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A pitbull setup


At the request from Max I thought I'd post a little beauty of a setup that I use....It's probably bastardized from somewhere so I won't take complete credit by any means. It is based on a Market divergence between the emini Dow and the emini S&P when they are trading near the extremes of the day ( the highs or the lows) . I will post some basic charts from a demo account ( which sucks because I don't know how to get text on the chart itself) but I won't give away all my secrets..lol...I have traded this method for a long time and some are improving it which is great ... we can also get ideas from some of the great minds on this forum...a few things first 1)I synch the emini dow to start at the same time as the emini S&P...for me that is 9:30 Eastern..I donot display any other earlier dow data....2) I look for the dow to make a new high ( in this example) but not the S&P...then I look to fade...so I will take a short 3) I fade moves and do not play breakouts so in general I sell strength and buy declines..now this may seem too simplistic for most but it is very powerful...The first chart is the emini S&P..Notice the retest of the 10:05 high at 11:10 on lower volume....at this time the Dow actually made a higher high.( see the dow chart)..then the dow again made a higher high at 12:05 too…but look what was happening to the S&P…again not near it;s highs..look at the volume ( or lack of)on the retests..This isn’t a perfect example but it worked for me…...To back test this, the only suggestion I can make is to watch it for a while....

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Now look what happens when the S&P is making new lows on the day but not the Dow...so the setups work in reverse too and can be used as a way to take profits... I have drawn trendlines...these entires can be improved by adding the $Tick index ( hint - Max) or something that works for the individual trader...some like to see what the Nasdaq composite is doing..you can even add an indicator.. .There is a way to utilize this method while we are inside the days range but that will be for another post. Hope somebody can understand this simple yet effective setup. And if I ever become a vendor ( which I won't ) I'll supply you with 7 years of statements or more...lol..
Here is one last chart to help support some of the concepts of todays (Thursday December 21st) trading. This is a multi day ( 10 or 12 day) profile.which was generated BEFORE todays trading it shows the following. 1) High volume at the 1426.50 area 2) high Volume in the 38 - 40 area 3) Low volume in the 1433.75 area and low volume in the 1430 area...You can see how most of these areas came into play today as a support or resistence area....this is just for reference and I don't want to start a Market profile thread here....just thought I'd show it..enjoy and have a great holiday everyone

Bruce

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So it looks like you are trading a "double divergence" (or would you call it a confirmed divergence?) and you are trading long in the ES when it makes a lower low but the TICK and YM do not make a lower low. Right?
That last posting was meant for the previous 3 charts that you posted and not the Market Profile chart. Bruce, you must have posted while I was typing.
bruce you just busted my bubble. the example went from simple to phd. if i need market profile in my arsenal than im doomed. im a low iq player.

max
Yes Elite..you have it in all it's simplicity... I am posting the Tick just to show one indicator that I have found useful but it isn't needed to take the trade...it always helps to have 2 or 3 things assist in the area of the trade...That is why that Market Profile chart was posted...just to show the support area....I am attatching the 5 minute SP chart which should have been posted before...I messed up and posted a one minute S&P chart with the 5 minute YM..the lower volume on that S&P breakout down is more prevelant here...If anyone would like me to clean up that post again I will....
quote:
Originally posted by elite trader

So it looks like you are trading a "double divergence" (or would you call it a confirmed divergence?) and you are trading long in the ES when it makes a lower low but the TICK and YM do not make a lower low. Right?



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Well Max for someone who is a self proclaimed "Newbie" you picked up that that was a Market Profile chart quick...so you have been busy..Congrats on your research......You don't need that mp CHART FOR THIS TRADE ....don't over complicte it and you will do fine....keep it simple..and make the trade your own....your bubble should still be intact...I'm glad you're following along
Bruce
quote:
Originally posted by max

bruce you just busted my bubble. the example went from simple to phd. if i need market profile in my arsenal than im doomed. im a low iq player.

max

quote:
Originally posted by max

bruce you just busted my bubble. the example went from simple to phd. if i need market profile in my arsenal than im doomed. im a low iq player.

Some Market Profile books if you are interested in improving your IQ.

Market Profile Books
quote:
Originally posted by BruceM

Well Max for someone who is a self proclaimed "Newbie" you picked up that that was a Market Profile chart quick...so you have been busy..Congrats on your research......You don't need that mp CHART FOR THIS TRADE ....don't over complicte it and you will do fine....keep it simple..and make the trade your own....your bubble should still be intact...I'm glad you're following along
Bruce

brucester youre giving me way too much credit. i had no clue what i was looking at until i read elites post. thanks anyway


maxster

oh jeez i still havent mastered this quote reply thing. how pathetic is that? very.

max
Hey BruceM........SHHHHHHHHHH!

Watching intermarket relationships during the day is a very powerful cocept, have been doing this for a long time. I actually watch the ES, YM, NQ, and the AB, however about 80 percent of my trades are in the ES or the YM. I am not thrilled with the NQ's, although they trade better now that the tick size has been reduced. THe AB (russell) is a bit quirky sometimes in my opinion.

You can also watch the Tick and the Advance/Decline charts looking for these divergences.

Ehile today there was a nice long setup in the YM in the 10 AM range there are a few nuances with this to keep in mind.......

A lot of times these divergemce trades are better on the short side, seems to take a lot less to push the market down the pull it up.

The Dow is the best to fade it seems, it seems to get overextended and get whacked more often.

In the current enviornment shorting the Russell when it makes a higher high and nothing else does is dangerous, this may not be that way forever, but at the moment it seems to lead to the upside, the Russell making a new low when nothing else is is often fadeable to the long side.



Thanks so much for doing that PT. I appreciate it.

Bruce