Tuesday, February 09, 2010

Demand shock?

Here is an hourly chart of day session e-mini trading. I think a demand shock just hit the market (green oval and wide range, green bar just above it). This demand shock is also a high volume, upside breakout from the 1153-68 trading area that has developed this week. If I am reading this correctly the market should not go very far back into this trading area and support should be found near 1066, just a shade below the horizontal green dash line.

The only potentially bearish potential I see in this chart is that the market has rallied exactly the same number of points as it did in its previous rally (blue rectangles). Moreover, it is still below the red dash descending trend line and below midpoint resistance at 1084 (purple dotted line). If this is really a demand shock the ES should move above these resistance points within the next day or so with little hesitation in the mean time.

Even if this is not a demand shock I still think any reaction from current levels will end at a low above Friday's 1041 low. I think a move to 1200 has begun.


Kishore said...

Carl says, "Even if this is not a demand shock I still think any reaction from current levels will end at a low above Friday's 1041 low."

Carl, I could not agree with you more. As soon as the current wave C up (of 4) is over, we should retest 1041. As the reaction from the low of 1041 has retraced 61.8%, there is now a higher probability of the market turning around before 1041, therby completeing a truncated minor wave 5 of the first wave to the downside from the the top at 1150.

So, do we all agree that we are going down at least one more time before going further up??

AdrianD said...


If your outloook was bullish for today you could have bought the ES just before rallying.
it was at support.
or maybe your favorite indicator might have given you a signal.

Teich said...

Carl said "end at a low _above_ ... 1041" (emphasis added), which is not what you said.

dcatlowpj said...

Carl very interesting...a demand shock is SUPPLIED buy institutional sellers in many cases. When I see SUPPLY, I am referring to LARGE GREEN VOLUME BARS, which indicate supply, not demand.

How's that for contrarian?

Typically, on a 5-minute chart, I would be looking to go short within a few bars....roll-overs and pull-backs occur after these volume bars.

This is a reference to VSA, which is VOlUME SPREAD ANALYSIS.

Tippy said...


Very true, but my outlook wasn't really that bullish today, and certainly not worth putting money on. In fact, my only trade was from the short side entering at 65.50 and covering at 61.50.

I really don't use many indicators, I'm pretty much a pure price action trader. My only 'indicators' are the 2yr/10y, EUR/JPY, Gold and Oil, and DXY.

That action out there today will rip you face off. Only the true gamblers are trading this afternoon's action. I'm sitting this one out. I think it's headed down, but man those rockets to the upside really put a damper on my short side trading. I'm pretty scared to put on a short trade right now out of pure fear of one of those BIG green bars..

jeff said...

I'm included in this sentence...only the liars know 100% of where we go from here, but, thus far, this is playing perfectly with my ABC retracement into the 1075-1083 range.

Folks, I think we are a very critical moment in this market.

1. We either break out here and it will be business as usual to the upside, or,
2, We are unable to get above the 1085-1090 mark and start a very powerful Wave III down to below 1000 in short order.

I'm waiting here with a ton a 'dry powder' and will wait for confirmation of either a break above 1090 or a break-down below 1065.

For now, I'm going to eat some popcorn and watch the show.

Good luck to all.

AdrianD said...


to eliminate that fear my charts are not red and green candlesticks.

tey are black HLC barcharts!

Tippy said...

Good post dcat,

I kind of agree with that. Today seems to be a pure 'emotional' trading day rather than a 'fundamental' trading day.

Stictly news based on the Greece bailout stuff. I think a lot of traders saw that clear, failed breakout after the open and went short, big. I know I did, but I only took a small bite. When the bailout news came out around 11:00 it caught everybody leaning the wrong way, forcing a cover and shot it up, just like last Friday.

When the news turned out to be not actually true about an hour later, everyone dumped and the ES tumbled 10 points, which is where I think your institutional volume came from. I got the feeling that even though the volume bar on Carl's chart was green, the majority of the true volume was institutional dumping on the news spike. Much 'grab those profits" and use the spike to exit any longs you wanted out of.

It would certainly be much clearer trading clues if today's action was driven by fundamental trading rather than pure emotional, news driven speculation.

TA.Stockman said...

For me, I just got a buy signal on the SPX.

A false signal would be a close below 1057.

I'll ride this until it ends, then switch sides.

TA.Stockman said...

@ Tippy last comment thread:

"underlying reasoning", really?

Have you never heard the adage:
"The market can stay irrational longer than you can stay solvent?"

It is so true if you're coming from a position of FULL BEAR. Nothing is written. Even Carl will concede that we are in for a correction if his method tells him so. For now, his method tells him UP, so you and Jeff should give him his dues and try to learn why his signal is different than yours. In the end, we will all be winners by studying each other and comparing our trades/projections.

In medicine, it's called an M&M. You study what is done correctly and what is not. And you LEARN from it. Until then, why don't all of us just give our opinions/trades, and leave out the negative comments about Carl and each other, etc.

jeff said...


There should be no need to bash anyone's thoughts in here as we are all trying to make money. That being said, I think this blog, coupled with Carl's short-term 60 minute charts tell compelling arguments to the long and short side. I know I keep sounding like a broken record when I say it, but as long as you, me, and/or Carl, can define our risk when we know we're wrong and latch on to the trend, that is the main point of it all.

Anyway, I'm looking for us to gap up tomorrow morning to hit the declining trend line from January before falling. Right now, that is around the 1081 mark. Since the 1083 mark has proven support/resistance many times, I wouldn't be surprised to head up into this area as well.

At that time, I will start to add to my short positions and look for further confirmation of a break below 1065 before adding more. I will know I'm wrong if we exceed 1090-1095 area so the risk from my perch is relatively small.

I recommend everyone do the same whatever your long or short market approach is.


TA.Stockman said...


I guess I'm coming across as what I say we shouldn't, huh? Well, I apologize. Some posts are getting the best of me.

However, I guess I am kind of tired of people "questioning" Carl's position. It is what it is based on HIS system. If you disagree, fine, but just make notes if your signal is wrong, NOT his. There is no need to come here and bash his projections - like your opinions are really going to change his method. Provide your own projections if you like (heck, start your own blog), but no need to question why he thinks one way or another. If you read his profile, the answer as to why he's keeping to his boxes is clear.

I personally do not think that Carl subscribes to geopolitical effects on the market. His box system is based on supply-demand as Darvas' was.

To me, everyone's signal will be a little different based on time-frame.
On the DAILY, mine's bullish.
On the WEEKLY, mine's bearish.
On the MONTHLY, mine's bullish.
Trade whatever time-frame suits your risk tolerance. As with any signal, as I have mentioned before, it can go from bull to bear and vice versa given the underlying principles...and this pertains to Carl's, too - I've seen it.


jeff said...


Nice. Nuff said!

waw4 said...

Seemed like a short squeeze to me, which quickly dissipated as soon as the panic was over.

At 12 a.m. EST, we're back to where the squeeze started in the 1060 area, near Friday's close.

Dave Narby said...

"Never short a dull market."

...Is this market dull?