Inventory Grab Alert 4/30/09!

Status
Not open for further replies.
A

AMT4SWA

I wanted to point out to ES traders that the last two days have been key price rotations at a significant resistance zone of previously held SHORT inventory. The 868 to 871 area for the current contract had a decent level of held SHORT inventory, formed off two prior price rotations (01/28/09 & 02/09/09) that had created a resistance zone.

On the 17th of this month we had our first proper test of this resistance zone which held for over a week. Yesterday and today, we finally had intraday price rotations that have cleaned out that previously initiated SHORT inventory. With price moves well into that held inventory and on up through their "stops" zone, we have what I call an inventory grab that has just played out.

This inventory grab event is a result of the perfect area/zone for LONG position holders, from much lower pricing levels, to thin out or dump large chucks of their "in the money" inventory (they cover large portions or all of their positions into a big pocket of resting held short inventory).

Now as a result of the last two days price rotations we have a very unique situation. The typical inventory grab will cause very reactive price movements in the days following the neutralization of such large positions. We will most likely make a significant trending move out of this current area of price.

Bulls are at a point where it would be most optimal to allow price to move down to lower (better) pricing levels to resume significant buying, for any next wave in a potential rally continuation through this area to even higher pricing levels (900's). Bulls also have to take into account they currently have some gaining momentum, and any pullback of price at this time could actually work against them for potential short term trend continuation.

The bears in this situation have their first real solid opportunity to test the strength of this bull rally off the years low. The bears have price now 200 points off the yearly low, with a decent payoff ahead if a low of the year retest move would develop. It potentially pays much better HERE for the bears to take a shot at selling the price rotations off the now concluded inventory grab event.

I was a very active seller today with the price probe beyond the area of now neutralized inventory (short covering spike). Bulls were not very likely to add new significant buy inventory at high pricing levels (880's) after they had just cashed out large size positions into the held SHORT inventory zone (870's). The price spike into the 880's today leaves a very definable level of near term resistance to be watched. IMO the bulls will need to challenge this level almost immediately to maintain momentum, and this next few days will be critical.
 
Also of note, if the market does have a multiday pullback we have to watch the 843's to 839's zone of near term support. Any selling that runs price through this zone will trigger additional liquidation of held LONG positions entered from lower pricing levels. Now we have our over/under range in place to watch for the next day or two. :)
 
Quote from AMT4SWA:

I was a very active seller today with the price probe beyond the area of now neutralized inventory (short covering spike). Bulls were not very likely to add new significant buy inventory at high pricing levels (880's) after they had just cashed out large size positions into the held SHORT inventory zone (870's). The price spike into the 880's today leaves a very definable level of near term resistance to be watched. IMO the bulls will need to challenge this level almost immediately to maintain momentum, and this next few days will be critical.
More...

Is there a new short inventory zone created in the 880's that provides near-term resistance? I don't see what would have created a short zone now unless it was there before. Wasn't the action in the 880's mostly from shorts who covered higher than intended and momentum traders who rode the spike?

D.
 
There was no intraday type delta divergence signals a person could have used for a real high probability entry as the ES traded above the 880's (but there was good initiated selling type signals that I use as the high retest took place). There was some previously held inventory that of course was neutralized with the short covering spike. What we have now at our recent high (pre-market spike 887.00 high) and retest rally lower high (885.75 10:16 a.m. CST touch) is a moderate sized pocket of held short inventory zone from the 883's to the 885's (very minimal inventory held above at 886 to 887). This is a new held short zone that was just created on 4/30/09, and of impotance was followed by an immediate initiated sell reaction.

Monday we will need to pay close attention to the delta if price can trade back to the 883's.......we need to look for strong initiated buying starting from this price level to have any indications that our new short inventory zone is moving to neutral. :)
 
Quote from AMT4SWA:

There was no intraday type delta divergence signals a person could have used for a real high probability entry as the ES traded above the 880's (but there was good initiated selling type signals that I use as the high retest took place). There was some previously held inventory that of course was neutralized with the short covering spike. What we have now at our recent high (pre-market spike 887.00 high) and retest rally lower high (885.75 10:16 a.m. CST touch) is a moderate sized pocket of held short inventory zone from the 883's to the 885's (very minimal inventory held above at 886 to 887). This is a new held short zone that was just created on 4/30/09, and of impotance was followed by an immediate initiated sell reaction.

Monday we will need to pay close attention to the delta if price can trade back to the 883's.......we need to look for strong initiated buying starting from this price level to have any indications that our new short inventory zone is moving to neutral. :)
More...

Thanks for the explanation. I have attached a picture of my footprint chart from the retest of the highs on Thurs. This is the area that you said there was initiated selling taking place, resulting in a pocket of held short inventory. I do see some large volume at the bid, but I also see decent ask size.

On the left side of the chart is the cumulative delta for each individual tick level. When I look at the delta for 883's-885's (where you said the short zone was), I don't see any out of the ordinary short inventory. In fact, it appears that more buying took place within that zone than selling.

Could you please expand on your last post in reference to my chart? Maybe I am using the footprint chart in the wrong manner, or maybe there is something I overlooked. Either way, I appreciate your help and will eagerly be awaiting a response. Thanks!!!
 

Attachments

This is why I do not use footprints for what I track......your delta per tick on the left is from ALL TIMES price traded at each tick level (combined laterally). What I am talking about was the price action from the point our lower high was created at 885.75 with the immediate initiated sell reaction following. Footprint charts will not show what I am talking about......you would need "delta bars" set to cumulative.
 
Quote from AMT4SWA:

This is why I do not use footprints for what I track......your delta per tick on the left is from ALL TIMES price traded at each tick level (combined laterally). What I am talking about was the price action from the point our lower high was created at 885.75 with the immediate initiated sell reaction following. Footprint charts will not show what I am talking about......you would need "delta bars" set to cumulative.
More...

Thanks for the clarification. At least I won't have to waste anymore time on footprint charts. haha

In an older post you said this-

"I use a proprietary built (had a programmer do it for me) delta tracking tool for multi-day tracking of the combined cumulative delta day after day......"

I don't really understand what you are using that proprietary software for if everything can be done with the Volume Breakdown tool alone.

In addition, you said "I also watch this order flow at all times "realtime" to always see who has control of the order flow AS IT TRADES.....this is the cumulative delta I watch at all times. "

It seems that the best way to watch the order flow and see where the size is, is by watching a footprint chart set to cumulative bid/ask ladder. Can you point me in a better direction? Thanks!!
 
I've attached a chart of the "Initiated Selling" that took place at the lower high of 885.75

Would you have been able to make your trade decision just by watching this chart realtime, or is there another piece to the puzzle that you would be looking at for verification?

Also, by looking at this chart, at what point would you have determined that actual "initiated selling" was taking place? Where would you have entered your short trade?

How did you determine that the short inventory pocket was between 883's and 885's?
 

Attachments

Quote from AMT4SWA:

There was no intraday type delta divergence signals a person could have used for a real high probability entry as the ES traded above the 880's (but there was good initiated selling type signals that I use as the high retest took place). There was some previously held inventory that of course was neutralized with the short covering spike. What we have now at our recent high (pre-market spike 887.00 high) and retest rally lower high (885.75 10:16 a.m. CST touch) is a moderate sized pocket of held short inventory zone from the 883's to the 885's (very minimal inventory held above at 886 to 887). This is a new held short zone that was just created on 4/30/09, and of impotance was followed by an immediate initiated sell reaction.
More...

My calculations (see attached pic) show that total per-tick delta for the 883-885 zone between the 887 spike and the following retest (showing as two vertical yellow lines) grew by +18k. Price drops quickly below 883 after the retest. This is a 10k/bar volume chart.

If I understood correctly, the initiated sell reaction you are referring to, followed the creation of that new held short zone between the spike and the retest, but my calculation shows +18k... what am I missing?

D.
 

Attachments

Quote from AMT4SWA:

I wanted to point out to ES traders that the last two days have been key price rotations at a significant resistance zone of previously held SHORT inventory. The 868 to 871 area for the current contract had a decent level of held SHORT inventory, formed off two prior price rotations (01/28/09 & 02/09/09) that had created a resistance zone.

On the 17th of this month we had our first proper test of this resistance zone which held for over a week. Yesterday and today, we finally had intraday price rotations that have cleaned out that previously initiated SHORT inventory. With price moves well into that held inventory and on up through their "stops" zone, we have what I call an inventory grab that has just played out.

This inventory grab event is a result of the perfect area/zone for LONG position holders, from much lower pricing levels, to thin out or dump large chucks of their "in the money" inventory (they cover large portions or all of their positions into a big pocket of resting held short inventory).

Now as a result of the last two days price rotations we have a very unique situation. The typical inventory grab will cause very reactive price movements in the days following the neutralization of such large positions. We will most likely make a significant trending move out of this current area of price.

Bulls are at a point where it would be most optimal to allow price to move down to lower (better) pricing levels to resume significant buying, for any next wave in a potential rally continuation through this area to even higher pricing levels (900's). Bulls also have to take into account they currently have some gaining momentum, and any pullback of price at this time could actually work against them for potential short term trend continuation.

The bears in this situation have their first real solid opportunity to test the strength of this bull rally off the years low. The bears have price now 200 points off the yearly low, with a decent payoff ahead if a low of the year retest move would develop. It potentially pays much better HERE for the bears to take a shot at selling the price rotations off the now concluded inventory grab event.

I was a very active seller today with the price probe beyond the area of now neutralized inventory (short covering spike). Bulls were not very likely to add new significant buy inventory at high pricing levels (880's) after they had just cashed out large size positions into the held SHORT inventory zone (870's). The price spike into the 880's today leaves a very definable level of near term resistance to be watched. IMO the bulls will need to challenge this level almost immediately to maintain momentum, and this next few days will be critical.
More...

Thanks for your post.

Could you please explain your methodology? For instance when you write 'short" inventory, I am not sure I understand what you mean. For any short inventory, there is a long inventory established at the same price and date/time.

If you can explain it more, it would be helpful to learn from your explanation and expertise.

Thanks.
 
Status
Not open for further replies.
Back
Top