AMT Model & Methodology

[Frank D]

SPI Monthly and Weekly

Breakout of October lows and SPI continues down towards the Weekly
lows @ 3703

Ideal pattern would be for the SPI to find some support around the
Weekly lows today, and then look for the first sign of a counter-trend
move from Wednesday back towards the Weekly 50% level.

This will only occur if US market lead, but the first sign will be price
trading above Monday's highs.

This scenario will lead a swing back towards the November 50% level,
which will also drag the November lows higher by Next week.

The Trend guide for next month will be simply defined by the Monthly
50% level, with the potential to continue down into November lows.

Note:- there is a breakout of October lows, a retest and reject
pattern of the break:- This often leads to a push down into the next
Months lows:- thrust pattern and continuation of the trend.

Therefore even if there is a counter-trend move later this week, there is still
the expectation of price moving down into November's lows.

If this week continues down (below 3703) then already we can see how far November can continue to go next month (3484)......

 

[Frank D]

SPI Weekly and Spiral filter

SPI didn't hit the Weekly lows precisely, but with 2.50pm
short-covering coming into the market and pushing the market back
towards Monday's highs....

In my opinion it sets up a rotation back towards the Weekly 50%
level.

Now whether US markets do the same on Tuesday, and we open much
higher tomorrow, or not....

3852 was my Weekly bais on Monday and will remain my trend bias for this
5-day pattern.

 

[Frank D]

S&P Weekly and 5-day pattern

Tuesday:- Text book patterns with today's rally back into the Weekly 50% level


Early resistance around the 5-day 50% level, and then once above the 5-day 50% level in afternoon trading.....the only way was UP


"In my opinion US markets are looking to rotate back towards the
Weekly 50% level on Tuesday.

Ideal pattern would be to rise upwards from Yellow support and break
the 5-day 50% level.

Note:- the 5-day 50% level is still seen as resistance.

If price hasn't tested Yellow support on Tuesday, price could still
come down as a 5-day 50% rejection pattern, and then have a late
short-covering rally into the close.

Above the 5-day 50% level shorting is open to Risk:- Weekly 50%
level rotation

 

[Frank D]

DOW Weekly and 5-day pattern

DOW 'Hook' over the Weekly 50% level:- test and
support

This often leads to a push towards the Weekly highs:- Friday

Especially in Bull trends or above the monthly 50% level. Which is neither at the moment.

However if using the 5-day pattern:- then the trading range is
Thursday's highs and trade on the side of support for day traders.

In Down trends:- 5-day highs are ideal shorting zones.

In reversal trends:- rotation back towards higher timeframe 50% levels, 5-day highs are less so:- random resistance.

They can be resistance for the day, but they shift higher each day.

Simply don't short trade above them.

~~~~~~~~~~~~~~~~~~~~~

SPI Weekly and 5-day pattern

SPI lagging, but after yesterday's downside gap fill and price trading above3888 today, it should reach 4140 (Weekly 50%) by tomorrow, which
matches Friday's highs.

Note:- Any continuation higher this week (lower Weekly open
rising into a higher Weekly close:- Friday) should align with the
November 50% level next week to get a better idea on any further
downside in the next month

Weekly Report on the Weekend

 

[Frank D]

Weekly Index & Forex Reports out now...

Australian Index (SPI) Futures

http://austindex.blogspot.com/


DOW and S&P Index Futures

http://usindexweekly.blogspot.com/

 

[Pairs Trader]

The core idealogy of this method, reversion to the mean is similar to market profile. I think the best opportunities come at the outer edges with extreme sentiment readings, the rest is just noise imo.

 

[Frank D]

Pairs,

I was trading and using market profile back in 93, so I’m qualified to comment.

Market Profile is based on Volume and distribution of price over time, it has nothing to do with Time, as part of its core ideology.

Market profile traders don’t know when the next distribution of volume over time will take place until after it takes place, and then the trader will use this distribution as support or resistance, or swing trade back to the same distribution levels from extremes.


Market profile is not a dynamic method, it’s a developing method that misses many ‘key’ components of technical analysis. Market profile won’t tell you where the next distribution of volume will take place until it has taken place

A Trader who uses Market Profile as a tool will use this distribution of volume to finally define support and resistance, and then the trader will mostly likely use these distribution levels to trade away from.


If the same trader is swing trading back towards the distribution levels then the trader is using different components to make those decisions, which are completely independent of market profile.

Personally I’m not a fan of market profile, but it can be beneficial to the ‘screen trader’ as an add on tool:- market profile is not a methodology.

Elliot wave is a methodology. Gann is a methodology. Mine is a methodology. Market profile is a Tool.


In saying that, I did mention it in my first book back in 2003, market profile did allow me to understand the concept of rotating back into central zones:- reversion.

And I also mentioned in the same paragraph, that Market profile fails as a stand alone method because it was marketed as a ‘day-trading’ tool, when the market doesn’t consist of 1 day’s trading, it consists of a number of days, weeks, months, and so on.


The best ‘short-term’ opportunities for swing-traders will always occur from the extreme.

The best ‘short-term’ opportunities for momentum-traders will always occur from the central zone as they trade with the trend.

The best medium-term and long opportunities will always occur from central zones as thrust patterns as price continues with the trend:- trade from the central zones outward to the extreme:- trading with the trend.

Most believe that trading 'breakouts' is the essence of capturing new trends. I beleive that the trader should already be in the trend before the breakout occurs:- central zone thrust patterns

That trend will then depend on the timeframe the trader is trading.

Never discount the two:- swing trading makes money, momentum trading makes money.

Both will make more money than each other when the market is moving in a trend or consolidating after a trend. They are dependant on market conditions.

And what your own preconceived ideas are about ‘noise’, is what the majority of day-traders are trading.

Noise:- bring it on!!!!


If you think that the best opportunties come from outer edges, then your missing a big chunk of the market to push your own barrel (pair trading).

You should know that the best opportunities come when the market presents a ‘new’ trend and you hold that trend as long as possible.

 

[MRC & Co]

Some good insight there Frank.

While I am not qualified to comment on market profile, I have heard it was more of a fad in Europe years back and is now barely used by professional traders..........

I trade intraday and trade that 'noise', but then again, the currents always start somewhere, so a lot of the time you are simply scalping larger trends in smaller timeframes, just trying to figure out which way the 'paper' is going

 

[Frank D]

MRC,

Noise is what most day-traders spend trading. Within that noise we’re
trading probability patterns using a multitude of different
techniques, indicators or systems.

I think there are better tools to use than Market profile because I
personally don’t look at volume. Someone who looks at volume and acts
on volume might use Market Profile to great effect.

But it’s still imperative to understand what’s going on in the
larger timeframes, because it allows the trader to know when to hold,
when to fold, and when to sit out.

Yesterday is a perfect example on higher timeframe patterns on the SPI (Charts below)

Last Week in the US, there was a Hook pattern over the Weekly
50% level, and then the trend bias was to continue higher into Friday.
So for the day trader it’s best to minimize trading on the short side or
have smaller profit targets, and look for trades on the long side.

Yesterday on the SPI price finally moved above the Weekly 50% level
@ 4086, whereas the Weekly 50% level in previous weeks were
much higher.

Once above 4086 the trend bias was to rotate back towards the Monthly
mid-points , which is what I thought would happen early in November.

I’ve also modeled further weakness in November down into the low
after these rotations into the Monthly 50% levels occur, but price won’t
just drop down like in the previous months because of the Weekly 50%
level;- it needs to unwind.

However there is a breakout of the 5-day highs on Monday @ 4153.

A Breakout of a 5-day high range can lead to further gains (especially in
bull trends or above Monthly 50% levels pushing the market up towards
4315.

But……

A Reversal into the Monthly 50% levels (balance-point) and below 4153,
can lead to a slow unwind, with price rotating back into the 5-day 50%
levels.

Therefore I already know how I should be trading for the rest of the
week.

Hit the market when my set-up matches the price action within the
higher timeframes, based on price trading either side of 4153 on Tuesday.

And minimise risk if my set-up triggers against the trend. I’ll probably
still trade but I’ll take quick profits of 10-20 points if I don't get stopped
out.

It’s a hard concept to understand, but price is always rotating and extending based on Time.

Have a look at the 5-day patterns in the S&P and DOW, as an example.

And currently in the SPI it’s rotating back towards the Monthly mid-points
(November), and if it's below 4153 today, then price trying to rotate
back towards the 5-day 50% levels.

Personally I like to give myself two analytical views of the market
each day based on rotation and extension, so I know how I should
be trading if price is moving in either direction based on certain levels
within the market

This allows me to know when to hold, when to fold, or when to sit out.

 

[Frank D]

SPI Monthly and 5-day pattern

Today completes the rotation back into the Monthly 50% levels.

Because of the breakout of the October's lows:- normal pattern is to
rotate back into the 50% levels and then continue down with the trend.

I have modelled another down move into November's lows, but at this
stage any down move won't occur until after the end of this Week's trading.

Basically any down trend would need to have a Friday close below
the Monthly 50% levels and then continue down from a higher Weekly
open the following Week and begin to slowly unwind.

If the next two days continue higher and the SPI closes above the
Monthly 50% levels on Friday, then any down move into November's lows
will probably not occur.

As per my 11th October post:- October lows resistance (breakout
forms resistance), and the trend guide for the 4th Quarter will be defined
by the November 50% level.

If that's the case:- then around November lows could provide
the ideal 'swing' low for a swing back towards the 2008 lows breakout, and
a higher 4th Quarter close."

 

[Frank D]

SPI Weekly and 5-day pattern

Yesterday completed the reversal back into the November 50%
levels @ 4315, and the reversal down from the 5-day highs @ 4360.

The first sign of a reversal is when there is a break of the 5-day 50%
level:- 4208 (today)

A bullish trend would have bounced off 4208 and moved back above
towards 4263 and higher:- gap closure

An unwinding pattern of any reversal is how price reacts to the 5-day 50% level, and that wasn't a good sign today.

However, as long as the SPI remains above 4173 tomorrow then this weekly
pattern will consolidate.

Below 4173 tomorrow, and things are starting to unwind.

At this stage price didn't react as if it was bullish, but doesn't mean it
can't go higher tomorrow.

Note:- As previously stated, a close below 4315 this week and I'd
be leaning to more weakness next week :- higher Weekly open and
selling down from the monthly 50% level

This will align with Wednesday's 'gap' close (possibly tomorrow) and then
look for any 'selling' patterns next week.

 

[Frank D]

Financial Index

As mentioned two weeks ago:- October low breakout will probably
continue down into November's lows for banking stocks.

Dilernia Model:- test and reject pattern of November's 50% level

Banking stocks draging down the market, and any support in November
is likely to come around the November lows.

But does it mean that it's the low for the banks?

Probably not:- as expectation is to make lower lows into 2009, which
won't be determined until the closing price of 2008.

 

[Frank D]

DOW Monthly and 5-day pattern

The current view of global markets has been the re-test of the
November 50% levels and then the 'thrust-rejection' pattern towards
the November's lows.

This is the pattern which is now occuring, along with the break of
Monday's support and then continuation down into Tuesday's lows.

The first two days is normal 2-day pattern:- 50% level towards the
5-day lows.

Now it gets interesting.....

Wednesday:- above the blue filter and it normally attracts
buyers pushing the market back towards Wednesday's highs:- short
term counter-trend move.

Below 8698 and things start to get ugly this week, which will probably lead
to a 5-day breakout and the completion of the November lows probably
by next week.

 

[Frank D]

DOW Monthly and 5-day pattern

Wednesday ends up ugly, with the push down from 8698 when the US
day session opens, and never looked back.

5-day breakout (Wednesday) resulting in an extended move down
towards Thursday's lows, and should be reaching the November lows
shortly.

Note:- I mentioned back on the 11th October that this pattern
would play out. I also mentioned that once this pattern has occurred, it
will be a major swing point that could finally see a 'larger' counter-trend
move upwards.

A larger counter-trend move upwards will still result in lower lows in
2009, because the market will still go lower next year.


Therefore it's imperative that these November lows in global markets
'hold' support and we see some buying support in the last week of
this month.

Buying support:- lower Weekly open rising upwards from
November's lows in the last Week of the month, and then pushing
higher from the December's 'balance point':- counter-trend move.

This will result in global markets re-testing the 2008 yearly low
breakouts, and then rejecting down towards new 2009 dynamic lows
next year.

Otherwise another Monthly breakout means another dynamic push down
in December, which pushes 2009 lows even lower...

 

[Frank D]

Financial Index

Financial Index completes the move down into November's lows.

Any bounce off this level and I have a feeling that the financial Index
is actually going to continue down into December lows:- 2 timeframe
wave pattern.

This is also based on the 4th Quarter breakout @ 3973.

If that's the case then Aussie Index is going to struggle to continue higher
in December.

The potential of support in November is there, but there is another
high probability pattern of a continuation down in December.

Two reasons why.....

October low breakout moves in a 2-timeframe wave pattern
(Dilernia Principle), but more importantly it's a Quarterly
breakout which is going to try it's best to cap the Financials for the rest of 2009.

Expectation that November lows should support the financials.

Worse case scenario is......

November just continues lower without support and ends up closing
below 3625.

That's extremely bad for financials, as it's the same pattern that occurred
in global index markets with the breakout of the October lows and the
free fall in the market.

An orderly pattern would be step formation downward:- November
supports the market and then continues down in December.

A worse case pattern would be a breakout of November's lows....Ouch.

Even though the expectation of lower prices in 2009, a breakout
of November's lows and Finanicals are going to continue down far more
than most expected they would.

 

[Frank D]

SPI Weekly and DOW 5-day pattern


Market's reversing down into the Weekly lows, and will probably continue down into November's lows.

But what about a 'short-covering' Rally tomorrow?

That will depend on US markets having an UP day on Thursday.

Why would US markets have an UP day on Thursday?

Look at the DOW 5-day pattern (chart below).

Yesterday's view was that if price was below the blue filters it would result
in a 5-day range breakout.

So what happens on a breakout?

Often price will come back and test the breakout before it continues down once again.

Therefore my ideal pattern in US markets is to push down on Thursday in
the 5-day lows, and then reverse upwards late in the day to close near the
5-day 50% level:- Higher daily close

What I don't want to see is a rally on open into the 5-day 50% level
and then a sell off back down into Thursday's lows:- not a good sign.

My ideal scenario of an UP day is:- this will hopefully see a higher open
on Financials, and hopefully a move back towards their 3-day highs tomorrow.

The 3-day 50% level tomorrow should hopefully be a good idea of a
daily trend tomorrow.

Wishful thinking maybe, but if the SPI is opening above 3825 tomorrow,
then there is a good chance that some 'gap' closing is going to
occur:- rotation back towards next week's 50% level, and then
continue down into next Week's weekly lows, which match the
November lows.

Lower Daily close in the US and won't be a good sign for Financials,
and markets will continue down into November's lows.

 

[Frank D]

DOW Weekly and 5-day pattern

Thursday:- push down into Support and the 'Reversal UP' day played
out precisely in US markets with a 500 point turn around.

And the SPI Should be opening around 3825 today.

 

[Frank D]

SPI Weekly and 5-day pattern

Yesterday I said that 3825 was critical on any short-covering rally to
close the higher gaps.

today's higher open based on the US rally has closed the gaps, and
price has pushed back down into support:- 3830-25

As long as the SPI remains above this level after 2:50pm, then
short-covering rally could see the SPI move back towards 4050.

Below 3825 and there won't be any Friday rally, and the SPI will probably be moving down towards next Week's weekly lows
(November's lows), which is what I think the market is going to do anyway.

What I would like to see the market do is, rally into the Weekly 50%
levels (4050+), and then reverse back down next week.

Note:- it's imperative that the SPI begins to move above the 5-day
50% level @ 3904, because at this stage Friday simply looks like a
stalling day between the 5-day 50% level and the current support @
3830-25.

Waiting for any leads from the US markets on Friday, and getting no friends from the Financials today.

 

[Frank D]

SPI Weekly and 5-day pattern

SPI breaks 3825, resulting in no short-covering rally on Friday, and
will probably end up around 3584 next week.


Text book pattern was to have a rotation back into the Weekly
50% level and then 'reject' downwards next week....


But I don't think that's going to happen, as the larger timeframe cycles
are pushing the market down lead by Financial Stocks.

 

[Frank D]

Aussie Index Weekly Report


http://austindex.blogspot.com/

November's low should be reached next week for a short-term
counter-trend rally.

But not 'the' major counter-trend rally just yet.

That should come in December:- Full analysis click above link.