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CISCO Futures
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Daily Bracket Screen™
November 4, 2005©

At the end of each trading day, each delivery is examined for it's 'market condition'. Is it balancing or in a trend? If balancing, what is the time frame?

A "Market Unit" encapsulates the eternal market motion. All markets spend time in the four market phases: (1) balance, (2) transition to trend, (3) trend and (4) transition from trend to balance. Each phase is determined by the market, by the demand of traders. A balance, or congestion period, may last one, ten or more days. The transition to trend may be minutes or days; and likewise for the the trend and transition back to balance.
        The Market Unit

The Daily Bracket Screen focuses on the market's balance phase. There are several factors that make a market's balance period so important.
...Balance (congestion) is a period of decreasing volatility and potential for gain
...Balance defines value (value region from the Overlay Demand Curve)
        Overlay Demand Curve Introduction

...Value region locates the support and resistance for a time frame
...Start of a trend requires price to depart from the value area
...Time length of the balance period defines a market's intrinsic activity
...Breakout from a balance is at the low volatility - high volatility interface
...You know the breakout price ahead of time (with no prediction of occurrence time)
...Bracket Screen is the raw data for the Advice Engine
        Advice Engine Background


Balance, as it emerges from the end-of-trend, accrues day by day. First there is a one day balance, then two, then three day and so on until the next trend begins. For convenience, the Bracket Screen table is posted for 5, 10, 15 and 20 days. As noted, a two day balance would not appear on the table, but a six day balance would show up in the latest five day column. So the screen is used best for an over-all market view, i.e. which deliveries and groups are in balance. The table for October 17 is shown below 




               Bracket Screen: End of Day October 17, 2005

                     LIMU    LIML     CLO    $RNG    OCTU     POC    OCTL Testing
 5 AB  12   5   S   64350   61700   63600    2650   64019   63025   62031     
 5 CL  11   5   S    6460    6240    6436    2200    6433    6350    6267     
 5 CL  12   5   S    6390    6200    6361    1900    6367    6295    6223     
 5 DJ  12   5   S  103700  101850  103700    1850  103469  102775  102081 T   
 5 EC  12   5   L  121350  120200  120740    1437  121207  120775  120343     
 5 GC  12   5   S    4808    4686    4766    1220    4793    4747    4701     
 5 HO   1   6   L   20900   20350   20541    2310   20832   20625   20418     
 5 HO   3   6   L   20600   20200   20246    1680   20550   20400   20250     
 5 HO  11   5   L   20200   19500   19833    2940   20113   19850   19587     
 5 LB   1   6   S    3055    2990    3026     845    3047    3022    2998     
 5 LB  11   5   S    2890    2800    2877    1170    2879    2845    2811     
 5 ND  12   5   S  155900  152500  155600    3400  155475  154200  152925     
 5 NY   3   6   L    5910    5690    5757    1100    5883    5800    5717     
 5 NY  12   5   L    5720    5530    5600     950    5697    5625    5553     
 5 PL   1   6   L    9485    9270    9365    1075    9459    9377    9296     
 5 QL  11   5   S   18400   17400   18153    4200   18275   17900   17525     
 5 QL  12   5   S   18450   17650   18199    3360   18350   18050   17750     
 5 RL  12   5   S   63900   61750   63600    2150   63632   62825   62018     
 5 SF  12   5   L    7808    7776    7790     400    7804    7792    7780 T   
 5 SP  12   5   S  119700  117300  119420    6000  119400  118500  117600     
 5 SU   3   6   L    1183    1146    1146     414    1179    1164    1150 T   
 5 SV   3   6   L    7980    7880    7910     500    7968    7930    7892 T   
 5 SV  12   5   S    7920    7660    7875    1300    7888    7790    7692     
 5 TX  12   5   S    8988    8912    8963     380    8979    8950    8921     
 5 UU  12   5   S  119750  117250  119425    1250  119438  118500  117562     
10 AB  12   5   L   65850   61700   63600    4150   65332   63775   62218  * 9
10 CD  12   5   L    8576    8438    8479    1380    8559    8507    8455     
10 CL  12   5   S    6420    6050    6361    3700    6374    6235    6096     
10 CO  12   5   L    1414    1350    1367     639    1406    1382    1358     
10 DJ  12   5   S  103950  101850  103700    2100  103688  102900  102112  * 9
10 EC  12   5   L  121900  119600  120740    2875  121613  120750  119887     
10 FC  11   5   L   11775   11515   11518     130   11743   11645   11547 T   
10 GC  12   5   S    4808    4664    4766    1440    4790    4736    4682     
10 GI  12   5   S   18275   17425   18210    2125   18169   17850   17531 T   
10 HO   1   6   L   21075   20350   20541    3045   20985   20712   20440 T   
10 HO  11   5   L   20650   19050   19833    6720   20450   19850   19250     
10 HO  12   5   S   21000   19450   20236    6510   20807   20225   19643     
10 LB   1   6   L    3125    2990    3026    1755    3109    3057    3006  * 9
10 LB  11   5   S    2935    2800    2877    1755    2919    2867    2816  * 9
10 MB  12   5   L   10510   10408   10413    1062   10506   10425   10412     
10 ND  12   5   L  159900  152500  155600    7400  158975  156200  153425  * 9
10 NY   3   6   L    5910    5690    5757    1100    5883    5800    5717  * 6
10 NY  12   5   L    5720    5510    5600    1050    5694    5615    5536  * 6
10 PA  12   5   S   21800   20650   21730    1150   21657   21225   20793 T* 6
10 PL   1   6   S    9480    9250    9365    1150    9452    9365    9278  * 8
10 QL  11   5   S   18500   17400   18153    4620   18363   17950   17537  * 8
10 QL  12   5   S   18550   17650   18199    3780   18438   18100   17762  * 9
10 RL  12   5   S   64900   61750   63600    3150   64507   63325   62143  * 9
10 SP  12   5   S  120600  117300  119420    8250  120188  118950  117712  * 9
10 SU   3   6   L    1186    1122    1146     716    1178    1154    1130     
10 SU   5   6   L    1180    1126    1137     604    1174    1153    1132     
10 SV   3   6   S    7980    7720    7910    1300    7948    7850    7752 T* 7
10 SV  12   5   S    7920    7650    7875    1350    7887    7785    7683  * 8
10 TX  12   5   S    8994    8908    8963     430    8984    8951    8918     
10 UU  12   5   S  121500  117300  119425    2100  120975  119400  117825  * 9
10 YM  12   5   S   10390   10190   10370     100   10365   10290   10215  * 9
15 CO  12   5   L    1414    1346    1367     679    1406    1380    1354     
15 EC  12   5   S  121800  119550  120740    2812  121519  120675  119831     
15 FC   1   6   L   11455   11215   11245     120   11425   11335   11245 T*12
15 FC  11   5   L   11755   11510   11518     122   11725   11632   11540  *12
15 GC  12   5   S    4804    4652    4766    1520    4785    4728    4671     
15 HO   1   6   S   21100   19850   20541    5250   20944   20475   20006  *13
15 HO  11   5   L   21750   19100   19833   11130   21419   20425   19431     
15 HO  12   5   L   21900   19500   20236   10080   21600   20700   19800     
15 PL   1   6   S    9470    9180    9365    1450    9434    9325    9216     
15 SU   3   6   S    1182    1108    1146     828    1173    1145    1117     
15 SU   5   6   L    1176    1114    1137     694    1169    1145    1121  *14
15 TX  12   5   S    9000    8898    8963     510    8988    8949    8910     
20 AB  12   5   L   67700   61800   63600    5900   66963   64750   62537     
20 CD  12   5   L    8612    8440    8479    1720    8591    8526    8461     
20 CO   3   6   L    1450    1378    1405     719    1441    1414    1387     
20 CO  12   5   L    1414    1338    1367     759    1405    1376    1347     
20 EC  12   5   L  122100  119550  120740    3187  121782  120825  119868  *18
20 GC  12   5   S    4804    4646    4766    1580    4785    4725    4665     
20 GI  12   5   S   18250   16650   18210    4000   18050   17450   16850 T   
20 HO  11   5   L   21750   19100   19833   11130   21419   20425   19431     
20 HO  12   5   L   21900   19500   20236   10080   21600   20700   19800     
20 LB   1   6   L    3230    3000    3026    2990    3202    3115    3028  *16
20 ND  12   5   L  162300  152700  155600    9600  161100  157500  153900     
20 NO  11   5   S   14500   12600   13887   19000   14263   13550   12837     
20 PL   1   6   S    9470    9180    9365    1450    9434    9325    9216     
20 QL  12   5   L   20400   17700   18199   11340   20063   19050   18037 T   
20 TX  12   5   S    9000    8872    8963     640    8984    8936    8888  *17
20 YM  12   5   L   10630   10200   10370    2150   10577   10415   10253     

Figure 1. Bracket Screen for October 17, 2005
Column 1:  Number of days in the screen (Overlay Demand Curves)
Column 2:  Symbol
Column 3:  Delivery month
Column 4:  Delivery year
Column 5:  L if close above middle, S if close below middle (obs)
Column 6:  LIMU is the upper limit of the balance region
Column 7:  LIML is the lower limit of the balance region
Column 8:  CLO is the settlement price or last trade
Column 9:  $RNG is the dollar range ULIM to LLIM
Column 10: OCTU is the upper octant (the 7/8th price in the ULIM to LLIM range)
Column 11: POC is point-of-control  (the middle price in the ULIM to LLIM range)
Column 12: OCTL is the lower octant (the 1/8th price in the ULIM to LLIM range)
Column 13: Testing
             T: Price within either the upper or lower octant (testing for breakout)
                  Bears watching for a breakout
             *9: Listed as a 10 day balance, but only 9 days in balance
             *12:Listed as a 15 day balance, but only 12 days in balance
             *18:Listed as a 20 day balance, but only 18 days in balance


From the above discussion you might get the impression that a bracketing, or balancing market is an exact measure. It is not. We are measuring congestion with tools and definitions we have devised. Our tools are necessarily inexact. The market is in continual flux, even when balancing. Our measurements are approximations. So when we present a table like the above and state "the five day UU (e-mini SP) is balancing", that statement implies the tag line "as best we can tell". Still, we understand the concept and we can be assured that the table above is the best we can do without the precise (impossible to attain) knowledge of the market's condition.

Recently, a student questioned the concept, expecting, possibly, that finding congestion is like measuring the water in a bucket. The exchange will help you to appreciate the use of congestion in your strategy.


You wrote:
Subj: Bracket Screen Discrepencies This morning I pull up the bracket screen for my daily scans and it says that corn/C, oats/O, rough rice/RR, soybean meal/SM and wheat/W are all bracketing since they are listed on the bracket screen, and when I pull up those issues on the VG, it says that there is "No Bracket" for each issue listed on the 5 day time frame. Why the discrepency?


Answer:
You first need to understand the bracket screen concept and then it's application.

A bracket screen is defined as an Overlay that results in a single distribution, with the close inside the distribution. For a 5 or 10 day screen, distributions will be separated by a price (or prices) of two TPO's. A bracket is the first step in identifying a period of congestion. It is dependent on time frame (number of days in the Overlay) and compression. For instance, grains are reported in 1/4 cents, but there is little trading at quarters--in fact there is rarely a quarter cent reported on the ticker--but they do actually appear in the Liquidity Data report. An Overlay based on quarters would rarely give a bracket that fits the definition, even though the market is in such deep congestion that it is essentially dead. Halves show more bracketing and whole cents will give a good view of congestion or not. To apply the definition you must know enough about the market to use the appropriate data.

In lesson 1 at 'E. Recap' it is pointed out that the bracket screen is the starting place for selection of trading candidates, e.g. where one is likley looking at congestion. The preliminary nature of the bracket screen is emphasized in lesson 4 at 'A. Bracket Screen'.

After finding a balance in the table, the next step is to take a deeper view with the Overlay. This detail comes from the Trader Control Package. There you can see the actual Overlays for 5, 10, 15 and 20 days. A more compressed view is offered in the Visual Graphic. In both cases, your judgement comes into play. For instance, in the Mar Corn on 20050104, 5 day Overlay, you can see that by the strict definition of a bracket the market is not in balance. But the more detail in the RotProf column shows that the main segment of the profile 2200 - 2144, with close inside, traded in days p, q, r, s, t, the latest five days. So, in your judgement, you would likely say the market is in balance over the last several days, at least.

So, the fact that the Bracket Screen showed an overall balance, while Visual Graphic did not, is immaterial. The screen led you to the point where you could figure out what is going on. Your job in setting up a strategy is to understand the environment you are working within. Markets are complex systems, exact strategies are rare. What is available is market feedback, from which you get meta-profiles, Overlays, etc.. You must learn how to apply these derived data to get an edge in your trading strategies.