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CISCO Futures

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Email dljones@cisco-futures.com




Overlay Demand Curves (tm)

The Overlay was developed to extend the one-day range of the Meta-Profile to a longer time-frame. An Overlay is a linear aggregation of profiles. Whereas the profile finds one-day value (value area), the Overlay locates value for the time period desired. Overlay's are especially valuable in recognizing balanced markets. They show upper and lower limits (support and resistance), estimate risk and provide a distribution that can be analyzed (the shape can show how demand comes into the market).

For more detail, go to homepage, left sidebar and in the "Background" section, click on 'Auction Market Theory' scroll down to 'Development of an Overlay'. Also, in "Background", click on 'Trader Control Package' Also, in "Free Stuff" you can find the book, Value Based Power Trading at 'Free Online Text Book'.


Using the Overlay Demand Curve
The Overlay gives the condition of the market. It identifies three basic trading reference points for a balanced market:
- upside balance limit (resistance)
- risk
- downside balance limit (support)

A breakout from the balance is an alert for start of trend.

In the absence of a breakout you will sell near the upper resistance or buy near the lower support price.

In a breakout situation, the shape of the Overlay distribution graphically pictures the transition to trend, the pauses and the transition back to balance. The phases of the market (balance, transition, trend, transition, balance, etc.) point the trader to different strategies.



The Overlay below is for the last 10 days. It is an accumulation of TPO's (the X's) over the last 10 days at all traded prices.

TPO's are a measure of the trading volume. A TPO is created when at least one trade takes place in a particular 30 minute period at a particular price. Think of the market as being broken down into a series of 30 minute 'mini' days.

An overlay forms a bracket when the overlay is a bell- shaped distribution of X's with a minimum peak number of X's. Less than two X's signals the end of a distribution.

The ends of the bracket define the breakout price levels. The center of the bracket defines value.

An excursion of price from the bracket indicates a trend has begun. This is called a 'breakout'.

Sources of Overlay Demand Curves
The Trader Control Package provides Overlays for the last 5,10,15,20 days.
Visual Graphic is a compact display of the Trader Control Package
Overlays can be ordered separately for arbitrary time periods.



Example of Overlay Breakout, Trend and Pause
   (Overlays compressed for display purposes)



Overlay #1  A Balanced Market: A Single Distribution                   
                                    
TPO VOLUME OVERLAY AND PRICE ROTATION PROFILE
MAR 03 S&P 500 (CME-IOM)     
01 09 03 TO 01 15 03

 PRICE DYS  L/F ROT PROFILE *  TPOS TPO VOL OVERLAY *
 
 93500  1         5               1 X
 93400  1         5               2 XX
 93300  2         45              3 XXX  <== Upper Limit
 93200  3    7    457             4 XXXX
 93100  4    7    4567            7 XXXXXXX
 93000  4    7    4567            8 XXXXXXXX
 92900  5   37    34567          18 XXXXXXXXXXXXXXXXXX
 92800  5   37    34567          22 XXXXXXXXXXXXXXXXXXXXXX
 92700  5   37    34567          33 XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
 92600  5   37    34567          33 XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
 92500  5   37    34567          24 XXXXXXXXXXXXXXXXXXXXXXXX
 92400  5   37    34567          20 XXXXXXXXXXXXXXXXXXXX
 92300  5   37    34567          17 XXXXXXXXXXXXXXXXX
 92200  5   37    34567          13 XXXXXXXXXXXXX
 92100  5   37    34567           9 XXXXXXXXX  O, C
 92000  3   37    347             7 XXXXXXX
 91900  3   37    347            11 XXXXXXXXXXX
 91800  3   37    347            13 XXXXXXXXXXXXX
 91700  3   37    347            10 XXXXXXXXXX
 91600  3   37    347             6 XXXXXX  <== Lower Limit
 91500  2   3     34              2 XX
 
 
TPO CONTROL PRICE (HPTP)     92700
AVERAGE TPO PER TIC         12.524

ROT PROFILE identifies the day ranges.  The largest number is the latest day.
  7 = Jan 15
  6 = Jan 14
  5 = Jan 13
  4 = Jan 10
  3 = Jan 9

 

Overlay #2  Single distribution but close below the Lower
            Limit, therefore not in balance.  Transitioning
            to a trend probably.  There is a breakout from
            the lower limit of yesterday (91600).

TPO VOLUME OVERLAY AND PRICE ROTATION PROFILE
MAR 03 S&P 500 (CME-IOM)     
01 10 03 TO 01 16 03

 PRICE DYS  L/F ROT PROFILE *  TPOS TPO VOL OVERLAY *
 
 93500  1         5               1 X
 93400  1         5               2 XX
 93300  2   4     45              3 XXX  <== Upper Limit (no longer valid)
 93200  3   4     457             4 XXXX
 93100  4   4     4567            7 XXXXXXX
 93000  4   4     4567            8 XXXXXXXX
 92900  4   4     4567           17 XXXXXXXXXXXXXXXXX
 92800  4   4     4567           21 XXXXXXXXXXXXXXXXXXXXX
 92700  4   4     4567           29 XXXXXXXXXXXXXXXXXXXXXXXXXXXXX
 92600  4   4     4567           26 XXXXXXXXXXXXXXXXXXXXXXXXXX
 92500  5   48    45678          19 XXXXXXXXXXXXXXXXXXX
 92400  5   48    45678          15 XXXXXXXXXXXXXXX
 92300  5   48    45678          14 XXXXXXXXXXXXXX
 92200  5   48    45678          14 XXXXXXXXXXXXXX
 92100  5   48    45678          10 XXXXXXXXXX
 92000  3   48    478            11 XXXXXXXXXXX
 91900  3   48    478            16 XXXXXXXXXXXXXXXX
 91800  3   48    478            16 XXXXXXXXXXXXXXXX
 91700  3   48    478            15 XXXXXXXXXXXXXXX  O
 91600  3   48    478            10 XXXXXXXXXX  <== Breakout
 91500  2   48    48              6 XXXXXX
 91400  1    8    8               6 XXXXXX
 91300  1    8    8               4 XXXX 
 91200  1    8    8               2 XX  C
 91100  1    8    8               1 X
 

 
TPO CONTROL PRICE (HPTP)     92700
AVERAGE TPO PER TIC         11.080

ROT PROFILE identifies the day ranges.  The largest number is the latest day.
  8 = Jan 16
  7 = Jan 15
  6 = Jan 14
  5 = Jan 13
  4 = Jan 10
 

Overlay #3  Trending.  Possible congestion starting
            around 90100.

TPO VOLUME OVERLAY AND PRICE ROTATION PROFILE
MAR 03 S&P 500 (CME-IOM)     
01 13 03 TO 01 17 03

 PRICE DYS  L/F ROT PROFILE *  TPOS TPO VOL OVERLAY *
 
 93500  1   5     5               1 X
 93400  1   5     5               2 XX
 93300  1   5     5               2 XX
 93200  2   5     57              3 XXX  <== Upper Limit (no longer valid)
 93100  3   5     567             5 XXXXX
 93000  3   5     567             6 XXXXXX
 92900  3   5     567            12 XXXXXXXXXXXX
 92800  3   5     567            15 XXXXXXXXXXXXXXX
 92700  3   5     567            20 XXXXXXXXXXXXXXXXXXXX
 92600  3   5     567            17 XXXXXXXXXXXXXXXXX
 92500  4   5     5678           13 XXXXXXXXXXXXX
 92400  4   5     5678            9 XXXXXXXXX
 92300  4   5     5678            9 XXXXXXXXX
 92200  4   5     5678           11 XXXXXXXXXXX
 92100  4   5     5678            9 XXXXXXXXX
 92000  2         78             10 XXXXXXXXXX
 91900  2         78             15 XXXXXXXXXXXXXXX
 91800  2         78             15 XXXXXXXXXXXXXXX
 91700  2         78             14 XXXXXXXXXXXXXX
 91600  2         78              9 XXXXXXXXX
 91500  1         8               5 XXXXX
 91400  1         8               6 XXXXXX
 91300  1         8               4 XXXX  <== Lower Limit (no longer valid)
 91200  1         8               2 XX <== Breakout
 91100  1         8               1 X
 90900  1    9    9               1 X
 90800  1    9    9               3 XXX
 90700  1    9    9               3 XXX
 90600  1    9    9               2 XX  O
 90500  1    9    9               2 XX
 90400  1    9    9               3 XXX
 90300  1    9    9               3 XXX  C
 90200  1    9    9               7 XXXXXXX
 90100  1    9    9               9 XXXXXXXXX  <== Pause
 90000  1    9    9               5 XXXXX
 89900  1    9    9               4 XXXX
 89800  1    9    9               1 X
 
 
TPO CONTROL PRICE (HPTP)     92700
AVERAGE TPO PER TIC          6.973

ROT PROFILE identifies the day ranges.  The largest number is the latest day.
  9 = Jan 17
  8 = Jan 16
  7 = Jan 15
  6 = Jan 14
  5 = Jan 13
 
For more information phone 1-800-800-7227 or 1-303-306-1521
Send e-mail to CISCO <dljones@cisco-futures.com>
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