$ES_F long term delta study 09/04/13

I was inspired by my long term Euro value chart last week so I have done the same on ES. I always do this when day-to-day price action is annyoying or I am getting to caught up in the small moves and lose sight of the bigger picture.


The chart above is in some ways a rip off of Mark’s analysis . It was build to show:

  • whether the current up-move is over-extended (white zig zag shows 25% up 11.3% down, 17.74% up and 8.77% down in 2012 – I have plotted what an 8-10% pullback would look like)
  • how a pullback may start (i.e. 3 lower highs in an “MA” shape before a sharp sell off – some will call it a triple top, others a head and shoulders etc.)
  • what a pullback may look like (where it might stop at developing value)
  • where it is likely to be to (look at the long term developing VPOC in bold red! price pulls back to near previous balance VPOC and then makes another up move – the next biggest hvn by volume on the upside is 1396)
  • red dotted trend line for developing value
  • solid gray trend lines for 2012 (with middle of range in dotted gray). They are 11.5% apart which is the Jan-Dec gain for ES last year.
  • 20 and 200 DMA (theory that price reverts to 200 DMA)
  • 127/161 extensions of recent pullbacks
  • 50/61 retracements of recent up moves

I have also been learning about Bunds this week. One trader was nice enough to answer a lot of my questions. I found something interesting on his page and that is an interview from Market Wizards with Michael Lauer.

Lauer talks about the “greater fools” game in which a small group of passive mutual fund managers are concentrated in high capitalisation stocks to imitate the S&P 500 index. The paradox being that this indexation, designed to achieve diversified and “safe” returns is actually a high risk play because it is crowded and has simply become a dangerous pyramid of higher and higher prices (ahem, S&P500?) and the play lasts so long as there is a greater fool to pass the positions on to. Lauer called out the tech crash in 1999-2000 based on the idea of overcrowding in large caps (dell, Microsoft…) and overvaluation of unproven internet stocks and perhaps his concepts will have some relevance/application in today’s record high markets. The message? Don’t be the bag holder.

I also saw some more doom and gloom with “Market Crash Likelihood Goes Up If Stocks Continue to Rally: Marc Faber” on cnbc.

One more thing: a documentary about Paul Tudor Jones:


2 thoughts on “$ES_F long term delta study 09/04/13

    • thanks Mark – have to keep an eye on the bigger picture. Paul Tudor Jones was templating the 1920s in 1987!

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