Archive for July, 2009
Delta Zone of resistance holds into the end of day.
Our newly tracked Delta Zone of resistance held for the day even though we had several price rotations come close. Price was never able to pierce into the Delta Zone today and the Delta Volume Distribution showed additional SHORT accumulation taking place throughout the day. We have actually put in a small layered level of additional resting SHORT inventory just under the main Delta Zone. There is no doubt in my mind, we have sellers getting active from what I can see in the Delta Volume Distribution with all trading in the 989’s on up.
Delta Zone of resistance it neutralized and we get excellent price reactivity
The market did take out that minor Delta Zone of resistance we had been tracking, and as a result the range extension I have been looking for is now to the upside. We did just track and then enter a SHORT trade at the 993.00 price level, so we will continue to manage this trade and watch the Delta Volume Distribution at.
After the market traded to new highs of 994.00 today we had two lower highs develop with the formation of a new Delta Zone of resistance. From the cumulative delta we can see that there has been significant SHORT inventory accumulation within our new Delta Zone of resistance prior to the end of day selling. SHORT positions still held from today’s trades have good potential for additional profit targets going forward. The Delta Volume Distribution looks like the after hour session could have some continued weakness.
The ES tests resting LONG inventory at support and then rallies into the close.
Yesterday I mentioned I was looking for some range extension today and we ended up with minor range extension into support. The after hour session had the ES trading to a low of 964.00 which was just a few points below yesterday’s LOD 966.00 level. I had indexed a Delta Threshold to the 966.00 level as mentioned yesterday to watch for my Delta Volume Distribution tracking today. So we ended up with minimal range extension into resting LONG inventory support over the last 24 hours. The bulls had several good challenges today with multiple hits in the 966’s and below, but their resting LONG inventory held and they mounted a nice fight at the end of the day. Now the sellers Delta Zone of resistance still in place from Tuesday seems the new target, oh the fun continues! 
Video 1 – Quicktime download link
Why I am not afraid to trade the highs and lows
Looking around on the web, I found a video explaining why a trader shouldn’t trade the highs or lows and it gave me pause. Since the market is consolidating 70-80% of the time, I actually prefer to trade the highs and lows. Why wouldn’t you look for opportunities at the highs and lows?
The short answer is you don’t have a solid method for determining whether it’s a breakout of consolidation or a return to the mean setting up. If you don’t have a way to counter-trend trade as well as trend follow, you’re leaving money on the table.
When a person first learns to trade actively in the market, they’re bombarded with indicators of various stripes that seem to make sense and end up being accepted because of a lack of understanding of what drives the market. A new trader doesn’t know that he doesn’t know and adds studies, stochastic oscillators, moving averages, and other convoluted derivations of past price action.
***NEWSFLASH*** Price is only half of the information.
I’d be afraid to trade the highs and lows too, if all I had to work with was price information. I’m not dismissing price action or its uses in trending markets, but I’ve sat through numerous days of low volatility getting useless price signals. You need an exceptional tool to make good use of those kinds of days.
As far as the highs or lows are concerned, the frustration of waiting for a price-based indicator to cross or “domino” before you take a long or short is amplified by the common occurrences of the move being over, or worse yet, a false breakout of consolidation leaving you as the chump who bought the high or sold the low.
My trading partners and I frequently step in front of moves and capture a good profit before trend followers hop in and boost it further. How? We can see resting inventories of supply or demand at certain price levels and thus have a huge advantage in gauging the strength of the move which allows us to join the auction in the right direction with much more confidence. That’s the power of Delta Volume Analysis.
I personally believe that understanding Delta Divergence combined with appropriate risk management can take a person from “novice” to “quite adequate” in a very short time.
Are we always right? No, of course not. We do not have predictive tools, we have probability tools. However combined with astute risk management, we are close enough to “right” to make it worthwhile and to judge the odds of various entries. We’re proud of what we have to offer. Certainly we’re a bit biased, but we’re biased from experience. These ideas have a lot of real-world miles on them. Maybe they can help you. Take a look at some of our videos, see what you think, and feel free to email us with questions.
Final note: If you want to see the math behind the more popular indicators, you can google Welles Wilder’s numerous works or Chuck Lebeau and David Lucas’ “Computer Analysis of the Futures Market” and gain a deeper understanding of how to use them to effect. Just understand their place and don’t expect them to deliver what they cannot.
Cheers,
Fulcrum Focus
A new Delta Zone of resistance forms at today’s highs
There was a broad mix of very interesting trade signals today. We had the typical Delta Divergence trades, trend following trades, and a really powerful resting inventory neutralization trade. I do see some tension building up in the Delta Volume Distribution, so tomorrow I do not see a consolidation type day ahead. I am looking for some price reactivity tomorrow which should cause range extension of price outside of today’s trading range. Price trading beyond the 978.25 level or below the 969.00 level will turn my focus to the Delta Thresholds I am tracking. I want to be ready for potential high probability trade set-ups at these areas.
