suriNotes Newsletter (Free)


  Trading CMI     01/06/2012 4.45pm

CMI ABC How to Trade CMI (Combined Market Internals)

Combined Market Internals Indicator shows a Combined Market Trend of Internals of $ADV, $DECL, $TICK, $TRIN, $ESINX, XLF, SPY in Real-Time. CMI shows underlying trend in a Histogram. CMI Ribbon shows the detail of internal trends.

Picking tops and bottoms is usually a losing proposition for most traders. I remember doing that with pride (false) of my ability to pick tops/bottoms early in my career. But markets quickly served me with reality and taught me great lessons right in the beginning of my career. Now I use wisdom when I analyze market tops/bottoms and remember my past experiences :)

Most wise analysts always say, Market Internals give a Top or Bottom signal far before any of the underlying trading instruments signals. Well, so how do we find which Market Internals and what are these signals?

I use CMI (Combined Market Internals) as my key Market Indicator. It uses 6 Market Breadth instruments and an arbitrage ($ESINX) to compute a complex Mathematical equation to derive a single Market Direction and plot it as a Histogram. I follow this CMI direction as a key resource for my pattern trading. I do not follow any other internals as I think the components I selected for CMI have a great significance in aiding me with finding the market direction.

I have studied CMI for about 4 years now and I think I have a pretty good understanding of how it works. It helps me in finding 1.) Underlying the Market Internals direction, 2. ) The Divergence between CMI and my trading instruments like ES, YM or NQ 3.) A Market Top and Bottom signal when it reaches extreme values in CMI.

Here I will discuss the third point, CMI extremes as signal for Market Tops/Bottoms. Remember my consideration for Market Top or Bottom is on a 5m CMI chart. It is not daily or 60m chart. I am trying to find a temporary Tops/Bottoms in SPX giving me 3-8 points profits during intraday. If I am in a position and I see CMI reached an exhaustion levels, then I take my profits out. Historically I have seldom came across CMI trading above +/- 200 levels. Not sure exactly how 200 level matters, but I noticed when markets start to trade above +/- 150 levels, it has signaled a Top or Bottom (even short-term) for at least 3-8 points.

I have plenty of cases of CMI extremes signaled followed by Market Reversals. On Jan. 05, 2012 was such an opportunity to find a ES Top.

On Jan. 5 markets rallied all morning from a low of 1260 and reached 1278 by 1.30pm ET. I was trading an ABC Bullish pattern and was out of my positions by 1272 level. ES continued its uptrend and rallied to 1278 level. Around 1.30pm, I noticed CMI reached its exhaustion level +150 ((Chart 1). ES price level was also coincided with my pattern exhaustion level 1278. By 2pm, Market internals started to weaken as ES started to trade below CMI 150 level. This provided another trade opportunity for me to short ES from 1275 level. Around 3.45pm, I closed my trade at 1270.5 to net 4.5 points profit in ES. I knew ES may fall futher down, but I do not want to deal with market closing volatility. ES continued to fall (Chart3) and trade lower in Globex trading.


Tools
1. Combined Market Internals
  Weekly Magazine (FREE)
  Books/Poster
     Trade Chart Patterns Like The Pro (Book)
     Trade Chartmuster wie die Profis (Book)
     Trade Chart Patterns (Poster)
  Indicators
      Auto ABC
      Market Structures
      2BTop/Bottom
      TrailStops
      EquiVolume
      Combined Market Internals
      eSix
      SuperBars
      Fib.Zones
      Fib.Bands
      Volatility Zones
      GapCharts
  Patterns
      Today's Posts
      ABC Bullish
      ABC Bearish
      AB=CD
      Gartleys (5-Point patterns)
      Head and Shoulders
      Inv. Head and Shoulders
      Cup and Handles
      Parabolic Arcs
      MegaPhones
      Channels
      Flags/Pennants
      Triangles
      2B Top and Bottom
      Double Top and Bottom
      Dragons
      Market Structures
  Blog Posts
      Trading Gold
      Trading Confluence of Chart Patterns
      Trading Bearish Shark Patterns
      Trading ABC Bearish Patterns
      Trading Head and Shoulders Reversals
      Trading Rectangle Channel Patterns
      Patterns within Patterns
      Trading Symmetric Triangle Patterns
      Trading Cup and Handle Patterns
      Trading Megaphone Patterns
      How to trade your Dragon
      Trading ABC Patterns
      Parabolic Arc: What Goes Up...
      Trading Large Gaps
      Trading Parabolic Arcs
      Behavioral Biases
      Trading Chart Patterns Prematurely
      Developing SPX Cup and Handle Pattern
      Trading Patterns with Market Context an
      Trading Patterns with Market Structures
  Blog Categories
      2B Patterns
      ABC Bullish
      ABC Bearish
      Books
      CMI
      Double Bottom
      Double Top
      Dragons
      Elliott Waves
      Failed Chart Patterns
      Fib. Bands
      Fib. Zone Pivots
      Fibonacci Levels
      Floor Pivots
      Gartley/Butterfly
      Globex Pivots
      Head and Shoulders
      Inv. Head and Shoulders
      Market Structures
      MegaPhone
      Multiple Tops
      Multiple Bottoms
      Options
      Parabolic Arc
      Pivots
      Price Profile
      Seminars
      Strategies
      SuperBars
      Triangles
      Trading
      Psychology
      Videos
      Volatility Zones
      VWAP
      Wolfe Waves
      X5 Patterns
  Combo Package Offers
      ABCPack1
      ABCPack2
      ABCPack3
      ABCPack4
      ABCPack5
      ABCPack6

Copyright © 2008-2017, suriNotes.com, All Rights Reserved ®


FULL Disclaimer/Terms & Conditions

DISCLAIMER: THE RISK OF LOSS IN INVESTING STOCKS, FUTURES, OPTIONS, FOREX OR COMMODITIES CAN BE SUBSTANTIAL. YOU SHOULD THEREFORE CAREFULLY CONSIDER WHETHER SUCH INVESTMENTS ARE SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION, YOUR INVESTMENT EXPERIENCE AND OBJECTIVES, FINANCIAL RESOURCES AND OTHER RELEVANT CIRCUMSTANCES. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS, AND LOSSES ARE ALWAYS POSSIBLE. THE STRATEGIES OR TRADE SETUPS MENTIONED HEREIN SHOULD NOT BE CONSTRUED AS CONSERVATIVE STRATEGIES BUT RATHER SPECULATIVE AND FOR SHORT-TERM TRADING PURPOSES ONLY. THERE IS EQUAL OR GREATER POTENTIAL FOR LOSS WHILE USING THIS STRATEGY AND TRADE SETUPS.

All information, graphs and depictions represented in this site are OPINIONS and HYPOTHETICAL PERFORMANCE RESULTS and should be recognized as such and are not solicitations or instructions to execute orders. You shall be responsible for any decision to purchase and/or sell any of the futures products depicted herein. The owner of this site makes this material available to the public but assumes absolutely no responsibility or liability. The website contains links to other websites. These links are provided as references to identify and locate other internet resources that may be of interest. These other websites were developed by parties independent of the owner of this site and as such the owner does not assume responsibility for the accuracy or appropriateness of the information contained at, or endorse the viewpoints expressed at, such websites. Copying with intent to redistribute any part of this website is expressly prohibited without prior written consent and is and punishable under United States copyright law. All rights reserved.