Friday, November 15, 2013

S&P 500 E-Mini Futures Opening Range Extension Chart

This is a 2013 chart of the E-Mini S&P 500 contract showing opening range extensions from Jan. 1, 2013.

We touched the 1792.25 level overnight and some technical indicators are showing some divergence with this new high. That being said, there seems to be little interest in selling.

Will update other charts over the weekend.

Thursday, November 14, 2013

How to Identify Turning Points in Your Charts Using Fibonacci

How to Identify Turning Points in Your Charts Using Fibonacci


By Elliott Wave International

In this trading lesson, Elliott Wave International's Jeffrey Kennedy shows you how you can use Fibonacci to forecast potential turning points in your charts. You'll learn the most common Fibonacci retracements and where to expect them in your charts. At the end of the lesson, learn how you can get a 14-page Fibonacci eBook, free!


                  The primary Fibonacci ratios that I use in identifying wave retracements are .236, .382, .500, .618 and .786. Some of you might say that .500 and .786 are not Fibonacci ratios; well, it's all in the math. If you divide the second month of Leonardo's rabbit example by the third month, the answer is .500, 1 divided by 2; .786 is simply the square root of .618.

                  There are many different Fibonacci ratios used to determine retracement levels. The most common are .382 and .618.

                  The accompanying charts also demonstrate the relevance of .236, .382, .500 .618 and .786. It's worth noting that Fibonacci retracements can be used on any time frame to identify potential reversal points. An important aspect to remember is that a Fibonacci retracement of a previous wave on a weekly chart is more significant than what you would find on a 60-minute chart.

                  With five chances, there are not many things I couldn't accomplish. Likewise, with five retracement levels, there won't be many pullbacks that I'll miss. So how do you use Fibonacci retracements in the real world, when you're trading? Do you buy or sell a .382 retracement or wait for a test of the .618 level, only to realize that prices reversed at the .500 level?


                  The Elliott Wave Principle provides us with a framework that allows us to focus on certain levels at certain times. For example, the most common retracements for waves two, B and X are .500 or .618 of the previous wave. Wave four typically ends at or near a .382 retracement of the prior third wave that it is correcting.


                  In addition to the above guidelines, I have come up with a few of my own over the past 10 years.

                  The first is that the best third waves originate from deep second waves. In the wave two position, I like to see a test of the .618 retracement of wave one or even .786. Chances are that a shallower wave two is actually a B or an X wave. In the fourth-wave position, I find the most common Fibonacci retracements to be .382 or .500. On occasion, you will see wave four retrace .618 of wave three. However, when this occurs, it is often sharp and quickly reversed.

                  My rule of thumb for fourth waves is that whatever is done in price, won't be done in time. What I mean by this is that if wave four is time-consuming, the relevant Fibonacci retracement is usually shallow, .236 or .382. For example, in a contracting triangle where prices seem to chop around forever, wave e of the pattern will end at or near a .236 or .382 retracement of wave three. When wave four is proportional in time to the first three waves, I find the .500 retracement significant. A fourth wave that consumes less time than wave two will often test the .618 retracement of wave three and suggests that more players are entering the market, as evidenced by the price volatility. And finally, in a fast market, like a "third of a third wave," you'll find that retracements are shallow, .236 or .382.

                  In closing, there are two things I would like to mention. First, in each of the accompanying examples, you'll notice that retracement levels repeat. Within the decline from the high in July Sugar (first chart), each countertrend move was a .618 retracement of the previous wave. The second chart demonstrates the same tendency with the .786 retracement. This event is common and is caused by the fractal nature of the markets.

                  Second, Fibonacci retracements identify high probability targets for the termination of a wave; they do not represent an absolute must-hold level. So when using Fibonacci retracements, don't be surprised to see prices reverse a few ticks above or below a Fibonacci target. This occurs because other traders are viewing the same levels and trade accordingly. Fibonacci retracements help to focus your attention on a specific price level at a specific time; how prices react at that point determines the significance of the level.


Learn How You Can Use Fibonacci to Improve Your Trading

                        If you'd like to learn more about Fibonacci and how to apply it to your trading strategy, download the 14-page free eBook, How You Can Use Fibonacci to Improve Your Trading.

                        EWI Senior Tutorial Instructor Wayne Gorman explains:


  • The Golden Spiral, the Golden Ratio, and the Golden Section

  • How to use Fibonacci Ratios/Multiples in forecasting

  • How to identify market targets and turning points in the markets you trade

  • And more!


See how easy it is to use Fibonacci in your trading. Download your free eBook today >>


                            article was syndicated by Elliott Wave International and
                            was originally published under the headline How to Identify Turning Points in Your Charts Using Fibonacci.
                            EWI is the world's largest market forecasting firm. Its staff
                            of full-time analysts led by Chartered Market Technician
                            Robert Prechter provides 24-hour-a-day market analysis to
                            institutional and private investors around the world.


Friday, November 8, 2013

High Frequency Trading Documentary : The Wall Street Code

This is an incredibly well done piece of the inner workings of order flow and how executions take place today. This is a far cry from the day when stocks were traded via a human specialist and there was often 1/4pt or 1/2 pt spreads. This shows how the current system is rigged and engineered. It is really eye opening and shows the courage of one man, Haim Bodek, opening up the unsavory inter-workings of High Frequency Trading.

 The Wall Street Code (Marije Meerman, VPRO)

Finally A Television Channel For Traders

While on twitter a week or so ago I came across a group of traders who started their own HD television channel over the internet. In the past I traded on a trading desk, but now trade solo; so it was pretty cool to come across this group. It is helpful to hear the ideas others have and how they approach their craft. There are different shows on this channel and each comes to the market from a different background. I highly recommend checking it out. All of the past shows are archived via youtube and can be searched for content.

Let me know what you think.

BTFDtv they have no writers, producers, editors, or on air rules. You don't have to take what they say as gospel, but their goal is to educate and eliminate the crap that goes along with the CNBC's of the world.

How to Find Trading Opportunities in ANY Market Using Candlesticks (Video)


By Elliott Wave International

Senior Analyst Jeffrey Kennedy is the editor of our Elliott Wave Junctures educational service and is one of our most popular instructors. Jeffrey's primary analytical method is the Elliott Wave Principle, but he also uses several other technical tools to supplement his analysis. In today's lesson, Jeffrey shows you how to use candlestick patterns to identify opportunities.

                  You can apply these methods across any market and any time frame.


                  If you think you need years of experience to identify a high probability trade setup -- you're wrong.

                  To prove my point, let's examine three price charts using only a few popular Japanese Candlestick patterns and a single simple moving average (SMA).

                  Japanese Candlestick analysis was introduced to the West by Steve Nison. The information contained in a candlestick chart is the same that is contained in an open-high-low-close chart, except that the data is presented differently using "shadows" and "real bodies."

                  Moreover, these candlesticks form patterns which are important to traders. If you would like to learn more about candlesticks, I highly recommend the book Japanese Candlestick Charting Techniques by Steve Nison.

                  How do two tools -- candlesticks and a 20-period SMA -- identify high probability trade setups?

                  The answer is simple in that you use the 20-period SMA to identify the trend and then focus your attention on the appropriate candlestick patterns. If the trend is up, as defined by the slope of the 20-period SMA, focus your attention on bullish engulfing patterns, piercing lines and morning stars. If the trend is down, as defined by the slope of the 20-period SMA, focus your attention on bearish engulfing patterns, dark cloud cover patterns and evening stars.

                  Watch this 4-minute video where I explain more:



Learn How to Apply Some of the Most Powerful Technical Methods to Your Trading

                        Get 10 additional free lessons just like this one to help you learn to apply powerful technical methods to your trading. In this 10-lesson series, EWI analyst Jeffrey Kennedy shows how to use Elliott Wave and supporting methods such as candlesticks, RSI and moving averages to improve your ability to spot and act on opportunities in your charts.

Get your 10 free lessons now >>


                            article was syndicated by Elliott Wave International and
                            was originally published under the headline How to Find Trading Opportunities in ANY Market Using Candlesticks (Video).
                            EWI is the world's largest market forecasting firm. Its staff
                            of full-time analysts led by Chartered Market Technician
                            Robert Prechter provides 24-hour-a-day market analysis to
                            institutional and private investors around the world.


Friday, May 31, 2013

Bonds, S&P 500 Flashback

I was recently reading some articles that seemed to tap into some of the fear that is underlying stock prices. I don't know if stocks are overvalued, undervalued, or fairly priced, but it all doesn't really matter. What is important is try to feel out and look at the balance between the HOPE that prices will go higher, and the FEAR that they have had a nice run and need to consolidate or correct.

In a test tube when the S&P 500 was at 666 it would make sense that it was there because of fearful required liquidation selling and that prices would not go to zero. That isn't want happens, it is the place when fear is the greatest and it feels like things might go to zero even though they never will. Also in a perfect test tube environment people that bought at the low area would have HOPE that prices would go higher, but as the market starts to recover instead of hope, FEAR comes in that prices might return and go lower.

Now after a strong recovering in the market, HOPE is all over and fear is gone. "Buy the pull backs" and other such systems are in vogue as long as the trend holds, but what happens when the HOPE/FEAR balances starts to change. Will it be an orderly sell off or will it it be a flash crash that recovers 30 minutes after it happens? Will a correction even happen?

Below are a couple charts from 1987 that show the S&P 500 and bond yields leading up to and during that crash.

S&P 500 Weekly Chart

S&P500 2013

The horizontal lines are extensions off of the opening range of the beginning of the year. I use them as areas to trade off of, but use at your own discretion.

10 Year Treasury Futures.