Sunday, September 20, 2009

More On Viewing Markets Through Volume Bars

I recently posted on the topic of denominating market charts in volume units, rather than time. Here we see volume bars for the S&P 500 e-mini (ES) futures, as drawn in e-Signal. Note how the chart condenses the overnight periods (of low volume) into fewer bars to give a clearer view of market action across a number of days. We can see clearly that the market has shifted from a trending mode to one of short-term range consolidation.

Once each bar is equivalent to all others in terms of volume of contracts traded, traditional technical indicators--such as trendlines, momentum oscillators, moving averages, cycles, and Bollinger Bands--become interesting. The challenges normally associated with how to account for overnight trading fly out the window.