Friday, February 26th review

Rather uneventful day today, not a lot of traders in the NYSE pit today due to the storm. We had some consolidation of the gains on Thursday.

Globex session tested the 76% fib level mentioned in Thursday's review, after the opening bell we pulled back to test the Value Area high, which was also a 50% long from Thursday's low to the close. We had solid support in the 1094-1096 area there as 1094 which was my line in the sand was the midpoint of the entire day Thursday as well. That area held strong and was immediately met with initial buying from longer timeframe traders.

Not a whole lot of volume, so you really can't read anything into this. Next week should be interesting, Double Top to 1130's or pullback to midpoint at 1076-1079? That will be the question. Still holding firm to us seeing 1230ish by summer.

Trade of the day
1- Turned out to be the only trade of the day, buying the midpoint and value area high.

Thursday February 25th, what a day!!!

Well what an amazing day we had today, I love this type of market! Obviously we saw weakness overnight and broke below my bull/bear line in the sand from yesterday's post. So was anticipating weakness in the morning.

Top chart is the 30 minute chart showing the last few trading sessions, from the most recent highs to Tuesdays sell off day. Wednesday was an inside day that retraced back to the 61% level for the bears. Bears defended it well, and later on defended the 50% retrace level, so lower highs lower lows, you know whatever the "news" or the unemployment claims data at 8:30 was, it was going to be sold into because of the current structure of the market.

Needless to say we sold off on the "news", check out the -23% range extension level on the charts, called the low of the day to the TICK!!!!! This is not a fluke, this is black box trading at it's best, and happens a lot. We rallied back up to test Tuesday's low, where we were met some more selling pressure.

Market retraced to test the Initial Balance low, and it was all downhill from there for the bears, as we rallied strong into the close on high volume!!

Now I felt like today was not going to be a downtrend day from the get go, the tape just didn't look right. Now I am more bullish than most in these times, but check out the third chart above. This is the VIX chart for the day, as you can see it was moving down pretty much all day, not confiming continued selling.

So we had a good day, what happens from here? Good question, check out the second chart above to see the 4hr chart of the ES from last lows to last highs, spanning about 2 weeks or so. We rallied back today again into the next measured move short on the longer time frame, when we hit the -23% target the bears handed the market back to the bulls to take over, now that we are in the next short setup the bears need to defend this setup or the correction will be over and 1130's will be achieved next, on the way up to 1230 in the next few months.

The key levels are 1102 - 1106 for the bears to defend, for the bears out there short these levels with stops above 1106 targeting the midpoint of this move up off the 1040 lows coming in around 1076.75. So your risking 4-5 points to potentially make 30pts, that's a great setup!

For the bulls, wait for a pullback to today's point of control to enter position, if 1106 seems to be holding abandon ship, if it breaks first target should be last highs at 1112.75, then 1130's. Not as good of a setup as the bears have right now, but still good enough.

We have GDP and New Home Sales as big economic news tomorrow, expect some decent action in the AM session at least. My bull/bear line in the sand for tomorrow is 1094ish.

Trade of the day
Obviously to buy the -23% range extension, trail it all the way up for big money!!!

Wednesday, February 24th Review, Bernanke does it again!

As I stated in yesterday's review, don't be surprised to see the bulls recapture most if not all of the losses from yesterday. Scenario played out beautifully!

As you can see in the top chart, the overnight session spent most of the time building value above the Value Area High (sign of strength), and opened just below it. Market internals were good as well. We had new home sales data come out, which was not very good at all. The market sold off right into the perfect long setup for the bulls at the Point of Control and IB low, you had to take this long position on first touch! Another reason why I say that market structure determines direction and not news, the news only provides a place to shake out or stop out weak money over to the pros. If you don't understand market structure, you won't understand why the market reacts the way it does to "news".

So the new home sales numbers shook out the weak longs and made for great long setup for the longer time frame buyers, as prices rallied fast without much pullback to jump in on. Rest of the day was uneventful as prices consolidated gains in the 1100-1105 area. Market closes just above today's Point of Control.

The volume chart shows you the value built higher from yesterday, with 1103 being the high volume value area. Tomorrow we have unemployment claims numbers @ 8:30am, my bias is bullish for tomorrow if prices can hold the 1098 level, below it more long liquidation may occur, and 1085 - 1087 will be my target. However I believe the market is headed for 1130 soon before any significant reaction will occur. 1230 area should be reached by summer.

Trade of the day
#2 - Long at POC and IB low off the New Home Sales data, doesn't get anymore easy money as that!

Tuesday February 23 Review, Consumer Confidence Dissapoints!

Well market had closed at it's highs the previous 5 trading sessions, so what do you do to alleviate the overbought condition? Send out some really bad consumer confidence numbers and bingo.... problem solved!

Market rallied and double topped during globex session, prices where immediately rejected as Dollar rallied and Euro sold off.

By 6:30am we were barely holding yesterday's IB low and well below Value area low. The market opened below value (sign of weakness), but A/D initially wasn't looking bad as Decliners had only a 1/1.5 advantage, initially this is a buying opportunity as Market internals not confirming price under value.

Thus we saw prices rally to test the Point of Control and close its gap around 9:47 am. Consumer Confidence numbers came out at 10am, they were well below estimates, thus bringing in longer time frame sellers and the market quickly sold off on the news.

A/D line became increasingly more negative after the numbers getting to -3/1, with heavy negative breadth as well.

The rest of the day was rather uneventful as bulls/bears battled, the bulls defended last week's midpoint and the bears tried to defend the IB low, market ended up closing inside the IB, but well below value.

Look for Bernanke tomorrow to move this market one way or the other, although we saw a lot of selling, the NYSE tick never hit any extreme levels, so it wasn't heavy volume panic selling. Don't be surprised to see this reverse and bears lose all of this ground tomorrow. Regardless, we must keep an open mind in this market.

Trade(s) of the day-
#3 -Short the Point of Control right before the numbers were released by far! It was a risky trade but would have paid off exceptionally well in a small amount of time. My type of trade!

#4 - Long at the -23% range extension off the IB, black box trading at its best!

Monday February 22nd Review

A rather uneventful Monday today, we had a typical rotational day building value higher and higher up the ladder. The advance-decline line was virtually flat the entire session. I haven't seen that in awhile, regardless there were trading opportunities outlined in the charts above still on a day like today.

After a small gap up into resistance during the globex session, we sold off and opened the day session at the value area high, we proceeded to close the gap in the first 30 minutes of trading.

There was the gap fill and the value area low (VAL) as confluence, that held all throughout the Initial Balance which offered a great low risk entry for a long. Once we bounced, we ran right into the Point of control, which we ran into more selling which knocked the market back near day session lows.

We then go on to make a flag formation, as buyers and sellers both compete for positions in a flat market. On the break to the upside, target should be now Value Area High (VAH) which again was met with sellers, right back into the VAL once again.

Even with the uneventful day, we still had opportunites to play ping pong with the value areas and make money, it is no coincidence that the market stopped exactly where it did. There is structure in Market Profile, these value areas are like magnets for price. They can be both targets and entries.

In a flat market like today, fading moves outside value areas are acceptable. When the internals are heavily favored in one direction, as in a trend day. Then it is ok to follow the trend by buying pullback to a value area.

Market is on its way to 1230's.