fight-club

I was looking at old posts over the weekend and I wanted to take a step back in time to re-analyze what happened before the break from the 1300-1320 area.

I also wanted to look to see how you can try to predict what a day will look like based on previous days. It is really tough with this Eurozone news driven market and sometimes there is one day of reference before it all changes.

There is something however in analysis using Arms Volume:

When I first thought of Equivolume as an alternative to bar charts, I was already aware of volume’s importance. It was necessary to see whether volume was heavy or light as a stock moved through an old level of resistance or support. Volume tends to become heavy and price spread tends to shrink at important tops. Large price swings on heavy volume are typical of climactic bottoms. Volume is at the foundation of my Arms Index, and it bothered me that volume was often relegated to a secondary significance or even completely ignored. I felt volume needed to be made a full partner with price to understand the underlying dynamics of price movement.
When it came to me, it was absurdly simple: Combine the two pieces of information into a single posting. I moved volume off the chart’s lower margin and incorporated it into the price posting. Each day would then appear as a rectangle, with the width being the volume.

I put this thinking together with delta candles and came up with this – you can see the selling climax and once it appears to have weakened the buyers pounce and vice versa at the top. Note the aggressive selling (aka profit taking on low vol Fed days). Then came the 2nd biggest down day of the year marked with a yellow ‘!’

I have highlighted the chop area and have zoomed in on the following image and added some commentary – remember again how the slightest weakness is exploited but never for too long. On the right side of the chart I added in some areas I am currently watching – esp the half way back of the current swing. Below this is 98, should be strong, below this is a retest of 1250/70’s

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2 thoughts on “fight-club

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