Sunday, April 14, 2013

dWbShadowTrader Quad

It was noted here early Wednesday morning (2AM pacific time)

Same deal, late addition... But look for retest of Value Area High (VAH) from above after bounce at or near open. Acceptance: New Highs; Rejection: POC

that if price was able to hold the Value Area High into the open, we would see a move to new All-Time Highs on the S&P 500. This indeed proved to hold true. The second part of the analysis, which goes back to last Monday, was that if prices were able to break to new All-Time Highs, it would have to be on a parabolic move: Analysis was based on the fact that price had fallen underneath a future mapping of itself, displaced 13 days forward. The idea of mapping price displaced into the future-- it is not an invention of modern times. There are several highly regarded technicians that have used this form of analysis for nearly 100 years-- To name a few, WM Hurst, Bill Williams, and more recently the creator of sentient trader( who has based his entire trading algorithm on the writings of WM Hurst). Bill Williams called this the alligator. He used displaced moving averages of five, eight, and 13 periods, respectively and moved them into the future those same corresponding numbers.Personally, I have found this methodology capable of signaling important and/or key troughs as well as gaining a head start in noticing the appearance of peaks. WM Hurst noted that the wavelengths of troughs were to be measured not peaks.
Getting back to price action that has brought us here, as this is exactly what has unfolded. The jobs report Sunday night that took /ES Futures lower and had the market open with a gap down-- All of this action, ultimately served as a textbook Wyckoff 'Spring.' The interaction with the Value Area and Point of Control (POC) Friday gave us several important clues to take away going into next week's trading. First, price lost its' grip on the POC overnight and moved substantially to the downside. As the New York Market opened, price made one last effort to climb to the point of control. This effort was stymied by the resistance of the overhead moving averages. The 60 period simple moving average (SMA) was the first barrier, followed by the 110 period exponential moving average (EMA). Price came within several ticks of Value Area Low (VAL); however, the rejection here built increasing momentum to the short side, which carried price to new lows. By no coincidence, VAL from two sessions prior, gave price temporary support and that support held through the close. The Monkey Bars (Contract Volume Profile) and TPO (Time Price Opportunity) of the five-day trading session showed a point of control at 1582 which I mentioned in Friday's screencast, on, as price moved beyond those levels down into the 70's. I noted at that moment on new lows, that price HAD to catch a bid back to 1582, at that time or the market was going to continue to decline into the close. The 10 day session, as well as the 20 day session, of the same profiles – shows POC at much lower levels. Watch interaction of price at these VPOC's (Virgin Point of Control) for clues going into next week's trading. These are referred to in this fashion because price continued higher, without ever revisiting the prior day's value. We are seeing consecutive days on the profile with the clear appearance of what would resemble lower a case letter 'b.' This configuration denotes traders getting bad fills at high prices. Most of these traders are amateurs and will continue to hold through losses, which will accelerate the decline once the losses become unbearable. This will also denote the change of investor psychology as the market reverses from all-time highs.