Today is Tuesday, October 20th and the market hit a little soft patch today.

Currently the S&P 500 Index is sitting on parallel support from the last 13 trading days. The support is identified by drawing a line across the tops of the recent move. Hold the same trajectory and place a parallel line at the bottom or base of the move and extend that out. That brings you to where we hit today and moved right off of it earlier in the session.

This support needs to hold and is in a similar place from a few trading days ago. Tomorrow will be a very important day to watch. If the trend is going to continue, we would probably move up early on off of support, then later in the session pull back to form a pivot. Once that pivot is formed, we will have a pivot below and a pivot above. The direction is going to be decided by a break of one of those pivots and that move should be sizable.

Currently the weekly trend is up, the daily trend is up and the hourly trend is down. So if the hourly would turn up, it is going to signify a continuation of the more dominant trend. That is how a trader should look and the market if you ask me. There are many converging signals all in different time frames, pulling and pushing against one another, but if you know how to structure yourself around the natural rhythm of the market instead of trying to impose your will on the it, you will do much better.

Over the last 5 trading days, the market has not really made any progress. If you look at an hourly chart, you can see the highs and lows and conclude that we have not made any significant progress higher only slightly. One of the reasons for this is what I call “Rotation”. The market is moving from strong hands and passing itself over to weak hands. You may ask why is that so or what exactly do you mean. I will explain.

There are many traders who have bought in at lower prices and have substantial profit, strong hands. They have the ability to let the price breath and take advantage of the larger overall trend, it has been nice. But there are so many people out there who have not been able to participate for a variety of reasons, with probably the biggest one being fear. They did not want to come in before because of all the negative talk, previous losses from last year or in the early months of this year. They have been burned and do not want to let that happen again, so this time they will be sure the market is going to move up before they get back in. These people are called “Weak Hands”. This group has been taught that you buy on a pull back and they have been doing that. Thus the reason the market has not gone down and has not gone up. The strong hands are getting out, selling to the weak hands.

This group does not have profit built up or in the market. At the first sign of trouble these people will again make an emotional decision and decide to sell once a large selloff becomes apparent and will again lose money. It is very predictable behavior and is something that can be capitalized on. It is sorry to say, but one persons panic is another persons windfall. It is all about positioning and know where those tipping points are.  There exit is your entry but in the opposite direction taking advantage of the stops. Often, I can see those tipping points coming in advance and get my order in just before the panic.

On a micro level, daytrading the swings is the exact same thing, but your competition is just a different audience, but the exact same principles at work. I have named these market swings differently over time but they are all the same. Some of the terms I have used and are original are; “pressure Points” , “Tipping Points” and “Turning Points”

I have been fond of the term, “Turning Points” and have on occasion posted a short clip of where those were in the trading day, but void of any explanation. The explanation is how I come up with those points on a consistent basis and how you could to. For those who are apart of the “Sniper Day Trading” group, that is exactly what they are getting with the rational behind it, clearly explained.

If two traders in my group were looking at the same chart understanding the method and each identified the turning points that they saw, the two traders would come up with the same turning points, a beautiful thing. The only difference would be which trades the trader took and which ones he let pass to wait for a stronger signal.  That is why I believe my training program is so powerful. I might add that those turning points are definitely tradable and all have no more than a 4 tick stop or even less, with a very high degree of accuracy. That is not something you will see everyday in the daytrading world.

A computer can not achieve what the mind can accomplish, because trading is an emotional endeavor and is ever changing. I will leave you with this today. Examine your progress and ask yourself if you are where you would like to be. If you get anything other than yes, you need to look for answers and find what can work for you before you lose your trading capital to other traders. Slow down and keep your capital safe until you feel you have a solid plan to extract what you need on a daily basis. Home runs are nice, but singles and doubles will improve the one thing that counts in this business, “THE BOTTOM LINE”.

Come back tomorrow to see some of those “Turning Points” I talked about today.

Related posts:

1. Market Turning Points
2. Key Stock Market Turning Points
3. Today’s Turning Points in the Sell Off
4. Today’s First Hour Turning Points
5. Today’s Turning Points

Tags: support, tick, time frame, trading world, turning points