Thursday, August 16, 2012

Where is Market Profile Now?

So the treasury market continued to selloff into the Tokyo session, but then rallied from the London open.  How does Market Profile read this?

This is the type of price action we would expect if the oversupply condition (trend lower) has been alleviated. 

Note - this does not necessarily mean the treasury market is going to rally now (that would be my gut call).  This simply means that the trend lower is over.

Given the recent selloff, upcoming month-end seasonals, and continued Fed POMO purchases, the most likely direction is of course up (again, gut call).  However, this is a gut call, and not a model generated call.  The model only says that, with the over-supply condition alleviated, the market is no longer trending lower, and  will seek out a new center of value.  Once a new center of value is established, we can calculate a high probability trading range and go from there.  This means that the model has no position, and needs more time / price discovery before it will re-enter the market.  So, given my new outlook on trading, I too will wait for more price discovery before i re-enter the market.

I realize that this blog post is, for the most part, a whole lot of nothing.  I'm simply trying to be patient and wait for my pitch.

govttrader out..


  1. just found your blog and i like your analysis. it's a tough game w/ narrow ranges followed by big breakouts. btw new value in zn/10y seems to be forming around 132-20 to 23/ 1.78to 180. any thoughts? thanks again

  2. Honestly, its too soon to tell where the new center of value will setup...we need more horizontal development (at least 3 hours) to get a clear read. The 11am 30Y POMO buyback incentivizes dealers to push up the market so they can make high sales to the Fed. Coincidentally, this type of activity tends to prematurely peak BEFORE the actual buyback...thus reinforcing the game theory / poker concept of the market. One must always think 2 steps ahead of the market. Just thinking of the next item is short sighted..and thinking too many steps down the road is counterproductive because the large market participants tend to not think that far ahead.

    Aside from one-off surprise events like ECB or EU area official speakers, known events such as todays POMO buyback are ripe for repeat game theory trading environments.