Business Name Update

Not that this is highly relevant to the reason for this blog but I thought I would give a quick update. Due to the numerous businesses with similar names to Torrey Pines Capital, I've decided to just stay with the original Benjamin Investment Management. Although using a new that is identifiable with the area where we're located, we can't risk being confused with other similar firms. With that said, BIM will be the name of the business.

Best regards,
Ben

Update

Just wanted to give a quick heads up that I've closed down the Benjamin Investment Management website in preparation for the business change. Sorry I haven't been able to provide any updates regarding the markets, etc. lately as I'm swamped in other business related issues in addition to managing my trading.

Based on my current workload, I'm not sure when I'll be able to put anything together but hopefully soon.

Clarification

I've been receiving some emails lately wondering if I'm still associated with the Private Banker website. I just want to make it very clear that I am not. I helped to get it started and provided some content but decided to discontinue my association to pursue my own CTA/Hedge Fund which I'm working on currently. You may also notice that I've changed the name of the business to Torrey Pines Capital Advisors which is associated with the fund I'm creating. More on this later but I may be changing the URL address for this soon which I will provide an update.

With that said, I decided to keep my blog up and running to continue to share information that will hopefully be of some use to traders. This is all being made available during my free time and out of good heart. I do not wish to sell anything or advertise some sort of service. This is all pure generosity for the greater good because as we all know, there 's a lot of bad information out there.

I hope this clarifies everything and look forward to providing timely updates on various market occurrences and one-off trading discussions.

Best regards,
Ben

Big Picture Update For Crude Oil

Today is Wednesday the 7th of January and as I sit and wait for the EIA inventories report, I thought I would quickly share some higher time frame charts that I'm looking at for Crude Oil.

First, I want to show what the yearly bars are looking like with potential support and resistance levels.

Next, if we look at a chart with the weekly bars, we can see that the market is making its way down to the previous support/balance area of the 2008-2009 low. This will need to be watched closely as it could be supportive.

I also use a proprietary volatility measurement again on a higher time frame. We can see that this move has gone from one extreme to the other. The current area where we are may be supportive.

The last chart I will show is that of the USD. This is the problem in seeing any bid in the energy markets. A strong USD will have pricing pressure on the energy markets. The 92 area is a key level to watch here. A breakout of this could send prices way into the 100s.

This is what I'm watching on a higher time frame and I'll keep this updated as material events occur.

**Warning: Redistribution or copying of this content is strictly prohibited without our expressed written consent. This is not investment/trading advice. Trading in futures and options involves substantial risk. You may lose more than your initial investment.**

Using Order Flow To Enhance Trade Decisions

Pursuant to my last post, I will be providing market related commentary as well as thoughtful trading related discussions. What I would like to cover here today is a way to use the market's order flow to help time entries and exits. 

This of course is not trading/investment advice and as you know, you can lose your ass trading futures so be careful! Anyway, I thought I would quickly go over this past Friday's action in Crude Oil to walk through the some helpful ways to view what the market is telling you. 

Before I go into this, I want to quickly cover the Numbers Bars in Sierra Chart (aka Footprint) tool that shows the market's underlying order flow. I've been using this tool for many years and from what I've seen, there is a lot of nonsense and misconceptions out there regarding the uses of it (footprint/numbers bars). What I mean by that is people are using this in a myopic setting that does not allow for viewing the important information the market is telling them. An example is someone using a small period setting for the charting interval. This is probably the most naive thing to do and all it will do is confuse you. Of course, if you're a scalper looking for a few ticks here and there, that's different and this discussion really isn't for you.

Let's talk about gauging volume and order flow. A lot of large order flow is algorithmic and measured on time along with other elements such as VWAP, etc. Ever notice the spike in activity on a new 30 minute bar period? With that said, we know large volume moves the markets. So, what would be the most logical way to view that order flow? My best answer is by viewing the market's order flow in 30 minute periods. This allows for a clearer perspective of the volume transacting relative to the algorithmic time constraint benchmarks and for the volume to build with very little overlap. When using small chart settings, you will have major overlap and this dilutes the information. 

Understanding order type behavior and how they can be viewed in the order flow. 

There are two order type behaviors that need to be known. The first is aggressive and the second is passive. Aggressive orders are market orders in that the participant wants an immediate fill whether it be entering or exiting their position. Passive behavior can be seen in the form of limit orders and iceberg orders. The participant in this case is only willing to be filled at a specific price level(s). 

How can these be seen in the order flow? First, order flow should be looked at diagonally. Meaning measuring the volume on the bid vs. the offer. If price is moving up with large volume printing on the offer and very little on the bid, that simply means that there are aggressive buyers lifting the offer. 

Is this the case all the time? If large volume is for example, filling at the bid, does that mean there are aggressive sellers pushing the market? Not always and this is where viewing the passive activity comes in. As I mentioned, passive activity comes in the form of specific prices being filled. If there are a lot of market participants that plan to have orders filled around the same level, it too, creates an imbalance. When this occurs, it can be termed as absorption where there are more buyers vs. sellers that want to fill at that level. This can be an entry or exit into a position but the imbalance is creating a floor in the case of sellers hitting the bid into an area where there is an imbalance of passive buyers which results in the move lower to stop and reverse. I like to term this as "passive flooring" which is the opposite of "passive capping" where there would be more sellers although passive than aggressive buyers. Make sense?

Now that has been covered, let's take a look at Friday's action and how the order flow was very helpful in guiding realistic trade expectations. By the way, this is by no means a lesson on how to trade and I won't go into that.

I've provided two screenshots of the day's action with notes pointing to the pertinent information. The first chart below is where we can see the market opening and establishing its initial balance. 

The context in this scenario is that the pit session (Regular Trading Hours/RTH) opened below the previous session's range. In market profile terms, that can be considered a gap and/or an open out of range. In these types of scenarios, the most important thing we want to do here is watch to see what the market's response will be. Will there be initiative or responsive activity? 

As noted on the chart, we had responsive buying come in and push price back into the previous session's range. The order flow showed aggressive buyers lifting the offer very quickly without much seller response. Once this occurred, the expectation then is for the market to test the previous session's other extreme (previous high) to see if there are sellers. 

So the trade idea for the day was to participate on the long side and capture the range from extreme to extreme. The market is showing signs of balance and we want to lean on those extremes. A long entry made sense on the market pulling back to the previous session's low where passive buyers absorbed all the "naive" shorts that jumped in without the market ever testing the other extreme. As noted on the chart, the cumulative delta for the pit open was very strong and above any sort of threshold extreme thus showing a strong buyer imbalance. It is imperative to go with that until that imbalance changes.

Once the trade was on, we would want to continue to monitor the order flow and look for signs of exhaustion and selling/liquidation coming in at our target area. On the chart below, we can see that very clearly. We see large churn volume coupled with a compression of the 30 minute bar's range. Then the next bar finally makes its way to the target area and delta shows signs of liquidation. We can see passive seller activity in the order flow at our target area. This should be confirmation to take off risk and if leaving anything on, make sure the market doesn't take out the previous bar's low. Once that happened, the trade was done and the market confirmed that the overall balanced state is in tact. 

All of this can be seen very clearly on the charts provided. The trick is learning how to see it occur in real-time which I can tell you, takes a while. But its worth the time and effort. Anyway, I hope this has been helpful for you.

**Warning: Redistribution or copying of this content is strictly prohibited without our expressed written consent. This is not investment/trading advice. Trading in futures and options involves substantial risk. You may lose more than your initial investment.**

End Of The Year Review

First and foremost, I've decided to keep this blog up and running after shutting it down briefly. The reason for doing so was a variety of reasons including compliance procedures, etc. Anyway, I will be providing updates to this site from time-to-time based on what I'm seeing in the markets. I'll also be discussing timely trading best practices and other related topics. 

The year in review.

It was a wild year for the energy markets. Crude Oil and the underlying products have been absolutely crushed. There are a variety of reasons for this including oversupply, the continued increase in the value of the US dollar among other concerns. But as it stands today which is the last trading day of the year, we have the following:

Year's High: 107.68

Year's Low: 52.44
Year's Close: 53.27

Year's Range: 55.24

Year-Over-Year Range Change: 28.61

Year-Over-Year Price Change: -45.15

Year End Volume: 65,384,268

Change in Year-Over-Year Volume: +3,540,528

Some other interesting stats for the year are the following:

• Price has closed way outside of the year's developing value as well is the previous year's value.
• Price closed outside of the current and previous quarter's value.
• Price closed outside of the current and previous month's value.
• Price closed at roughly the week's VWAP. 
• This year's range exceeded the last five years' range and is the second largest range I have available in my data. The largest being the crash in 2008.
• Price has closed right on the long-term trend line that has been supportive since 1999, 2002 and 2009. 
• Price is very close to reaching my proprietary long-term volatility band support level of 51.35. The other extreme of this volatility level was resistance back in 2011. So, essentially moving from one extreme to the other. 

Looking ahead at the new year.

By looking at the stats I've listed here, we can see that Crude Oil and its related products are still looking very bearish. I won't postulate the how's and why's of what may occur but I can say that we could see continued downside price discovery while looking for a level buyers feel comfortable with buying this market en masse. Obviously, the supply/production levels need to pair with the existing demand but there's also the continuance of a stronger US dollar. At the time of this post, the USD is taking out the highs from 2013, 2010, 2009 and very close to 2006 and 2005's highs. This has negative pricing pressure on commodities. 

One scenario I can see happening is that price finally gets to a level where buyers are interested and wee see a price range compression for the year. Then again, it could be a case like in 2007 where the market went too far too fast and we saw a huge reversal. Definitely something to keep in mind. 

With that said, I hope you all have a happy new year and I'll be back soon with further market analysis.

**Warning: Redistribution or copying of this content is strictly prohibited without our expressed written consent. This is not investment/trading advice. Trading in futures and options involves substantial risk. You may lose more than your initial investment.**

Crude Oil Market Recap for October 6th - 17th

I finally have some time to come up for air here and commentate on what I've been seeing in the Crude Oil market. As I last spoke briefly, the "trash compactor" scenario ended up playing out. That just told me that the longer time frame sellers were still very active and once value caught up to price, we saw a violent drop through the congestion area we had been trading in.

The reason I say violent is the velocity in which the market breaks through a level which is fueled by stop market orders firing off. And we saw some incredible drops throughout that period. Since the time I last commented, we are lower by roughly $15/barrel. Very impressive to say the least.

This drop has brought on tremendous volatility which is appearing in many markets now. The S&P 500 has corrected just over 200 points (roughly 10%) from its high. The US dollar has some strength and has pushed above last year's high and hovering up there still. The CBOE Volatility Index (VIX) has broken higher. US Treasury bonds have spiked up higher but lost most of that going into the end of the week and many other commodities are continuing to see weakness.

These are indeed interesting times. Times in which traders and investors that are inexperienced see substantial draw-downs in their portfolios due to the increase in volatility. October has traditionally been tough on stocks and this time is no different.

Looking forward, I have not seen a change in this down trend in Crude Oil however there have been signs of settling the last two sessions. For one, we had a giant short covering rally yesterday that took the market up roughly $5/barrel. This move also took out the previous session's high which stopped the one time framing action that had been occurring since October 2nd. And today, we just spent time in yesterday's upper distribution area. Keep in mind that today was a roll day but certainly something to take note of in that the selling has slowed down for now.

Looking at next week, we could see further rotational balancing activity until value catches up to price again. There is of course, always the chance for the market to run higher and meet value. 85.90 was last year's low. There could be some interest at that level for sellers as well.

Here are some updated charts that I put up last time and what the market has done since.

Here's a snapshot of the weekly and monthly average true range. As you can see, we've broken above last year's extremes.

Here are some daily bar charts of the Bollinger Bands and EMAs. Both looking very bearish currently.

These charts are the quarterly and yearly VWAP. Very clear measured moves occurring here.

This weekly bar chart is showing all the levels were broke though before finding some support (for now) at the $80 level.

Last chart is a weekly bar chart as well of the longer term perspective of Crude Oil. We can see that we're still trading below last year's low. We can also see that the RSI is showing an oversold level. Keep in mind that the RSI can remain oversold for a long time so, no sure indication that we're going to see a change here but worth noting.

Hope these last few weeks have been lucrative for you!


**Warning: Redistribution or copying of this content is strictly prohibited without our expressed written consent. This is not investment/trading advice. Trading in futures and options involves substantial risk. You may lose more than your initial investment.**

The Week In Review For Crude Oil - September 29th - October 3rd, 2014

You'll have to excuse me for this week's update. I have several items that require my attention this weekend which will not allow for a detailed market update.

One thing I will say is that we continue to experience increased trading ranges and the "trash compacter" scenario I spoke of last came to fruition.

In any event, I'll be making an update in the coming week.


**Warning: Redistribution or copying of this content is strictly prohibited without our expressed written consent. This is not investment/trading advice. Trading in futures and options involves substantial risk. You may lose more than your initial investment.**

The Week In Review For Crude Oil - September 22nd - 26th, 2014

I've changed the titles to these reviews to simplify and operate under the assumption that everything being discussed forward will be revolving around technical analysis for the most part. I will discuss fundamentals from time-to-time but the technicals are crucial in trading around shorter-term directional themes. 

As we left off last week, we had been looking for two scenarios to unfold. We either broke the recent swing lows and see a continuation lower or we break out of this support area and test the contract roll gap and higher. I also mentioned that these were merely possibilities and that anything can happen in the market.

What did happen was rather interesting. As I last mentioned, I was looking for the market to break (reject) from this support/balance area and make a definitive move. What we got was a test of the low two weeks prior which held to the tick. There simply was no follow through as the selling completely dried up. 

Remember what I said about last week making a higher high by taking out the one time framing lower that had been occurring. That was a sign of potential balance returning to the market. The next thing the market did was test support where buyers were able to gradually respond. We are also at a huge level that being the year's low. We can expect there to be some large interest here by higher time frame money.

Once this became apparent, the only natural thing the market would need to do then is run back up to resistance. What we got then was one inside day of long accumulation on Tuesday. This was sparked by a test of the week's developing value area low which saw a "V" shaped bounce. From that point on, the market was clearly being controlled by buyers. Price could not make a sustained move below the week's VWAP once this really started to move higher. 

Here's a quick visual of this occurrence:

In the event you were wondering, the blue shaded areas are simply the overnight (globex) sessions. 

On Wednesday, we had the EIA inventories number which saw a drop in inventories to -4.3MM barrels down to 358 million total. Like price, inventories are hovering around the year's low. Fundamentally, this should be bullish on price. This is also a level (roughly the 360 million) where we have seen a bottom to inventories and a gradual rise from there. In January of this year, we did see a dip lower to the low 350s but essentially its a very important level to watch. 

Here's a snapshot of the report courtesy of the EIA:

We saw initial buying on the EIA number which took us up to the week's high. This knee-jerk reaction/algo driven move up stalled and dropped right back to VWAP for the week. Real Buyers (humans) again stepped in big and we saw a strong spike higher in to the close. This finally broke us out of the 3 day balance area that had been accumulating.

From that point on, the obvious directional filter became to the upside. Thursday saw a move far away from value which naturally had buyers back off until price returned back to value. We initially bounced off the developing value area high (DVAH) and then tested the swing high from Wednesday which was the week's initial balance high as well. I mention the initial balance because of its importance in the context of this week in that we were balanced and became imbalanced with buyers. This bounce was great confirmation showing that buyers were still in control. 

Lastly, yesterday (Friday) saw price open outside of value again. Once price dropped back to value, buyers stepped in and pushed the market higher. There was what many would consider an intra-day double-top which most likely drew in shorts that obviously did not see the bigger play at hand. Buyers absorbed the sellers around the day's initial balance high and cumulative delta returning back to the mean. This resulted in a great short squeeze into the close as the market spiked higher taking out the stops that accumulated over the last two days and closed the contract roll gap that we were looking for. 

Like I showed last week, here is a chart showing the week's volume and time spent at each price level with potential scenarios going forward. Let me remind everyone that this is in no way trading advice. Simply observations of potential outcomes that may occur. Please refer to the disclosures I have listed at the bottom of this page.

What I'm looking for now is a continuation higher to the 98 area. There are of course potential factors that could keep us from accomplishing this such as price is still trading outside of the developing value for the year. But the quarterly and monthly value charts are showing price returning back within value. So, this bottom up perspective could be signaling a potential change in trend. As we know, trends don't turn on a dime and its a process one in which we may be experiencing currently. 

There's still the potential for continued downside as well just to remain somewhat neutrally biased. We did trade below the year's low and this pause we've been experiencing could simply be a waiting pattern for higher time frame value to catch up to price and do what I like to refer as the "trash compacter". This often happens when opposing directional traders are lured into a position thinking the move is exhausted and they experience limited success in their position to only be for lack of a better word, violently crushed and stopped out of their position once value and price come together again. 

With that said, any long bias currently will need to be treated with caution. Additionally, next week is the last few days of the 3rd quarter. These events often experience some wild swings in the market due to rebalancing, etc. Not so much so as the equities markets but be cautious.

The last piece I want to quickly cover is the CFTC Commitment of Traders report. I look to keep an eye on this for more or less confirmation in what I'm seeing. I've highlighted the areas that I keep closest attention to as they represent more of an indication on directional expectations vs. producer hedges and Swaps. The "Managed Money" reporting is the most important area I watch as it represents what it says, managed money meaning CTAs, CPOs and any other professional related entity such as hedge funds. I also watch the "Other Reportable" as this represents mostly retail traders. 

Upon reviewing this past week's COT, we can see that the "Pro's" are positioned overwhelmingly long with a long-short ratio of almost 4:1. Retail on the other hand, is at roughly 2.5:1. We know retail is usually late or wrong so this is an interesting development to keep an eye on. 

Until next week, best of luck in the markets!


**Warning: Redistribution or copying of this content is strictly prohibited without our expressed written consent. This is not investment/trading advice. Trading in futures and options involves substantial risk. You may lose more than your initial investment.**

The Week In Review For Crude Oil - September 15th - 19th, 2014

Crude Oil experienced a round trip type of week in that it closed roughly where it opened but slightly lower. I've been watching the 92.20 - 92.40 area to serve as key support which was the year's swing low back from January and February. Last week took out that low to establish fresh lows for the year but closed right on this support area.

Fast forward to this week and we opened right in this area with buyers stepping in to push the market right back up to resistance. Once we hit the resistance area, there was "quiet" liquidation coming in while the market appeared to find balance. The last CLV14 (October) contract trading session remained within the previous session's trading range but continued liquidation became much clearer. The EIA inventory number was reported during this session as well which saw a build in inventories to 3.7 million barrels. There was a continued seller response to this number but the seller "wheel" was already in motion as the market pushed lower which retraced roughly half of Tuesday's range.

Then on Thursday, the first "formal" trading session on the CLX14 (November) contract, we saw a small roll gap between V14 and X14 and sellers ran with that gap to push the market back down into support. This was a great day in going with the seller imbalance as the market one time framed lower for the entire session. One time framing in layman's terms is when each 30 minute period does not breach the previous 30 minute period's high for down moves and low for up moves excluding inside periods in which neither the high or low of the previous period is breached. When this occurs, its a clear sign that the market is trending and one needs to go with that trend until the one time framing stops.

The market (CLX14) ended the week back down at the referenced support area and initially saw selling into the pit open which was short lived. As I just mentioned, the one time framing down stopped just before the lunch hour (EST) and proceeded to balance for the remainder of the day. One interesting note that occurred for the rest of the session is that the day's cumulative delta (difference between the bid and ask volume) continued to rise. This could be evidence of short covering and/or new longs being put into the market. I would suspect it was short covering and potentially further contract roll dynamics which should may be taken with a grain of salt.

Going into next week, we're at a key level still and we will see some clear indications of what the market is looking to do. Either we bounce off this support level and run back to test resistance again while closing out the contract change gap or we break below this support area and run to the next level of the 88 area.

Here's a map of the week's action via a Market Profile chart with some potential scenarios that "could" play out going into next week. I say "could" and not "should" as we never know what the market will do and remaining open-minded is the best approach which allows for a reaction rather than a surprise from a bias. I encourage you to click on all the charts (courtesy of Sierra Chart) below to increase the size and see more detail.

Here are some higher time frame charts that I'm watching for indications of trend continuation and levels of support and resistance.

As you can see on the higher time frame charts, the bearish sentiment is still well in tact. We've seen a pause at the current support level which is important to watch for a trend change but this past week's bar looks like a failed move. One thing to note is that this could just be evidence of potential balance returning as the one time framing down has stopped. Again, we're at the year's lows so its a very important level to keep an eye on.

In terms of rotations around higher time frame value, we can see that the market is trading within the previous year's range and testing both ends of the previous value extremes. One note about the current scenario is that we're trading outside of the current year's developing value. A continued rejection of developing value could see a breach of last year's low as we failed to take out last year's high. These are obviously huge target areas for long-term money and something to be closely watched.

Lastly, on a very large time frame perspective, we can see huge excess (rejection) being made at the key $100/barrel level while the $92/barrel has provided huge support with excess below. We know this is a huge psychological level. We have not taken out a previous year's low however since the big reversal in 2009 which could be a side effect of the liquidity gushing out of the Fed with its QE program but that's a completely different conversation in of itself. But since the market pushed higher in 2011 (most recent swing high in cycle), we've experienced major consolidation/inside bars of the 2011 year's range. This could signal a big move when price finally breaks out.

Hope this was helpful in understanding the market's current context. In summary, the overall trend is bearish but we've reached a key level on a higher time frame which may see a stall in this trend and see an eventual reversal. Further selling however could see a run for last year's low.


**Warning: Redistribution or copying of this content is strictly prohibited without our expressed written consent. This is not investment/trading advice. Trading in futures and options involves substantial risk. You may lose more than your initial investment.**