail Sales ( Cont. from page 1)
rally to the current multiyear high, S&P futures pulled back to 1777, but strong bullish sentiment caused the market rally higher before re-testing the previous multiyear high. To the extent that the bullish sentiment continues to dominate, support may hold at 1784-1782. Sell Programs Waning is the ...sceeto Order Flow Event to look for during pull-backs, along with the pause pattern which accompanies an end run sequence. However, should initiated selling (HFT sell surge) occur during
a pull-back probability would favor a low lower. In that case, the long must be exited. An effort could be made to sell the break-out. Otherwise, wait the re-test on the next support level (1777-1773).
2) www.EarlyAnnouncement.com | The 2nd insight that we used was from earlyannouncement.com where it was noted that the Retail Sales data being announced at 8:30 a.m. had a Very high probability for upside surprise.
We also broadcast this information on Twitter, at twitter.com/ SocialTape well before the announcement, about the probaility for an upside surprise, so that traders could prepare their trades for the eventual upside Surprise! The headline news provided an immediate upside trading opportunity. Retail Sales - headline 3) www.sceeto.com | On this chart of the S&P 500 e-mini contract we can see the support range from 1782 to 1784 as denoted in last nights Bayesian Inference to Buy The Pullback. On this chart of the S&P 500 e-mini contract we can see the support range from 1782 to 1784 as denoted in last nights Bayesian Inference to Buy The Pullback.
WEEKLY RECAP
Hello Traders, Last week, we commented on the November 7th rout of the trading range and the subsequent major short covering rally that followed. We noted that a rout of the trading range is a tactic used by the large financial institution to shake of weak longs and force margin calls. Our expectation was that S&P futures would pull-back to the mid-point of the trading range (1754) and potential auction above the prior multiyear high and rally up to a new multiyear high. As of Fridays session the Follow the Bots computational estimate was 1793.
Market
On Monday (11-1113) S&P futures traded up to re-test the prior multiyear high (1773). Monday, was a holiday for many market participants. S&P futures traded up to 1770, before the short covering rally ran its course. On Tuesdays (11-12-13) the broad benchmark index sold off from the 1770 holiday high and pull-back to 1754, at or near the mid-point of the trading range. Following Tuesdays pull-back to 1754, S&P rally back through the previous days trading range and broke-out above the prior days high (1770) and prior multiyear high at 1773. S&P futures traded up to 1782. During the rally we identified the 1777 prior level in Tuesdays market structures as the potential minor pull-back level. At Thursdays open, S&P futures pull-back to 1777, before extending the rally and auctioning up to 1789. The rally continued to extend the range on Friday. S&P futures
trade up to a new multiyear high at 1796, before sell-off modestly and close the weeks session at 1793. The starting point of the rally was Wednesdays pull-back to the mid-point of the trading range at or near 1754. Following Wednesdays sell-off to 1754, the selling pressure paused. S&P futures traded between 1762-1758 for approximately 3 hours. During the pause a positive bias developed resulting in the start of the run, which continued up to 1785 in the overnight session. At the 1785 price level the Order Flow Monitor detected buy programs waning. Following the alert the high frequency computerized trading algorithm ceased buying, S&P futures pulled back to 1777. The downward momentum ceased, Order Flow Monitor detected sell program waning. The horizontal pause pattern turned up. Initiated buying entered the order flow and S&P futures auctioned above the overnight high and made a higher high (1789). Notice that during Fridays session the rallied continued and price traded up to 1792, at or near the Follow the Bots computational maximum likelihood estimate (1793).
The Order Flow Monitor detected Buy Programs Waning and S&P futures sold down to 1788, at or near the prior days close. The horizontal pause dominated the majority of Fridays session until late in the day. During the period when the High Hrequency 2 points Up-Down Market Maker Algorithm was dominant, buy-side [High Frequency Trading Buy Surge] programs initiated and price auctioned up to 1796, before pulling back to 1793 into the close.
According to Yellen there is no evidence of an asset-price bubble in the stock market. Although stock prices have risen robustly, Yellen stated stocks are not in territory that suggests bubble-like conditions, yet. By in large, Yellen said, I dont see evidence at this point in major sectors of asset price misalignments, at least of the level that would threaten financial stability. If any bubbles emerged, the central bank would be willing to tighten policy to try to deflate it, she said.
Fed Watch The primary factor contributing to this weeks positives sentiment was soon to be Chairman of the Federal Reverse Janet Yellen indicating under her stewardship Federal Reserves will continue its extraordinary, unconventional accommodative stimulus policy.
Based on Chairman to be, Janet Yellens comment it appears the Fed is signaling some form of QE is likely to continue beyond the proposed March 2014 target. Therefore, experienced traders, inclined to trade counter to the trend are advised to pay close attention to the Order Flow Events. For example, the Oder Flow Monitor detected buying programs waning at Fridays high, and at the open of Sundays globex session, and since then, the S&P 500 e-mini futures have sold down to 1791. The horizontal pause pattern has given way to a down turn in the micro digital filters. So, counter trend trades can indeed be profitable. Still, as of Friday, there is nothing to suggest there was any serious selling pressure during the session and sixty-eight (68%) of the S&P 500 components traded above their previous days close. A strong sell response [HFT Sell Surge] will be required on the pull-back to 1791, in order to drive S&P below the 2 point market maker algo range: 1791-1789. In the event, the computerized sell programs wane during Sundays pull-back to 1791, there will likely be little to gain defending a short at Fridays close.
At the open of Sundays globex session, S&P futures sold-off below Fridays high (1996) and pulled back to 1790, at or near the narrow high frequency market maker algorithmic that dominated Fridays mid-day session. Following the pull-back, S&P 500 e-mini futures contract traded up to Fridays high (1796) and made a higher high, auctioning up to 1799. At Mondays open, S&P futures sold-off and filled the gap at or near Fridays settlement (1793). The initial pull-back resulted in a buy response and S&P futures traded back to re-test the opening range high (1798), before pulling back to 1795 and traded in the 2 point up <>down market maker algorithmic pattern. Following the prolonged flat-line period, in the final hour of Mondays session S&P futures sold-off below the opening range high 17991798, then sold support below Fridays close (1793), then breached support at the overnight low (1790), and traded down to 1785, at or near 1784 price level indicated in Sundays market structure commentary. Last week, we noted that following the initial run (see chart) on November 11th, S&P futures paused at 1785, before pulling back
to 1777. S&P futures went on to make a series of higher highs and fractal lows. We commented that fractal lows are only likely to provide minor support as longs at the bullish bias continued. However, once the sell response was initiated the minor fractal lows were not likely to with stand any selling pressure. Following Up On Sundays Bayesian Inference # 2 | Buy The Pullback We noted that Fridays low 1787 was the result of a high frequency 2 point up > down market maker algorithmic programed trade. Volume was below average and mostly short term in duration. Nevertheless, there was a minor 5 point run into the close. Thus, Fridays low cannot be ruled out as pull-back candidate. There was also support late in the day on Thursday at 1884, more or less equal to the price level of the overnight high. If S&P futures trade at or near 1800-1803, 1884 would likely provide a better entry point on a pull-back. On Mondays, S&P futures pull-back to 1784, before auctioning up to 1790.
Coming into Tuesdays session All financial markets are considered to be non-linear dynamic system. In such a system there is a primary direction (trend) and a secondary reaction (correction). Without going into detail the historic data as shown is previous post confirms that all auction market develop in a non-linear price dynamic. What is non-linear price dynamic? The CBOT market profile handbook explains there are buyers and sellers at every price. Buyers represent demand and sellers represent supply. In other words, a market will advance as long as more market participants are willing to buy. A market will decline as long as there more market participants are willing to sell. In this manner the price discovery process determine the value of
Tuesdays Bayesian Inference # 2 | Buy the Pullback at or near 1777 IF, S&P futures fail to re-test the high (1798-1800) and selling pressure increases resulting in a breach of support at Mondays low 1784, probability favors a lower low. The next support level is located at November 14th low at 1777. The breakout-point, the previous multiyear high at 1773 is the transitions point. However, as were noted in Sunday market structure the previous sellers were positions between 1773 and 1768. Tuesdays Bayesian Inference # 3 | Sell the Retracement at or near 1785 In the event support at Mondays low is breached, the trading strategy will be to sell the retracement. And look for support at the lower price levels indicated above. For now, support holds at 1785 and the expectation remains: a re-test of Mondays high. The minor obstacle is the initiated selling point at 1793, which is Fridays settlement.
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Good morning Traders, Overnight, S&P futures traded up to 1791, 2 points below Fridays close (1793), the price level where the initiated selling occurred during Mondays late-in-the day sell-off. Yesterday, both the Dow 30 and the S&P 500 traded at new psychology levels, 16,000 in the Dow, 1800 is the S&P. The financial media has sited Billionaire investor Carl Icahns comment that the recent rally in the equities market were related to low borrowing cost and not the result of corporate management, as contributing to yesterdays sell-off. A more likely reality is that profit taking was triggered yesterday as the Major Indexes reached new highs. At yesterdays high (1800), S&P futures were up 27 points (1.5%) above the most recent multiyear high and 46 points above its previous pull-back level at 1754. The reality that you will rarely read in the financial media is that markets dont go up forever. If nothing else, profit taking will result in a secondary reaction to the primary trend. For most part the financial media avoids headlines like profit taking, as such an acknowledgement might influence the sentiment of retail buyers. The question now is how many buyers are left? S&P futures have sold-off from the psychology 1800 price level and pulled back to approximately the distance of daily range (17 points) below Mondays high.
Will the first link in the hidden Markov sequence be enough to attack buyers or will the S&P have to be discounted further (23 points): down to the previous low at 1777? The retracement up to 1791 suggests all the buyers have not left the market and in the context of the holiday seasonality the likelihood is the broad benchmark S&P 500 will have another go at the high. Optimistic comments by two Fed officials on the state of U.S. economy may have contributed to a more cautious mood ahead of Federal Reserve Chairman Ben Bernankes speech due later in the day and the minutes of the FOMCs October policy meeting slated to come out on Wednesday. A pull-back ahead to the FOMC minutes is likely healthy events and Janet Yellens recent comments: i.e. QE into March 2014 remains the driving force, even if Carl Icahn is just now willing to publicly acknowledge it. For now Mondays Bayesain Inference | Buy the pull-back to 1784 holds. A breach of support at the overnight low will have to be dealt with determing your risk management and acting accordingly. The next support at the November 14th pull-back level is 1777 and below that the previous multiyear high 1773.
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S&P futures are attempting to establish a base of support, before potentially moving higher. Today, price pulled back to 1784-1782. Then price auctioned back up to 1793-1791. Building a base of support can take several days. Ideally, the market will spend time at the low before attempting to move higher. The ideal support candidate is the prior multiyear high at 1773. During the rally to the current multiyear high, S&P futures pulled back to 1777, but strong bullish sentiment caused the market rally higher before re-testing the previous multiyear high. To the extent that the bullish sentiment continues to dominate, support may hold at 1784-1782. Sell Programs Waning is the ...sceeto Order Flow Event to look for during pull-backs, along with the pause pattern which accompanies an end run sequence. However, should initiated selling (HFT sell surge) occur during a pull-back probability would favor a low lower. In that case, the long must be exited. An effort could be made to sell the break-out. Otherwise, wait the re-test on the next support level (1777-1773).
Tape Reading Lesson Of the Week | Anatomy of A Pull Back (Cont. from page 1)
how market development occurs during an initial pull-back below a new historic high. The event study methodology will begin by establishing the facts, i.e. the current state or market condition.
On Monday S&P futures rallied to a new multiyear high at or near 1800. The rally began on November 13, when the S&P auctioned above the prior multiyear high at 1774. Prior to breaking out above the prior multiyear high S&P futures pulled back to 1754. During the rally to the new multiyear high the S&P futures initially traded up to 1784, made a modest pullback to 1777 before extending the rally to its current high at 1800. Since auctioning above its initial stopping point at 1784 is not been a pullback equal to an average daily range.
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After auctioning up to the new multiyear high during yesterday session, S&P futures sold off from the high and pulled back to 1784, the approximate distance of an average daily range. Prior to the sell-off of the multiyear high S&P futures traded in a narrow trading range between 1796 and 1794. During the breakdown below the narrow trading range and initiated selling entered the market at 1793. At Tuesdays open, S&P futures retested the prior days low (1784) and auctioned back to the point where the initiated selling occurred during the breakdown of 1793. The retracement back to the initiated selling point encountered resistance. After encountering resistance at 1793, later in the day the S&P pulled back and retested the opening range low (1784) and made a minor lower low trading down to 1782. S&P auctioned up off the low and traded back to 1789.
there had not been a pullback equal to an average daily range during the run up to the current multiyear high (1800). Mondays sell-off indicated that buying interest ended as both the Dow and the S&P traded up to the next major psychological levels: 16,000 in the Dow and 1800 in the S&P. Price discovery had found a stopping point. Informed market participants took profit and the new phase for major indexes would be to determine support. We identified several possible candidates, 1784 being the first such candidate and 1777 (at or near the prior multiyear high) being the ideal candidate. As traders, we had to be prepared to consider buying the pullback above the ideal candidate and begin at 1784. During the opening range price discovery there were two opportunities. The first opportunity occurred prior to the open, wherein the S&P auctioned back up to 1789. And the second opportunity shortly after the open, wherein the S&P auctioned
Now we have established the facts associated with todays events. In Mondays market structure commentary we put forth the Bayesian inference, buy the pullback at 1784, with the expectation that the S&P would auction back to the point where the initiated selling occurred at 1793. In the context of Mondays selloff we inferred the likelihood the market would encounter resistance during the initial retracement to the point of initiated selling (1793). We also noted that, up to this point in the rally buyers had little or no opportunity but you chase the market higher. In other words,
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On the first chart titled anatomy of a pullback I have indicated the minor resistance level (1793) the overnight high (1791) and the point of the initiated selling (1789). I have included the notation that the pullback target was approximately 17 points below the previous high. And I have also indicated the earlier low (1784). When considering buying the pullback the context is always the most important consideration. What is the state of the market? What is the longer term or primary trend? How did price arrive at its current location? Is this the first time the market is pulling back to this location?
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If, this is the second time price has sold off (pulled back) to this location, what was the previous outcome? Is there evidence upon which we can determine who was the beneficiary of the first pull-back? How did the seller during the initial pullback fair? Was the seller rewarded? Has the market establish support at this location? These are the questions the trader must hold in his or her mind. The purpose of holding these questions in your mind is to be confident that you are not engaging in some foolish action such as buying the high. Is there reason to infer that the market will retest the high? Have the fundamental factors that contributed to the rally changed? Finally, what does auction market theory tell us regarding why the market trades lower? Does it not state in the CBOT market profile handbook, and that the market will trade lower until such time that the selling pressure is cut off? Does it not state in the CBOT market profile handbook, and that the market will trade higher until such time that the buying interest is cut off? Did we not just observe that the market traded higher until such time as the buying interest was cut off? IF yes, is it not reasonable to assume that at some point the selling pressure will be cut off? Do the order flow events indicate that the computerized trading programs have ceased executing to the sell side?
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There is always risk trading. The degree of certainty is never a deterministic (100%), but indeed is always probabilistic: i.e. most likely, least likely. Therefore the risk can never be eliminated, it can only be managed. The trader must assess the situation and determine who is at risk by seller the low, the buyer or the seller? What is the risk to the buyer? What is the risk to the seller? What options are available for the buyer in terms of managing the positions? What options are available to the seller in terms of managing the positions?
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In the current context, i.e. the initial pullback below a new multiyear high, what are the probability that if price traded below 1784-1782, that it would retrace back to the price level?
In the event price breaches support, where is the next potential support level? If price were to breach support (1784-1782) and sell off to the next support level (1777) is likely the market would auction back to 1784-1782? These are the questions the trader must address if he or she is to manage the position. During the pullback what is the appropriate description of the trade execution sequence? Have you previously observed the 2 point up <> down sequence? During the sequence who is the beneficiary: who is in profit? At what entry point does the beneficiary profit? Does the seller at 1782 profit? Does the buyer at 1785 profit?
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During the current days developments, where (at what price level) has the seller been profitable? In the context, of the breakout above the prior multiyear high has it been profitable to be short at 1782? Finally, how did the buyer at the earlier low (1884) make out (fair) during the second pullback? Was the buyer at the previous low (1784) able to exit the position? To what extent, how many points and for what duration (time) did the buyer at the previous low have to hold the offside position?
The above questions are an example of the type of thoughts that the trader must hold in his or her mind while assessing the prospects of participating in the price discovery during the initial pullback, equal to an average daily range, following a rally to a new multiyear high.
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market to rally higher before retesting the previous multiyear high. To the extent that the bullish sentiment continues to dominate support may hold at 1784-1782. Selling programs waning is the order flow event to look for during pull-backs, along with the pause pattern which accompanies an end run sequence. However, should initiated selling (HFT sell surge) occur during a pullback probability would favor a low lower. In that case, the long must be exited. An effort could be made to sell the break-out. Otherwise, wait for the re-test on the next support level (1777-1773). IF during Wednesdays session S&P futures re-test support at 1782 and support is seriously breached, we will look to sell the retracement and consider buying the pull-back at the ideal, more desirable trade location (1773-1776). Coming into the Open support holds at 1782.
Speaking to economists late Tuesday evening, Fed Chairman Bernanke said a preponderance of data will be needed to begin removing accommodation, and that the target for the federal funds rate is likely to remain near zero for a considerable time after the asset purchases end, perhaps well after the jobless rate breaches the Feds 6.5% threshold.
THURSDAY
Wednesdays Recap | Thursdays Reference Points
Hello Traders, In today market structure commentarywe will continue along the lines of yesterday event study discussion. The event we are studying is an initial pull-back below a new multiyear high. On the onset it should be noted that the events under discussion is not unique. Since the inception of the S&P 500 index there have been numerous multiyear highs in the historical record confirms that the broad benchmark index has sold off and pulled back below all of them. Therefore, while we will stay the specific price levels associated with the current multiyear high, terms like the prior day low, the prior days high, the previous pullback level, the break-out-point, the break-down-point and the starting point of the rally should be understood to be generic. Such terms are not simply applicable to the current event, but have their counterparts in all prior events. While such terms may have little meaning to the casual observer, they have technically significant to the current trading professional. The Follow the Bots market structure commentary is a chronology of the developments in the S&P 500 eMini futures contract. The day by day market developments indicate the buying interest and selling pressure in the broad benchmark index. In order to comprehend the significance of these developments, references to past inferences and future expectations are included as part of our event study. We will begin our discussion with a review of our expectations. Coming into Wednesday session Bayesian Inference # 1 | sell the retracement at or near 1793. Minor resistance was confirmed on Tuesday at near 1793, the
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initiated selling point identified during Mondays session. Having sold off below the new multiyear high (1800) S&P is now in search of support. The market is likely to consolidate before moving higher and attempt to re-test the multiyear high. Bayesian Inference # 2 | buy the pull-back at or near 17841782 S&P futures are attempting to establish a base of support, for before potentially moving higher. Building a base of support can take several days. Ideally, the market will spend time at the low before attempting to move higher. The ideal support candidate is the prior multiyear high at 1773. During the rally to the current multiyear high, S&P futures pulled back to 1777, but to strong bullish sentiment caused the market rally higher before re-testing the previous multiyear high. To the extent that the bullish sentiment continues to dominate support may hold at 1784-1782. Selling programs waning is the order flow event to look for during pull-backs, along with the pause pattern which accompanies an end run sequence. However, should initiated selling (HFT sell surge) occur during a pull-back probability would favor a low lower. In that case, the long must be exited. An effort could be made to sell the break-out. Otherwise, wait the re-test on the next support level (1777-1773). IF during Wednesdays session S&P futures re-test support at 1782 and support is seriously breached, we will look to sell the
retracement and consider buying the pull-back at the ideal, more desirable trade location (1776-1773). The rationales for the above expectations (Bayesian inferences) are discussed in detail in Tuesdays market structure and the daily market recap. Now let us begin by stating the facts as evidenced in todays market structure. Out lining Wednesdays market developments we will use the standard numbering convention illustrated on the five tick range chart polynomial regression model. There are 10 numbered reference on the chart. #1 the pullback to retest of the prior low at 1782 # 2 the retracement to retest minor resistance at 1793 # 3 the high frequency market maker algorithm sequence which occurred in the midpoint of the range # 4 the sell-off (pullback) at or near the prior low 1783 #5 the retracement to 1788, where price broke down below the high frequency market maker algo sequence #6 the probe for stops, two points below the prior low at or near 1781 #7 the retracement to 1785 at or near where the initiated selling occurred (at #5) # 8 the breakdown point, where price traded below the previous low at 1781 and sold down at or near todays ideal pullback target at 1773. #9 on the pull-back (sell-off) below previous support at 1777 and the retest of the previous multiyear high at 1774
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#10 the retracement back to the prior low at 1781 Each of the above 10 references played a role in todays market development. What information is conveyed by the above reference points? The first two reference points (#1 and # 2) are more directly associated with Tuesdays trading session, inasmuch as they confirm the general premise stated in yesterdays Bayesian inferences. S&P futures are attempting to build a base of support. Establishing a base of support is likely to take several days. S&P futures are not likely to auction back up immediately and retest the multiyear high at 1800. Reference point #3 is only worth mentioning the costs the high frequency market maker algorithmic sequence is typically a part of the intraday market development and traders should familiarize themselves with the pattern. Reference point #4 represents a retest of the prior low at or near 1784-1782 and #5 is the minor retracement back to where price broke down below the market maker algorithm. Reference point # 6 is important inasmuch as when the market is attempting to establish a base of support price discovery typically includes a probe for stops below the prior days low. Reference point #7 is the prelude to the break-down and #8 is the acceleration point where the selling pressure proceeded to drive the S&P down to prior support at or near 1777, ultimately resulting in the sell-off to the previous multiyear high. Reference # 9 is the climax selling at the previous multiyear high. Those who are serious about understanding the current event should take note that break outs above prior multiyear highs are typically followed by a pullback to the prior multiyear high. Why is this important? Because this observation confirms there is never a benefit to buying the multiyear high. IF, during Mondays rally to the multiyear high (1800 in the S&P, 16,000 in the DOW), you had any doubt that the S&P would pullback to the previous multiyear high you now have evidence to confirm William Hamilton axiom; trees dont grow in the sky and markets dont go up forever. Regarding the consideration by todays pullback to the prior multiyear high, the question is, IF, it makes no sense to buy a 26 point (1.4%) relative discount below a new multiyear high, how is it possible to make money investing in the S&P 500?
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The initial up-side target for the active futures trader has been achieved in the overnight session. After re-testing the low (1776) S&P futures has traded above the prior low (1782-1784) and has auctioned back up to the mid-point of the developing trading range (1786): + 10 points. We also noted that Bayesian inference # 2 | Sell the retracement at 1793 The expectation is that the initial retracement to minor resistance is likely to Mark the end of the buying interest and price will pull back into the midpoint of the developing trading range. The initial retracement means the first time price
However, for those active traders who read yesterdays market structure break-down, we suggest you review. #7 the retracement to 1785 at/or near where the initiated selling occurred (at #5) The current pre-market high is at/or near yesterdays #7 initiated selling point, S&P futures are likely to down-tick, at least back to 1782, prior to the open.
FRIDAY
Thursdays Recap | Fridays Reference Points
Hello Trader, The major US Indexes traded higher on Thursday. The Dow 30 closed at 16009: () up + 109 points (+0.69%). S&P 500 close at 1795: () up + 14 points (+0.81%). The NASDAQ close at 3969: () up + 47 points (1.22%). 424 (84%) of the S&P 500 stocks end the session above their prior days close, while 73 (14%) declined. Thursdays Market Structure S&P future gapped above yesterdays close (1880) and short covered up through the previous days trading range. S&P futures traded up to 1795 and close the session at 1793. During Wednesdays session S&P futures sold-off below 1793 and traded down to 1774.
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According to the financial media, even though the Fed the announced 20 days ago it was considering to tapering its bond purchasing sometime in the futures, apparently the mention of Fed tapering the minute to the FOMC took market participants by surprise. According to the NEWS sources, concerns about the possibility of Fed tapering caused investor to all the stock right into Wednesdays close. And they so concerned, they even sold the S&P down to 1776 in the overnight session. But, all was not lost, my friends, because today despite the bad economic data, investors bought all their stock back at the higher price. Yes, apparently the financial media thought idea of buying the S&P at 1774-1776, even thought it was the first opportunity to buying the S&P at prior high, since S&P futures traded up to 1800 wasnt a good idea. However, accordingly to the financial media buying the S&P at 1794, 20 points of the above the low, seem to way to outperformed the Index. Follow the Bots computational model indicates the only way to outperform the Index is to buy the pull-back. The combination of the Follow the Bots computational algorithms not only inform our members where the buying interest and selling pressure is in real time, the computational algorithms inform you ahead of time. Coming in the Thursdays session our statistical Bayesian inference (#1) algorithm indicated Buy the pullback at or near 1776 -1774 The expectation was that the S&P will auction back 1787 -1793. We suggest that the a longer term swing trader (SPY ETF) could consider hold the positions longer with the expectation that the S&P 500 will re-test the multiyear high at 1800.
In our view, we would have preferred to see the S&P futures auction down and re-test the low in the day session. However, S&P futures had gapped above Wednesdays close (1780) prior to the open, after re-testing the low (1776) in the overnight session. The market development that followed was primarily a short covering rally. At each of the prior supply clusters (selling levels) the volume at price data indicates the supply volume converted back to the buy side. Under those circumstances (short covering) no new capitol enters the market. The new capital entered at the low, when the uninformed participants fell the media hype regarding the already known fact that the Fed is considering tapering. In the context of our event study discussion our members can make up their own minds regarding the so-called efficient market theory which recently won the Nobel Prize in economics. In our view efficient market theory seems to ignore the fact that while all market participants have access to the same information, there is disparity in how to interpret it. The second Bayesian Inference (#2) we posted was Sell the retracement at 1793-1794, minor resistance. The expectation is that the initial retracement to minor resistance is likely to Mark the end of the buying interest and price will pull back into the mid-point of the developing trading range. As of these post S&P futures has yet to encounter end of the short covering rally. After short covering up to 1773-1774, the High Frequency Market Maker Algorithms Sequence dominated the session into the close. Major resistance is up at the multiyear high (1799-1800).
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Bayesian Inference # 1 (1121-13) Sell the Retracement at 1799-1800 In the context where the short covering rally continues up to the multiyear high without a pull-back, with the exception of the new capital that entered at the low, no additional capital will have entered. Therefore, we would expect to see the broad benchmark index sell-off from the high. The current trading range is 27 points: the high 1800, the low 1773. The mid-point of the trading range is 1786. The upper quartile is 1993. Following a short covering rally up to 1799-1800, we would expect to price auction back t down at or near 1791 Bayesian Inference # 2 (11-21-13) In the event during the overnight session, S&P futures sell-off below Thursdays high (1795-1794) minor support is located at 1789, Better support is located at 1784.
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1793-1794, minor resistance. Our expectation is that the initial retracement to minor resistance is likely to mark the end of the buying interest and price will pull back into the mid-point of the developing trading range. In Thursdays market structure commentary we note that: while buying interest waned, S&P futures had not encountered sufficient selling pressure to warrant remaining short covering rally. The rally up to 1773-1774, resulted in a High Frequency Market Maker Algorithms Sequence which dominated into the close. Major resistance is up at the multiyear high (1799-1800). Traders had the option to reverse direction and go long with the expectation that the Short covering rally would continue up to the multiyear high (1799-1800). Trade management would call for placing at stop loss order below 1792. U.S. markets appear ready to add to their gains following yesterdays run up, which saw the Dow Industrials (16,000) and the S&P 500 Index climb to record highs. The major U.S. index futures point to a slightly higher opening on Friday. The minor support levels noted in Thursdays market structure are: minor support is located at 1789; Better support is located at 1784. Bayesian Inference # 1 (11-21-13) is still in play. Sell the Retracement at 1799-1800. IF; trader elected to reverse positions at 1974 and go long, the multiyear high is the profit target. In the context where the short covering rally continues up to
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500 be up 61% from its Great Recession low? The obvious answer that no one wants to admit is that the dollar is worth less. The S&P 500 will sell below it new multiyear high, just as it has sold below every previous multiyear high. As we stated yesterday, the uniformed fools buy the high, and the informed trader buys the pull-back. On Wednesday, November 20, 2013, we posted Bayesian inference #1 (11-20-13) Buy the pullback at or near 1776 -1774 We suggest that the a longer term swing trader (SPY ETF) could consider hold the positions longer with the expectation that the S&P 500 will re-test the multiyear high at 1800. The longer term trade opportunity may not be suitable for active intraday S&P futures traders; we encourage our members to consider trading the SPY ETF. As of this morning the longer term SPY swing trade is complete. The S&P 500 is above 1800, time to consider taking profit. Tresses dont grow in the sky and markets dont go up forever. As we noted in Fridays morning briefing, were likely to see a prolonged period of the HF market maker algorithmic sequence during the re-test of the high (1800). Trade opportunities may be limited to scalping. Stop loss orders are liklely to be located at 1802. Based on the opening range low at 1792, the average daily range extension (MLE) is up at 1809.
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Seoul shares extended gains for a fourth day, with a slew of key reforms announced by China last week underpinning sentiment. The benchmark Kospi average advanced 1.0%, to trade at 2,032, its highest level in three weeks. Hyundai Motor and Samsung Electronics advanced 1.8% and 1%, respectively. Shares of Korea Electric Power jumped nearly 7% after the state-owned utility said it would raise electricity prices by an average 5.4 percent and impose taxes on the use of thermal coal in power plants. New Zealand shares drifted lower for a second day, tracking mixed global cues and ahead of an announcement by the government that it raised $365 million from selling down its 20 percent stake in Air New Zealand. The benchmark NZX-50 declined 0.6%, to trade at 4,863. Gold miner OceanaGold led the decliners on the exchange, falling 3.4%, while A2 Corp declined 2.6% after announcing changes to its U.K. joint venture. According to a survey published by the Reserve Bank of New Zealand, inflationary expectations in New Zealand remained almost unchanged compared to the third quarter. The fourth quarter survey, the one-year inflation expectations came in at 1.94 percent, compared to 1.90 percent in the prior quarter. The key benchmark indexes in India and Indonesia were up around 0.2 % each. Malaysias KLSE Composite was gaining 0.8% and the Taiwan Weightage rose 0.8%, while Singapores Straits Times was down 0.3%. U.S. stock indexes traded lower overnight, as profit taking following recent gains in the Dow (16,000) and the S&P (1800). Billionaire investor Carl Icahns cautioned that the recent rally in the equities market were related to low borrowing cost and not the result of corporate management. Optimistic comments by two Fed officials on the state of U.S. economy may have contributed to a more cautious mood ahead of Federal Reserve Chairman Ben Bernankes speech due
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later in the day and the minutes of the FOMCs October policy meeting slated to come out on Wednesday. The NASDAQ fell 0.9% and the S&P 500 dropped 0.4% percent, while the Dow edged up marginally.
According to the Ministry of Finance, Japans merchandise trade deficit increased to 1.090 trillion yen in October, said -missing forecasts for a shortfall of 854.2 billion yen and sliding into the red for the 15th consecutive month. Exports gained 18.6% to 6.104 trillion yen from a year earlier, while imports surged an annual 26.1 percent. Chinas Shanghai Composite index rose 0.6% to a near onemonth high.
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U.S. stocks traded lower overnight as investors digested mixed earnings reports from Home Depot and Best Buy and awaited Bernankes speech on monetary policy for further clues on stimulus tapering. The Dow edged down 0.1%, the S&P 500 dropped 0.2% and the NASDAQ shed 0.4%.
Gold stocks got declined the most, with Newcrest tumbling 4% and Perseus Mining shares plunging over 10%, after gold futures plunged to four-month lows on Wednesday. Australand Property Group declined 4% after Singapore-listed property developer CapitaL and sold a portion of its 59 percent
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stake in the Australian real estate developer. The International Monetary Fund has urged the Reserve Bank of Australia to keep its monetary policy accommodative as an overvalued exchange rate continued to weigh on the nonmining sector. The monetary policy should act as the primary macro-economic tool for managing the economy as mining investment begins to drop off over the next several years, the Washington-based lender said in a regular review report. New Zealand shares retreated in line with the regional selloff. The benchmark NZX-50 declined 0.50%, to trade at 4,818 According to data released by the Reserve Bank of New Zealand On the economic front, credit card spending fell 0.8 percent in October from the previous month, following the 0.1 percent fall in the preceding month. Spending grew 3.2% on an annual basis. Another report from ANZ bank showed that total job advertisements in New Zealand rose 4.5 percent in October, following the revised 1.3 percent gain in the previous month. Air New Zealand extended losses to end 1.9 percent lower. Seoul shares fell for a second straight session, dragging the benchmark Kospi average down 1.2%, to trade at 1,994. Indias Sensex was down 1.6 percent, extending the previous sessions loss.
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percent in September. Economists had forecast an increase to 4.2 percent. U.S. stocks advanced overnight. In the previous session Dow Jones Industrial Average closed above 16,000 for the first time. Janet Yellen moved a step closer to become the first woman to lead the Federal Reserve. The Dow rose 0.7%, the tech-heavy NASDAQ rallied 1.2&%and the S&P 500 advanced 0.8%.
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Algo Futures | Trending Now Weekly Edition | Issue 8 In commodities December Crude is trading at $92.81 per barrel: () down -$0.22. December gold is trading at $1272.0 a troy ounce: () down - $0.30.
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Fund, collectively known as the troika, have concluded their visit to Greece following productive discussions with the authorities, troika said in a joint statement. The Euro Stoxx 50 index of Eurozone bluechip stocks is down 0.32%. The Stoxx Europe 50 index, which includes some major U.K. companies, is down 0.23%. The DAX index of Germany is losing 0.3% and the French CAC 40 is declining 0.4%. The UKs FTSE 100 and Switzerlands SMI are marginally higher.
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Trending Now
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