BarroMetrics Views: A Blogger’s Paradise II
Before I look at Monday, Aug 2’s price action, I’ll introduce Pete Steidlmayer’s concepts of responsive and initiating activity.
Pete believes that the market is an auction process. It moves from high to low, low to high looking to attract trade, Responsive activity is ‘normal’ activity: higher prices bring in sellers; lower prices bring in buyers. When the reverse occurs, lower prices bring in sellers, higher prices bring in buyers, Pete called this ‘initiating activity’. Initiating activity is deemed to be stronger than responsive activity and is generally short lived.
Now lets turn to Monday Aug 2’s price action.
Figure 1 the Normalised Volume chart for Aug 2. It shows an above normal range with below normal volume. The volume suggests the price action was dominated by short covering. The above normal range shows that the responsive seller was not present. If the S&P is to turn down, the responsive seller needs to make his presence felt.
Figure 2 is the Market Delta End of Day chart and it confirms Normalised Volume analysis. We see a day where the buying control is the lightest of the past 20 days. The Split Delta shows an even more bearish picture. The initial move up showed light selling control, a bearish divergence. The strongest buying volume showed a range that is below normal - also bearish. The rally in the last period, shows light selling control and probably a short covering rally.
The final chart is the 60-minute S&P. It shows a potential bearish, (normal) diagonal terminal. This is not a Nature of Trend Forecasting Diagonal Terminal because there is no symmetry between the two corrective legs. This means that even if we see a confirmed breakdown from the pattern, the change in trend is that of the 60-minute timeframe. However given the current structure, a breakdown in the 60-minute may be the precursor of a larger timeframe break.
If we see acceptance above 1143, then the probability is, the diagonal has failed and we should the S&P go to 1186
So Monday’s price action provided clear parameters for identifying near -term direction and the benchmarks by which we’ll judge that price action.
Figure 1 Normalised Volume Cash S&P
Figure 2 Market Delta End-of-Day ES (Sept)
Figure 3 Split Market Delta ES (Sept)
Figure 4 60-Minute S&P (Cash)
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