Micro-Nasdaq 100 Analysis

Last post detailed the macro-chart landmarks and price points that we need to be mindful of going into the end of August. That post should be read before proceeding into the micro analysis that I'm going to describe in this post. Visually and conceptually its easier to see things from a larger or longer perspective before drilling down into the Micro market language and detail.





As I mentioned last post, the current trade (#27 of 2012) has been open since August 3.  The intraday chart below (15min) zooms out to incorporate the August 3 long-entry and the duration of the current long trade/market swing in its entirety -- referenced by the 'green' arrows on the chart or the August 3 pit session closing price 'LE-C 2671.5' (which reads 'LongEntry-Close 2671.5'). This type of signal is triggered at the end of the trading-day(pit session), which I refer to as a Type2 signal or 'closing entry'. This would imply that there is also a Type1 trading signal, which I will describe shortly.

But first, how does the LE-C signal (Type2) get triggered?

The August 3 trading day marks the first trading day that Index closes above the 3 day price-regression (+1 standard deviation) since the previous downswing. The regression-structure shows up on the chart as the 'pink' band that trails the price -- or price leading the regression. I will refer to the 'regression' as the '3 day pivot' of the market.

I use the relationship between 'Price' and '3 day pivot' as a way to establish a market opinion about the directional bias of the index.

When price closes and continues to trade above the 3 day pivot we have a long bias generated. When price trades below the '3 day pivot' and continues to do so, we have a 'short' bias in the index.

So, the '3 day pivot' is a 'medium' that defines short term market condition OR the markets 'Micro-Structure' and is used in conjunction with the relative position of the Macro-Structural boundaries (Monthly and Weekly) that we discussed in Macro-Nasdaq 100 Analysis which gives us an unbiased, mechanical insight into the markets short term directional activity and behavior.

The intraday chart below looks closer at the interplay between index price, 3 day pivot and the macro-structural channel boundaries I mentioned in the previous post (Monthly (brown-dashed line 2753) and Weekly (blue-dashed line 2780.50-2705.75 ) channel overlays and critical reference points). Today the index price trades above the monthly channel boundary high at 2753 and narrowly below the 3 day pivot regression discussed above. In day 14 of the current long trade, I am watching the index for signs of erosion that could be signalling a short term change in direction (to the short side). The evidence of this transition would be the index closing below the 3 day regression (below the pink channel boundary low at 2780.75) which would signal SE-C ('ShortEntry- Close') implying a short trade set up.

Otherwise, the index will remain in its upward bias until the price begins to trade below the 3 day pivot. Again, the important price reference is the 2753 monthly brown-dashed line that represents an important psychological boundary for this market, and then the weekly blue-dashed channel boundary at 2705.5 that would be either an good long entry point for short term traders or signal a potential downside push lower if violated on a weekly basis.