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September 25, 2012 / redman59

Finally Some Distribution

This morning I found myself having to leave about 30 minutes before market open and then returning in the afternoon, so I missed some of the morning but the action didn’t really happen until the afternoon anyway.  Lately the market has left little opportunity for day traders that trade the emini-SP500 ($ES_F or /ES).  I like to trade this at times when there is volatility in the market, but as stated it has lacked so I have stayed away from trading the/ES as the ranges have been small.

I have previously stated that I like to watch the /ES during the day as stated in this post with some explanation market profile.  During today’s selling I zoomed out the 30 minute 20 day chart.  Really there is not much to panic about here just yet as we saw some stalling at the monthly (20 day) Point Of Control (POC).  This comes in at the 1436 area, but also looking at the profile, if this fails I think we can see further selling to the monthly volume area low that also shows as a support area of 1405-1410.

Also keep in mind we are only -2.18% off the highs so not much to be concerned about yet.  It is funny how fast sentiment can swing on selling after we have been in a constant buy market.  Even though the velocity of the move can be concerning keep in mind that charts are resetting up for proper buy points that are not too extended from their bases.

In my opinion it may be best to step aside and book profits but not get overly short, despite the noise.  Looking at the big picture (weekly chart) the trend is still up.  If you are going short leading stocks it looks like you are trying to pick tops more than anything.  If looking to short stock look for those where the moving averages are trending down and have the classic lower high lower low pattern.  If looking to go long, then there are many charts setting up the pull back pattern.

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