Inverted head and shoulders on the SPX?

[pinebilly]

First off I wanted to say thanks to AMT for being willing to share such relevant information, it is very kind of you AMT, thanks. Also wanted to say thanks for the people involved in the thread who are keeping it on track and adding relevant info, not always the case on ET, so thank you as well.

I currently use price action to guide my trading and nothing else but still come across the dilemma of whether a price level will hold or not. I got fed up with purely "scalping" the es (on a tick by tick basis) and have been searching for some understanding in regards to a more swing based approach. I can see the PA very well on a chart but what AMT is talking about would really help me (and I am sure many other traders) establish a better understanding of areas to be adding positions or liquidating etc.

I am currently using zen/ninja as charts which are fine for tick based charts/volume charts etc. I was wondering if anyone out there has found any code that is useful in charting what AMT is talking about.

I know that a vol footprint exist for NT (basically its a market delta) here - http://www.fin-alg.com/product.html , but I do not know if this is sufficient or the same as to what AMT is doing.

AMT, I dont know if your willing to sort of guide some of us who are wanting to pursue this a bit further but if so any help would be appreciated. IF anyone has found anything relevant for NT and wouldnt mind posting that would be appreciated.

If the tool does not exist for NT it seems like the other option is DTN IQ for the feed and investor RT with the volume breakdown.

Any help/suggestions are appreciated, and thanks once again to AMT, intriguing thread here.

Bill

 

[frank grimes]

Why is it fucked up? We are in a recession that is getting worse by the day and the only person that can't see the credit problems is apparently you, as soon as you can admit to yourself that you are, have been, and will continue to be wrong you can turn bearish. As soon as this happens the mkt will rally and you can just go away, knowing that you are quite possibly the worst "investor/trader" on the planet.

 

[Gordon G.]

Quote from chuckt101:

Right, you have the net transactions in that zone, but your longs have long (hehe, pun) since liquidated on the way down. Your calculation doesn't take into account that they can operate outside of the consolidation zone

Hi Chuck, that's exactly the point I did not understand (I probably expressed my doubts in an earlier post in this thread): how can we know how many contracts are being held from a certain zone if there is still plenty of time to liquidate these positions?

 

[chuckt101]

Quote from Gordon G.:

Hi Chuck, that's exactly the point I did not understand (I probably expressed my doubts in an earlier post in this thread): how can we know how many contracts are being held from a certain zone if there is still plenty of time to liquidate these positions?

This part makes sense to me but again, AMT will have to confirm that I'm not being too naive here -

Say your net delta at 720 was -100k 3 days ago. Now if we move back to that level with your net delta at -150K, that tells you you still have 50k contracts that are NET SHORT.

That tells you 50k shorties are at this level, maybe 718-722ish. If they have standing stops in place, the market will have to produce 50k BUYS to neutralize the zone. If they have mental stops then price can move past this zone easily. But at this point they will either defend by selling more or liquidate AKA generating BUYs. I gather that it if they wanted to liquidate, they would have done so way before this level, so you will see the neutralization or net longs start to fill up when price starts getting into this zone.


edit: whoops, messed up the math

 

[sandygray66]

Quote from stock_trad3r:

this market is fucked up

Really? It only took you 7000+ Dow points to figure that out?

Does this mean you're finally bearish?

 

[Gordon G.]

Quote from chuckt101:



Say your net delta at 720 was -100k 3 days ago. Now if we move back to that level with your net delta at -150K, that tells you you still have 50k contracts that are NET SHORT.

That tells you 50k shorties are at this level, maybe 718-722ish. If they have standing stops in place, the market will have to produce 50k BUYS to neutralize the zone. If they have mental stops then price can move past this zone easily. But at this point they will either defend by selling more or liquidate AKA generating BUYs. I gather that it if they wanted to liquidate, they would have done so way before this level, so you will see the neutralization or net longs start to fill up when price starts getting into this zone.

Thanks Chuck!

From what I understand so far:

- if we break down from a balanced zone with a negative delta, we can expect the market to test it later (with a positive delta at least equivalent positive delta, if it wants to penetrate the resistance)

- if we break down from a balanced zone with a positive delta, those who took a long position will be forced to cover, adding to the selling.

Just for info, I attach a pic of March 2 720 level ... as you can see the cumulative delta seems to be positive in the area 720-724.

 

[blueskier]

Quote from chuckt101:

This part makes sense to me but again, AMT will have to confirm that I'm not being too naive here -

Say your net delta at 720 was -100k 3 days ago. Now if we move back to that level with your net delta at -150K, that tells you you still have 50k contracts that are NET SHORT.

That tells you 50k shorties are at this level, maybe 718-722ish. If they have standing stops in place, the market will have to produce 50k BUYS to neutralize the zone. If they have mental stops then price can move past this zone easily. But at this point they will either defend by selling more or liquidate AKA generating BUYs. I gather that it if they wanted to liquidate, they would have done so way before this level, so you will see the neutralization or net longs start to fill up when price starts getting into this zone.

Are your sure that's what he means (i.e., that a disparity develops between price and net contracts)? In that case it has nothing to do with commercials vs. speculators. I thought what he meant is that part of the -100K also persists since it is due to commercial hedgers who stick to their positions, and do not trade like the rest of us speculators. These short commercial positions can continue to accumulate on each pullback, until finally a break is made through that level and they are all forced to cover.

 

[chuckt101]

Quote from Gordon G.:

Thanks Chuck!

From what I understand so far:

- if we break down from a balanced zone with a negative delta, we can expect the market to test it later (with a positive delta at least equivalent positive delta, if it wants to penetrate the resistance)

- if we break down from a balanced zone with a positive delta, those who took a long position will be forced to cover, adding to the selling.

Just for info, I attach a pic of March 2 720 level ... as you can see the cumulative delta seems to be positive in the area 720-724.

I think our understanding is not consistent yet. Negative or positive delta is only important when you look at the NET between the cumulative deltas at the same price level at two different times. The fact that cumulative delta is -100k means nothing by itself. You treat this as a watermark point and see what cumulative delta is when price returns to this zone and then figure the NET between these two deltas. That gives you the perspective you need. That being said, I think the reason for the confusion is you appear to be resetting your deltas each day?? That is definitely not the way to go

Quote from blueskier:

Are your sure that's what he means (i.e., that a disparity develops between price and net contracts)? In that case it has nothing to do with commercials vs. speculators. I thought what he meant is that part of the -100K also persists since it is due to commercial hedgers who stick to their positions, and do not trade like the rest of us speculators. These short commercial positions can continue to accumulate on each pullback, until finally a break is made through that level and they are all forced to cover.

Same answer as above. The -100K doesn't mean anything until you give it perspective - i.e. comparing it to another time & price level.

If the commercial guys continue to accumulate on each pull back, the cumulative delta will continue to decrease right. So when you look at net difference at this same level, you will clearly see the shorts accumulating vice longs coming in (Edit: or sellers covering/getting stopped. Same thing fundamentally - ASKs lifted/price & delta goes up).

The -100k can be whatever.. +100k, 0, whatever. It doesn't matter until I compare it to something.

5ft is tall for a 5yr old, short for a 30yr old and avg for a 60 yr old.. or something like that lol

Anyways, I'll try to refrain from posting more until AMT responds so we can have some "authoritative" input

 

[AMT4SWA]

Quote from chuckt101:

I am looking at the cumulative delta for the day and for simplicity, let's say the delta when we got to 682 around 12:15 EST was about -100k. Prices continued to consolidate with Deltas doing the same. At around 15:00 EST, Deltas returned to about -100k with prices making new lows around 680.

To me, this means bulls still have some power since there was not real volume behind the new low. Sure enough, price retraced about 8 points.

We then came down to the 682 level (2 minutes before your post saying inventoried cleared out) with a higher delta, though not by much.

Question is, how did you know the inventory was cleared out if Delta wasn't equal? Or was this higher delta statistically equal? (Was greater by about 7% based on intraday data)

Attachment explains what I mean.

Thanks!


P.S. you should post pics of your airplane build sometime

I was comparing the cumulative delta from the 681's trade on 3/3/09 to the 681's trading on 3/5/09.......that is the difference. It was not until our third rotation down to the 681 level today that our multi-day continuous cumulative delta went neutral for that zone.

 

[AMT4SWA]

Quote from Gordon G.:

Hi AMT,

sorry, but I don't get it: from 720 to 724, I see a long inventory of 2.000-2.500 contracts on March 2 and of 10.000-11.000 contracts on March 5.
So, not a short held inventory ... I probably use a wrong method of calculation?!

What are you using to track the delta......charting & feed?