rally fail

A gap into support and the market seemed like it was on course for a trend day. By looking back to Friday we could see potential for support around the $113.90 level (Resistance becomes Support (RbS).Another concept I have been learning more of lately is that of Point of Control (POC), and theories grounded in the market profile approach. Using the volume profile as a guide for potential Support/Resistance (the largest volume areas representing a point of balance in the market) here is what we get:Now take a look at the intraday 5-min chart with those horizontal levels (POC's) marked ($114.36 & $113.87):Also indicated is an Avalanche setup, where selling took place on higher volume, made an attempt to test the highs, then failed. Things looked promising for the bulls, though NYSE Advancing/Declining issues were under 1000 (not overly strong) and when Up-Down Volume broke down it was all over.The catalyst? Perhaps the selloff in GS helped contribute to the profit-taking dash for the exits.

next stop 50EMA

Watch to see if we get a bounce at the 50EMA on the SPY ($102). Another trend day down today. Market breadth was bearish the entire day, yet there were times I found myself fighting the trend.
The first 30-minutes of the morning SPY based at my support pivot before failing. That big freakish candle at 10:01a.m. was ominous indeed.Watch the first hour tomorrow morning to see if any buying is triggered. Check to see if the 30-min SPY chart puts in a momentum buy divergence.
Watch for a potential test of $104 tomorrow as that is within today's value area ($103.50-$104.00) and is also the last hour's high (day after a trend day down look at the last hour's high as good resistance).

narrow range, low volume

A sideways consolidation day after yesterday's "trend" day. The one thing to look for on a day like today are momentum divergences in the early-middle of the day.Though the momentum divergence in the very early morning was the first opportunity to short (the gap-up open vs. the impulse move on Monday morning).We closed on the previous day's support/intra-day value area. You can see it looking at the 5-min chart above, or by looking at the Market Profile.
Here's where we stand:
Tomorrow we'll see if we can test previous lows on strong momentum. Otherwise, we put in a higher low on weak momentum and work on a re-test of the highs.

keeps going, and going, and...

The SPY closed on the highs of the day (highest close since Oct. 06, 2008!). Until the dollar can get it's footing, it looks like our lows will keep getting bought.Total NYSE volume today was the 2nd lowest it's been all year.These past two days in the SPY have left us with "P"-shaped profiles having single print buying tails, just enforcing how quickly the lows have been bought.
This morning the SPY gaped up, TICK was weak and getting weaker, price returned to the previous day's close (PDC) so a scalp short was in play.
The resistance pivot held pretty well throughout the day (red horizontal line), not sure what the 1p.m. fake-out was all about, but the momentum divergence paid off when price came back down under resistance. Later in the day the 3/10 oscillator recovered from it's bearish tone and momentum started working upwards.
The resistance pivot also worked extremely well with RIMM. After being rejected for the 3rd time, price stair-stepped back down to the lows of the day.While resistance for the day coincided with my pivot level, it also happened to be the 50-EMA on the 15-min chart (confluence of technical signals!!).

enter sellers

SPY gaped up on relatively weak +TICK (which coincided with a long-term level of resistance; see daily chart in previous day's post). Price then returned to the previous day's close, where I have before discussed a scalp short entry. Sometimes you get a little, sometimes you get a lot.The 5-min shows a couple of things; (1) price came within pennies of our resistance pivot, while our support pivot held for most of the day. Price did break down from that support (cha-ching!) but ended up returning to close right back at that level. (2) some momentum divergences. I have two vertical dash lines that indicate where the buy divergence would be initiated (based on a tick up in the macd histogram). The first one was on a dragonfly doji candle that barely tested the lower keltner channel and closed right on top of support. The second on a long hammer candle that closed inside the keltner channel after a long wash-out move. I'm not just looking for a tick up in a histogram, I'm looking for this confluence of technicals to show themselves (i.e. candle patterns, price relative to other values, etc.).A couple of observations about today:
- First, on this 60-min chart below we have the "Slow Line" of the macd (also known as the "stability of trend" line) crossing negative. The last time it did that (green up arrow) we had a snap back rally, but the previous three times it did this (3 red down arrows) price corrected lower. (Sorry, I included the wrong 60-min chart, so the one below doesn't contain the arrows where the slow line crosses zero).
- Next, A seminar I once attended lent the idea of observing the total nyse volume in the first half-hour of the day, to get an idea of "higher time frame" participation. In other words, the participation of institutions, and deep-pocket swing/position traders entering the market. Today's first 30-min volume was indeed high, and what followed? Selling!
On the volume chart above I also circled the most recent previously large 30-min bars, and below on the SPY daily chart the vertical dash lines highlight those days with "higher time frame" involvement, and you can see how price reacted.Finally, there's the market profile. Today's profile gives us a "b" shape, which simply highlights the rejection of value at a higher level. Up to this point we have had "fat" profile bodies, building value at higher levels. Now we see value working lower.

opex friday

We worked off our Overbought conditions through sideways price behavior (as opposed to retracing lower). Today's SPY trading was an nr7 (narrowest range of the past few months actually), also on the lowest volume of the year, but it did need the time to digest previous gains.A trade I didn't make today, but want to keep in mind for future reference is fading the highs of the day on such a narrow range day following a trending move of the previous day (or days).
Later in the day (just before 2pm) we tested the highs which coincided with a break through the keltner channel. In a day other than a z-day we could suspect this move to be an impulse move to the upside and look to get long. However, being that this day was a suspected consolidation day, the higher probability play would be to fade the highs of the day. As such, we had the breakout through the keltner channel (high of the day) and volume came in (dots, above/below candles), selling price back to our pivot point. It's tricky in the sense that our momentum indicator is showing a higher high, and the pattern looks like a bull flag setting up. But if you are suspecting a bull flag you would be waiting for price to close above the flag "pole" for one. So while you're waiting for this flag confirmation you start to see price testing down, rather than up and we get the lowest close over the last three bars, you can then suspect that the volume you see is actually selling, not buying.

Anyway, there's no guarantee we'll make new highs next week, but things are shaping up for a test of that $96 range. The market profile shows how we spent all day establishing value in this narrow range:A trade I did make today involved FAS; can you pick out the high probability trade in this chart?
The setup on this chart allowed for a very tight stop, right below a narrow consolidation point that came after an impulse move, here's a closer look:

NRc

A narrow range consolidation day. Not much to say about it, tomorrow could show us how much conviction the bull camp has, as we're at a level to pop or drop from.Market Profile shows us a tight range "fat body" similar to an nr7 candle. I'm going to have to do a more in depth post on the market profile at a later time. If you're too anxious to wait, go get your hands on the book Makets in Profile by James Dalton.

time to get your drink on

We did manage some reasonable volume on the SPY, but overall total NYSE volume was very weak, so we'll have to see if some higher time-frame buyers step in next week.
I wanted to include an idealized trade here to get short when you're expecting an overall trend day down. Wait for price to return to an "overbought" area that coincides with a level of support/resistance; in this case the upper keltner channel AND R3, AND a round number like $90.50. In this case it might have even been better to wait for volume and TICK to confirm the move (volume represented by the dots above/below the candle).All-in-all, nothing is really confirmed until we close under $89 (a good price for those higher time-frame players to come in at).
From now on I'm going to include a view of the SPY market profile. For today's market, observe how price found support at those "single prints" (the "A's" from 6/25).Have a very fantastic 4th of July weekend!