Monday, March 15, 2010

Monday March 15th Review

Well another great day of trading, as prices rotated down in the morning and finished strong in the afternoon and into the close.

Top chart is a daily chart of the ES, showing the Fib retracement levels off both the 1040 low and the 1084.50 previous low. We had a 23% fib level that got hit this morning and called the low of the day to the tick! Prices reversed and we were able to close above both the midpoint of today and the IB high. As long as 1142 holds I am anticipating some follow through on today's closing action.

Bottom chart shows the 30 minute bars of the day session only (9:30am - 4:15pm). The 23% fib was also confluence for the -61% range extension support (number 1 trade). Made for a great long entry on first touch. The number 2 trade was the first test of the IB low, great short entry on first touch. Number 3 trade was the 50% pullback and the line in the sand that the bulls needed to defend in order to protect the low of the day from being broken to the downside.

As long as 1136's hold I have a target on this long trade of 1167's, the market will reach 1220's or more by summer, summer, summertime:)

Remember also this is FOMC week, it can get rather crazy especially from Wed 2:15pm until Friday close. Trade safe!

Wednesday, March 10, 2010

Wednesday March 10th Review

Continued strength in the markets, with the small caps and the Nasdaq already breaking January highs the Dow and S+P are lagging a bit, with the ES touching its January high today.

We had slightly above average range yesterday during the open outcry market, so are range extension targets especially on the upside would be reasonable fade entries.

The market opened in value from the previous day, and took off to the upside to form the initial balance. We had our first range extension area between the -23 and -38 zones conveniently at 1148 which was the January high.

You had to take this short entry on first touch with the market being a little overextended, made for a great fade. We came back inside range as initial sellers stepped up to the plate at the yearly highs. We ended up pulling all the way back to the midpoint support, point of control and IB high of yesterday which ended up being a great long entry back into the overall trend.

Bottom chart shows the market once again accepted value higher today.

Important note: the next two days will be difficult trading days, March futures contracts get liquidated into the June Contracts, rollover time. As well we have Options Expiration, we call this quadruple witching day (Friday). Don't be surprised to see a nice gap down tommorow, I would not be surprised to see a small break down to around 1126 or so during the next two days.

But its imperative to not overtrade the mess that will more than likely transpire the next 2 days. It may be best to take the next 2 days off, enjoy the family or the weather recoup and be back Monday. Not for me however, I will still be here:)

Tuesday, March 9, 2010

Tuesday March 9th Review

On the eve of the one year anniversary of the market bottom, it was only fitting to get some continued range extension to the upside.

Market traded lower in the overnight session, we touch the 100% range extension on the short side in overnight. This is calculated by taking the high to low of the previous trading day to come up with these range extension support/resistance levels for the next day.

As soon as we touched the range extension which was double the range of yesterday, we saw immediate short covering and initial buying. In fact we rallied all the way up to the 100% range extension level on the long side. Two great low risk trade entries that worked quite well today!

We continue to build volume value higher today (bottom chart) and closed above both point of control and midpoint.

However we are approaching the January highs again, I would not be surprised to see a minor reaction at these levels maybe back down to 1126 or so again.

But once again not to sound like a broken record, the market is ultimately headed for 1230's, at least!

Monday, March 8, 2010

Monday March 8th review

Well it was a rather uneventful day today as we had some consolidation of Friday's gains. The market built value around Friday's Point of Control (bottom chart) in a very small 4pt range in the open outcry markets. Yes it was like watching paint dry!

However the only real trade of the day was to short on first touch the first resistance level I posted yesterday on the Monthly chart. That proved to be the high of the day to the tick!!

Other than that not too much to say, bull/bear line will be 1126's. I expect to see this market crack the 1200 level before summer time.

Sunday, March 7, 2010

Weekly Update and next Resistance levels.

Hope everyone had a great week of trading! Even as short term traders it is imperative to ALWAYS know where we are trading in relation to the longer time frames. I try to bring this perspective from time to time to stay grounded and to realize the overall trend of this market. Most would argue that this can't be a Bull Market because of the circumstances we are in. While that is certainly true and the debate of whether this is a bull market or still a bear market can still be debated. I think most can and should agree that at least the trend even on the longer time frame charts is and has been extremely bullish for some time.

This last week proved the point exactly, we broke out of all the short setups we had from the January - February correction and more than likely will be testing previous highs, and breaking them.

Another thing I pointed out awhile back as to why I felt the market had NOT topped in January, we touched the 1148 high in the ES 2-3 times! The pros would NOT give us that many chances to catch a significant market top like that, by studying historical price action.

So now armed with this information, what should we be looking at for upside targets? Well my top chart shows the picture, I said 1230's will trade by summertime. The 1235 level is the 61% retracement from all time highs. We have 1200's which is the low created by the Lehman's Bros collapse and a significant double bottom we created back in early '08 coming in at 1250's levels.

All are serious targets that I am fully expecting to be hit, I believe this is a scenario where the market is moving higher to attract longer time frame sellers. The lack of overall volume tells me that so far the longer time frame sellers DON'T see these prices as high enough to get out of longs/ or establish new short positions.

Remember the longer time frame participants are the ones that move markets, so it is always imperative to see where they may come in. When they do come in, you will know. It will cause a supply/demand shock with unusually high volume.

As far as shorter term resistance levels, bottom chart shows the monthly chart with range extension targets. As the market continues to move up, if there happens to be a corrective reaction as it moves up, more than likely it will occur at one of these levels above for the month of March.

The 1140 level is currently where we are at right now, I wouldn't be surprised to see a 15 point or so correction around this level before moving to new highs. As always we'll just have to wait and see.

SIDE NOTE: I have begun to trade the Euro, it is an amazing market that has 5-10x the daily range of the S+P and has a 2008 style move every year!!!! It is a money making machine, and I am going to start to post reviews on the Euro as well as I get more familiar with this amazing market, anyone have any questions about trading this monster market, please feel free to let me know.

Here's to a great week of trading!

Friday, March 5th Review - NFP + Range Expansion!

Per my post in Thursday review, "range contraction leads to range expansion". We had just that from the begiining as overnight trading saw us breaking out above the top of the 3 day trading range we were in. NFP employment numbers came out and still the market was able to hold its overnight lows (very bullish). It was off to the races and up trend day was heavily in the cards.

Best trade of the day would have been buying the 1126's as market pulled back to test the previous trading range high. We were able to hold the 100% range extension resistance for most of the day, however we had consumer credit report come out late in the day, it was a very positive report which continued to fuel the fire for the bulls, and we saw more responsive buying taking us back into the range we were in, in January.

Once again, this market will more than likely be trading 1230's by summer time.

I will post some resistance levels and an update on the longer time-frame charts soon!

Thursday, March 4, 2010

Thursday, March 4th Review: Jobs Data

We had an inside day today, which means prices stay in the previous day's range. Range expansion leads to range contraction, which in turn leads to range expansion once again. So needless to say the jobs number tommorow I believe will provide more than enough ammuntion for some range expansion.

Top chart I am using the 30 min ES chart of day session trading only (9:30am-4:15pm). We opened in range and value, tested the Point of Control before heading lower. We then tested the previous day's low which saw some initial buying, which once again brought us back up to the Point of Control.

We closed above today's midpoint and point of control, possibly setting up for some decent jobs number. If I am reading this correctly, then I expect 1129's to get tagged tomorrow. Once again my Bull/Bear line is 1113, any time spent below that level is bearish for short term.

Wednesday, March 3, 2010

Wednesday, March 3rd Review

We had a typical rotation day in the markets with average volume and daily range. It was another uneventful day to say the least, and mirrored yesterday's price action rather well.

We gaped up but still opened in yesterday's value area, I really thought we would see a gap fill early on, but bulls defended yesterday's midpoint and off we went. Again notice the 23% range extension once again calls the high of the day to the tick!!!! Made for a great short entry, and turned out to be really the best/only decent trade of the day.

Just like yesterday, market rotates up to build volume value, eventually finds some sellers and rotates right back to its starting point. Again typical rotation day action, however these small daily ranges are quite frustrating. It would be nice to see the VIX back over 20 again, maybe we could get at least 20point S+P ranges once again.

My Bull/Bear line will once again be 1113, as long as price stays above that level, a test of 1129 is imminent, then 1149 before any correction may take place, on its way to 1230's. We did however close below the midpoint again for the second straight day. So we may very well be setting up for some weakness for the rest of the week, under 1113 expect to see some long liquidation as well.

We have unemployment claims tomorrow @ 8:30 AM, and Friday is Non Farm Payroll and Unemployment Rate, which is historically the most volatile day in the markets. Expect to see some range expansion either way for the rest of the week.

A couple of things I want to say on the lack of volume on this run up, one is to look at where market is accepting value, in other words don't focus on the total volume but focus on what price levels the volume is coming in at. Which is why I always display the volume profile charts for the day in my reviews. As long as the market accepts value higher, that is bullish, doesn't necessarily matter what the total number for the day is.

I believe the lack of volume is bullish, for it shows a lack of participation by longer time frame sellers. One of the many reasons I have explained for some time now, as to why I see higher prices in the near future. Longer term bears (ones with the real money to move markets) are waiting for higher prices, is my interpretation of this price action.

Again I am fully expecting to see 1230's trade by summer time, the only thing that would sway me would be acceptance of prices below 1050's.

Lastly, I have shown many the advance - decline chart of the NYSE, that shows extreme bullish levels, even surpassing those of the 2003 bull market and how it has bounced off its 20sma even before the correction last month ended. I gave two levels using recent price action that I believed the correction of the market would end, while the market was still selling off.

I said 1080 - 1068 would match the corrections we had last fall percentage wise, well we bounced off that level initially for some nice profits, but failed to hold.

The next zone I mentioned was 1045 - 1030, which would match the correction last June/July percentage wise. I said I couldn't get bearish until I see those levels taken out, because it would have broken the rhythm of the market all the way up from the March lows.

Well we hit 1040's and bounced, breaking short setups all the way up, in light of all the bearish sentiment out there, and if I am reading the tape correctly, we will see new highs in the not too distant future.

I say all of this not as a pat on the back for myself, believe me I am no guru. But too enlighten us traders to study PRICE ACTION and VOLUME only! I can not stress this enough, I made such progress as a trader when I learned this.

There is a rhythm to every market, it's up to us to figure it out. Let CNBC talk doom and gloom and end of the world scenarios, price action has been screaming bullishness since March. The bears will certainly have their way once again at some point, although I don't believe it will be anytime soon. Regardless when they do regain control there will be a rhythm to that market as well for us to follow.

My .02

Tuesday, March 2, 2010

Tuesday March 2nd Review: Bears defend the 76% retracement level!

Top chart displays the daily chart of the ES, using retracement levels from the January highs to the 1040 low, bears had only the 76% left to defend. They did a decent job of it throughout the day. Market was unable to break above it, stopping to the tick for today.

Second chart shows the intraday action, after a gap up in the overnight session, we tagged that 76% retrace level on the daily, which was sold into. That level happened to coincide with a range extension resistance level as well for today, so it made for a great shorting opportunity, not once but also in the afternoon into the close as well.

The problem with today's action was simple, we shot up too far too fast. No test of a value area or gap fill, that is why once the buying started to dry up we had to pull back into yesterday's value area to facilitate trade again. As I said, the market is always searching for fair value, where both buyers and sellers are evenly matched, until one overpowers the other the market will then move in that direction until it is met with opposition, and on and on.

Today was the classic example of that, not enough buyers to keep prices up, so we needed to pull back to test value and attract the bulls. However we did end up closing below the midpoint of today's action, and also closing below the Point of Control high value acceptance area for today (bottom chart). That is worth paying attention to as a cautionary measure. Let's see how we trade overnight for clues on tomorrow's price action.

My Bull/Bear line is going to be 1113 for tomorrow, I think we could come back and test that Point of Control and that would still be bullish. Market accepts value below there though, I will be bearish for tomorrow.

Monday, March 1, 2010

Monday, March 1st Review

Today was the first day of a new trading month, which is historically bullish. Couple that with it being a Mutual Fund Monday and well you have a serious potential for some bullish action. Market opened with an advance - decline line around 3to 4/1 in favor of the bulls and the tick stayed in positive territory for most of the first 30 minutes of trading, which is very bullish.

Top chart shows a 50% retracement from Friday's lows to Globex highs Sunday Night/this morning(#1 on the top chart). They bought that level, even front running it by a couple ticks, and it was up from there. A rather uneventful day after the am session however, our -23% range extension target calls the high of the day to the tick once again!

Volume Point of Control (bottom chart) comes in at 1114's. Midpoint of today's range is 1110's, that will be my line in the sand, bullish above/bearish below for tomorrow.

I believe the market is headed for 1129's first before any significant pullback reaction. if/when that pullback reaction occurs I expect the market to trade up to 1149's again by at least the end of the month of March, of course on its path to eventually trading 1230's by summer time!