Lock's Cable Corner

Hi Lock,

I went some further in Daltons book (Mind Over Markets)....

He is normally writing about the daily sessions. How it opens how it develops etcetc....
You are normally watching the sessions in the day. and if I did understand it correctly you specially give attention to the Europe-Session, Pre-pit USA session end the USA-session.

I firstly understood that we could look to the value of the day (or even to the different sessions in a day )....if the new day (sessions) opens within the range....or without the range it can tell you something. Anyway if I read your tread it looks like you give less attention the Tokyo and Sidney ranges and values....but specially you look to the EU-session and the open of the coming EU-session as well for the pre-pit USA and USA-session. So the short question is why you have less attention on the Tokyo and Sidney session and their opening?

Hope you can put some light on this.

Regards,

Hello HappyMe,
value is related to liquidity (meaning volumes involved in price movements). Liquidity during Asia sessions is generally much less than during Europe and US sessions. Consequently value of Asia sessions is generally less important than value during Europe and US sessions. Also generally US sessions have much liquidity than Europe one.
Obviously it also depends upon the traded instrument. A pair like cable or indexes like S&P 500, NASDAQ, RUSSELL, etc should substantially respect such an assumption while other pairs like NZDJPY or ASIA indexes will generally not.
In S&P 500 both Asia and EU sessions (preUS included) are considered "less strong" than Pit US session for liquidity reasons. And the sum of Asia+EU+preUS ("overnight" session) is considered generally a weaker price activity.
Consequently, because of the intrinsic weakness of overnight activity, generally pit sessions tend to retrace overnight price activity (more than 60% of the times) where the reason for that behaviour by pit partecipants is pretty clear: they know that those who conduct overnight activity are weaker than their and probably price levels left by overnight activity will oppose less or none resistance (or support) to new stronger pit participants going in the opposite direction.

Example: let's say overnight participants conducted an antire session trending higher, without correction or retracements, meaning building longer and longer inventories all night long. When eventually pit session will open, US stronger participants immediately will understand that inventories are long and have been made long by weak hands participants: now, unless a major structural change occurred, the first business to take care off will be to liquidate these inventories selling against weak overnight market activity. And because of the weak support given by the levels traded by overnight participants, that liquidation will be generally sharp and fast.
You will find confirmation of this behavior very often.

Note also that this particular situation generally deceives less experienced traders that, being unsuspecting of this particular situation, will tend to consider such initial fast and sharp moves as the sign of a particular strong bear conviction while instead it is only the correction of old business that does not necessarily involve the presence of new money selling.
And the same thing could be said about the opposite situation, when overnight inventories are too short and the pit session will cover those too short weak inventories with sharp fast moves upside.

In pairs like cable the situation is slightly different because there you will have a "first" overnight given by Asia sessions in contrast to GB/Euro session and then a second overnight given by Asia+GB/Euro plus preUS in contrast with pit session. As you can easly see this is more complex. Specially in cable where the GB session is sometime stronger and sometime weaker than the pit one.

Having said that, sometimes excesses like GB and US gaps could develop during Asia sessions and with this the price activity during these sessions could be absolutely relevant: because it could signify that something structural has changed during overnight. Then if this change will be accepted by following Europe and/or US sessions here you have that the importance of "overnight" sessions is not understimated by this analysis' approach.
Other relevant market generated information given by "overnight" activity could be the double distributions sessions: also in this case the overnight session profile could provide relevant info for subsequent Euro and/or US sessions, because a double distribution could mean that a change has occurred and also in this case the upcoming Euro and/or US sessions could accept or reject that change.

For the same liquidity variation also other relevant market generated information have to be considered differently between Asia and Euro-US sessions: in a weak environment you will find a weak behaviour given by the weaknesses of market participants: poor highs, poor lows, exact references tags etc will be very common and normal in such an environment: so you should not give them any particular relevent meaning. In stronger market's sessions you will expect stronger participants and consequently a stronger behavior: so when you will find weak references you should consider them with more attention and consideration. This is the reason why a pit poor low is far more important for example of a Tokyo poor low...

Finally an important note is about your trading activity: if you trade during Euro/US sessions you will act in a certain way considering the competitors involved in current market. You want to trade alongside stronger participants avoiding the flanking of weak ruled price actions. differently if you are going to trade during overnight, given the normal absence of stronger participants, you will generally try to stay with what weak participants will normally do, because you will be pretty secure of the absence of stronger participants capable to overrun this weak action. As you could esily note in cable the situation will generally drastically change during the last trading hours of Asia session: during those hours you could experience liquidations and short coverings in anticipation of the upcoming GB session open...

In balance or out of balance.

Excess and balance are the most important aspects of any trading environment. A balance is a situation in which traders are adjusting inventories and there is still no conviction in any particular direction. An excess could mean exactly the opposite: the last balance zone does not work any more as the "fairest place where to conduct business" and market participants are now searching for a new "fairest place where to conduct business" again, meaning a new balance zone, moving swiftly away from the old balance condition and leaving behind them an "excess" meaning a price zone where the movement was so fast to leave only an isolated "tail" of bidded price (selling tails, buying tails, gaps, minus developments etc.).
Given these assumptions, about open price position related to previous session range the considerations to take care of, are the following ones:

1. if price will open inside the previous range (previous balance) it will generally means "initial acceptation" of what the previous session did. There is still no conviction in any particular new direction and the old "fairest place to conduct business" is still accepted by new market participants. You are in balance and your behavior should adapt to this particular environment.

Consequently, unless price drives away from previous range (balance) very quickly (meaning immediate rejection of the old balance), your expectation for the initial part of the session should be smaller and less enthusiastic: those are the cases in which generally it is better to wait for a test of one of the previous session range limits (above or below) leaving the market shake out initially.

Note that most of unexperienced traders, unaware of this situation of acceptance of old balance, suffer heavy losses during first hours of market activity precisely because they attempt to follow price up and down continuosly, wishing for a directional move, just to be eventually mesmerized by a substantially undirectional confused price activity.

If you really want to trade effectively in such conditions you should be able to follow what weak hands daily traders do during those times: your references will be their references. And you will act in a continuos very short 2 way auction made of multiple and iterated corrections of previous inventories became to short or too long. Your support and resistance will be previous open and close prices, overnight highs and lows, half back, poor lows and highs, etc.

Obviously you will have to be always aware of the dangerousness involved in such flanking action, because you should know your are following weak participants' action and that if stronger timeframes participants will step in, this initial trading activity could be overrun in a matter of milliseconds.

1. if price will open outside previous range (previous balance) it will generally means initial "rejection" of what the previous session did. There is initial conviction in one particular direction and we are trading above or below the previous "fairest place to conduct business". You are out of balance, searching for a new place (price level) where a new balance could eventually occurr.

Those are the situations in which a trader could act immediately because the move from this opening position could be substantially bigger and directional than those possibly occurring in "a previous balance acceptation" condition. To be "out of balance" could infact underline the participation of stronger timeframes (those who generally managed to move price directionally, away from a previous balance, where instead price action is ruled mainly by weaker hands participants).

Also a market in such position could generally do only a couple of things: a further rejection of the new "out of balance price location", coming back inside the old balance again, or, at the opposite, a substantial acceptation of the new price location eventually leading to a continuation in the direction of the outside location.

Note that if price went back inside the old balance,what we could experience is one of the most strong move of any market: the outside session.

Let's make an example here: price opened above previous range (balance) found nothing (no new money buyers there) and went back inside previous range/balance. Now those who are selling knew a very important market information: there is no acceptation above the previous balance, consequently a move downside could have much more conviction than a move started inside the previous balance without a test above it. New participants could pile on the new move downside with more conviction knowing that there are no buyers in current market above previous balance. Now, if they also will not find buyers inside or below the previous balance they will get a very strong indication of the total absence of buyers from current market and consequently they will know that the move downside could eventually accelerate and lead to a strong consistent directional move downwards.

A mirror example could obviously be done in the very opposite situation, when price opens below the previous range/balance obtaining a full rejection there and then coming back inside prev. bal.

Conlusions: I think I answered to your very important question in a very synthetic way covering only a very small portion of all the issues related to it: so do not take this argumentation as a conclusive speach about this matter. In order to do so I would need some months, an entire thread and maybe a lot more preparation of what I currently have.

Best L.

Hi Lock, Thanks you for very good answer/explanation...!!

I will study it, absorb it. Indeed it's a long way to go...and yes this part is a small part of the puzzle!

Thanks again!!
HappyMe

2016/11/21 MONDAY 08:41 (edited untill 09:01)
EARLY MORNING REPORT

Friday GB session ended with a test downside with its last 2 periods (I and J): this spike has its base at 2396 that is the most important level for upcoming GB session. If the new GB open will be below the spike base we could consider the test downside accepted at least initially, if above or very close to it the Friday test downside will be considered rejected.

Note also that current market location derives from the attempted break above 11.16 GB inside session (Wednsday 24085-2492) made by 11.17 GB session (Thursday): in fact after the Thursday upside failure (above Wednsday 2492 ) Friday went down to the opposite side of Wednsday balance (Wednsday 24085 ) and eventually managed to remove all the GB lows made starting from 11.10 going well below the 11.16 GB balance session. So currently we are in an attempted break out downside, if accepted (meaning no retracement inside 11.16 GB session range (24085-2492), we could experience continuation downside.

Furthermore consider that current Tokyo session is acting below Friday GB session: if for any reason we will see GB open below Friday GB low at 2363 we will have a further gap downside. Now, a gap is a form of excess as it is the spike from Friday: so in this particular situation we will have 2 excess in the same direction and a must do short downside (at least initially) because 2 excesses in the same direction give us exponential odds of continuation in the direction of these 2 excesses. But this is only a possibility.

The other very important references for upcoming GB session are clearly the main composite pocs at 2415 (above) in the case of a failure of the Friday test downside, and at 2293 (below) in the case of acceptation of the Friday test downside. Note also that right abovethis POC we got a previous poor low made by Sydney 11.02 at 2296.

Finally consider that currently price is acting between 2 major weekly references given by teh high of the first weekly balance high at 23315 and the high of the second weekly balance at 24437.

GB SESSIONS DAILY CHART



SESSIONS

09:19+1GMT
GB session opened below Friday spike test downside: below its base but also below Friday range low, making a new GB gap downside.

Current A period high is weak as it is at round 2350.

9:37 first weekly balance at 23315 tagged by B period low that now is weak. (edit : taken out immediately)Note also the weak low of today Tokyo session tagging the poor low of today Sydney session at 23175. At the same time remember that B period high is at half back, A period high is at round 2350 and today Tokyo session high is poor at 23643. But as you see initially the double excess (Friday spike + new gap) is prevaling. Note that we got an old GB gap at 2319-23275 that GB is trying to fill.

09:43 23255 is Friday GB close: for any meaningfull continuation dowside we need to see price acceptance below it.

10:05+1GMT
....as you see: B high taken out and now A high tagged. Current GB session high is very weak as it is poor and also a tag of round 2350.

immediately taken out.

10:19+1GMT
Tokyo weak low 23175 tagged. (at the pip) Old GB gap (2319-23275) filled.

10:43 Taken out.

15:27+1GMT
EARLY AFTERNOON REPORT

I was not present to this last sharp cover but anyhow, we are now back inside the Wednesday pit balance 2413-2470 (the pit session inside the Tuesday 11.15 pit session 23793-25138). Consequently if pit session will open around here and price will be accepted here or above current location we could consider the Friday pit session attempted break out downside as failed. The Friday pit session gap downside is currently a double pass one (23666-2408) and preUS is building a big gap upside from Friday pit session high at 23666.

PreUS B period is inside A as C is currently inside B: possible break from here. Current A high is weak at round 2500.

Now, if pit session will attempt a test above Wednesday balance (above 2470) and the test will succeed we could see a correction of the old gap downside at 25138-25596. Also note that inside it we got the old preUS 11.14 poor high at 2555. In this case the possible filling of this gap could eventually lead to a similar reaction of the one we have just seen downside after the correction of the old GB gap. If not we could reach the very prominent pit POC at 2596. If instead the possible test above 2470 will fail we could see a new correction downside just where we came from (meaning the lower composite poc at 2293.) Along this possible correction we will fill all the minus development left by current short covering.

17:13 Please note the importance of this level.

18:19
I'm off for today. Have a nice continuation. Best L.

16/11/22 TUESDAY 08:53 +1GMT (edited untill 08:57)
EARLY MORNING REPORT

GB will open with any probability with a huge gap upside following yetserday spike with base at 2350. This is the most relevant information we have for upcoming GB action: we will have two excess in the same direction. Plus current Tokyo high is extremely weak because it is poor at 25123 and weak as a tag of yesterday pit session high just a pip below it. Also Tokyo M period high is a round tag at 2500.

Other relevant info regards the old GB GAP downside at 24355-2446 (that will become a DOUBLE PASS GAP) and the old GB TRIPLE PASS GAP at 25413-2553.

My opinion is that we are in a mirror situation of yesterday just in the opposite direction: the different is that today we already have a big information about the non-acceptation downside. SO if the new test upside will be accepted we could experience more conviction.

09:40+1GMT

A period low back to back Tokyo low at 24637 (it's weak), B period low at open at 24764 (it's weak). At the same time we have a big gap upside and the yesterday spike confirmed for now. In case of failure upside the base of yesterday spike (2350) will be an important reference obviously as the composite poc at 2415.

09:49 Note that price is up and down 24873 the half back (50%) of the entire move downside from 11.11 high to 11.18 low.

10:43 Extraordinary weak environment for now: very narrow range (30 pips), poor high, weak C period low at half back, weak period A low at Tokyo low tag, D period low at half back too. It should unfold from here.

What is missing in these analysis is the final line when the buying selling and exiting should be. The implications and application of the analysis to actually trade.

11:08 Very very weak environment: poor high and poor low for now. Watch out.