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I was wondering, does anybody know why 1206.25 was hit yesterday (November 09, 2010) on the ES. Trying to identify the technical reasons. I think the weekly pivot was at 1206.75 but apart from that and a Pitchfork line at 1206.25, i can't see anything else.
Can you help answer these questions from other members on NexusFi?
The market was very top heavy with held LONG inventory past week.......after trade back to 1224's (where I was showing over 50,000 contracts still held SHORT.....major Delta Divergence SHORT signal) the market was unable to range extend/breakout. When that happens, many LONG holders from lower levels start to unwind good portions of their recently initiated LONG inventory (from last few trade days.....they take profits). We had a typical down move then built in the ES by the predominance of LONG covering.....down we went until several key levels of LONG inventory bailed out (and that caused trade to 1206's).
The inability to breakout yesterday helped to fuel the down move into an environment of a rising US Dollar and Equities who were running sell programs off the days highs and lower.
Thanks Fulcrum, that's a very sound explanation. I did not know we could make delta studies in I/RT. I thought that was reserved to MarketDelta's users only.
If you don't mind could you explain how you identify these "key levels of LONG inventory where they (bulls) bailed out". What constitutes an inventory level ? I suppose you can only gauge that by looking at volume but how much volume at level xyz must we find to say hey! here is a very important inventory level.
I have tracked the Cumulative Delta for almost 8 years now, and in the beginning years I developed a method to track zones of resting inventory through analysis of the Delta Volume Distribution (the plot of the CD candlesticks). That is a big edge for me in my trading....knowing pricing levels where large liquidity participants are still holding inventory (SHORT and LONG). In my opinion, true support or resistance in the market is where someone has their butt on the line with real inventory.
Over time you will see many repeating patterns in the "market order" driven order flow as the Delta Volume Distribution develops....I watch for these patterns day after day (what I call supply & demand events) to base trade entries from. Knowing where real support or resistance is located and then tracking for the typical patterns for trade entries is how I trade futures/options.....pure supply & demand based trading.
The ES likes to move around 5 point increments for moves and also around 2 or 5 point moves past pivots to take out stops. The low on 11/5 to the point you marked is about 6.
The point you marked to todays low (so far) is 4.5 points.
Take a look at this thread for when I practiced this when I was analyzing the ES. On about post 12 I started drawing support resistance in blue and targets 2 and 5 points above / below the blue lines to predict the market targets based on the overnight or prior days activities. Then I analyzed the results. You can ignore the last post. I cleaned up my charts with just a few MAs for my FOREX trading. Enjoy.
