Friday, August 27, 2010

Behind the curtains - Trend change setup

Just a quick note. Yesterday there was a big fight between bull and bear volumes resulted a complete setup change usually used by smarts to place their first eggs into the nest and go bull.

They are ready.

I will show you this setup in my week-end post. In nutshell, they

-step1.: perform and almost invisible sequence of manipulation that pulls  prices up. While they do that, they pass their short positions to retails and go cash.
-step2.: Retails buy relatively cheap puts and wait further drop.
-step3.: Smarts use current sentiment with a two or three cascade further selling results price drop in calls and enter. This selling volume is 1/10th of the former day's selling volume, but results nice drop in prices.
-step4.: For now, they have a perfect setup. This is where we are now.

Further steps : There are tons of call stops @1039.  As everybody knows that it's a no-man's land below that area.
If big guys in play, they'll push prices down under that level wit 4-5 points in te first one or two hours, triggering massive panic-sell.
That results fierce price effect down and they can buy calls again. 

This is the method of a safe bottom-buy. Results is an upswing in prices.
As this few hours cycle is a low-volume manipulation, just  to drag prices down in order to make safe dip-buy, upswing prices will result now  a massive short cover results an upswing cascade again.
For that moment retails totally confused and miss the change.
As you can see both retail bulls and bears loose, smarts win.

If we see a huge power up in volumes around 1035 then we know that FED is also behind the market.
If we see market below 1030 then smarts made a decision: there is more business downside than upside.
I need to tell you that's a possible scenario as well! (probability is relatively small, as daily selling oscillators singal cycle-end, but it's possible)

As you can see, I did not make an attempt to trade scenario above.
It's a theory and commentary part, an intellectual game here in my post.

We trace smarts and their behavior by checking their signals. Let's sit back and enjoy the show.

I'll only buy with our bull strategy if volume signals are clear on 60-min, 1-day and 2-days charts.

As per moment, 15, 30 and 60-mins charts have this possible change and show the perfect setup for this scenario.
1-day and 2-day charts have no confirmation.

Have a great day!

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