8/5 Market Recap.
Posted by jon on
Spy of the week.
Dear Traders! on the previous week, the market has experienced a small consolidation in prices. it seems that the previous resistance level of 169.00 now acts as a support. This level starts to mark itself as an important level to both buyers and sellers, and the more price action happens in this level, the more importance it will gain as an inflection point for the following sessions.
As a general rule, the month of august is known to be a slow and lazy trading month, and until now it did act that way, showing slow volume and low volatility.
Energy & Metals
Overall this week was also a reddish week for energy and metals. On the USO, we had a long down wick which represents a fast down move and a reverse back to the original open price. The price has bounced again from the previous swing at 36.5 which is a bullish sign. This level is acting as a support for a reason, looking back on the weekly chart, this price level unravels to be an important area where buyers and sellers often struggled upon. We will keep watching this level.
As for gold, prices keep struggling over the down channel resistance line, and as far as the volume gold is being currently traded at, this is not a scenario we can tag as a bullish one.
It has been over 2 month we are bearish on gold and we still are.
One sign that starts to, perhaps, signal of a potential change is the up curve of the Laguerre Filter. As our experience tells us, this indicator has a good “feeling” of what’s going on behind the scenes and this time we may be already on a reversal phase. Again, up until we get clear signs of a change in sentiment, we are still bearish on gold.
The dark side of AlgoTrading.
This term probably rings a bell to most of you traders. For those of you who are still unfamiliar with this concept here is a short description: “Algorithmic trading, also called automated trading, black-box trading, or algo trading, is the use of electronic platforms for entering trading orders with an algorithm which executes pre-programmed trading instructions whose variables may include timing, price, or quantity of the order, or in many cases initiating the order by a “robot”, without human intervention. “
Infact, this is what we do here at ProTradingIndicators.com…
Recently, a phenomenon that caused damage to traders like us was put to an end, or kind of…
On late 2010, about 3 years ago, I bumped into a video of a fella calls himself kdenninger on YouTube. He claimed that Nanex, a data mining company, has succeeded in revealing a pattern on the market that indicated that someone is placing and quickly canceling bids on assets as commodity contracts and stocks. This practice is known as “spoofing”. As you will see in the video below, his method is being used in order to deceive traders and other robots thinking that indeed there’s a bidder or a seller on the other side of the market, but whenever one will try to place a trade the other side will already vanish.
These are the repetitive bidding and asking patterns that emerged from Nanex reasherch:
These geometric shapes show how regular and algorithmic was this kind of activity, one that is strictly forbidden by the CTFC.
Why do we bring that piece of information now? about a week ago, a high frequency trading firm in new Jersey was fined for doing just that.
The Commodity Futures Trading Commission (CTFC) accused the firm named Panther Energy Trading and its owner, Michael Coscia of “using sophisticated computer algorithms to illegally place and quickly cancel bids on commodity contracts”.
This is an encouraging case because it’s infact the first time that the CTFC has enforced the ban of spoofing put in place under the law. This is a message to all of the massive algoTrading institutions that this kind of activity will not be profitable in the end…
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