A poor high

From http://jamesdaltontrading.com/blog

Poor or unsecured highs or lows: Auctions, within the market’s natural two-way auction process, end in one of two ways: 1) Most commonly the auction ends through a more aggressive counter auction that creates a buying or selling tail; or 2) The auction ends through simple exhaustion. Exhaustion is similar to running up a steep hill and continuing to lose pace or momentum until we just stop and begin to slowly turn around and gradually walk back down the hill. The only thing that stopped us was the loss of our own momentum. By far the most reliable and information packed ending is through aggressive counter action. We refer to an auction that terminated through exhaustion as poor or unsecured because of the lack of counter action; the original auction, after getting a rest, is more likely to make another attempt to crest the hill. The more attempts that are made, the more likely the auction will finally succeed. Poor highs or lows are often the result of excessively long inventory (with regard to poor highs) or excessively short inventory (with regard to poor lows). These inventory imbalances often involve longer-timeframes and therefore take time to balance before continuing in the direction of the prevailing trend.

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4 thoughts on “A poor high

  1. Hey toast! Just my 2 (Euro)cents regarding Dalton’s article:

    Whilst the above concepts are relevant I have to say that I completely disagree with Dalton’s idea of “new money”. This idea goes totally against the concept of the “3rd force”, i.e. money which has not yet taken a position, and the amount and plan of which is unknown by definition. This usage of “new” and “old” money is illogical and even dangerous as it gives one a false sense of being able to somehow quantify and operationalize the money or buying power sitting on the sidelines which (not only in times of overloaded printing presses) is absurd. If anything, it is the “old money” i. e. traders who already took positions that can be quantified but even that is not really helpful. With all due respect to Dalton’s contribution to AMT, his new/old money concept is a weird theoretical “excess” to stay within the terminology with and has no practical application, at least not for the simple minded trader that I am.

    Second cent: In the context of “poor” vs. strong lows, I agree that strong counteraction by OTF gives reliable clues as to the potential end of the auction on a larger timeframe but, in this particular example, Dalton is completely wrong again. The reason for this is his anachronistic TPO-based approach which he seems not to want to let go of, and which displays its weakness beautifully in this example. In my plan from yesterday (http://benkotrader.wordpress.com/2012/03/30/plan-of-attack-03302012-2/) I expected a long entry by OTF around the 97.50 level. This is precisely what happened and the rejection could not be clearer if you look at it with a volume based chart, e. g. with 10k volume. The market overshot the MVCPOC on its way down and shot back up, retested it from above to the tick and off to the races it went! It never came even close to retesting this level; in fact it exploded for 6 points without any counter rotation. So, I am asking, is that “weak?” Or, were that daytraders who took it that high? I don’t think so. The reason Dalton does not see it is because he is still looking at his arbitrary 30 mins based TPOs which in a way reminds me of those people who enter a position because their 5 min, 10 min, or whatever min candle just closed. I mean, what if the market had opened 15 mins, earlier or later? What if we change the TPO period to 15 or 28 mins? Would those TPOs look different? Would the rejection become “stronger”? You get my point.

    As far as I am concerned, time does not equal value, or more precisely, sometimes it does, and sometimes it does not. This is a simple fact of life. In my trading approach, time does not matter, activity does. Whilst the TPO is great as a quick and easy visualisation of the market action and also has some self fulfilling power probably because it is used so widely, its disadvantages against newer ways of reading the auction are also evident.

    • hi Benko, thanks for the comment! – I agree with you on the old vs new money and the time price – the volume distribution on any day is U-shaped and not all TPO’s are equal.

      To be honest I did not really examine the volume chart on Friday, just the settle price. I did however after the fact look at the MicroComp of Wed/Thurs 24 hr and I saw the VPOC of that area provide support –

      I wanted to log something about the idea of a poor high – the analogy of the hill is similar to something amusing that I hear at the trading office where I have started to work.

      Also, as a result of being back at work I don’t have time to look at IRT during the day – my analysis has to be for longer time frames – but that suits me ok as I was too caught up in the tick level and was losing track of the bigger picture. Fortunately I can see what is happening in the market during the day. I don’t have to look far, the price is on the televisions in the office and on the company website!

    • thanks Benko, I am glad to finally see this analysis working – I might have been lucky but I saw the 87/88 to 1409 move and then the 1419 – the 1409 was was one day later than I expected (it was close on Friday and the reaction at 1405/06 tells me that level should be some support).

      The 1419 HVN is close to being touched. I would not be surpised by a pullback to ~ PP/1410 and then a new 2012 RTH high.

      Now I need to work on having the discipline to wait for 3 days with trades to go to my levels 😉

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