CMI 5m continues to show side-ways and bearish trend since 10:30p

November 19, 2012 · Posted in CMI · Comments Off on CMI 5m continues to show side-ways and bearish trend since 10:30p 

Tough to trade on Big GapUp Days

November 19, 2012 · Posted in CMI · Comments Off on Tough to trade on Big GapUp Days 

One of my rule is to NOT to counter trend trade on big GAP Up or Gap Down days. Today (11/19/2012, Monday) ES gapped up big (11.5 ES points) on the news of potential fiscal cliff solution. Overnight markets traded higher. These days are usually difficult to trade as markets gaps up or down in a hurry and trade side-ways for the rest of the day. These are the days I am more careful to NOT counter-trend trade and trade most of the opportunities in the GAP direction.

Today (11/19) Gap direction was UP. Around 10.30a, I started seeing CMI red bars signaling side-ways to mild down side trend. From open I was waiting for a CMI Green bar (UP) with a potential long trade setup (same direction as GAP up). I have not seen any setup until 1:30p. There were some scalp opportunities in the downside direction, but I refused to trade Shorts on a big Gap Up day.

CMI5 did great job today signaling RED bars and keeping me off the random LONG trades. I’ll wait for a clear Pattern setup in the direction (UP) of gap today.

CMI Extremes Signal Market Tops and Bottoms

January 6, 2012 · Posted in ABC Bullish, CMI · 1 Comment 

CMI Description
Combined Market Internals Indicator shows a Combined Market Trend of Internals of $ADV, $DECL, $TICK, $TRIN, $ESINX, XLF, SPY in Real-Time. CMI shows underlying trend in a Histogram. CMI Ribbon shows the detail of internal trends.

Picking tops and bottoms is usually a losing proposition for most traders. I remember doing that with pride (false) of my ability to pick tops/bottoms early in my career. But markets quickly served me with reality and taught me great lessons right in the beginning of my career. Now I use wisdom when I analyze market tops/bottoms and remember my past experiences :)

Most wise analysts always say, Market Internals give a Top or Bottom signal far before any of the underlying trading instruments signals. Well, so how do we find which Market Internals and what are these signals?

I use CMI (Combined Market Internals) as my key Market Indicator. It uses 6 Market Breadth instruments and an arbitrage ($ESINX) to compute a complex Mathematical equation to derive a single Market Direction and plot it as a Histogram. I follow this CMI direction as a key resource for my pattern trading. I do not follow any other internals as I think the components I selected for CMI have a great significance in aiding me with finding the market direction.

I have studied CMI for about 4 years now and I think I have a pretty good understanding of how it works. It helps me in finding 1.) Underlying the Market Internals direction, 2. ) The Divergence between CMI and my trading instruments like ES, YM or NQ 3.) A Market Top and Bottom signal when it reaches extreme values in CMI.

Here I will discuss the third point, CMI extremes as signal for Market Tops/Bottoms. Remember my consideration for Market Top or Bottom is on a 5m CMI chart. It is not daily or 60m chart. I am trying to find a temporary Tops/Bottoms in SPX giving me 3-8 points profits during intraday. If I am in a position and I see CMI reached an exhaustion levels, then I take my profits out. Historically I have seldom came across CMI trading above +/- 200 levels. Not sure exactly how 200 level matters, but I noticed when markets start to trade above +/- 150 levels, it has signaled a Top or Bottom (even short-term) for at least 3-8 points.

I have plenty of cases of CMI extremes signaled followed by Market Reversals. On Jan. 05, 2012 was such an opportunity to find a ES Top.

On Jan. 5 markets rallied all morning from a low of 1260 and reached 1278 by 1.30pm ET. I was trading an ABC Bullish pattern and was out of my positions by 1272 level. ES continued its uptrend and rallied to 1278 level. Around 1.30pm, I noticed CMI reached its exhaustion level +150 ((Chart 1). ES price level was also coincided with my pattern exhaustion level 1278. By 2pm, Market internals started to weaken as ES started to trade below CMI 150 level. This provided another trade opportunity for me to short ES from 1275 level. Around 3.45pm, I closed my trade at 1270.5 to net 4.5 points profit in ES. I knew ES may fall
futher down, but I do not want to deal with market closing volatility. ES continued to fall (Chart3) and trade lower in Globex trading.

Confluence of Price Levels

January 27, 2010 · Posted in ABC Bullish, CMI, Globex Pivots, SuperBars · Comments Off on Confluence of Price Levels 

Jan. 26, 2010

Price confluence is an amazing phenomenon. Today many price levels were confluencing to suggest the key targets and reversals. This morning produced a great ABC Bullish pattern with an entry level near 1087.5. Although not a perfect ABC to trade, it is one of my favorite as it showed its strength right at the open. Once this ABC started to trade above the Mid-Fib. Bands (1088.75), a solid entry is confirmed. I was also looking at the Fib. Zone Pivots for potential target to the upside…. Fib. Zone Pivots were placing today’s target in the area of 1100 to 1102.5. Note pHi is at 1099.5. The confluence of these levels may be the target for the day.

Here is the Intraday TradeBlog:

Around 10am, ABC Bull started to take-off and reached the 1st target: 1092.75 (62%). The next target would be 100%AB at 1097. (See my 10.07am chart).
At 10.22am, ES reached Globex High and started to retrace 3 points (See 10.30am chart).
At 11.42am, ES started to rise and head towards the defined Fib. Zone Target (1100) while respecting the VAH, POC, pHi Levels…
At 12.48am, ES reached the Fib. Zone Target of 1100 and showed signs of reversals. This was also evident in CMI 5m chart as CMI
showed significant Divergence at 1100 level.
By 4pm, ES sold off from 1100 levels to reach 1086.

ABC Bullish

Fib. Zone Levels

End of Day Sell off

ABC Bullish
Fib. Bands
Globex Pivots
Fib. Zone Pivots

TradeLog: Jan 12, 2010: Three-Valleys, Broadening and ABC

January 12, 2010 · Posted in ABC Bearish, ABC Bullish, CMI, Three Valleys · Comments Off on TradeLog: Jan 12, 2010: Three-Valleys, Broadening and ABC 

Jan. 12, 2010

Today, ES continued its yesterday’s significant patterns: ABC-Bearish and Three-Valleys in their bearish trend. ES Opened near 100% of AB Range around 1133-34. Until noon ES attempted several times to close above the 200-SMA. CMI5 was red most of the day until 2pm. Around 2pm, the first bullish signal was triggered by CMI5m Green bar.

Today’s another major pattern: Broadening Bottom. This pattern was visible right from the open. I thought it was going to be a Flat Bottom Broadening pattern. Around 11am, the pattern made its last failed attempt to trade above 200-SMA and sold off until 2pm.

The late day rally produced another ABC Bullish pattern aided by CMI5 strong green bars.



ABC Bullish

Market Structures

Trade Log: Jan. 05, 2010

January 5, 2010 · Posted in ABC Bearish, CMI, Floor Pivots, Globex Pivots · 2 Comments 



@ES was pretty lethargic at the open. Started off with a Rectangle channel and traded between
1126 and 1130.75. At 10am, I was expecting ES to trade near Pivot Point (1126) and trend
to continue lower. About 10.15am or so, ES started to rally and started showing strength.
SuperBars and CMI both picked up strength with Green bars.

1. My first trade was a setup to trade one-tick above the Globex Pivot on a breakout. Placed a Long
order to trade upto GbxHigh from 1129. closed near 1130 to 1130.5
Stops were placed below the vWAP (1127).

2. My second trade was the best trade today. After closing my first trade, I placed
a Sell order to short 3c at 1132. I was near certain that R1 (1132.5) will be
resistance and could retrace to pHi. Around 10.45, my trade was triggered and
quickly retraced. After some side-ways anxious time, it started its color and
traded below GBXHI (1130.75). Closed all around 1130 to lock 2 points… Watch the
Pipe Pattern from R1. This is one of the high probability pattern.

3. Some one wrote to me during the setup asking the current retracement was an ABC Bullish Pattern.
It was, but it is NOT a perfect ABC Bullish pattern and internals were clearly
weak. Hence, I wanted a clear confirmation to trade.

Around Noon, the price retraced to GBXHigh (1130.75) and signaled ABC Bearish (Perfect)
pattern. This is one of hte best pattern to trade. I placed another trade around 1130
to short. This time the targets were near 1127. ABC Retraced more than 100%, see
one of the chart.

4. I have NOT traded this as I was little skeptic about PP, YHI bounce
from 1126.5. Prices made a dramatic rally to R1: 1132.5. Did not participate
as I was busy working something else.

ABC Bearish
Fib. Bands

Globex Pivots
Floor Trading Pivots

Trade Log: Jan 04, 2010

January 4, 2010 · Posted in CMI, Floor Pivots, Globex Pivots · Comments Off on Trade Log: Jan 04, 2010 


Today was an interesting day. A Strong open (about 8 pts up in @ES) signaled
a solid up day with Dow may closing at least 100 points up. Pre-market Flag setup
is also an interesting setup with a potential trade.

Pre-market, price retraced to the Globex Mid point in a Flag setup.
Initial reaction was to wait for the Pivot (1114.75) buy.
But right after the open the trend was clear. I wanted to buy above
Globex High (1120.5) with a setup to pHI: 1124 to Fib. Zones Range (1125-1126).

1. I placed an order of 8c at 1121 just above GBXHigh. Filled at 1121.25.
Targets were set at 1124-1125. Also Stop set at 1118 (3 points), just
below the bands… About 10-12 minutes later all Contracts hit the targets.
Closed few at pHI. Check Internals, CMI and kTrend for a pullback.

2. Around 11am, market lost its momentum and trading very slow. Still
uptrend as SuperBars were strong. No Patterns formation visible other than simple breakouts.
Trade in the direction… But my CT instinct kicked in on red CMI Ribbon.
So, I took a 3c short with a very short time frame ideas. Also, betting on market
trading at R2 and may be tired. Wanted 1-2 points on 3c. About 10-15m
later, still prices were printing GREEN SuperBars. I was in 1 pt profit
so, I peeled them out slowly.

3. 1.30pm: Still thinking it will move up. CMI5 turned RED around 12.30pm.
R2 seems solid resistance. Saw first Red on CMI15…. A risky setup.
Traded Short thinking there will be TICKDUMP and then moveup. Wanted a CT
trade with Quick-in-Out for TickDump. Placed a stop above R2. Got just 1 point
for all 3cs about 2pm…

4. 2.30 pm: Placed a Buy above R2 with 3c.. Never traded. Around 3pm, I closed and walked off.

Only Four Trades today in @ES. Not focused on other instruments as no clear patterns were
emerging other than straight upside.

Here is the Link to Todays’ Daily Chart Blog on my website:

Fib. Bands
vWAP Bands

Globex Pivots
Floor Trading Pivots
Fib. Zone Pivots


Divergence Trade using CMI 5m

December 15, 2009 · Posted in CMI · Comments Off on Divergence Trade using CMI 5m 

@ES opened near Previous day’s Low 1104 and traded side-ways in the first half hour. Around 10am, ES brokeout the trading range from 1104-1106 and traded higher. By 11am, ES traded near Value Area High (1109) and Point Of Control (1108.75) cluster. CMI (Combined Market Internals) were showing the Internal weakness as CMI made a lower-high when ES reached to POC/VAH cluster signaling a potential divergence. CMI post red-bars until 2pm as the divergence resulted in price trade from 1109.25 to 1104. CMI5Divergence_Dec15098

Fib. Bands
Globex Pivots
Floor Trading Pivots


CMI (Combined Market Internals)

November 13, 2009 · Posted in CMI · Comments Off on CMI (Combined Market Internals) 

@ES rallied today and made a high of 1096. CMI also was strongly green until 1pm.
Around 1pm, CMI 5m started showing signs of potential pullback. @ES also rolled over
and traded lower on Bearish CMI setup. About 2.30p, @ES traded near 1089.

CMI Description
Combine Market Internals Indicator shows a Combined Market Trend of Internals of $ADV, $DECL, $TICK, $TRIN, $ESINX, XLF, SPY in Real-Time. CMI shows underlying trend in a Histogram. CMI Ribbon shows the detail of internal trends.


1. CMI