Trending Now - Issue 8 - Sunday, November 24th 2013

STRATEGIES FOR TRADING IN HIGH FREQUENCY MARKETS
Trending Now
Algo Futures
WEEKLY NEWSLETTER | ISSUE 8 SUNDAY, NOVEMBER 24th, 2013 STRATEGIES FOR TRADING IN HIGH FREQUENCY MARKETS Analysis Prepared By: www.FollowTheBots.com Algorithms Powered By: www.sceeto.com Published By: www.AlgoFutures.com
FOR PROFESSIONAL TRADER USE ONLY
Tape Rading Lesson of the Week | Anatomy of a Pull Back
INSIDE THIS ISSUE

THIS WEEK IN TRADES
Hello Traders, In following discussion can be framed as an event study. Event study methodology us a core elements capital markets research. The first event studies focused on examining various aspects of market structures. In the context of our discussion the event study will address Read More... WEEKLY RECAP..........3 MONDAY.............6
Mondays Reference Points........... 6 Daily Morning Briefing.................. 7
TUESDAY.............8
Mondays Recap | Tuesdays Reference Points............................................. 8 Daily Morning Briefings:............. 11 Wednesdays Reference Points... 12 Daily Morning Briefing................ 18 Wednesdays Recap | Thursdays Reference Points.......................... 19 Daily Morning Briefings:............. 22
How We Traded Wednesday Sep-20ths Upside Surprise in Retail Sales

We used 3 sources to trade this mornings Surprise in Retail Sales: at 10:22 pm Eastern, we surfaced the following in our daily Market Structure post: Bayesian Inference # 2 | Buy the Pullback S&P futures are attempting to establish a base of support, before potentially moving higher. Today, price pulled back to 1784-1782. Then price auctioned back up to 17931) www.FollowTheBots.com | Last night
WEDNESDAY..........12
1791. Building a base of support can take several days. Ideally, the market will spend time at the low before attempting to move higher. The ideal support candidate is the prior multiyear high at 1773. During the Read More...
THURSDAY ...........19
FRIDAY.............22
Thursdays Recap | Fridays Reference Points........................................... 22 Daily Morning Briefing................ 24 Intraday Market Commentary.... 25
ASIAN MARKET RECAPS....27 EUROPEAN MARKET RECAPS .33 ANATOMY OF A PULL BACK (VIDEO) .............36 HOW WE TRADED SEPTEMBER 25THS RETAIL SALES ANNOUNCEMNT (VIDEO) ...36 DAILY MARKET RECAPS....37
Market Insights Trending Now
Algo Futures | Trending Now Weekly Edition | Issue 8
How We Traded Wednesday Sep-20ths Upside Surprise in Retail Sales ( Cont. from page 1)
rally to the current multiyear high, S&P futures pulled back to 1777, but strong bullish sentiment caused the market rally higher before re-testing the previous multiyear high. To the extent that the bullish sentiment continues to dominate, support may hold at 1784-1782. Sell Programs Waning is the ...sceeto Order Flow Event to look for during pull-backs, along with the pause pattern which accompanies an end run sequence. However, should initiated selling (HFT sell surge) occur during
a pull-back probability would favor a low lower. In that case, the long must be exited. An effort could be made to sell the break-out. Otherwise, wait the re-test on the next support level (1777-1773).
2) www.EarlyAnnouncement.com | The 2nd insight that we used was from earlyannouncement.com where it was noted that the Retail Sales data being announced at 8:30 a.m. had a Very high probability for upside surprise.
Sunday, November 24th, 2013

Retail Sales sceeto There was an opportunity to buy the pullback in the overnight session where ...sceetos order flow monitor surfaced Sell Programs Waning. And there was another opportunity to buy the pullback in the pre-market prior to the retail sales announcement at 8:30 a.m. You will notice that when the retail sales announcment occured at 8:30 a.m. a High Frequency Trading Buy Surge was denoted by ...sceeto and the market took off from there.
We also broadcast this information on Twitter, at twitter.com/ SocialTape well before the announcement, about the probaility for an upside surprise, so that traders could prepare their trades for the eventual upside Surprise! The headline news provided an immediate upside trading opportunity. Retail Sales - headline 3) www.sceeto.com | On this chart of the S&P 500 e-mini contract we can see the support range from 1782 to 1784 as denoted in last nights Bayesian Inference to Buy The Pullback. On this chart of the S&P 500 e-mini contract we can see the support range from 1782 to 1784 as denoted in last nights Bayesian Inference to Buy The Pullback.
WEEKLY RECAP
Hello Traders, Last week, we commented on the November 7th rout of the trading range and the subsequent major short covering rally that followed. We noted that a rout of the trading range is a tactic used by the large financial institution to shake of weak longs and force margin calls. Our expectation was that S&P futures would pull-back to the mid-point of the trading range (1754) and potential auction above the prior multiyear high and rally up to a new multiyear high. As of Fridays session the Follow the Bots computational estimate was 1793.
This Weeks Development
Market
On Monday (11-1113) S&P futures traded up to re-test the prior multiyear high (1773). Monday, was a holiday for many market participants. S&P futures traded up to 1770, before the short covering rally ran its course. On Tuesdays (11-12-13) the broad benchmark index sold off from the 1770 holiday high and pull-back to 1754, at or near the mid-point of the trading range. Following Tuesdays pull-back to 1754, S&P rally back through the previous days trading range and broke-out above the prior days high (1770) and prior multiyear high at 1773. S&P futures traded up to 1782. During the rally we identified the 1777 prior level in Tuesdays market structures as the potential minor pull-back level. At Thursdays open, S&P futures pull-back to 1777, before extending the rally and auctioning up to 1789. The rally continued to extend the range on Friday. S&P futures
trade up to a new multiyear high at 1796, before sell-off modestly and close the weeks session at 1793. The starting point of the rally was Wednesdays pull-back to the mid-point of the trading range at or near 1754. Following Wednesdays sell-off to 1754, the selling pressure paused. S&P futures traded between 1762-1758 for approximately 3 hours. During the pause a positive bias developed resulting in the start of the run, which continued up to 1785 in the overnight session. At the 1785 price level the Order Flow Monitor detected buy programs waning. Following the alert the high frequency computerized trading algorithm ceased buying, S&P futures pulled back to 1777. The downward momentum ceased, Order Flow Monitor detected sell program waning. The horizontal pause pattern turned up. Initiated buying entered the order flow and S&P futures auctioned above the overnight high and made a higher high (1789). Notice that during Fridays session the rallied continued and price traded up to 1792, at or near the Follow the Bots computational maximum likelihood estimate (1793).

Yellen said the central bank will take care not to withdraw stimulus too early, as the US economy is operating well below potential. In her testimony before the Senate Banking Committee, Yellen said it is important not to remove support, especially when the recovery is fragile and the tools available to monetary policy should the economy falter, are limited given that short-term interest rates are at zero. Fed policy makers will probably not pare back pace of their monthly bond buying to $ 85 billion until their March 18-19 meeting. The group next meets Dec. 17-18.
The Order Flow Monitor detected Buy Programs Waning and S&P futures sold down to 1788, at or near the prior days close. The horizontal pause dominated the majority of Fridays session until late in the day. During the period when the High Hrequency 2 points Up-Down Market Maker Algorithm was dominant, buy-side [High Frequency Trading Buy Surge] programs initiated and price auctioned up to 1796, before pulling back to 1793 into the close.
Fridays RUN into the Close
According to Yellen there is no evidence of an asset-price bubble in the stock market. Although stock prices have risen robustly, Yellen stated stocks are not in territory that suggests bubble-like conditions, yet. By in large, Yellen said, I dont see evidence at this point in major sectors of asset price misalignments, at least of the level that would threaten financial stability. If any bubbles emerged, the central bank would be willing to tighten policy to try to deflate it, she said.
Fed Watch The primary factor contributing to this weeks positives sentiment was soon to be Chairman of the Federal Reverse Janet Yellen indicating under her stewardship Federal Reserves will continue its extraordinary, unconventional accommodative stimulus policy.

MONDAY
Mondays Reference Points
Coming into this weeks session Relative to the starting point of the rally, Wednesdays (11-1313) low, the pull-back to the mid-point of the trading range at or near 1754 S&P futures have traded up + 42 points (2.3.%) Fridays high at 1796 is 23 (1.28%) points above the previous multiyear high (1773). Thus far, the maximum pull-back has been 8 points. The initial high (Thursday overnight) was 1785 and the Thursdays low was 1777. Bayesian Inference #1 | Buy the Pull-back | At or Near 1773 1768 An argument could be made that Thursdays low (1777) was an attempt to re-test the prior multilayer high and the bullish sentiment was so strong that buyers were anxious and entered early. However, the break-out-point does not completely represent the price level where previous sellers were active, which is more accurately between 1768 and 1773. Thus, the previous multiyear high is the currently the key support level. In other words price discovery could probe the 1773-1768 price area and buyers must be prepared to consider buying the pull-back. Bayesian Inference # 2 | Buy the pull-back | At or Near 1787 Fridays low 1787 was the result of a high frequency 2 point up > down market maker algorithmic programed trade. Volume was below average and mostly short term in duration. Nevertheless, there was a minor 5 point run into the close. Thus, Fridays low cannot be ruled out as pull-back candidate. There was also support late in the day on Thursday at 1884, more or less equal to the price level of the overnight high. Bayesian Inference # 3 | Sell the retracement | At or Near the MLE (1793) Fridays closes range high (1796) exceed the maximum likelihood expectation estimate by 3 points. However, S&P futures sold down to 1793 into the close. This indicates buyers are at risk above the MLE and Fridays high is now the potential stopping points. However, the effect of QE continuation into March of 2014 cannot be underestimated.
Based on Chairman to be, Janet Yellens comment it appears the Fed is signaling some form of QE is likely to continue beyond the proposed March 2014 target. Therefore, experienced traders, inclined to trade counter to the trend are advised to pay close attention to the Order Flow Events. For example, the Oder Flow Monitor detected buying programs waning at Fridays high, and at the open of Sundays globex session, and since then, the S&P 500 e-mini futures have sold down to 1791. The horizontal pause pattern has given way to a down turn in the micro digital filters. So, counter trend trades can indeed be profitable. Still, as of Friday, there is nothing to suggest there was any serious selling pressure during the session and sixty-eight (68%) of the S&P 500 components traded above their previous days close. A strong sell response [HFT Sell Surge] will be required on the pull-back to 1791, in order to drive S&P below the 2 point market maker algo range: 1791-1789. In the event, the computerized sell programs wane during Sundays pull-back to 1791, there will likely be little to gain defending a short at Fridays close.
Daily Morning Briefing

Good Morning Traders, Observation #1 Overnight S&P futures sold down modestly below Fridays high (1796) and pull-back to 1791. In Sundays Market Structure commentary we noted that At Fridays high the Oder Flow Monitor detected buying programs waning and at the open of Sundays globex session, S&P futures sold down to 1791. Observation #2 While the horizontal pause pattern has given way to a down turn in the micro digital filters. We stated that a strong sell response (HFT sell surge) would be required on the pull-back to 1791, in order to drive the S&P below the 2 point market maker aglo range: 1791-1789. In the event, the computerized sell programs wane during Sundays pull-back to 1791, there will likely be little to gain defending a short at Fridays close. During the minor sell-off Sundays globex pull-back to 1791, the Order Flow Monitor detected the computerized sell programs waning at 1791. S&P futures auctioned back to re-test Fridays high (1796) and traded 2 points above the high to the where stop loss orders are typically located. In the current context of Fridays low (1786) the maximum likelihood expectation estimate is now located at 1803. However, the trading range is narrowing and upside momentum is waning. The aggressive buyer is at risk above Fridays high (1796) and likely to see only modest gains at best. Sundays Bayesian Inference # 2 | Buy the pull-back Fridays low 1787 was the result of a high frequency 2 point up > down market maker algorithmic programed trade. Volume was below average and mostly short term in duration. Never the less, there was a minor 5 point run into the close. Thus, Fridays low cannot be ruled out as pull-back candidate. There was also support late in the day on Thursday at 1784, more or less equal to the price level of the overnight high. If S&P futures trades up to 1800-1803, 1784 becomes a better entry point on a pull-back.

TUESDAY
Mondays Recap | Tuesdays Reference Points
Hello Traders, The major US Indexes traded mixed on Monday. The Dow 30 closed at 15876: () up + 14 points (+0.09%). S&P 500 close at 1790: () down - 7 points (+0.37%). The NASDAQ close at 3972: () down -36 points (0.93%). 125 (25%) of the S&P 500 stocks end the session above their prior days close, while 366 (73%) declined. U.S. stocks advanced at Mondays open, with the Dow 30 trading above 16,000 for the first time and the S&P 500 above 1800. As the market keeps going and making new highs, trading volume is getting thinner. Once again volume is below the 30-day average. The financial media reports that market participants remain bullish based on Janet Yellens statement that the Fed will continue it accommodative monetary policy QE. Yellen said last week that the economy and labor market are performing far short of their potential and must improve before the central bank can begin reducing monetary stimulus.
At the open of Sundays globex session, S&P futures sold-off below Fridays high (1996) and pulled back to 1790, at or near the narrow high frequency market maker algorithmic that dominated Fridays mid-day session. Following the pull-back, S&P 500 e-mini futures contract traded up to Fridays high (1796) and made a higher high, auctioning up to 1799. At Mondays open, S&P futures sold-off and filled the gap at or near Fridays settlement (1793). The initial pull-back resulted in a buy response and S&P futures traded back to re-test the opening range high (1798), before pulling back to 1795 and traded in the 2 point up <>down market maker algorithmic pattern. Following the prolonged flat-line period, in the final hour of Mondays session S&P futures sold-off below the opening range high 17991798, then sold support below Fridays close (1793), then breached support at the overnight low (1790), and traded down to 1785, at or near 1784 price level indicated in Sundays market structure commentary. Last week, we noted that following the initial run (see chart) on November 11th, S&P futures paused at 1785, before pulling back
Mondays market Development
to 1777. S&P futures went on to make a series of higher highs and fractal lows. We commented that fractal lows are only likely to provide minor support as longs at the bullish bias continued. However, once the sell response was initiated the minor fractal lows were not likely to with stand any selling pressure. Following Up On Sundays Bayesian Inference # 2 | Buy The Pullback We noted that Fridays low 1787 was the result of a high frequency 2 point up > down market maker algorithmic programed trade. Volume was below average and mostly short term in duration. Nevertheless, there was a minor 5 point run into the close. Thus, Fridays low cannot be ruled out as pull-back candidate. There was also support late in the day on Thursday at 1884, more or less equal to the price level of the overnight high. If S&P futures trade at or near 1800-1803, 1884 would likely provide a better entry point on a pull-back. On Mondays, S&P futures pull-back to 1784, before auctioning up to 1790.
Coming into Tuesdays session All financial markets are considered to be non-linear dynamic system. In such a system there is a primary direction (trend) and a secondary reaction (correction). Without going into detail the historic data as shown is previous post confirms that all auction market develop in a non-linear price dynamic. What is non-linear price dynamic? The CBOT market profile handbook explains there are buyers and sellers at every price. Buyers represent demand and sellers represent supply. In other words, a market will advance as long as more market participants are willing to buy. A market will decline as long as there more market participants are willing to sell. In this manner the price discovery process determine the value of

the underlying markets. Therefore, an advancing market (trending higher) will at some points lack the required buying interest (demand) to continue auctioning price higher. At that point price will sell-off below the high. There are micro and macro sell response. Tuesdays Bayesian Inference #1 | Buy the pull-back at or near 1784 A pull-back (selloff) less than daily range is considered to be a minor (micro) response. The initial sell response is defined as the first time price trades below a new high the distance of a daily range. The initial sell response is an important event in the stages of market development. Why? During the stage when the price structure is advancing the implicated interpretation is that buyers are driving (bidding) the market up (higher). The recognition that some are selling to the buyers is not prime focus. Only when the secondary response occurs does the presence of the seller, who was the counter party to the buyer, become obvious. IF, in the current context, the buyer were to bid the S&P up to 1799-1800, above Fridays high (1796), and above Thursdays high (1789), why are there no buyers at 1784 willing to support the market and enter at a relative (1.0%) discount ? The only logical answer is there are not enough willing buyers left in the market. Thus, the buyers at the high (1798-1799) paid the maximum price and the sellers at the high have the advantages. It should be noted that the S&P 500 has indeed sold off below every previous multiyear high. In the words of William Hamilton, trees dont grow in the sky and markets dont go up forever. Therefore, the bullish expectation is that the initial daily range pull-back must hold support and price must auction back to re-test the high. A failure to follow through indicates the buyers at the high are in trouble. The high then represents excess and the market will seek a lower low.
Tuesdays Bayesian Inference # 2 | Buy the Pullback at or near 1777 IF, S&P futures fail to re-test the high (1798-1800) and selling pressure increases resulting in a breach of support at Mondays low 1784, probability favors a lower low. The next support level is located at November 14th low at 1777. The breakout-point, the previous multiyear high at 1773 is the transitions point. However, as were noted in Sunday market structure the previous sellers were positions between 1773 and 1768. Tuesdays Bayesian Inference # 3 | Sell the Retracement at or near 1785 In the event support at Mondays low is breached, the trading strategy will be to sell the retracement. And look for support at the lower price levels indicated above. For now, support holds at 1785 and the expectation remains: a re-test of Mondays high. The minor obstacle is the initiated selling point at 1793, which is Fridays settlement.
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Daily Morning Briefings:
Good morning Traders, Overnight, S&P futures traded up to 1791, 2 points below Fridays close (1793), the price level where the initiated selling occurred during Mondays late-in-the day sell-off. Yesterday, both the Dow 30 and the S&P 500 traded at new psychology levels, 16,000 in the Dow, 1800 is the S&P. The financial media has sited Billionaire investor Carl Icahns comment that the recent rally in the equities market were related to low borrowing cost and not the result of corporate management, as contributing to yesterdays sell-off. A more likely reality is that profit taking was triggered yesterday as the Major Indexes reached new highs. At yesterdays high (1800), S&P futures were up 27 points (1.5%) above the most recent multiyear high and 46 points above its previous pull-back level at 1754. The reality that you will rarely read in the financial media is that markets dont go up forever. If nothing else, profit taking will result in a secondary reaction to the primary trend. For most part the financial media avoids headlines like profit taking, as such an acknowledgement might influence the sentiment of retail buyers. The question now is how many buyers are left? S&P futures have sold-off from the psychology 1800 price level and pulled back to approximately the distance of daily range (17 points) below Mondays high.
Will the first link in the hidden Markov sequence be enough to attack buyers or will the S&P have to be discounted further (23 points): down to the previous low at 1777? The retracement up to 1791 suggests all the buyers have not left the market and in the context of the holiday seasonality the likelihood is the broad benchmark S&P 500 will have another go at the high. Optimistic comments by two Fed officials on the state of U.S. economy may have contributed to a more cautious mood ahead of Federal Reserve Chairman Ben Bernankes speech due later in the day and the minutes of the FOMCs October policy meeting slated to come out on Wednesday. A pull-back ahead to the FOMC minutes is likely healthy events and Janet Yellens recent comments: i.e. QE into March 2014 remains the driving force, even if Carl Icahn is just now willing to publicly acknowledge it. For now Mondays Bayesain Inference | Buy the pull-back to 1784 holds. A breach of support at the overnight low will have to be dealt with determing your risk management and acting accordingly. The next support at the November 14th pull-back level is 1777 and below that the previous multiyear high 1773.
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WEDNESDAY
Wednesdays Reference Points
Coming into Wednesdays session Bayesian Inference # 1 | Sell the Retracement The broad benchmark S&P 500 has sold-off below it most recent multiyear high at or near 1800. The rally has encountered a stopping point, a price level above which there is currently no buying interest. Minor resistance was confirmed today at 1793-1791, at or near the initiated selling point identified during Mondays session. The S&P is now in search of support. The market is likely to consolidate before moving higher and attempting to re-test the multiyear high. The risk is a break-out above 1793-1791. To the extent the order flow monitor continues to indicate buy program waning during retracement to the minor resistance level, 1791-1793 represent the upper cluster of the consolidation range. A break-out above minor resistance will be accompanied by initiated buying (HFT buy surge). Short positions should not be defended (held on to) if the order monitor detects HFT buy programs. Bayesian Inference # 2 | Buy the Pull-back
S&P futures are attempting to establish a base of support, before potentially moving higher. Today, price pulled back to 1784-1782. Then price auctioned back up to 1793-1791. Building a base of support can take several days. Ideally, the market will spend time at the low before attempting to move higher. The ideal support candidate is the prior multiyear high at 1773. During the rally to the current multiyear high, S&P futures pulled back to 1777, but strong bullish sentiment caused the market rally higher before re-testing the previous multiyear high. To the extent that the bullish sentiment continues to dominate, support may hold at 1784-1782. Sell Programs Waning is the ...sceeto Order Flow Event to look for during pull-backs, along with the pause pattern which accompanies an end run sequence. However, should initiated selling (HFT sell surge) occur during a pull-back probability would favor a low lower. In that case, the long must be exited. An effort could be made to sell the break-out. Otherwise, wait the re-test on the next support level (1777-1773).
Tape Reading Lesson Of the Week | Anatomy of A Pull Back (Cont. from page 1)
how market development occurs during an initial pull-back below a new historic high. The event study methodology will begin by establishing the facts, i.e. the current state or market condition.
On Monday S&P futures rallied to a new multiyear high at or near 1800. The rally began on November 13, when the S&P auctioned above the prior multiyear high at 1774. Prior to breaking out above the prior multiyear high S&P futures pulled back to 1754. During the rally to the new multiyear high the S&P futures initially traded up to 1784, made a modest pullback to 1777 before extending the rally to its current high at 1800. Since auctioning above its initial stopping point at 1784 is not been a pullback equal to an average daily range.
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After auctioning up to the new multiyear high during yesterday session, S&P futures sold off from the high and pulled back to 1784, the approximate distance of an average daily range. Prior to the sell-off of the multiyear high S&P futures traded in a narrow trading range between 1796 and 1794. During the breakdown below the narrow trading range and initiated selling entered the market at 1793. At Tuesdays open, S&P futures retested the prior days low (1784) and auctioned back to the point where the initiated selling occurred during the breakdown of 1793. The retracement back to the initiated selling point encountered resistance. After encountering resistance at 1793, later in the day the S&P pulled back and retested the opening range low (1784) and made a minor lower low trading down to 1782. S&P auctioned up off the low and traded back to 1789.
there had not been a pullback equal to an average daily range during the run up to the current multiyear high (1800). Mondays sell-off indicated that buying interest ended as both the Dow and the S&P traded up to the next major psychological levels: 16,000 in the Dow and 1800 in the S&P. Price discovery had found a stopping point. Informed market participants took profit and the new phase for major indexes would be to determine support. We identified several possible candidates, 1784 being the first such candidate and 1777 (at or near the prior multiyear high) being the ideal candidate. As traders, we had to be prepared to consider buying the pullback above the ideal candidate and begin at 1784. During the opening range price discovery there were two opportunities. The first opportunity occurred prior to the open, wherein the S&P auctioned back up to 1789. And the second opportunity shortly after the open, wherein the S&P auctioned
Now we have established the facts associated with todays events. In Mondays market structure commentary we put forth the Bayesian inference, buy the pullback at 1784, with the expectation that the S&P would auction back to the point where the initiated selling occurred at 1793. In the context of Mondays selloff we inferred the likelihood the market would encounter resistance during the initial retracement to the point of initiated selling (1793). We also noted that, up to this point in the rally buyers had little or no opportunity but you chase the market higher. In other words,
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up to the initiated selling point at 1793. The second Bayesian reference was to sell the retracement at 1793. During the retracement the order flow monitor indicated by programs waning. S&P futures sold off from the retracement to 1793 and pulled back into the trading range and paused at the mid-point 1787. After auctioning back to 1791, S&P futures retested the low later in the day. During the second retest of the low, price discovery probed below the earlier low (1784) and traded down 1782, i.e. 2 points below at the location where stop loss orders at typically located. In response to a members request, we focus our discussion on the late in the day pullback and the subsequent probe for stops. Ive included several charts illustrating the price structure.
On the first chart titled anatomy of a pullback I have indicated the minor resistance level (1793) the overnight high (1791) and the point of the initiated selling (1789). I have included the notation that the pullback target was approximately 17 points below the previous high. And I have also indicated the earlier low (1784). When considering buying the pullback the context is always the most important consideration. What is the state of the market? What is the longer term or primary trend? How did price arrive at its current location? Is this the first time the market is pulling back to this location?
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If, this is the second time price has sold off (pulled back) to this location, what was the previous outcome? Is there evidence upon which we can determine who was the beneficiary of the first pull-back? How did the seller during the initial pullback fair? Was the seller rewarded? Has the market establish support at this location? These are the questions the trader must hold in his or her mind. The purpose of holding these questions in your mind is to be confident that you are not engaging in some foolish action such as buying the high. Is there reason to infer that the market will retest the high? Have the fundamental factors that contributed to the rally changed? Finally, what does auction market theory tell us regarding why the market trades lower? Does it not state in the CBOT market profile handbook, and that the market will trade lower until such time that the selling pressure is cut off? Does it not state in the CBOT market profile handbook, and that the market will trade higher until such time that the buying interest is cut off? Did we not just observe that the market traded higher until such time as the buying interest was cut off? IF yes, is it not reasonable to assume that at some point the selling pressure will be cut off? Do the order flow events indicate that the computerized trading programs have ceased executing to the sell side?
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There is always risk trading. The degree of certainty is never a deterministic (100%), but indeed is always probabilistic: i.e. most likely, least likely. Therefore the risk can never be eliminated, it can only be managed. The trader must assess the situation and determine who is at risk by seller the low, the buyer or the seller? What is the risk to the buyer? What is the risk to the seller? What options are available for the buyer in terms of managing the positions? What options are available to the seller in terms of managing the positions?
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In the current context, i.e. the initial pullback below a new multiyear high, what are the probability that if price traded below 1784-1782, that it would retrace back to the price level?
In the event price breaches support, where is the next potential support level? If price were to breach support (1784-1782) and sell off to the next support level (1777) is likely the market would auction back to 1784-1782? These are the questions the trader must address if he or she is to manage the position. During the pullback what is the appropriate description of the trade execution sequence? Have you previously observed the 2 point up <> down sequence? During the sequence who is the beneficiary: who is in profit? At what entry point does the beneficiary profit? Does the seller at 1782 profit? Does the buyer at 1785 profit?
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During the current days developments, where (at what price level) has the seller been profitable? In the context, of the breakout above the prior multiyear high has it been profitable to be short at 1782? Finally, how did the buyer at the earlier low (1884) make out (fair) during the second pullback? Was the buyer at the previous low (1784) able to exit the position? To what extent, how many points and for what duration (time) did the buyer at the previous low have to hold the offside position?
The above questions are an example of the type of thoughts that the trader must hold in his or her mind while assessing the prospects of participating in the price discovery during the initial pullback, equal to an average daily range, following a rally to a new multiyear high.

Good Morning Traders, S&P futures held support in the overnight session, trading within the parameters of Tuesdays trading range: the high 1790, the low 1782. In the previous session, S&P probed support at the 1784-1782 price levels. Early in the session, S&P futures traded up to retest Monday break-down point of initiated selling at 1793. S&P futures sold down from the 1793 price level and re-tested the opening range low (1784) and made lower low. Overnight, S&P future tested the 1782 support level again. In Tuesdays Market Structure Commentary we noted: Bayesian Inference # 1 | sell the retracement Minor resistance was confirmed today at 1793-1791, at/or near the initiated selling point identified during Mondays session. The S&P is now in search of support. The market is likely to consolidate before moving higher and attempting to re-test the multiyear high. Bayesian Inference # 2 | buy the pull-back S&P futures are attempting to establish a base of support, before potentially moving higher. Building a base of support can take several days. Ideally, the market will spend time at the low before attempting to move higher. The ideal support candidate is the prior multiyear high at 1773. During the rally to the current multiyear high, S&P futures pulled back to 1777, but strong bullish sentiment caused the
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market to rally higher before retesting the previous multiyear high. To the extent that the bullish sentiment continues to dominate support may hold at 1784-1782. Selling programs waning is the order flow event to look for during pull-backs, along with the pause pattern which accompanies an end run sequence. However, should initiated selling (HFT sell surge) occur during a pullback probability would favor a low lower. In that case, the long must be exited. An effort could be made to sell the break-out. Otherwise, wait for the re-test on the next support level (1777-1773). IF during Wednesdays session S&P futures re-test support at 1782 and support is seriously breached, we will look to sell the retracement and consider buying the pull-back at the ideal, more desirable trade location (1773-1776). Coming into the Open support holds at 1782.
Speaking to economists late Tuesday evening, Fed Chairman Bernanke said a preponderance of data will be needed to begin removing accommodation, and that the target for the federal funds rate is likely to remain near zero for a considerable time after the asset purchases end, perhaps well after the jobless rate breaches the Feds 6.5% threshold.
THURSDAY
Wednesdays Recap | Thursdays Reference Points
Hello Traders, In today market structure commentarywe will continue along the lines of yesterday event study discussion. The event we are studying is an initial pull-back below a new multiyear high. On the onset it should be noted that the events under discussion is not unique. Since the inception of the S&P 500 index there have been numerous multiyear highs in the historical record confirms that the broad benchmark index has sold off and pulled back below all of them. Therefore, while we will stay the specific price levels associated with the current multiyear high, terms like the prior day low, the prior days high, the previous pullback level, the break-out-point, the break-down-point and the starting point of the rally should be understood to be generic. Such terms are not simply applicable to the current event, but have their counterparts in all prior events. While such terms may have little meaning to the casual observer, they have technically significant to the current trading professional. The Follow the Bots market structure commentary is a chronology of the developments in the S&P 500 eMini futures contract. The day by day market developments indicate the buying interest and selling pressure in the broad benchmark index. In order to comprehend the significance of these developments, references to past inferences and future expectations are included as part of our event study. We will begin our discussion with a review of our expectations. Coming into Wednesday session Bayesian Inference # 1 | sell the retracement at or near 1793. Minor resistance was confirmed on Tuesday at near 1793, the
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initiated selling point identified during Mondays session. Having sold off below the new multiyear high (1800) S&P is now in search of support. The market is likely to consolidate before moving higher and attempt to re-test the multiyear high. Bayesian Inference # 2 | buy the pull-back at or near 17841782 S&P futures are attempting to establish a base of support, for before potentially moving higher. Building a base of support can take several days. Ideally, the market will spend time at the low before attempting to move higher. The ideal support candidate is the prior multiyear high at 1773. During the rally to the current multiyear high, S&P futures pulled back to 1777, but to strong bullish sentiment caused the market rally higher before re-testing the previous multiyear high. To the extent that the bullish sentiment continues to dominate support may hold at 1784-1782. Selling programs waning is the order flow event to look for during pull-backs, along with the pause pattern which accompanies an end run sequence. However, should initiated selling (HFT sell surge) occur during a pull-back probability would favor a low lower. In that case, the long must be exited. An effort could be made to sell the break-out. Otherwise, wait the re-test on the next support level (1777-1773). IF during Wednesdays session S&P futures re-test support at 1782 and support is seriously breached, we will look to sell the
retracement and consider buying the pull-back at the ideal, more desirable trade location (1776-1773). The rationales for the above expectations (Bayesian inferences) are discussed in detail in Tuesdays market structure and the daily market recap. Now let us begin by stating the facts as evidenced in todays market structure. Out lining Wednesdays market developments we will use the standard numbering convention illustrated on the five tick range chart polynomial regression model. There are 10 numbered reference on the chart. #1 the pullback to retest of the prior low at 1782 # 2 the retracement to retest minor resistance at 1793 # 3 the high frequency market maker algorithm sequence which occurred in the midpoint of the range # 4 the sell-off (pullback) at or near the prior low 1783 #5 the retracement to 1788, where price broke down below the high frequency market maker algo sequence #6 the probe for stops, two points below the prior low at or near 1781 #7 the retracement to 1785 at or near where the initiated selling occurred (at #5) # 8 the breakdown point, where price traded below the previous low at 1781 and sold down at or near todays ideal pullback target at 1773. #9 on the pull-back (sell-off) below previous support at 1777 and the retest of the previous multiyear high at 1774
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Surely, IF the idea of buying the pullback is considered foolish what can be said of those who bought above 1774? Coming in the Thursdays session Bayesian inference #1 Buy the pullback at or near 1776 -1774 The expectation is that the S&P will auction back 1787 -1793 and potentially retest the multiyear high at 1800. This trade falls into the category of a longer term swing trade. Longerterm swing trades are typically taken in the Spiders ETF (SPY). The trade opportunity may not be applicable to our active intraday members. The minimum expectation on todays long is at the S&P will auction above the prior low at 1782-1784. Until price auctions above the prior low, it is not safe to assume that the low is in. In other words, if S&P futures are unable to trade above the prior low, then the market has not yet established a base of support. Bayesian inference # 2 Sell the retracement at 1793 The expectation is that the initial retracement to minor resistance is likely to Mark the end of the buying interest and price will pull back into the midpoint of the developing trading range. The initial retracement means the first time price retraces back to 1793. Bayesian inference #3 0n a more micro intraday level, sell the retracement to 17821784, with the expectation S&P futures will pull back an attempt to retest the low, had a minimum the trade will be worth a few points. A failure to attract buying interest above the prior low (17841782) and a subsequent pullback to Thursdays low as low probability of the S&P making a lower low. The prior multiyear high is likely to have a percentage of off side short positions down at or near 1768. Therefore, it would not be out of the question for todays low to be retested and for the S&P to take out stops below the low.
#10 the retracement back to the prior low at 1781 Each of the above 10 references played a role in todays market development. What information is conveyed by the above reference points? The first two reference points (#1 and # 2) are more directly associated with Tuesdays trading session, inasmuch as they confirm the general premise stated in yesterdays Bayesian inferences. S&P futures are attempting to build a base of support. Establishing a base of support is likely to take several days. S&P futures are not likely to auction back up immediately and retest the multiyear high at 1800. Reference point #3 is only worth mentioning the costs the high frequency market maker algorithmic sequence is typically a part of the intraday market development and traders should familiarize themselves with the pattern. Reference point #4 represents a retest of the prior low at or near 1784-1782 and #5 is the minor retracement back to where price broke down below the market maker algorithm. Reference point # 6 is important inasmuch as when the market is attempting to establish a base of support price discovery typically includes a probe for stops below the prior days low. Reference point #7 is the prelude to the break-down and #8 is the acceleration point where the selling pressure proceeded to drive the S&P down to prior support at or near 1777, ultimately resulting in the sell-off to the previous multiyear high. Reference # 9 is the climax selling at the previous multiyear high. Those who are serious about understanding the current event should take note that break outs above prior multiyear highs are typically followed by a pullback to the prior multiyear high. Why is this important? Because this observation confirms there is never a benefit to buying the multiyear high. IF, during Mondays rally to the multiyear high (1800 in the S&P, 16,000 in the DOW), you had any doubt that the S&P would pullback to the previous multiyear high you now have evidence to confirm William Hamilton axiom; trees dont grow in the sky and markets dont go up forever. Regarding the consideration by todays pullback to the prior multiyear high, the question is, IF, it makes no sense to buy a 26 point (1.4%) relative discount below a new multiyear high, how is it possible to make money investing in the S&P 500?
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Daily Morning Briefings:
Good Morning Traders, Overnight, S&P futures pulled back and re-tested support at 1776. Coming into Thursdays session Bayesian inference #1 | Buy the pullback at/or near 1776 -1774 The expectation is that the S&P will auction back 1787 -1793. We suggest that the longer term swing trader (SPY ETF) could consider holding the positions longer with the expectation that the S&P 500 will re-test the multiyear high at 1800. The longer term trade opportunity may not be applicable to our active intraday members. The minimum expectation on todays long is that the S&P will auction above the prior low at 1784. Our view in the overnight session was that until price auctions above the prior low, it was not safe to assume that the low is in. In other words, if S&P futures are unable to trade above the prior low, then the market has not yet established a base of support.
The initial up-side target for the active futures trader has been achieved in the overnight session. After re-testing the low (1776) S&P futures has traded above the prior low (1782-1784) and has auctioned back up to the mid-point of the developing trading range (1786): + 10 points. We also noted that Bayesian inference # 2 | Sell the retracement at 1793 The expectation is that the initial retracement to minor resistance is likely to Mark the end of the buying interest and price will pull back into the midpoint of the developing trading range. The initial retracement means the first time price
retraces back to 1793.
However, for those active traders who read yesterdays market structure break-down, we suggest you review. #7 the retracement to 1785 at/or near where the initiated selling occurred (at #5) The current pre-market high is at/or near yesterdays #7 initiated selling point, S&P futures are likely to down-tick, at least back to 1782, prior to the open.
FRIDAY
Thursdays Recap | Fridays Reference Points
Hello Trader, The major US Indexes traded higher on Thursday. The Dow 30 closed at 16009: () up + 109 points (+0.69%). S&P 500 close at 1795: () up + 14 points (+0.81%). The NASDAQ close at 3969: () up + 47 points (1.22%). 424 (84%) of the S&P 500 stocks end the session above their prior days close, while 73 (14%) declined. Thursdays Market Structure S&P future gapped above yesterdays close (1880) and short covered up through the previous days trading range. S&P futures traded up to 1795 and close the session at 1793. During Wednesdays session S&P futures sold-off below 1793 and traded down to 1774.
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According to the financial media, even though the Fed the announced 20 days ago it was considering to tapering its bond purchasing sometime in the futures, apparently the mention of Fed tapering the minute to the FOMC took market participants by surprise. According to the NEWS sources, concerns about the possibility of Fed tapering caused investor to all the stock right into Wednesdays close. And they so concerned, they even sold the S&P down to 1776 in the overnight session. But, all was not lost, my friends, because today despite the bad economic data, investors bought all their stock back at the higher price. Yes, apparently the financial media thought idea of buying the S&P at 1774-1776, even thought it was the first opportunity to buying the S&P at prior high, since S&P futures traded up to 1800 wasnt a good idea. However, accordingly to the financial media buying the S&P at 1794, 20 points of the above the low, seem to way to outperformed the Index. Follow the Bots computational model indicates the only way to outperform the Index is to buy the pull-back. The combination of the Follow the Bots computational algorithms not only inform our members where the buying interest and selling pressure is in real time, the computational algorithms inform you ahead of time. Coming in the Thursdays session our statistical Bayesian inference (#1) algorithm indicated Buy the pullback at or near 1776 -1774 The expectation was that the S&P will auction back 1787 -1793. We suggest that the a longer term swing trader (SPY ETF) could consider hold the positions longer with the expectation that the S&P 500 will re-test the multiyear high at 1800.
In our view, we would have preferred to see the S&P futures auction down and re-test the low in the day session. However, S&P futures had gapped above Wednesdays close (1780) prior to the open, after re-testing the low (1776) in the overnight session. The market development that followed was primarily a short covering rally. At each of the prior supply clusters (selling levels) the volume at price data indicates the supply volume converted back to the buy side. Under those circumstances (short covering) no new capitol enters the market. The new capital entered at the low, when the uninformed participants fell the media hype regarding the already known fact that the Fed is considering tapering. In the context of our event study discussion our members can make up their own minds regarding the so-called efficient market theory which recently won the Nobel Prize in economics. In our view efficient market theory seems to ignore the fact that while all market participants have access to the same information, there is disparity in how to interpret it. The second Bayesian Inference (#2) we posted was Sell the retracement at 1793-1794, minor resistance. The expectation is that the initial retracement to minor resistance is likely to Mark the end of the buying interest and price will pull back into the mid-point of the developing trading range. As of these post S&P futures has yet to encounter end of the short covering rally. After short covering up to 1773-1774, the High Frequency Market Maker Algorithms Sequence dominated the session into the close. Major resistance is up at the multiyear high (1799-1800).
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The initial retracement; i.e. the first time price retraces back to 1793-1794 resulted in nothing more than a minor down-tick to 1792. The price action suggests the short covering could continue up to the multiyear high.
11-21-2013 4-57-17 PM Coming session into Fridays
Bayesian Inference # 1 (1121-13) Sell the Retracement at 1799-1800 In the context where the short covering rally continues up to the multiyear high without a pull-back, with the exception of the new capital that entered at the low, no additional capital will have entered. Therefore, we would expect to see the broad benchmark index sell-off from the high. The current trading range is 27 points: the high 1800, the low 1773. The mid-point of the trading range is 1786. The upper quartile is 1993. Following a short covering rally up to 1799-1800, we would expect to price auction back t down at or near 1791 Bayesian Inference # 2 (11-21-13) In the event during the overnight session, S&P futures sell-off below Thursdays high (1795-1794) minor support is located at 1789, Better support is located at 1784.

Good morning Trader, U.S. stock indexes advanced modestly overnight. S&P futures maintained the gains made during yesterdays short covering rally. There was no substantive higher high. Price in the S&P futures auctioned between 1795 and 1792. Seller at the prior minor resistance level (1794) had the opportunity to exits the short positions at break even. On Wednesday we posted Bayesian Inference #2 (1120-13) Sell the retracement at
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the multiyear high without a pull-back, with the exception of the new capital that entered at the low, no additional capital will have entered. Therefore, we would expect to see the broad benchmark index sell-off from the high. After obsering the reaction during Thrusdays short covering rally at previous supply levels, we would not be surprised to see a prolonged period of a HF Market Maker sequence (2 points up <> down) occur during the initial retracement to the multiyear high. The current trading range is 27 points: the high 1800, the low 1773. The mid-point of the trading range is 1786. The upper quartile is 1993. Following a short covering rally up to 1799-1800, we would expect to price auction back t down at or near 1791 Fundamentals Nevertheless, the lack of any major catalysts could make it difficult for the markets to sustain the gains and move further up from these levels. U.S. stocks benefited from the release of some strong data points on Thursday and ended the session notably higher. Kansas City Federal Reserve Bank President is due to speak on bank supervision at Bank of France conference in Paris. Federal Reserve Governor Daniel Tarullo will speak on shadow banking to Economic Policy Institute in Washington. The Kansas City Federal Reserve is scheduled to release the results of its manufacturing survey today.Economists expect the manufacturing index for November to remain. unchanged at 6.
1793-1794, minor resistance. Our expectation is that the initial retracement to minor resistance is likely to mark the end of the buying interest and price will pull back into the mid-point of the developing trading range. In Thursdays market structure commentary we note that: while buying interest waned, S&P futures had not encountered sufficient selling pressure to warrant remaining short covering rally. The rally up to 1773-1774, resulted in a High Frequency Market Maker Algorithms Sequence which dominated into the close. Major resistance is up at the multiyear high (1799-1800). Traders had the option to reverse direction and go long with the expectation that the Short covering rally would continue up to the multiyear high (1799-1800). Trade management would call for placing at stop loss order below 1792. U.S. markets appear ready to add to their gains following yesterdays run up, which saw the Dow Industrials (16,000) and the S&P 500 Index climb to record highs. The major U.S. index futures point to a slightly higher opening on Friday. The minor support levels noted in Thursdays market structure are: minor support is located at 1789; Better support is located at 1784. Bayesian Inference # 1 (11-21-13) is still in play. Sell the Retracement at 1799-1800. IF; trader elected to reverse positions at 1974 and go long, the multiyear high is the profit target. In the context where the short covering rally continues up to
Intraday Market Commentary

Hello Traders, The Dow 30 is trading above 16,000 yesterday. The S&P 500 is above 1800. The new Fed Chairman Janet Yellen claim there is now assets bubble. However, the trade activity is dominated by HF market maker (market taker) 2 point algo sequences, where the machines are out of the market for 3 to 5 ticks. The S&P sells off to the prior multiyear high (1774) and the News Media headlines claims investors are concerns about Fed tapering. The next day the S&P short covering through the range and headline is investors are euphoric and market is going up forever. The US financial media is with the grand delusion, that printing money out of thin air will somehow have a positive effect on the economy. In 2008 the broad benchmark S&P 500 Index was trading below 700. As of today the S&P is up 1100 points (61%). The average American earns less than they did in 2008 and richest 10% have seen their incomes sore.
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The US GDP is up $6 trillion. But total debt is up $30 trillion. Debt is rising five times faster than output. How could the S&P
500 be up 61% from its Great Recession low? The obvious answer that no one wants to admit is that the dollar is worth less. The S&P 500 will sell below it new multiyear high, just as it has sold below every previous multiyear high. As we stated yesterday, the uniformed fools buy the high, and the informed trader buys the pull-back. On Wednesday, November 20, 2013, we posted Bayesian inference #1 (11-20-13) Buy the pullback at or near 1776 -1774 We suggest that the a longer term swing trader (SPY ETF) could consider hold the positions longer with the expectation that the S&P 500 will re-test the multiyear high at 1800. The longer term trade opportunity may not be suitable for active intraday S&P futures traders; we encourage our members to consider trading the SPY ETF. As of this morning the longer term SPY swing trade is complete. The S&P 500 is above 1800, time to consider taking profit. Tresses dont grow in the sky and markets dont go up forever. As we noted in Fridays morning briefing, were likely to see a prolonged period of the HF market maker algorithmic sequence during the re-test of the high (1800). Trade opportunities may be limited to scalping. Stop loss orders are liklely to be located at 1802. Based on the opening range low at 1792, the average daily range extension (MLE) is up at 1809.
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ASIAN MARKET RECAPS

Mondays Asian Market
Asian stocks are broadly higher on Monday. China pledged to undertake sweeping economic and social reforms over the next decade. Chinas Shanghai Composite index rallied 2.9%, to trade at 2,197, its biggest single-day gain in 10 weeks. China vowed to deepen reforms to allow its transition towards a consumption-driven economy. Unveiling a raft of reforms, China on Friday announced plans to allow more private investment in the state sector, build a more and impartial and sustainable social security system and let Chinese companies and individuals make investments offshore more easily. Hong Kongs Hang Seng index jumped 2.7%, to trade at 23,660, a nine-month high. According to data published by the National Bureau of Statistics, average new home prices in Chinas 70 major cities rose to another record high in October, House prices in all Chinese cities except Wenzhou increased as the government abstained from initiating new property curbs. Japanese shares ended largely unchanged after hitting a fresh six-month high early in the session supported by the yens weakness, which hovered near two-month lows versus the dollar. The benchmark Nikkei average slipped 2 points or 0.01%, to trade at 15,164 after climbing nearly 8 percent last week. Exporters lost ground. Sony advanced 0.9% after announcing it had sold more than 1 million units of its new PlayStation 4 gaming console during the first 24 hours of sales in the U.S. and Canada. Australian shares ended in the red, with gains in miners capping losses. The benchmark S&P/ASX 200 dropped 0.3%, to trade at 5,385. Seoul shares rose to a twoweek high, with automakers rallying the most. Hyundai Motor rose 2% and its affiliate Hyundai added 1.2%. According to a report released by the Bank of Korea, producer prices in South Korea dipped 0.4 percent in October compared to the previous month following the 0.1 percent decline in September. New Zealand shares bucked the regional uptrend to end on a subdued note. The benchmark NZX-50 dropped half a percent to 4,892, dragged down by Chorus shares after the network company withdrew its dividend guidance, citing regulatory uncertainty and the outcome of the governments independent review of its current financial position. Chorus shares plunged 5.2%. According to the latest survey from Business NZ,an index monitoring the services sectors in New Zealand came in with a score of 58.2 in October, up from 56.4 in September, Indias Sensex was rallying 1.8%, Indonesias Jakarta Composite index was adding a percent. Malaysias KLSE Composite was gaining 0.2%, Singapores Straits Times was up marginally and the Taiwan Weighted average rose 0.2%. According to data from the International Enterprise Singapore, non-oil domestic exports increased 2.8% in October from a year earlier following the 1.2 percent decline in the previous month. Data from the National Economic and Social Development Board showed that Thailands GDP growth eased unexpectedly to 2.7 percent in the third quarter, down from the revised 2.9 percent expansion logged a quarter ago, driven by a sharp decline in investment. U.S. stocks advanced modestly in the overnight session. On Friday, the Dow and the S&P 500 reaching fresh record highs, as market participants overlooked downbeat reports on industrial production and manufacturing in the New York region and focused instead on the overtly accommodative comments from the Feds chairperson nominee Janet Yellen indicating continuation of the Feds $85 billion monthly asset purchase program into March 2104. The Dow rose half a percent, the tech-heavy NASDAQ edged up 0.3% and the S&P 500 added 0.4%.
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Tuesdays Asian Market
Asian stocks ended mixed on Tuesday. Japanese shares fell slightly due to a halt in the yens slide. Exporters led the declines, with Toyota Motor, Honda Motor, Fujitsu, Advantest and Sharp falling 1-2%. Economy Minister Akira Amari reported that Japan will avoid issuing bonds to fund the economic stimulus package. The government plans to compile a package worth around JPY 5 trillion to offset the impact of the sales tax hike. The consumption tax will be raised to 8 percent from next April, with the full details expected to be unveiled by early December. The benchmark Nikkei average slipped 38 points or 0.3%, to trade at 15,127. The broader Topix index shed 0.4%. Chinas Shanghai Composite index fell 0.2% on profit taking, snapping a three-session winning streak. Banks led the declines after rallying sharply the day before on enthusiasm over economic reform plans unveiled last Friday. Hong Kongs Hang Seng edged down marginally. According to a report issued by the Commerce Ministry, China attracted $8.42 billion foreign direct investment in October, up 1.24 percent from a year ago. The annual growth rate was slower than the 4.9 percent rise registered in September. Australian shares weakened for the second consecutive session, dragged down by banks after their recent sharp gains. The benchmark S&P/ASX 200 dropped 0.6 %, to trade at 5,353. Commonwealth, ANZ, NAB and Westpac fell between 0.2% and 1% after the Reserve Bank of Australia (RBI) signaled it could deliver another rate cut. Resource stocks also drifted lower after copper prices slipped to near three-month lows on Monday. Commonwealth Property Office Fund jumped 5% after GPT Group made a surprise counter bid for the real estate trust. GPT Group shares, meanwhile, retreated 1.6%. The minutes of the RBAs November 5 meeting revealed that the central bank is keeping the door open for more interest rate cuts to support the economy. However, the board members said that they wanted to make sure the stimulus that already been introduced to the economy has had an opportunity to take hold. According to the Conference Board, an index measuring the outlook for the Australian economy moved up 0.3 percent in September following the 0.2 percent contraction in August. The boards coincident index added 0.1 percent following no change in the previous two months.
Seoul shares extended gains for a fourth day, with a slew of key reforms announced by China last week underpinning sentiment. The benchmark Kospi average advanced 1.0%, to trade at 2,032, its highest level in three weeks. Hyundai Motor and Samsung Electronics advanced 1.8% and 1%, respectively. Shares of Korea Electric Power jumped nearly 7% after the state-owned utility said it would raise electricity prices by an average 5.4 percent and impose taxes on the use of thermal coal in power plants. New Zealand shares drifted lower for a second day, tracking mixed global cues and ahead of an announcement by the government that it raised $365 million from selling down its 20 percent stake in Air New Zealand. The benchmark NZX-50 declined 0.6%, to trade at 4,863. Gold miner OceanaGold led the decliners on the exchange, falling 3.4%, while A2 Corp declined 2.6% after announcing changes to its U.K. joint venture. According to a survey published by the Reserve Bank of New Zealand, inflationary expectations in New Zealand remained almost unchanged compared to the third quarter. The fourth quarter survey, the one-year inflation expectations came in at 1.94 percent, compared to 1.90 percent in the prior quarter. The key benchmark indexes in India and Indonesia were up around 0.2 % each. Malaysias KLSE Composite was gaining 0.8% and the Taiwan Weightage rose 0.8%, while Singapores Straits Times was down 0.3%. U.S. stock indexes traded lower overnight, as profit taking following recent gains in the Dow (16,000) and the S&P (1800). Billionaire investor Carl Icahns cautioned that the recent rally in the equities market were related to low borrowing cost and not the result of corporate management. Optimistic comments by two Fed officials on the state of U.S. economy may have contributed to a more cautious mood ahead of Federal Reserve Chairman Ben Bernankes speech due
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later in the day and the minutes of the FOMCs October policy meeting slated to come out on Wednesday. The NASDAQ fell 0.9% and the S&P 500 dropped 0.4% percent, while the Dow edged up marginally.
Wednesdays Asian Market

Asian stocks fell for the second day amid growth concerns. Growth worries resurfaced after Paris-based Organization for Economic Co-operation and Development (OECD) lowered its global growth forecasts for this next year and next, citing slowing growth in emerging markets. Japanese shares ended a lackluster session lower. The Nikkei average fell 0.3%, to trade at 15,076, extending losses for the third straight session. The yen strengthened against the dollar after Bernanke signaled the Fed will keep shortterm interest rates low well after the jobless rate falls below its 6.5 percent threshold. Exporters fell on profit taking, with Canon Kyocera, Nikon, Sony, Fanuc and Tokyo Electron Hong Kongs Hang Seng edged up 0.2%, to trade at 23,701, after the Peoples Bank of China signaled it would end normal intervention in the currency market and accelerate the process of full yuan convertibility. The central bank plans to widen the Yuans trading band in an orderly way while increasing the currencys two-way flexibility, Governor Zhou Xiaochuan reportedly wrote in a guidebook. China should seize favorable time window to speed up yuan convertibility on capital account, Zhou said. Investors, meanwhile, shrugged off a report from the Conference Board, which showed that a leading economic indicator for China rose at a weaker pace in October, signaling subdued economic activity in the final quarter of 2013. Australian shares fell to a one-month low, with banks pacing the declines on valuation concerns. The benchmark S&P/ASX 200 dropped 0.8%, to trade at 5,308. Worley Parsons shares plunged 26 % to a 4-1/2 year low after the mining services company issued a profit warning, citing disappointing trading conditions in Australia and Canada. According to a report from Westpac and the Melbourne Institute, Australias leading indicator of economic activity continued to grow at an above-trend pace in October, pointing to a pick-up in overall growth over the next few quarters than that the economy experienced in the year to the June quarter. The headline index rose to 1.2 percent from 0.6 percent in September. The Australian dollar wiped out its early gains against most major currencies after the Reserve Bank of Australias assistant governor Guy Debelle said the central bank desires to have a lower exchange rate, which could happen after the U.S. changes its monetary policy direction. South Koreas Kospi closed 0.7% lower, snapping a four-day winning streak amid foreign fund selling. Overseas investors offloaded shares worth a net 144.3 billion won today, data showed. New Zealand shares fell for the third day, with Air New Zealand shares falling sharply after the government raised about $NZ365 million from selling 20 percent of its stake in the
losing between 0.4% and 1.3%.
According to the Ministry of Finance, Japans merchandise trade deficit increased to 1.090 trillion yen in October, said -missing forecasts for a shortfall of 854.2 billion yen and sliding into the red for the 15th consecutive month. Exports gained 18.6% to 6.104 trillion yen from a year earlier, while imports surged an annual 26.1 percent. Chinas Shanghai Composite index rose 0.6% to a near onemonth high.
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national carrier. Air New Zealand shares plunged 5.2%, while the benchmark NZX-50 dropped half a percent to 4,840. According to Statistics New Zealand output producer prices in New Zealand climbed 2.4 percent in the third quarter of 2013 compared to the previous three months. That follows the 1.0 percent increase in the second quarter. Indias Sensex was down 0.3%, Indonesias Jakarta Composite was losing 1.1%. Malaysias KLSE was down half a percent, Singapores Straits Times was declining 0.3% and the Taiwan Weighted average dropped 0.7%.
U.S. stocks traded lower overnight as investors digested mixed earnings reports from Home Depot and Best Buy and awaited Bernankes speech on monetary policy for further clues on stimulus tapering. The Dow edged down 0.1%, the S&P 500 dropped 0.2% and the NASDAQ shed 0.4%.
Thursdays Asian Market

Asian stocks fell broadly to near one-week low on Thursday. The declined is being attributed to downbeat manufacturing data out of China. Chinas Shanghai Composite index ended little changed with a negative bias after falling more than a percent early in the session. Hong Kongs Hang Seng declined 0.50%. Survey results from HSBC and Markit Economics showed Chinas growth momentum softened a little in November on the back of weak new export orders and the slowing pace of restocking activities. The headline manufacturing PMI index came in with a score of 50.4, touching a two-month low and down from 50.9 in October. Japanese shares rallied on the back of a weaker yen, which hit a four-month low versus the greenback. Japans Nikkei average rallied 1.9%, to trade at 15,366, its highest level since late May. News that the Government Pension Investment Fund is considering investing more of its $2 trillion in public funds in stocks and other riskier assets has contributed to the rally. Adding to the positive sentiment, the Bank of Japan retained its monetary easing plan unchanged while reiterating that the economy is recovering moderately and efforts to stoke inflation are taking hold. The yen edged lower across the board, touching 100.80 against the greenback for the first time since July 19, as the central bank retained its plan for JPY 60 to JPY 70 trillion annual increases in monetary base. Among the prominent gainers, Honda Motors, SoftBank, Fast Retailing and KDDI jumped 3-6%. Australian shares fell for the fourth day, with softer Chinese manufacturing data and considers regarding Fed tapering weighing on sentiment. The benchmark S&P/ASX 200 index dropped 0.4%, to trade at 5,288, its lowest closing level in more than a month.
Gold stocks got declined the most, with Newcrest tumbling 4% and Perseus Mining shares plunging over 10%, after gold futures plunged to four-month lows on Wednesday. Australand Property Group declined 4% after Singapore-listed property developer CapitaL and sold a portion of its 59 percent
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Key benchmark indexes in Indonesia, Malaysia, Singapore and Taiwan were down between 0.2 percent and 1.3 percent. Singapores GDP expanded by a seasonally adjusted annualized 1.3 percent in the third quarter of 2013 compared to the previous three months, contrary to contraction estimated last month, the revised report from the Ministry of Trade and Industry showed, prompting the government to raise its growth forecast for 2013. Moodys Investors Services raised its outlook on the Malaysian economy to positive from stable while affirming the A3 credit rating. U.S. stocks index trade low overnight, but have since rallied above their lows. The minutes from the Federal Reserves October policy meeting were released yesterday. The meeting stated the Fed could scale back its stimulus program at one of its next few meetings. The notion that the FOMC minutes contributed to yesterday selloff is pure non-sense. The information is weeks old and every NEWS outlet in the world as stated the same opinion since the FOMC press conference. Mixed economic reports were released in the US, with retail sales rising more than expected in October and inflation falling slightly due to a decline in energy prices, while existing home sales fell for the second consecutive month. The Dow and the S&P 500 pulling back about 0.4% each, while the NASDAQ declining 0.3%.
stake in the Australian real estate developer. The International Monetary Fund has urged the Reserve Bank of Australia to keep its monetary policy accommodative as an overvalued exchange rate continued to weigh on the nonmining sector. The monetary policy should act as the primary macro-economic tool for managing the economy as mining investment begins to drop off over the next several years, the Washington-based lender said in a regular review report. New Zealand shares retreated in line with the regional selloff. The benchmark NZX-50 declined 0.50%, to trade at 4,818 According to data released by the Reserve Bank of New Zealand On the economic front, credit card spending fell 0.8 percent in October from the previous month, following the 0.1 percent fall in the preceding month. Spending grew 3.2% on an annual basis. Another report from ANZ bank showed that total job advertisements in New Zealand rose 4.5 percent in October, following the revised 1.3 percent gain in the previous month. Air New Zealand extended losses to end 1.9 percent lower. Seoul shares fell for a second straight session, dragging the benchmark Kospi average down 1.2%, to trade at 1,994. Indias Sensex was down 1.6 percent, extending the previous sessions loss.
Fridays Asian Market

Asian stocks rose broadly on Friday. A weaker yen and some bargain hunting contributed to the positive sentiment following three days of losses. Japans Nikkei index closed at a fresh six-month high paring early sharp gains. The Nikkei average closed up 16 points or 0.1%, to trade at 15,382, with exporters gaining ground on the back of a weaker yen. The benchmark index rose as much as 1.5% early in the session after Bank of Japan announced that the central bank remains open to further easing measures and that recent currency fall is not abnormal. While speaking to the lower house financial affairs committee, the Bank of Japan president Kuroda said that the yen has been in a correction process since last year and there is no bubblelike, abnormal yen weakness right now in the currency market. The BoJ released its monthly economy report, affirming its earlier view that the economy is recovering moderately. The central bank slightly upgraded its assessment of global economy, saying overseas economies are picking up moderately, although a lackluster performance is partly seen. Sharp Corp soared 8.4% on a Nikkei report that it would sell small- and mid-size LCD panels to Chinas ZTE Corp. SoftBank sharers rose 2.3% on a Wall Street Journal report that activist hedge fund manager Daniel Loebs U.S-based hedge fund Third Point LLC has taken a more than $1 billion stake in the Japanese wireless carrier. Sony declined a percent as the consumer electronics giant unveiled plans to cut costs by $250 million at its pictures segment. Chinas Shanghai Composite index fell 0.4% on profit taking, dragged down by telecom and property stocks. The Hong Kongs Hang Seng rallied 0.50% to trade at 23,696. Australian shares snapped a four-session losing streak after the Australian dollar fell to a two month low following comments from Reserve Bank governor Glenn Stevens that he was open
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minded on intervening in the forex markets to push the currency lower. The benchmark SP/ASX 200 advanced 0.9% to trade at 5,336. Seoul shares rebounded from two days of losses on bargain hunting. The benchmark Kospi average closed 12 points or 0.6% higher at 2,006. Doosan Infracore Co. rallied 3.7% as the constructionmachinery maker unveiled plans to secure up to $400 million by issuing global depositary receipts in a bid to repay its foreign-currency denominated debt. New Zealand shares saw mixed trading, leaving the benchmark NZX-50 index largely unchanged. Warehouse Group tumbled 4.7 percent after the retailer said it expects lower first-half earnings due to a margin squeeze at its flagship Red Sheds. According to Reserve Bank of New Zealand Governor John McDermott the New Zealand dollar is overvalued from a longterm perspective and the high exchange rate is contributing to economic imbalances. The central bank would like to see it lower in order to promote more sustainable economic growth. Indias Sensex was up 0.2%, Malaysias KLSE Composite was little changed and the Taiwan Weighted average rose 0.2%. According to data from the Director-General of Budget, Accounting and Statistics showed Taiwans unemployment rate fell modestly to 4.17 percent in October from 4.18
percent in September. Economists had forecast an increase to 4.2 percent. U.S. stocks advanced overnight. In the previous session Dow Jones Industrial Average closed above 16,000 for the first time. Janet Yellen moved a step closer to become the first woman to lead the Federal Reserve. The Dow rose 0.7%, the tech-heavy NASDAQ rallied 1.2&%and the S&P 500 advanced 0.8%.
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EUROPEAN MARKET RECAPS

Mondays European Market
The European markets are moderately higher on Monday. According to a report released by the European Central Bank, the euro area current account surplus declined to a seasonally adjusted 13.7 billion euros in September from 17.9 billion euros in August. Data showed that the surplus on goods trade decreased to 13.7 billion euros from 14.7 billion euros in August. Surplus on services fell to 7.6 billion euros in September from 8.2 billion euros. The Euro Stoxx 50 index of Eurozone bluechip stocks is advancing 0.59%. The Stoxx Europe 50 index, which includes some major U.K. companies, is rising 0.38%. The DAX index is gaining 0.6% and Switzerlands SMI is adding 0.3%. The French CAC 40 and the UKs FTSE 100 are adding 0.4% each. Across Asia/Pacific, markets rose broadly, led by China after the worlds second largest economy vowed to deepen reforms to allow its transition towards a consumption-driven economy. U.S. futures advanced modestly overnight. In the previous session, the Dow rose half a percent, the techheavy NASDAQ edged up 0.3% and the S&P 500 added 0.4%. In commodities December Crude delivery is trading at $93.52 per barrel: () down - $0.32. December gold is trading at $1283.7 a troy ounce: () down -$3.70.
Tuesdays European Market

The European markets are trading lower on Tuesday. Sentiment was little changed even after Germanys economic sentiment rose more-than-expected in November to its highest level in four years. Results of a survey by the Centre for European Economic Research/ZEW showed that Germanys economic sentiment rose more-than-expected in November to its highest level in four years. The ZEW Indicator of Economic Sentiment for Germany rose to 54.6 from 52.8 in October. Economists had forecast a score of 54. The latest reading is the highest since October 2009. Germanys employment growth maintained a steady pace in the third quarter, data released by the Federal Statistical Office showed. The number of employed grew by 0.6 percent or 253,000 year-on-year in the three months to September. Meanwhile, the Organisation for Economic Co-operation and Development downgraded its global growth projections citing worsening outlook for some emerging economies. The global economy is expected to continue expanding at a moderate pace over the coming two years, the Paris-based organization said in its latest Economic Outlook. The Euro Stoxx 50 index of Eurozone bluechip stocks is losing 0.89 percent, the Stoxx Europe 50 index, which includes some major U.K. companies, is falling 0.69 percent. The DAX index is falling 0.4%while the French CAC 40 is declining over 1%. The UKs FTSE 100 and Switzerlands SMI are declining. Technology firm Smiths Group said overall trading for the first quarter has been in line with expectations. The companys expectations for the year remain broadly in line with the previous outlook, although foreign exchange translation is expected to be a headwind at current rates while sales to government-funded customers remain a risk. The stock is down 2.1 percent.
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Royal DSM is up 3.3% in Amsterdam. The Dutch Life Sciences and Materials Sciences company and middle-market private equity firm JLL Partners agreed to create a new company in a $2.6 billion deal. U.S. future indexes traded lower overnight. In the previous session, the NASDAQ fell 0.9% and the S&P 500 dropped 0.4%, while the Dow edged up marginally.
Algo Futures | Trending Now Weekly Edition | Issue 8 In commodities December Crude is trading at $92.81 per barrel: () down -$0.22. December gold is trading at $1272.0 a troy ounce: () down - $0.30.
Wednesdays European Market Recap

The European markets are trading in negative territory on Wednesday. According to the Federal Statistical Office, Germanys producer prices declined for the third successive month in October, and at a faster pace than expected by economics, the said. The industrial producer price index decreased 0.7 percent on an annual basis in October, following the 0.5 percent drop seen in September. The minutes of Bank of Englands monetary policy meeting showed that policymakers voted 9-0 to maintain 375 billion pounds in quantitative easing and unanimously voted to hold interest rate at 0.50 percent. The Euro Stoxx 50 index of Eurozone bluechip stocks is adding 0.07%. The Stoxx Europe 50 index, which includes some major U.K. companies, is gaining 0.10%. The German DAX is losing 0.1%. The French CAC 40 and the UKs FTSE 100 are down 0.2% each. Switzerlands SMI is falling 0.4%. In Frankfurt, ThyssenKrupp is down 1.8%. The steel giant postponed the release of annual results by about ten days as it is in exclusive talks on the potential sale of its US steel plant in Calvert/Alabama. U.S. futures held support in the overnight session ahead of the release of key reports on retail sales, consumer prices and existing home sales. In the previous session, stocks finished lower as investors digested mixed earnings reports. Market participants awaited Bernankes speech on monetary policy for further clues on stimulus tapering. The Dow edged down 0.1%, the S&P 500 dropped 0.2% and the NASDAQ shed 0.4%. In commodities January Crude is trade at $93.87 per barrel: () down -$0.02. December gold is trading at $1270.9 a troy ounce: () down -$2.60.
Thursdays European Market Recap

The European markets are trading mixed on Thursday. According to a survey by Markit Economics German private sector business activity increased at the fastest pace in ten months in November. The composite output index, that measures business activity across both manufacturing and service sectors, rose to a tenmonth high of 54.3 in November from 53.2 in October. Meanwhile, activity in the French private sector decreased in November, after recording modest growth in the previous month, as both manufacturing and services activity fell sharply. Growth of Eurozones private sector business activity moderated for a second month running in November, a survey by Markit Economics revealed. The composite output index fell to a three-month low of 51.5 in November from 51.9 in October. Markit Economics survey measuring manufacturing activity in China came in with a score of 50.4 in November. The result was well shy of forecasts for 50.8 and down from 50.9 in October. The troika of international creditors would return to Greece in early December to resume review of the countrys economic adjustment program, an official statement said. The European Central Bank and the International Monetary
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The Asian stocks fell broadly to near one-week low as downbeat manufacturing data out of China. U.S., futures have rallied above their overnight lows. In the previous session the S&P sold-off and pull-back to it prior multiyear high at 1774. In commodities January Crude is trading at $93.79 per barrel: () down -$0.06. December gold is trading at $1247.2 a troy ounce: () down -$10.80.
Fund, collectively known as the troika, have concluded their visit to Greece following productive discussions with the authorities, troika said in a joint statement. The Euro Stoxx 50 index of Eurozone bluechip stocks is down 0.32%. The Stoxx Europe 50 index, which includes some major U.K. companies, is down 0.23%. The DAX index of Germany is losing 0.3% and the French CAC 40 is declining 0.4%. The UKs FTSE 100 and Switzerlands SMI are marginally higher.
Fridays European Market

The European markets are trading mixed in on Friday. German business confidence improved more than expected in November. Survey results from the IFO Institute revealed that in Germany the headline business climate index rose to 109.3 in November from 107.4 in October. Economists had forecast an increase to 107.7. The current conditions index scored 112.2 during the month, up from 111.3 in October. The expected score was 111.5. The expectations index jumped to 106.3 from 103.7 in the previous month. This was forecast to rise to 104. According to data from the Federal Statistical Office, German economic growth moderated in the third quarter as estimated in the preliminary report. The seasonally and calendar-adjusted gross domestic product increased 0.3 percent quarter-on-quarter in the third quarter, matching the preliminary estimate published earlier this month. The recent deterioration of Eurozone consumer confidence, and slowdown in consumption growth indicate that the blocs economic recovery may have lost some momentum in the fourth quarter, Capital Economics economists Paul Hollingsworth and Jonathan Loynes said. According to Capital Economics, a consumer-led economic recovery seems very unlikely, with household spending growth being held back by an extremely weak labor market and continued household deleveraging. The Euro Stoxx 50 index of Eurozone bluechip stocks is adding 0.04%. The Stoxx Europe 50 index, which includes some major U.K. companies, is down 0.01%. The German DAX index and the UKs FTSE 100 are down marginally. The French CAC 40 and Switzerlands SMI are advancing 0.3% each. The Asian stocks rose broadly, as a weaker yen and some bargain hunting supporting sentiment after three days of losses. U.S futures traded modestly higher in the overnight session. In the previous session, stocks advanced, with the Dow Jones Industrial Average closing above 16,000 for the first time. In commodities January Crude delivery is trading at $95.22 per barrel: () down - $0.22. December gold is trading at $1241.7 a troy ounce: () down - $1.90.
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ANATOMY OF A PULL BACK (VIDEO)
HOW WE TRADED SEPTEMBER 25THS RETAIL SALES ANNOUNCEMNT (VIDEO)
36
DAILY MARKET RECAPS

Weekly Market Recap
Mondays Market Recap
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Tuesdays Market Recap
Wednesdays Market Recap
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Thursdays Market Recap
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FOR PROFESSIONAL TRADER USE ONLY

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Trending Now - Issue 8 - Sunday, November 24th 2013

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Tape Rading Lesson of the Week | Anatomy of a Pull Back

INSIDE THIS ISSUE

How We Traded Wednesday Sep-20ths Upside Surprise in Retail Sales

Market Insights Trending Now

Algo Futures | Trending Now Weekly Edition | Issue 8

Sunday, November 24th, 2013

Algo Futures | Trending Now Weekly Edition | Issue 8

Market Insights Trending Now

Sunday, November 24th, 2013

Market Insights Trending Now

Algo Futures | Trending Now Weekly Edition | Issue 8

This Weeks Development

Sunday, November 24th, 2013

Algo Futures | Trending Now Weekly Edition | Issue 8

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Fridays RUN into the Close

Sunday, November 24th, 2013

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Algo Futures | Trending Now Weekly Edition | Issue 8

Sunday, November 24th, 2013

Algo Futures | Trending Now Weekly Edition | Issue 8

Market Insights Trending Now

Daily Morning Briefing

Sunday, November 24th, 2013

Market Insights Trending Now

Algo Futures | Trending Now Weekly Edition | Issue 8

Mondays market Development

Sunday, November 24th, 2013

Algo Futures | Trending Now Weekly Edition | Issue 8

Market Insights Trending Now

Sunday, November 24th, 2013

Market Insights Trending Now

Algo Futures | Trending Now Weekly Edition | Issue 8

Sunday, November 24th, 2013

Algo Futures | Trending Now Weekly Edition | Issue 8

Market Insights Trending Now

Daily Morning Briefings:

Sunday, November 24th, 2013

Market Insights Trending Now

Algo Futures | Trending Now Weekly Edition | Issue 8

Sunday, November 24th, 2013

Algo Futures | Trending Now Weekly Edition | Issue 8

Market Insights Trending Now

Sunday, November 24th, 2013

Market Insights Trending Now

Algo Futures | Trending Now Weekly Edition | Issue 8

Sunday, November 24th, 2013

Algo Futures | Trending Now Weekly Edition | Issue 8

Market Insights Trending Now

Sunday, November 24th, 2013

Market Insights Trending Now

Algo Futures | Trending Now Weekly Edition | Issue 8

Sunday, November 24th, 2013

Algo Futures | Trending Now Weekly Edition | Issue 8

Market Insights Trending Now

Sunday, November 24th, 2013

Market Insights Trending Now

Algo Futures | Trending Now Weekly Edition | Issue 8

Daily Morning Briefing

Sunday, November 24th, 2013

Algo Futures | Trending Now Weekly Edition | Issue 8