ES – when buying is scary and selling is even scarier

info #1 price histogram : total volume & delta
info #2 tf histogram : total volume & delta

In this review, we will look at the December contract of the S&P500 Index, but in terms of volume analysis. The main focus is on the first slide, we will need the second slide with the heat map to identify the trading scenarios.

The first 5 days of the futures contract – everyone was placing positions. The price was in a tight range waiting for everyone to decide on the trend. Then a 2 day sharp drop from 3920 to 3680 to wake up the bears of all ranks. After all, a really big player just needs counter orders to comfortably place buys.

Compare the trading volume prior to the bull-bear battle (“The Trap” – prior to September 25) to what the volume was prior to the October 4 ” Load”. Right up until the end of October there was a volumetric buying level. From that platform the further price increase began until December 1.

Note that before every price jump, positions are placed for a few weeks and as soon as there are fewer bears, the price breaks out further by the law of supply and demand.

The price has reached the 4000 mark. Should we keep buying or should we exit?

Let’s take a look at what the big players are doing. The lower histogram, which is the total volume for the day, looks like everybody is going on holiday for the New Year holidays. Wouldn’t you agree? Every day there is less money in the system, which means that the trend is also going on holiday.

Thanks to the liquidity analysis and understanding when the trading is going on in a normal day and when the big guys have entered the arena. The possibilities and applications of such a tool are much wider. For example, you can know when and at what price a big player has made a deal in real-time.

What scenarios are expected in the coming weeks:
The start of a correction down to the vwap level – the price is shown on the slide. (It’s already worth looking to buy there).
If the bulls haven’t taken everything yet – then it’s not profitable to lower the price strongly into correction and it should be held in the current range. (complicated scenario – but gives a good signal)
The Level test and without a breather we continue to update the price range (that scenario when it is scary to buy)

Many of you are smiling when you read these words, because it’s better than the analyst’s prediction: that there will be buying or selling and a flat is possible. But that’s what most people do.

Try not to be tied down and wait for a buy or sell trend. Be prepared for 3 or better 6 possible scenarios and predetermine at what price you will make a deal in case of confirmation of the scenario.

And the slide below will plant some food for thought. This is a heat map of ES from yesterday. All sectors have fallen, and if you look closely at the Financial and Energy sectors, the possible scenarios on the index are self-evident.

Author / trader Mikhail Lemah