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Day Trading the London Blast July 7, 8 2005
Donald L. Jones, July 14, 2005©


In an earlier article we explored auction market value trading of the Dow Index on May 18, 2005. We gave the details of the analytical procedure and walked through the market behavior step by step. We will apply that procedure to the unexpected case of a market shaking world event, the London bombing of July 7, 2005.
Meta-Profile and Overlay for Day Trading

At the close of trading on Wednesday, July 6, there was no hint of anything unusual in the Dow Index and the end of day Visual Graphic of the Dow Index (mini-sized) confirms that fact.



Following the practice of Part 2, Step 1 of the previous Dow Index study, we note that the Meta-Profile half hour bars were sloping down on July 6, the close is below (just barely) the bottom of the 5 day Overlay and the 10 day as well. The market is trending down and is at the lows of the last 20 days. 

 
  Market Condition from Visual Graphic:  YM End of Day July 6, 2005:

                Meta-Profile      5 Day Overlay       10 Day Overlay

   Resistance         10402      Directional Down      Directional Down

   Support            10323      Below Support         Below Support      

   Risk (estimated from 5 day)   1/8 X 155 = 20 (rounded)

   EOD July 6, Close: strong down.
   Market condition: downward trend
   Meta-Profile: Close below both lower Meta and 5 Day Overlay support
   Risk estimated from old 5 Day Overlay  $100
   Ten Day Overlay: Close below support
   Meta: Trading back into 10290 - 10400 suggests down trend is over (return to 5 Day balance)
   5 Dy Oly: Trading above 10450 would be a sign of strength.
Between the close on July 6 and open on July 7, the world learned of the London subway blasts. Naturally the uncertainty of the situation made the markets nervous. Generally, uncertainty leads to selling.

By the opening at 7:20 the Dow Index was down to 10152. This is a huge gap from the close of 10288. The only support from the evening analysis was 10323 and even that is not too trustworthy since the markets need to be in balance for the Meta-Profile value area to be representative. Still, a trader who really wanted to trade would be looking to go short (with the trend) around 10320 or so, the lower value area limit. The hugh imbalance would tell any logical trader that the unknowns vastly outweighed the knowns (the support and resistance from the value area and Overlays). Other financial markets behaved much like the Dow.

Logically, a trader facing a potentially market shaking event would be wary of trading. Risk is of unknown proportions. A right guess might be profitable, but a wrong one could be a disaster. One who trades as a business will probably close up shop on a day such as this. For the value trader it made little difference. The extreme market action placed any reasonable trade out of the realm of possibility. 
 
            Commodity:  YMU - MINI DJ 5 (CBOT)
         Trading Date:  2005 July 7
           Start Time:  07:20
            Stop Time:  15:15
         Profile Type:  30 minute
 
 
         CISCO Meta-Profile
------------------------------------------------
                       V Tick      30 minute
    Price  TPOs        A Count     Tick Bars
------------------------------------------------
                                                      <== VAU (yest)  10402
    10338  O               2                     O   
    10337  O               6                     O   
    10336  O              11                     O   
    10335  O              15                     O   
    10334  O              14                     O   
    10333  O*             17                     O  L <== Close (today)  10333
    10332  O              12                     O   
    10331  O               7                     O   
    10330  NO          |  25                    NO   
    10329  NO          |  45                    NO   
    10328  NO          |  48                    NO   
    10327  NO          |  49                    NO   
    10326  MNO         |  51                   MNO   
    10325  MNO         |  42                   MNO   
    10324  MNO         |  58                   MNO   
    10323  MNO         |  78                   MNO     <== VAL (yest)  10323
    10322  MNO         |  88                   MNO   
    10321  MNO         |  88                   MNO   
    10320  MNO         | 104                   MNO   
    10319  MNO         | 116                   MNO   
    10318  MNO         |  95                   MNO F 
    10317  MNO         |  63                   MNO   
    10316  MNO         |  69                   MNO   
    10315  MNO         | 101                   MNO   
    10314  MNO         | 133                   MNO   
    10313  MNO         | 159                   MNO   
    10312  MNO         | 171                   MNO   
    10311  MNO         | 151                   MNO   
    10310  MNO         | 129                   MNO   
    10309  MNO         |  92                   MNO   
    10308  MNO         |  92                   MNO   
    10307  MNO         | 101                   MNO   
    10306  MNO         |  91                   MNO   
    10305  MNO         |  79                   MNO   
    10304  MN          |  64                   MN   
    10303  MN          |  51                   MN   
    10302  JMN         |  49                J  MN   
    10301  JM          |  34                J  M   
    10300  JM          |  17                J  M   
    10299  JM          |  42                J  M   
    10298  JM          |  57                J  M   
    10297  JM          |  47                J  M   
    10296  JM          |  50                J  M   
    10295  GJM         |  47             G  J  M   
    10294  GJM         |  42             G  J  M   
    10293  GJM         |  43             G  J  M   
    10292  GJM         |  52             G  J  M   
    10291  GJM         |  55             G  J  M   
    10290  GJM         |  39             G  J  M   
    10289  GJM         |  35             G  J  M   
    10288  GJKM        |  53             G  JK M   
    10287  GJKLM       |  97             G  JKLM   
    10286  GJKLM       | 109             G  JKLM   
    10285  GJKL        | 114             G  JKL   
    10284  GJKL        | 122             G  JKL   
    10283  GJKL        | 114             G  JKL   
    10282  GJKL        |  96             G  JKL   
    10281  GJKL        | 104             G  JKL   
    10280  GJKL        | 119             G  JKL   
    10279  GHJKL       | 165             GH JKL   
    10278  GHJKL       | 212             GH JKL   
    10277  GHJKL       | 215             GH JKL   
    10276  GHJKL       | 214             GH JKL   
    10275  GHJKL       | 217             GH JKL   
    10274  GHIJKL      > 204             GHIJKL   
    10273  GHIJKL      | 224             GHIJKL   
    10272  GHIJKL      | 191             GHIJKL   
    10271  GHIJKL      | 137             GHIJKL   
    10270  GHIJKL      | 133             GHIJKL   
    10269  GHIJKL      | 138             GHIJKL   
    10268  GHIJKL      | 137             GHIJKL   
    10267  GHIJKL      | 143             GHIJKL   
    10266  GHIKL       | 136             GHI KL   
    10265  GHIKL       | 117             GHI KL   
    10264  GHIL        |  99             GHI  L   
    10263  GHIL        | 100             GHI  L   
    10262  GHIL        |  70             GHI  L   
    10261  GHIL        |  34             GHI  L   
    10260  GH          |  25             GH   
    10259  FGH         |  43            FGH   
    10258  FGH         |  63            FGH   
    10257  FG          |  67            FG   
    10256  FG          |  66            FG   
    10255  FG          |  48            FG   
    10254  FG          |  26            FG   
    10253  FG          |  12            FG   
    10252  F           |   6            F   
    10251  F           |   3            F   
    10250  F           |   5            F   
    10249  BF          |  10        B   F   
    10248  BF          |  17        B   F   
    10247  BF          |  35        B   F   
    10246  BF          |  41        B   F   
    10245  BF          |  52        B   F   
    10244  BF          |  57        B   F   
    10243  BF          |  58        B   F   
    10242  BCF         |  89        BC  F   
    10241  BCF         | 106        BC  F   
    10240  BCF         | 137        BC  F   
    10239  BCF         | 129        BC  F   
    10238  BCEF        | 116        BC EF   
    10237  BCEF        | 129        BC EF   
    10236  BCEF        | 188        BC EF   
    10235  BCEF        | 234        BC EF   
    10234  BCEF        | 226        BC EF   
    10233  BCEF        | 258        BC EF   
    10232  BCEF        | 284        BC EF   
    10231  BCEF        | 306        BC EF   
    10230  BCDEF       | 330        BCDEF   
    10229  BCDEF       | 276        BCDEF   
    10228  BCDEF       | 213        BCDEF   
    10227  BCDEF       | 155        BCDEF   
    10226  BCDEF       | 117        BCDEF   
    10225  BCDE        | 143        BCDE   
    10224  BCDE        | 182        BCDE   
    10223  BCDE        | 185        BCDE   
    10222  BCDE        | 179        BCDE   
    10221  BCDE        | 127        BCDE   
    10220  BCDE        | 119        BCDE   
    10219  BCDE        | 114        BCDE   
    10218  BCDE        | 118        BCDE   
    10217  BCDE        | 127        BCDE   
    10216  BCDE        | 133        BCDE   
    10215  BCDE          162        BCDE   
    10214  BCDE          187        BCDE   
    10213  BCDE          203        BCDE   
    10212  BCDE          192        BCDE   
    10211  BCDE          183        BCDE   
    10210  BCDE          146        BCDE   
    10209  BCDE          117        BCDE   
    10208  BCDE          122        BCDE   
    10207  BCDE          139        BCDE   
    10206  BCDE          109        BCDE   
    10205  BDE            85        B DE   
    10204  BDE            95        B DE   
    10203  BDE            91        B DE   
    10202  BDE            62        B DE   
    10201  BDE            51        B DE   
    10200  BDE            51        B DE   
    10199  BDE            58        B DE   
    10198  BD             52        B D   
    10197  BD             57        B D   
    10196  ABD            63       AB D   
    10195  AB             69       AB   
    10194  AB             69       AB   
    10193  AB             71       AB   
    10192  AB             64       AB   
    10191  AB             33       AB   
    10190  AB             11       AB   
    10189  A               8       A   
    10188  A              15       A   
    10187  A              18       A   
    10186  A              14       A   
    10185  A              18       A   
    10184  A              32       A   
    10183  A              44       A   
    10182  A              42       A   
    10181  A              44       A   
    10180  A              32       A   
    10179  A              21       A   
    10178  A              17       A   
    10177  A              15       A   
    10176  A              21       A   
    10175  A              21       A   
    10174  A               8       A   
    10173  A               1       A   
    10172  A               1       A   
    10171  A               1       A   
    10170  Z$A             7     Z$A   
    10169  Z$A            15     Z$A   
    10168  Z$A            25     Z$A   
    10167  Z$A            27     Z$A   
    10166  Z$             32     Z$   
    10165  Z$             33     Z$   
    10164  Z$             40     Z$   
    10163  Z$             37     Z$   
    10162  Z$             33     Z$   
    10161  Z$             24     Z$   
    10160  Z$             22     Z$   
    10159  Z$             20     Z$   
    10158  Z$             27     Z$   
    10157  Z$             33     Z$   
    10156  Z$             41     Z$   
    10155  Z$             33     Z$   
    10154  Z$             24     Z$   
    10153  Z$             31     Z$   
    10152 *Z$             24     Z$   <== Open (today)  10152
    10151  Z$             15     Z$   
    10150  Z$             18     Z$   
    10149  Z$             10     Z$   
    10148  Z$              9     Z$   
    10147  Z$             12     Z$   
    10146  Z              11     Z   
    10145  Z               5     Z   
    10144  Z               7     Z   
    10143  Z               6     Z   
    10142  Z               4     Z   
 
Totals: 15834 Ticks in 197 prices.
A look at the half-hour price ranges throughout the day shows the extreme volatility. Z the opening period (07:20 to 07:30) saw a 28 point range. B period (08:30 to 09:00) had a 59 point range, with tremendous back and forth activity in B, C, D, E, and F periods (08:30 to 11:00). And so on throughout the day. Overall the market trended up, essentially wiping out the initial gap. Clearly the risk was huge the entire day.



By the close on Thursday, July 7, the world has more facts; the London blasts were limited. The market's startling recovery, closing at 10333, back within the previous day's value area signaled a return to sanity. For the value trader, the only real price of interest was the support at 10323. That occurred after 14:00. Even then value was just coming into balance and the trend was up. So it is safe to say that the value trader saw no opportunity in the market of July 7, but there is reason to consider trading the next day. Value analysis would have kept you from doing any trading July 7; so the expectation is that if the market on the 8th is crazy, value analysis can likely provide a safeguard there as well.

In the markets, there is always tomorrow. Since markets reflect the emotions of the sum of all traders (feedback), on Thursday we were treated to initial fear, followed by a strong show of confidence. Now it is likely business as usual. Again, following the analytical procedure we used on the Visual Graphic report for Wednesday, we do the same after Thursday's close.

We note that the Meta-Profile half hour bars were sloping up on July 7, the close is at the top of the Meta-Profile value area; and well within the quasi 4 day Overlay and the 10 day Overlay (really 7 days) as well. 
 
  Market Condition from Visual Graphic:  YM End of Day July 7, 2005:

                Meta-Profile      4 Day Overlay       9 Day Overlay

   Resistance         10333      Balance (10425)     Balance (10450)

   Support            10218      Balance (10265)     Balance (10270)

   Risk (estimated from 4 day)   1/8 X 160 = 20

   EOD July 7, Close: strong up.
   Market condition: upward trend
   Meta-Profile: Close at upper Meta (VAU) and within 4 Day Overlay limits
   Risk estimated from old 5 (4) Day Overlay  $100
   Ten (9) Day Overlay: Close within the 9 day limits
   Meta: Trading below 10218 would be a sign of weakness (VAL)
   Meta: Trading above 10330 would be a sign of strength (VAU)
   5 Dy Oly: below 10210 would be a confirmation of weakness (4 LLIM)
   5 Dy Oly: above 10450 would be a confirmation of strength (4 ULIM)

 
            Commodity:  YMU - MINI DJ 5 (CBOT)
         Trading Date:  2005, July 8
           Start Time:  07:20
            Stop Time:  15:15
         Profile Type:  30 minute
 
 
         CISCO Meta-Profile
-----------------------------------------------
                      V Tick      30 minute
    Price  TPOs       A Count     Tick Bars
-----------------------------------------------
    10483  M              3                   M   
    10482  M              9                   M   
    10481  MN            31                   MN   
    10480  MN            63                   MN   
    10479  MN            74                   MN   
    10478  MN            78                   MN   
    10477  MNO*          66                   MNO  L  <==  Close  10477
    10476  MNO           75                   MNO   
    10475  MNO          103                   MNO   
    10474  MNO          101                   MNO   
    10473  MNO           72                   MNO   
    10472  MNO           88                   MNO   
    10471  LMNO         120                  LMNO   
    10470  LMNO         110                  LMNO F 
    10469  LMNO          93                  LMNO   
    10468  LMNO          73                  LMNO   
    10467  LMNO          57                  LMNO   
    10466  LMN           58                  LMN   
    10465  LMN           71                  LMN   
    10464  KLMN          97                 KLMN   
    10463  KLMN         110                 KLMN    <== Pause  +  KLMN
    10462  KLMN         111                 KLMN   
    10461  KLM          125                 KLM   
    10460  KLM          128                 KLM   
    10459  KLM           98                 KLM   
    10458  HKLM          98              H  KLM   
    10457  HKLM         120              H  KLM    <== Pause  KLM  
    10456  HKLM         125              H  KLM   
    10455  HKLM         130              H  KLM   
    10454  HKLM         148              H  KLM   
    10453  HKLM         138              H  KLM   
    10452  HKL          119              H  KL   
    10451  HK         | 103              H  K   
    10450  HIK        |  93              HI K     <== Up breakout of 4 ULIM
    10449  HIK        |  92              HI K         Possible add-on point
    10448  HIJK       |  75              HIJK   
    10447  HIJK       |  87              HIJK   
    10446  HIJ        | 112              HIJ    <== Pause  HIJ
    10445  HIJ        | 144              HIJ   
    10444  GHIJ       | 131             GHIJ   
    10443  GHIJ       | 100             GHIJ    <== Pause + GHIJ
    10442  GHIJ       |  89             GHIJ   
    10441  GIJ        |  61             G IJ   
    10440  GIJ        |  69             G IJ   
    10439  GJ         |  88             G  J   
    10438  GJ         | 102             G  J   
    10437  GJ         | 107             G  J   
    10436  GJ         | 105             G  J   
    10435  GJ         | 109             G  J   
    10434  G          |  78             G   
    10433  G          |  45             G   
    10432  G          |  36             G   
    10431  G          |  62             G   
    10430  G          |  64             G   
    10429  G          |  33             G   
    10428  G          |  24             G   
    10427  G          |  19             G   
    10426  G          |  12             G   
    10425  G          |   1             G   
    10424  G          |   1             G   
    10423  G          |   7             G   
    10422  G          |   8             G   
    10421  G          |   6             G   
    10420  FG         |  10            FG   
    10419  F          |  12            F   
    10418  F          |  22            F   
    10417  F          |  43            F   
    10416  F          |  52            F   
    10415  F          |  49            F   
    10414  F          |  76            F   
    10413  F          |  82            F   
    10412  F          |  79            F   
    10411  F          |  81            F   
    10410  F          |  73            F   
    10409  F          |  57            F   
    10408  F          |  22            F   
    10407  EF         |   9           EF   
    10406  EF         |   8           EF   
    10405  EF         |  11           EF   
    10404  EF         |  22           EF   
    10403  EF         |  31           EF   
    10402  EF         |  24           EF   
    10401  EF         |  12           EF   
    10400  EF         |  24           EF   
    10399  EF         |  38           EF   
    10398  EF         |  59           EF   
    10397  DE         |  74          DE   
    10396  DE         |  52          DE   
    10395  DE         |  30          DE   
    10394  DE         |  41          DE   
    10393  DE         |  69          DE   
    10392  DE         |  99          DE   
    10391  DE         | 119          DE   
    10390  DE         | 108          DE   
    10389  DE         |  91          DE   
    10388  DE         |  97          DE   
    10387  DE         |  64          DE   
    10386  DE         |  56          DE   
    10385  DE         |  74          DE   
    10384  DE         |  73          DE   
    10383  DE         |  45          DE   
    10382  DE         |  14          DE   
    10381  ZD         |   3     Z    D   
    10380  ZD         |   3     Z    D   
    10379  ZD         |   7     Z    D   
    10378  ZD         |  25     Z    D   
    10377  ZD         |  46     Z    D   
    10376  ZD         |  51     Z    D   
    10375  ZD         |  66     Z    D   
    10374  Z$D        |  72     Z$   D   
    10373  Z$D        |  79     Z$   D   
    10372  Z$D        |  61     Z$   D   
    10371  Z$D        |  45     Z$   D   
    10370  Z$D        |  62     Z$   D   
    10369  Z$CD       |  67     Z$  CD   
    10368  Z$CD       |  60     Z$  CD   
    10367  Z$BCD      >  59     Z$ BCD   <== Pause BCD
    10366  Z$BCD      |  57     Z$ BCD   
    10365  Z$BC       |  81     Z$ BC   
    10364 *Z$BC       | 104     Z$ BC    <== Open  10364
    10363  Z$BC       | 137     Z$ BC   
    10362  Z$BC       | 173     Z$ BC   
    10361  Z$ABC      | 174     Z$ABC   
    10360  Z$ABC      | 159     Z$ABC   
    10359  Z$ABC      | 100     Z$ABC   
    10358  $ABC       |  87      $ABC   
    10357  $ABC       |  87      $ABC   
    10356  $ABC       |  77      $ABC   
    10355  $ABC       |  70      $ABC   
    10354  $ABC       |  60      $ABC   
    10353  $ABC       |  80      $ABC   
    10352  $ABC       |  86      $ABC   
    10351  $ABC       |  68      $ABC   
    10350  $ABC       |  73      $ABC   
    10349  ABC        |  67       ABC   
    10348  ABC        |  70       ABC   
    10347  ABC        |  79       ABC   
    10346  ABC        |  66       ABC   
    10345  ABC        |  65       ABC   
    10344  ABC        |  70       ABC   
    10343  ABC        |  81       ABC   
    10342  ABC        |  68       ABC   
    10341  ABC        |  28       ABC   
    10340  AB         |  16       AB   
    10339  AB         |  22       AB   
    10338  AB         |  26       AB   
    10337  B          |  17        B   
    10336  B              9        B   
    10335  B              8        B   
    10334  B              7        B   
    10333  B             16        B   <== VAU (yest)  10333 (Entry long, B period)
    10332  B             13        B   
    10331  B             13        B   
    10330  B             17        B   
    10329  B             17        B   
    10328  B             20        B   
    10327  B             25        B   
    10326  B             34        B   
    10325  B             36        B   
    10324  B             20        B   
    10323  B              6        B   
    10322  B              5        B   
    10321  B              2        B   
                                       <== VAL (yest)  10218
Totals: 10259 Ticks in 163 prices.
Value Analysis of Trading July 8
After opening well above the upper value area (VAU) in Z period, trading moved down into the value area in B period (8:30 to 9:00). As price rose back up through the upper value area (VAU), that signalled a breakout and an alert for increasing value. The rise was steady with a pause at 10366 - 10367. The next pause (10442 - 10448) was short lived and the rise continued unimpeded until 10453 and above, indicating a congestion phase. A simple, straightforward value trade would have caught the bulk of this exceptional move.