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ES 1-6-2008

Good Morning Traders !

VAH 930.50
POC 925.50
VAL 922.00

Weekly R1: 954.50
Weekly PP: 904.00

Daily R2: 944.00
Daily R1: 935.75
Daily PP: 926.00

Highest High in last 20 trading days: 934.25

I will be watching what happens at R1 with great interest this morning ! Also watch the IB high for indications of a trend day if price is accepted above R1.

ES Daily Notes 5 Jan 2009
Originally posted by vast524

Hi PT. Thanks.
If I see a lot of big buys at or above the ask price and it is of a S/R point then I may see the price push up.(And not them exiting a short) I wonder if when they are exiting a trade their big order will be sitting there and it will get printed as smaller lots as the smaller buyers get their contracts. But when they enter a trade it will get printed in one go?
Or do they exit using market orders?

I wanted to take a minute and specifically answer or respond to this comment and question.

When price breaks through a well defined S/R level, and big orders print, these orders are usually triggered by resting stop/limit or stop/market orders. These orders are a combination of orders to exit a losing position and orders to enter a new position. The expectation here is one of the start of a new directional price move away from the now broken S/R price level. This is one case.

Another case is when a large order comes into the market at the inside bid or ask price. In a downtrend for example, the large order it is often placed as a limit order at the current inside bid price or below the bid ("hitting the bid"). The converse holds for large buy orders hitting the offer. What the large sell order does is consume all the contracts at the bid leaving a residual number of contracts on the new inside offer price in the form of a limit order. This technique makes a limit order look like a market order on the T&S. This is a very commonly used technique often seen being used in the direction of an established trend.

In general, entry in the direction of an established trend is more likely going to occur in the form of a limit order (as described above hitting the bid / offer) or stop/limit order, and exit will occur in the form of a resting limit order at a target price. We see this tendency reflected in the interaction between the DOM and T&S. In a downtrend for example, the offer side of the DOM will be thinner than the much deeper bid side. The bids are mostly resting orders to exit an existing short trade. The offers in this case are hopeful or residual orders waiting for a bounce to allow entry into the trend. At the same time, the T&S will be printing a steady flow of size at or below the bid, and not much activity of size at the offer.

So in general, within a trend, traders are pushing the market through the order book toward a resting order at an exit price.
Thanks PT. Very much appreciated the time and thought that you have put into the questions I asked.
I have still a lot to learn.