In my weekend post, I mentioned that the market looked ready to try and rally, and I did think it would try. Obviously, that didn’t happen. Instead, the S&Ps fell 86.5 points from yesterday’s close, and as I write this at about 6:20 PM Eastern Time, the market is still heading lower.
I was talking with David Weis after the close and he noted something I think important. He said this is very different than the Fall 2008 when we saw big down days and high volatility. In 2008, we had already been falling for a year. Here we are just starting to fall. That doesn’t bode well for the market.
Although we didn’t rally, we could see the selling very early in the day. In the 5-minute chart posted of the ES, I have included a version of David’s Weis Wave. This is a modern version of Richard Wyckoff’s Tape Reading Chart he described in his Tape Reading Course. David first showed me this in 2007. Hands down, this is the most useful tool I know.
We see right from the beginning of the US session that supply was overcoming the buying. The first few waves of the day (within the first 30 minutes of the Open) show heavy supply at A. Traders skilled in the use of this chart would to take shorts at B or C as demand became anemic. Note that the Weis Wave highlights the supply in a highly readable manner and far superior than normal volume (bottom panel).
The market falls on very heavy volume (wave D). The rally up on wave E saw upside volume dry up and another good location for a short was highlighted. Virtually all of the up waves thoughout the noon hour confirmed the almost total absense of demand, suggesting in advance that we could see further downside follow through in the afternoon session, and we did.
Wave F shows the anticipated supply and the up waves of G and H show no demand and additional short locations. Compare this area with the normal use of valume and you can readily see how clear David’s Wave is. It is a real boon to the Wyckoff trader. Wave I saw volume come in to the upside – time to cover those shorts!
This is just some of the technique available with David’s Wave Chart. You can learn more about this unique tool and the educational webinar David will be doing on August 17 (which will be recorded, so you can view it later, as well), at the link below. There are several chart examples highlighting some of the trade setups on different time frames and markets, includingg FX. As with all of our webinars, this will be in-depth and cover all the bases for you. You won’t want to miss this one!
Link: Weis Wave Plug-in & Tutorial Webinar
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