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Understanding market trends: Breaking the intra-day code of the E-mini financial futures market

Published 23-APR-2020 10:42 A.M.


6 minute read

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After undertaking a multi-year, real-time study of the S&P500, Dow Jones, NASDAQ and Russell 2000 Futures, CEO & founder of DMIC2059 Alan Fitterman discusses how intra-day traders can understand and recognise market trends.

If about 65% of trading is by high-level corporate computers, how can an intra-day trader find a more level trading ground?

Excuse the rhetorical question.

The answer is an engulfing formula developed after many years of real-time study of the S&P500, DJ and Nasdaq Futures. The objective when creating this formula was to provide a real-time daily window on the market, custom fit to each new intra-day market.

In developing the new proprietary software, old measures or repackaging of old or usual measures were set aside.

In addition to analysing each individual E-Mini (E-mini is an electronically traded futures contract that is a fraction of the value of a corresponding standard futures contract) financial commodity chart, a new cross-reference indicator developed.

I found that the DMIC individual time and price indicators of the S&P500, NASDAQ, DJ and the Russell 2000 can coalesce to provide a significant indicator.

Through the research, I was able to produce the ‘Daily Matrix Island Combination’ software which gives identities to the various iterations the market may take on any day. It also gives instant real time feedback.

The software projects a detailed critical path of intra-day market movement, including each day’s critical ‘Time Waves’ and ‘Price Waves’ using a number of ‘Time Teams’ that create the ‘Daily Market Time & Price Meter’ TM among a set of new indicators.

These ‘Time Teams’ check on the markets intra-day ‘Critical Path.’ Somewhat similar to an (Intra-day market) GPS system. The DMIC2059TM Software looks at each day as a separate entity. Its ability to project a trend day, a ‘buy day’ or ‘sell day’ – meant non-trend days also had to be recognised.

The software is a one-stop analysis of each intra-day market. It stands alone. The architecture of the software was built to roll-over with the market over time, organically updating itself each day. The market is a multi-dimensional mix of elements that need unification in an understandable format, which sharply focuses on the ropes and pulleys that move each separate intra-day market.

Here's a look at how it works:

Market character changes almost daily. Rarely is the same iteration repeated the next day. Each day, new support and resistance is set, new break-out and reversal prices form, time and price relationships change. This change information is both varied and numerous, as many as 20 to 50 price and time calculations need to be organised in meaningful dimensions.

In a meaningful context.

Each new day is a custom fit. Instant analytic intelligence feedback allows the trader to concentrate on executing trades, releasing the trader from too many demands of instant analysis. The software is an interactive trading partner.

In detail the DMIC2059 software projects the type of day to expect, volatile or not. Relates that volatility to the number of waves to expect and projects which wave is the key trend wave and which wave to reject as a trend wave. It pinpoints the prices where the market is expected to break-out or reverse.

Included are details of preferred conditions that match certain days. These price points are up to the minute and available after the market has opened and once the DMIC software is set for the day.

One-dimensional tools may be the reason it is claimed about 90% of traders lose. The conventional approach tends to lack context, too often taking a train without knowing where the objective is. Immediate market context is a key.

Numerous theories such as Taylor’s ‘Three Day Book Theory’ – Elliot Wave – ‘Value Areas’ –Moving Averages and other algorithms play a part in trading, but the DMIC2059 software’s focus is solely on each individual intra-day market. It’s not irrelevant that ‘time’ is largely absent from most other theories, time is critical to any intra-day analysis. Time and Price is the true Intra-Day dimension.

The on-going intra-day DMIC’s bear a strong relationship to each other. Providing strong indicators as the markets over-lap between Daily Matrix Island Combinations and DMICs called out as ‘key’ during the week. The on-going DMICs can also signal a key reversal in the longer term market. For example in the declining market of 2009, after a decline of about 120 S&P points (1200 Dow points), the DMIC produced an unexpected strong Buy DMIC indicator. Not only did the market decline stop that day, but it set a market low for the next three weeks or so.

Similarly, within the framework of Taylor, as the three-day rotation takes shape, the expected daily rotation is checked by DMIC and an early am fit can be projected. The Daily Matrix Island Combination often recognises at least one ‘value area’ on the day formed, as opposed to being called out after the market day has closed. This recognition brings forward a new early day ‘Value Area’ measurement , when two Dmics realize a consecutive trend break-out in the same direction. Focused from about thirty days prior, layering forward, market history is carried forward. DMIC sieves trading history into the current day, creating a current window for the new intra-day market.

The multi-dimensional aspect of time and price has not been fully appreciated. Real-time needs to be converted to trading time. Trading times can vary depending on the current intra-day iteration. During the many years of real-time research, there were times when doubts arose, when thoughts and processes needed re-examination, a doubling back for more evidence. A few particular articles and books helped. One day I read an article in the Sunday papers that helped keep me going. I had been working on many combinations of price and time, but had not cracked the code to my satisfaction. That Sunday I read about the theory of Combinatorics for the first time. It began with Archimedes puzzle. It was thought Archimedes puzzle pieces were a game to make figures with, such as an elephant. In fact, the article reported, the objective of the 14 irregular shaped pieces is to use eleven pieces to make a square and to determine how many different combinations of pieces can be used to make a square. The answer was 17,152 different combinations. The key to the puzzle is the thing that caught my interest. Three different pairs are always needed to form a square. A constant pre-coded combination was needed to unlock the puzzle, constant elements were the foundation of the final build. But finding 17,152 combinations were hidden in 14 pieces, it became clear the Daily Matrix Island Combination had a much larger number of inter-relationships that needed unlocking than previously thought. The scope of the DMIC would have to expand.

Later I was very happy to read Benoit Mandelbrot & Richard Hudson’s book The (mis)Behavior of Markets.’ Mandelbrot was the inventor of fractal geometry, recognising the reproduction intricacies of patterns over varying scales of time and space. They pointed out a number of things that fit the DMIC research work. And noted the strongest market ‘finger print’ correlations were those with the shortest windows. This fit with the DMIC theory of ‘time teams.’ Their work supported the ‘trade time’ theory, knowing how patterns fit ‘trading times.’ They noted that large market declines can take place on a very limited number of days, as can large gains. This points to the urgency of understanding each trading day and the ‘finger print’ efficacies of each new intra-day market.

A simple metaphor in summary: The market is an island in an ocean of tidal ebb and flow action. Various volcanoes on the sea floor erupt regularly, mainly within measured parameters, but constantly shifting the ebb and flow within the parameters. At times the parameters are broken. Daily monitoring indicates the formation of new barriers and the strength of the ebb and flow waves and when normal parameters are likely to give way.

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