A Short Study of Volume

A Short Study of Volume

Here is a short study of volume in this morning’s S&P futures (ES, e-Mini).  We are using the Weis Wave, which aggregates wave volume, and the 3,000 Tick chart, which shows overnight waves well.

A: Supply into yesterday’s low, no question about it.

B: We break yesterday’s low and selling isn’t strong.  Hmmmm ….

C: A push down, but all that downside volume isn’t pulling the market down hard.  We call this Effort to go down, but no real result.  There is selling, but the buying is stronger.

D: Demand shows itself for the first time this morning.

E: No Supply.  What happened to all the sellers?  Anywhere in here is a buy spot.  Note there’s no rush to get into the market.  We let a story of supply & demand unfold until it is clear which side had the advantage.  Then we go with that side.  Here, it’s demand that has the upper hand.  We see this in our study of volume and price action.

F: Demand overcomes supply.  This is the anticipated result of the story of supply turning to demand.

G: The opposite side of the coin from E.  No Demand.  It’s overbought and an aggressive sell spot.  Because of the demand in the background, however, it would be a scalp-only trade.  In other words, given the market’s overall tone, we don’t anticipate a big move down.

H: Heavy downside volume since C.  Potential change of behavior?

I: Heavy downside volume dries up.  False alarm.  Any remaining shorts covered.

J: Demand reasserts itself.

K: A small pullback on comparatively lighter volume into a support level.  Normally, we would buy this but the overhead resistance at the 2778 level makes this less than a choice setup, and we pass.

L: Good upside volume, but no reward.  Market should have jumped the resistance at F/G but doesn’t.  Another short spot.

You can see the short from the resistance at L.  We’ve had a little profit coming down to the last swing low.  The play is for a break of this support and a run down to the 2769 low.  But, it could also spring.  A portion of the trade was covered at the swing low.  If the market does spring, we will simply cover the remainder.

Postscript: It did start to spring and we covered.