Successful Test?

BarroMetrics Views: Successful Test?

The S&P attained my target zone last night.

Figure 1, the cash, Normalised Volume, shows that as the S&P moved into the zone, we have seen declining volume and range. Figure 2, the E-mini, traditional Market Profile, shows that last night, the E-mini gapped up and stayed within a narrow range. Normally, the two charts would raise the possibility of an Island Reversal opening for the today’s ‘day session’, and I would be looking for shorting opportunities in the London time zone.


But these are not normal times.

My shorting idea comes from range/volume analysis. It will ‘work’ if, and only if, the market assumption,  of a FED rescue being effective, itself is no longer held by the majority of players. Still, there is a sliver lining in this added uncertainty: we should know in the next couple of sessions whether the ‘assumption’ is operating.

  • If the S&P grinds up on low volume and range, we’ll know it is.
  • If declines and volume and range increase, then it’s probable that the assumption has been weakened to the extent that market forces are returning to ‘normal’.


FIGURE 1 S&P Daily Normalised Volume

Chart through the courtesy of Market Volume


FIGURE 2 E-mini 30-minute Market Profile

Charts through the courtesy of Market Delta


BarroMetrics Views: Volume?

Yesterday, Paul asked: “Without the knowledge of Dark Pools’ liquidity, is traditional volume analysis useful/meaningful?

The alternative method taught in HOS would be a good reasonable replacement?”

Paul et All,

I have no way of assessing the impact of the volume done by Dark Pools. I do know that in this environment, using traditional volume/range analysis, I continue to return a positive edge. Indeed, my returns in this quarter have a higher average than most years. So, I’d answer ‘yes’ to your first question.

As to the second, also a ‘yes’ with the same proviso I make at HOS classes: the alternatives are not as robust as /range analysis; I’d use /range analysis where possible.

Paul’s question reminded me to sound a qualification to my recent S&P analysis.

Regular readers of this blog will know that for much of 2012 until the recent decline, I advocated a policy of ‘long or out’ i.e. I was unwilling to short the S&P. The reason was QE had placed a floor under US Stocks; in this environment, traditional volume/range analysis had to be amended: it was fine with bull signals at support, less so for sell signals at resistance.

Figure 1 shows what I mean. In this chart you have the S&P bull run since 2008. Notice the rectangles marked 1 (blue), 2 (brown) and 3 (green). At each stage volume declined. Even if we compare down volumes, we see the same phenomenon.

The analysis I did last week assumed that the market would view an end to FED intervention. BUT, this assumption of perception may be wrong. In reality the FED did not say it was stalling QE; is said that it would stall QE IF the data warranted it. Since recent data is mixed, we may well see the bulls predominating with the view that “QE will end someday, but not yet”. On that basis, the S&P could continue its grind up.

I do take the view that Sept 2013 will prove to be the high in US stocks marking the beginning of the multi-year down swing that will breach 666. For this to happen, we need to see a withdrawal of the belief that the FED can and will save the market from any substantial decline.

I take the view that if the FED June hint (that the QE party may be coming to an end) is not the event that ends the ‘assumption’, then, we’ll see a bullish conviction close above 1620(basis Sept). A bearish conviction below 1555 will signal that the participants now believe that QE has ended. We’ll see…….


FIGURE 1 S&P Daily Normalised Volume

Charts through the courtesy of Market Volume

S&P, An Update 2013-06-20 III

BarroMetrics Views: S&P, An Update 2013-06-20 III

Today we are looking at a context for the current S&P price structure.

Long-Term Perspective

Figure 1 is the cash, Monthly S&P, Normalised Volume from Market Volume. We see that the high at  1576 produced more volume (blue line) than the new high at 1688.

Given that the S&P’s have been in a congestion market since 2000 (Figure 2), the new high at lower volume raises the probability of an Upthrust Change In Trend Pattern (for the 60-month swing). At the very least, if we see a bearish conviction close below 1447, we should see a breach of 666.

Medium Term Perspective

I have found that the MRCI seasonal chart useful in my trading. Figure 3 shows that we can expect:

  • a seasonal low 3-4 week in June to 1st week of July.
  • a seasonal high around mid July
  • a seasonal high around mid Sept. (There are intervening seasonal highs and lows between Aug to Sept but I view the mid-Sept highs as the most important).

You may ask if we see a rally from here (a June seasonal low), why do I expect the July seasonal low to form a lower low rather than a higher one?

Answer:  the current price structure and price action suggest continuation of the down move to 1540 to 1545 (basis cash) unless the E-mini (Sept) accepts above 1620.

Current Status

Yesterday, Speck asked how, if a new low occurred yesterday on declining volume, how would I treat it?

We did see a new low. This is how I have viewed it.

Figure 4 shows the Split Delta picture.  In the first two periods, we a waning of selling control that is followed by strong buying control. In the final period, despite the strong selling control, the buyers were able to provide a floor, and as a result inside bar resulted. This suggests more upside today.

Finally Figure 5 shows the S&P, Daily Normalised Volume. We see exceptionally strong volume but the close is around mid-range – this supports the Delta suggestion that buying was strong enough to provide a floor.

So, it seems to me that we should see a rally today, and we need to see a close above yesterday’s high to set the scene for a test of 1620 (basis Sept).

A test yesterday’s high that is followed by a bearish- conviction close below yesterday’s low would suggest that the test of 1620 has failed. Such a failure means we’ll see the S&P trade lower looking for 1540 to 1545. (By test I mean the Emini touches at least 1575) 


FIGURE 1 S&P Cash Monthly Normalised Volume


FIGURE 2 S&P 12-month and 60-month Swing


FIGURE 3 MRCI Seasonal S&P Chart


FIGURE 4 E-mini, Split Delta


FIGURE 5 S&P Cash Daily Normalised Volume

S&P, An Update 2013-06-20 II

BarroMetrics Views: S&P, An Update 2013-06-20 II

Today, I was going to the review the context of the S&P’s structure; but, Friday’s price action is worthy of a comment.

FIGURE  1 shows the Normalised Volume of the cash S&P. Normally, a strong volume Neutral Day that is preceded by consecutive trend days, usually suggests that the buying activity has been capped. If that were the case here, we should see another strong move in the US session today (Monday). 

However, if we look at a breakdown of the daily volume, as well as the intra-day volume, a different picture emerges.

FIGURE 2 is the Daily. Delta  volume of the E-mini. You see that the thrust down has been accompanied by declining selling control, even though total volume remained constant for Thursday and Friday. This suggests a rally.

FIGURE 3 confirms this – this is a E-mini Delta Volume where the day has been split into five sessions.  We see that after a strong thrust down, the buyers came in. And subsequently, even though the sellers returned to the fray, we see a declining participation.

The way I interpret the info is we’ll see an early rally. If the buyers can secure acceptance above the key reference level at 1620, we could see a retest of the 1650 to 1645 zone.

For my part, I believe that any test, at this stage, of 1620 will fail. Following that failure, we’ll see a resumption of the down move. The minimum target for the first leg down is the 1540 to 1545, with the probable target at 1531 to 1519 zone (basis cash).(FIGURE 4)


FIGURE  1 Normalised Volume Cash S&P


FIGURE 2 Daily-Delta  Volume


FIGURE 3 Intra-Day Delta  Volume



S&P, An Update 2013-06-20

BarroMetrics Views: S&P, An Update 2013-06-20

Pete Steildmayer, whom I consider my mentor, used to say, ‘trend Days  are not good continuation days unless they are the start of new distribution.’

With that comment in mind, let’s have a look at the price action for Wednesday and yesterday.

Figure 1 shows a combined Market  Profile distribution. A trend day (in my terms an ‘Initial Price Movement [IPM]’) began in the ‘J’ period (14:00) on June 19, Wednesday. That distribution completed during the ‘I’ period [13:30] yesterday.

The S&P then started a new bearish profile. The subsequent price action suggests that the IPM has ended and a sideways pattern will now form.

So, we have seen trend consecutive trend days. Is this the start of a move down that will culminate in s September high?

The first thing to note is if we do see a sideways pattern form over today and perhaps Monday, as long as we don’t see acceptance above 1620 (basis Sept), the current IPM down remains intact.

Secondly, what are the chances we’ll see a rally start today?

The first reason is the second Profile pattern. You see a clearly defined ‘b’. The second reason is found Figure 2:  we see that yesterday’s volume may constitute ‘stopping volume’.

We can now address the question ‘are we are seeing the price action that suggests  the S&P is on track for a September high’?

If we do see a rally today, the quality of the rally will be a significant clue to answering that question. If we continue another strong day down, that price action will also provide clues.

More on Monday…..


FIGURE 1 Combined Market Profile, E-mini


FIGURE 2 Normalised Volume, Daily, S&P

The Snowden Affair

BarroeMetrics Views: The Snowden Affair

The Edward Snowden affair does not seem to be creating headlines in papers like the International Herald Tribune, and Financial Times. But, in our local papers e.g. South China Morning Post (HK), the affair is creating frequent headlines.

The latest headline suggests that the US Government has been spying on the privileged communications between Haldanes, a local legal firm, and Dotcom.  Dotcom (a company) is a New Zealand based Hong Kong resident that has been charged by US authorities with copyright infringement, racketeering and money laudering in relation to the file-sharing website, Megaupload.

All charges have been denied.

What is important to note is, if true, the matters have little to do with the issues raised by Obama in the defense of the intrusive programs. In his TV interviews, Obama has made the point that the snoop programs have been restricted to matters linked to terrorism, weapons and hacking. There is no suggestion that Dotcom was involved in these activities.

And, the next question to be asked, if Obama did mislead (deliberately or inadvertently) on the Dotcom issue, then how much can we trust his word on the other statements e.g.

that ‘if you are a US person, the NSA cannot listen to your phone calls, the NSA cannot target your emails. On this telephone program, you’ve got a federal court….overseeing the entire program’

And speaking of the Federal Court to which Obama refers: Russell Tice, a former National Security Agency analyst said  of it “It is a kangaroo court with a rubber stamp”.

Why the harsh comment?

Well,  perhap it has something to do with approval rate……of  the total warrants applied for, 18,761 warrants were granted, while just five were rejected. (see

Statistically this suggests a ‘rubber stamp’ mentally.

Interesting, you may say. But, does this have anything to do with trading and investing?

It provides me with a context…..As readers know, I am a fan of Blood in the Streets by Lord Ress-Mogg and Davidson, and I am student of history. Based on Rees-Mogg’s thesis, and history, economically, politically and socially we are at a once in a lifetime inflection point that will see a bear (price) market in bonds, and the start of a collapse in US stocks.

Ideally, in September 2013, we’ll the S&P (cash) have a monthly close below 1546…that close will be the first indication my view is correct. A S&P (cash) monthly, bearish-conviction close below 1448 will confirm the sell signal. A monthly, bullish conviction-close above 1776 will negate this scenario.

A ‘Preparation’ Example II

BarroMetrics Views: A ‘Preparation’ Example II

We are looking at an example of preparation.

In my last blog, I had identified:

  1. I wanted to be long the USDJPY
  2. What price I wanted to see before I would go long, 95.27
  3. That I wanted to wait until after Non-Farm Payrolls before taking the trade.

In preparing for the trade, I considered two scenarios:

  • The minimum price target (95.27) would not be attained before N-F
  • The minimum price target (95.27) would be attained before N-F.

Since we did see 95.27 before N-F, here, I’ll focus on this aspect of the preparation.

An hour before N-F, I refined the scenarios:

  1. Scenario A: The figure would have a bearish effect: we’d see acceptance below 94.22 (given the range prior to N-F, 253 points), I considered it unlikely we’d see confirmation as this would have meant a daily range of over 300 points – an unlikely event). So, as the indicator of a bearish effect, I settled  a 240-minute bearish conviction bar after N-F.I would stand aside if this scenario eventuated.
  2. Scenario B: The figure would be bullish. This could take the form of either be (a) a strong up move immediately after the figure or (b) a move down followed by a reversal.
  3. Scenario B: I decided that I would be a buyer on a bullish conviction close at the close of the 60-minute after N-F.
  4. Scenario B: I determined that my maximum stop would be below 94.22 but that I would move the stop up below the entry bar once I entered the trade.
  5. Scenario B: If my stop was at 94.22, my maximum entry price was 97.02.
  6. Scenario B: Assuming a stop at 94.22 and an entry at 97.02, my first exit was at 102.62

That was the left brain preparation; then came the right brain where I spent 15-minutes visualizing the actions (2) to (5) (I’ll usually spend at least 10-minutes and no more than 20-minutes on visualization). The idea is to make the execution as close to automatic as I can possibly make it.

As it was, I entered at 96.802. I raised my stops to 94.47; as a consequence, my first exit was 100.97.

I go through the same process in managing a trade. In this case:

  • I determined that if the USDJPY breached  96.78, I’d look to exit.
  • When the USDJPY broke below this price on June 11, I exited the position at 97.2 and 97.11.

In summary, preparation for me is both a left-brain and right-brain activity.  First I create scenarios and then visualize them so that execution is automatic should one of the scenarios play out.

A ‘Preparation’ Example

BarroMetrics Views: A ‘Preparation’ Example

I received a couple of emails asking for an example of ‘preparation’. I’m happy to oblige; in the next series of blogs, I’ll take you through a USDJPY trade that I have just exited. 

I start my analysis trend identification. In this process, ‘context’ plays an important role.


Figure 1 shows the 13-week swing (quarterly trend) – the ‘context trend’. I ask and answer the questions:

  • What is the trend of my trader’s timeframe (in this case either the 5-day or 18-day swing)? 
  • Is it likely to continue or change? 

Because I take the view that the 18-day uptrend will continue, I am looking to go long either on a correction in the 5-day swing (weekly trend) or in the 18-day swing (monthly trend).Figure 2 shows the 5-day (blue line) and 18-day Swing (brown line) as at Wednesday, June 5 . At this point, I am looking for a 5-day trade magnitude that provides an entry around the bottom of the trend channel. 

Figure 3 shows the picture on June 6.  The 5-day trade is no longer being offered since the USDJPY has breached 5-day swing lows. So, whatever we have, we don’t have a 5-day swing uptrend.

The 18-day swing line has now corrected. So, I am now looking for an 18-day swing, long opportunity. (And, since the 5-day swing no longer plays a part, I remove the swing from my chart).

In looking at this possible 18-day trade, I note that I would be a buyer only if prices reach at least 95.28 (33% retracement).

I also note that if USDJPY bounces from 95.28, then there are 3 possible scenarios that will follow. In my order of probability:

  1. We’ll see a sideways structure form between 103.73 and the low of the correction. This means I would exit the position at around the Primary Sell Zone. OR
  2. The move from 103.73 to low of correction is first leg down of a simple correction. This means I need to watch the 50% to 62% retracement zone of the down leg for signs of weakness. OR
  3. The move from 103.73 to low of correction will prove to be a simple correction. This shallow correction suggests a strong impulse to follow. Given the strong move up to 103.73, I rate this scenario as highly unlikely.

(I have outlined the 3 scenarios in Figure 4).

Finally, I note that June 10 is Non-Farm payrolls. So, I shall wait until after the figure to take any trade.

This concludes the context section….….more tomorrow. 


FIGURE 1 USDJPY 5-day and 18d Swing


FIGURE  2 USDJPY 5-day and 18d Swing


FIGURE  3 USDJPY 18d Swing 


FIGURE  4 USDJPY 18d Swing  

A Lesson From History

BarroMetrics Views: A Lesson From History

My view is we’ll be seeing some sort of economic inflexion point in 2013.

I laid out my views based on my analysis of markets in other blogs, for example in SP 2015-05-20.Today, I’d like to turn to lessons from history.

From the Golden Age of Greece (time of Pericles cira 480 BC to 404BC) to the Roman Empire to the Spanish Empire to the British and now to the US – one fact stand out – a fact that has marked the decline of all the empires: as internals threaten those in power, they turn to suppression and bribery of its citizens.

We are seeing that in the US today:

  • Harassment of its press while
  • Spying on its own citizens whether or not there is just cause.

One heartening event –  at the moment. in the US, the press can still publish material embarrassing to the government of the day. In many parts of the world, the material would not have seen the light of day.From a trader’s point of view, it’s another element in the canvas of context. Let me make clear what I am saying……

What history shows is towards the end of any empire, there is a drive to protect the power of the state. Today, we are seeing that drive in the US. It gathered momentum with George Bush (why am I not surprised) and has grown under Obama – despite his promises to the contrary.

And, given my view of the US Stock Market, this context suggests the chickens ought to come home to roost earlier rather than later. For me, Sept 2013 is a likely time.

Speaking of chickens coming home to roost:The US bond market despite QE, appears to have topped in price(bottomed in yields). I think a rally is possible before the next down move. I’ll certainly be looking to sell Bonds futures and CFDs into the rally. More on this when the rally occurs.

Tactics to Manage the ‘3Fs’ II

BarroMetrics Views: Tactics to Manage the ‘3Fs’ II

RECAP: We are looking for ways to manage Flight, Fight and Freeze, usually brought about by anxiety or fear.

My first line of defense is preparation:

  1. What do I have to see to confirm my view?
  2. What do I have to see that will threaten my view?
  3. If  I see (1) or (2), how will I feel? How do I want to feel?
  4. How do I want to respond to (1)? And, how do I want to respond to (2)?
  5. What is the best thing that can happen for this trade?
  6. What is the worst?

For this prep, the key is to take time – to use my imagination to see and feel as if the events in question are actually happening. By doing this, I have found that more often than not, my response real-time becomes automatic.

The second line of defense is ‘early awareness’. I agree with Howell: by the time I am aware that I am ‘feeling’ flight, fight or freeze, it’s too late to stop it. The best thing for me to do is to leave the screen i.e. walk, and then ‘write’ or ‘talk’ until I know I am again managing my emotions. Diaphragmatic Breathing is a big help in this situation.

But, if we can catch the ’emotion’ before it blossoms into a ‘feeling’,  we have a more effective tool. Howell views ’emotions’ as ‘behavioural responses’  i.e. to catch the emotion involves being aware of shallow breathing, quickened pulse rate etc. In my case, it more like a cognitive-emotional response taking the form of self-talk:

“Come you xxxx. Why do you stop going down (if long)?’

“Why don’t you want xxxx go up (if long)!?” etc, etc

Catching these thoughts, my immediate response is to slow my breathing and then WRITE answers to:

  1. Is my subconscious seeing something I am blocking?
  2. What is the market telling me about my position (or the position I want to take)?

I emphasize that my responses are automatic whenever I catch the thoughts. In NLP terms, I have anchored the responses to the pattern of thought.

The final tool is perhaps the most important. It is strategic rather than tactical. The value of Mindfulness Meditation for improved decision-making is now well documented. See

If you would prefer a short summary rather than reading the articles: mindfulness quietens the heart, and settles the mind, so that we are more able to see ‘what is’ – rather than what ‘we would like it to be’.