Severe Congestion

by Larry Levin

No, I am not experiencing a nasty head cold but the market is. It has been suffering a bout of severe congestion for many days now and one must wonder: when will this end?

We don't know when it will end, but it will end. The severe congestion level can be broken into two parts and when these are finally breached we will have our answer. The most recent severe "balancing" or congestion area has taken place over the last three days. Over these days the market has mostly traded within 1171.00 and 1164.25. Yes, for three days about 90% of all trades have occurred in a minuscule 6.75-point range...for THREE DAYS! Even Wednesday's gap open lower made no difference - it simply popped back up into this area like a bobber under water floating back to the surface.

However, the congestion has lasted longer than that. If you look back a bit further you will see that this current balance/congestion area started on March 23rd and continues to this day. This slightly larger area ranges from (mostly) 1171.00 to 1160.00. Can you believe it; for a staggering SEVEN DAYS the market has mainly traded in an 11.00 point range! An 11.00-point range for one day is small, but seven days?

Some other statistics are equally maddening for the recently deceased month of March. The initial balance (IB) is defined by the first two 30-minute bars of the day. This range "holds" roughly 78% of the time. Said another way, when the market chooses a move beyond that IB it rarely reverses through the other side of the IB. March's IB statistics, however, show that the IB held only 61% of the time - well below the average.

Finally, the day type (1 through 4) agrees with all of the other miserable stats. The #4 type day generally signifies a very choppy day and is rarely wrong. In March, traders were sliced and diced by an amazingly high amount of #4 days: 78%.

Severe congestion indeed!


Previous Day's Trading Room Results:

Trade Date: 3/31/10

E-Mini S&P Trades*
(before fees and commissions):

1) OTF buy @ 10:20am at 1166.00 = +1.00 & +3.50 (2 lots)

2) Algorithm positions (6)

3) "Reading the Tape" positions (9) ...combined Secret's, Algo, & "Reading the Tape" total...+2.25



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