Archive for May, 2010

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Market Drops Off as Sentiment goes with it

Thursday, May 13th, 2010

Today is Thursday, May13th and the market started to pull back after hitting overhead resistance.

Well, the market hit the overhead resistance I had talked about in the night trading. It came within a couple of points at 1175 before the sellers took advantage of the offering. I would bet you will have some holding on for big potential returns. If it does not happen, they may get stopped out for a 2-3 point loss, but if it does go down like I mentioned in yesterdays blog, it could be a big runner, potentially to 1120 area.

I saw overhead resistance at the previous break, it is not rocket science, but a pull back from that point would be a market play and I am sure there were many looking to get short after the open as well. There were a few good opportunities to do so, with one run producing a trade-able 13 S&P points.

I came into today late, at the last hour and missed all the fun. The market was in that big sell off when I started watching it. I did have a very nice trade just at the close of session for about 4.50 points.  It was that big counter trend move back up. Before that I had a couple of trades I would call bad trades. All losses are not bad trades, they are just losses and that is trading, but if I go against my rules and enter at a point that is not consistent with my method, I call that a bad trade. Even if a trade turned into a gain and I did enter properly, I would still call that a bad trade.

I was able to come back and then some, still hitting my daily goal, but I don’t like it coming so late in the day. You may not have enough time to recover if you are down. Well, that again is my fault for starting so late.

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Just a short word on the market sentiment numbers released on Wednesday morning. This is the investment newsletter writers weekly survey of bullish or bearish opinion. After hitting the tipping point on Wednesday morning the market watchers may have used that to sell it off. All the major Indexes were in the right position to sell off. They were on the right side of the chart as a top had been established with definable short entry points. The break that started on last Wednesday is exactly what we hit in the night trading from today’s session. It basically came all the way back up as if nothing had happened. The sentiment numbers being so bullish at 56% had something to do with it. At 55% and above, is typically the time when you will see a reversal.  With so many people thinking one way, that is a sign that it is about to go in the opposite direction. It lost no time as the decline really started on Wednesday and you now know the rest of the story.

Currently the numbers have dropped off to 47% and that is a good start. At 45%, that is considered neutral and 35% will usually trigger a bullish rally. If we see a pull back as mentioned, the numbers should come off again by next week. The newsletter writing community are usually trend followers and as the move becomes obvious to the majority, it then is time for a change in direction. We are not there yet and are still working off this overly bullish stance.

We will need more time for anything new to develop. You will usually see 3 to 5 good turning point signals from this tool per year. I will keep you posted and interpret as things progress.

That’s it for now, hope to see back again, for another session tomorrow.

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Trading to Win Mindset

Wednesday, May 12th, 2010

Today is Wednesday, May 12th and we saw a little follow through from last weeks sell off.

Just before the drop the market was showing clear support at S&P level 1177 and Dow 10,965. As those numbers broke, the flood  gates were opened and the institutions and Banks jumped on the short side of the market and exacerbated the situation. Some say it was engineered, but the point is, it did not happen when it was not supposed to, it happened right when it should have. The move just got overdone as it cleaned out all the stops that were just sitting there. If your stop was at the top, you don’t feel so bad, but if you were in the middle to lower end of sell off, you may be feeling violated right now. The reversal back up happened without you and as this market continues to push higher as in today 150 point plus Dow advance you are feeling worst. All I can say, those who had there stop in the middle or lower end of the sell off range needed to move it up closer to break. This is in regards to the daily charts and stock trading in general.

After saying all of that, I see two things right now. The support that broken is often times now the new resistance. That would be the numbers I mentioned above. If the market were to act in a typical fashion, we would push up either in the night trading or on the open tomorrow a little higher from where we are here and back off pretty hard. I could not say how far it would go down, but it will be significant. I would expect somewhere around S&P 1120. That is a 57 S&P point reversal off of that number if in fact it goes down like that.  The sell off  may only be short lived as then the market could make an attempt at the old high from that point, it is possible. I would like to see the sentiment numbers before I go out that far.   If you see the market blow past the two numbers I gave above 1177 S&P and Dow 10965 with conviction, I would have to consider that the it may move straight up to the old resistance at very top.

So, to recap, look at how the market handles the 1177 S&P number( in that area). If it is struggling with it, look for a selling opportunity based on your own criteria. If the market blasts past that number with ease, it may be on its way to the very top at S&P 1217.

This is just what I see at this point, but I will be reacting to the current conditions as it unfolds and you should to, if you are trading the market.

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Trading to Win Mindset:  This is the attitude that traders need. You need to feel confident with your skills as a day trader to come out on top at the end of the day. Trading has many facets to it. Money management is very important and it can not be overlooked. Many times if I am doing well and I want to keep trading, I will start to lower my contract size or if you are trading stock your share size. By doing this, you are scaling out on your equity profit. If you make a mistake or just get stopped out, it is not going to effect you as much because your size is smaller. The key is to end the day in the green.

Starting off with the right frame of mind is key. If your skills are refined and you know exactly what you are looking for, you will not feel like you have to hope or wish your trade into profitability, because it is just going to happen. You have come and or will come to expect that. That is having a wining mindset. You create your opportunity, if it is a small scalp trade or a larger runner. What ever the market does, you will come to expect that you will get what you need for the day. That is why having realistic goals are very important. It will continue to feed that wining mindset that will help you attract the next positive trade.

The opposite is true. If you feel like you are constantly on the ropes, always fearful of getting stopped out, you not only attract negative trading energy, you will create it. the results are what you dread and that makes it all even worst. If you currently don’t posses the skills to trade and maintain the edge with real money, don’t trade. I do not mean ever, but just until you find the wining mindset needed.

I think it is best to have a mirror to follow. If you can prove in practice trading that you know how to handle yourself and can come out on top most days, you now have a model to follow. If you can’t do it in practice, how are you going to do it in real live trading. Don’t lose money you don’t have to. Trade only if you have the advantage. That only makes sense, but that is not what always happens.

If you feel even a little uneasy about a position that you just put on, get out. Don’t wait to be stopped out, close it out and reevaluate the situation. Let the trade come to you. Don’t be anxious, that will only create hesitation to pull the trading trigger. Day trading need not be a struggle. I know it is for people and that is why I am saying to those who can hear me, to just relax and as I said, let the trade come to you. Don’t go searching for it to the ends of the earth. If you have to look that hard to see what it is that you need to do, you are probably not ready to trade. If you do it anyway, you will only be paying expensive tuition. Don’t do it. Keep your money safe until you feel comfortable with the process and you have “The Trading to Win Mindset”.      Today’s trades below.

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Educating Traders for Success

Tuesday, May 11th, 2010

Today is Tuesday May 11th, and the market seems to be catching its breath.

We were down slightly for the day on most of the index’s after making a run in the early session. There is a lot going on in the market and it seems to be trying to figure out what it’s next move is going to be.

There seems to be some renewed hope with the European bail out. The funny thing is, that it is our country’s money to a large extent. The way I read it, the bulk of the money is going to Germany and France to help with the Euro Dollar’s problems. Back in 2008 when the dollar had its problems , I did not see any foreign country’s coming to our aid.

I don’t want to get off on a tangent, but the foreign bankers are trying to save the Euro at all costs. It does not fit there plans for Europe and the World if the Euro fails, but the dollar can go into the tank without a wimper. There I go again. I try and not be political and I don’t mean to be, but this all has a pretty big impact on our markets. I don’t think our country can afford to spend the money they do without it coming to some sort of culmination.

At this time I can’t say when the day of reckoning is going to come, but it is, that is for sure. I don’t like to be pessimistic, but rather a realist. I am not afraid of looking for the truth as it stands. I know of many who would rather believe all is well and pretend it will all continue. The world is changing, that is for sure and to expect the status-quo is wishful at best.

Traders and investors need to diversify into other area’s of assets to safeguard themselves from the unexpected. What would have happened if the market continued to melt down at the pace we saw last Thursday into Friday. If there was a good enough excuse for the market to do that we could have seen a 2-3 thousand point decline in the Dow in a couple of days. I think we should not rule it out, but am not really calling for that now.

I heard someone say they heard financial guests say on the cable channels that this was a great time to buy? Well, maybe it is, but I don’t think I would be making any long term buying decisions right now. I don’t listen to CNBC or the news channels, as I got rid of my cable superscription over two years ago. I don’t miss it. Listening to all the experts on TV give there opinion was a little to much for me. That is not why I don’t have cable but it is a benefit, I don’t have to hear them. Most are wrong more often than not and well, I will just leave it there.

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In today’s trading I did pretty good, I had several trades and was going to quite early as I had my daily goal, but I have been trying to do some live video’s of the market action as it comes in, with commentary and an occasional trade. This is my second day of this and I do like it. I have heard from several of my students that they are learning more this way and I will try and keep it up to better help them reach a higher level within the markets. I will say, becoming a good trader does take time and commitment. The ones that really want it, will find a way to make it work. The thing is, if you have a good understanding of how the market really works and a solid trading method, it can happen much quicker.If you don’t, it could take many years still with no guarantee that you will make it.

If a trader puts time into the markets and is learning and focusing on the wrong things, it is not going to help him and often times will only hurt them. But how is a trader to know if what he is currently learning is of value or is a waste of time and money. Well, I can’t make any blanket statements because there are some good trainers and trading methods out there in the day trading world, but I think they are few and far between. I am trying to be different than the rest of the trading educators by giving a fundamental understanding of how trading really works.

Indicators are helpful for many traders, but it can become a crutch and hold good traders back from focusing on what drives the indicators, “Price”. The price always rules every time. If a trading program does not help traders to read the price as it unfolds, it can be holding you back. The markets are not random, they are very predictable, because people are predictable. The behavior of traders is no different that the rest of the population and that is why if you are able to get into there head, so to speak and know what they are thinking so that you can do the opposite, you will be on your way. Over time, you will not even have to think like that, because it will become second nature, (built into the price patterns).   If this, then that, period.

With all of that said, I have a video of my trades in my T-1 trade model. This is for short swings and scalp trades. Scalp trading can mean different things for different people, but for me it means 1 to 2 points, with an focus in the 1 point range. I take trades out of this model for more at times and still rarely ever risk more than 3 or 4 ticks on any one trade. Timing is the key and understanding when the price is going to move. When it doesn’t I get out. I don’t rely on indicators but read the price and the indicators seem to line up with my method, not the other way around. If anyone is interested, or has questions, please feel free to email me. I wish you all the very best.

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Monster Move Up On Wall Street, will it last ?

Monday, May 10th, 2010

Today is Monday May 10th and the market took investors for a ride back up.

That’s right, in a blog that I wrote but never got uploaded, (glitch), I said in that post that we had a very good chance to go yet higher as the retracement back up closed near the high of the day. That is always a good little clue as to the next move. Fridays market action settled us back into the range where today we took off. The actual number I saw us getting to initially was 1145.

Today we saw the market trade past my number by a little, which was good. As things have settled from today’s session with the S&P up close to 50 points and the Dow up over 400 points, where do we go from here?

This is only an observation as the market has with today’s run settled into a 62% retracement from top, bottom and now back to the middle at 62%.  High 1217 low of this move 1056, 62% at current price)  At 50 -62 %, a common retracement point for all trading instruments in all fractal time frames, but in the daily chart the S&P is now again looking at 62% retracement from the top.

It seems the market got excited about the prospects for a European bail out of 1 Trillion dollars. That is a lot of money. It may help in the short run, but I can’t see exactly how this is going to make all the problems in Europe go away. Many countries are in bad shape and this may just push off the “Day of Reckoning”.  I do think that day is coming when the market won’t come back but just keep going in the direction of last Thursdays market. That day may be pushed off in the future for now.

It is a good thing that as a day trader, you start each day new, with no concerns or worry’s of previous positions. I could see the market pull back off of its run up initially in tomorrows session, but we will have to see how things turn out. I would not rule out a move all the way back up to the previous high, it is possible. At that point, I think you would have to be open minded about the possibility of a new downturn? I think the market sentiment will give us a very good clue as to what is the next move. I will be looking at the new numbers coming out this week to see how much market euphoria we were able to release. It is really hard to tell right now. One thing is for sure, if you know how to day trade, you can do very well. The opposite is true just the same. Here are some things to remember.

Don’t get greedy, and don’t be controlled by fear. Both of those emotions will cause you to place trades that you wish you could take back. Place trades only if they meet your criteria. You will stand to loose a lot more than trading capital if you allow yourself to be gripped by these two emotions. Be sure to never pull your stops, ever, for any reason. If you did not enter right, don’t try and compensate your position for a wider stop. you will often times only be making a bad thing worst. If you do this and it works out, it will only cause you to do it again thinking too that this time it will work out and you will loose more than than you bargained for. Your first loss is your best. If the markets are showing a much wider trading range, you may have to move your stop to a larger position, but this will all be done ahead of time, not as the trade is getting under way. I did this last week. I usually have only a 4 tick stop while trading the S&P and with the increased volatility I moved it up to 6 ticks. That was a preset position that gets entered every time I put on a position. I feel all traders should have the same. Don’t put on a position and then go and place your stop after that. Things move to fast at times and it only takes one time for a position to move against you by several points in a blink of eye, at which time you may be shocked. That shock can cause you to freeze and before you know it, you are reeling with a huge loss.

Lastly don’t trade in fear. Fear of lose and fear of missing a big move. Both can cause you to enter the market at times that do not reflect your trading plan. It is not worth it, you need to tell yourself that now. Be disciplined. If I can’t get filled in the area that my method or plan tells me to, then I need to let it go. Don’t look at all the money you could have had. That will only cause you to enter at the top or bottom only to be stopped out. You need the trading edge, if you don’t have it over other traders, they will have it over you. Which do you want to be? If you don’t have the edge or advantage, don’t put on the position. Much of this has to do with seeing the trade ahead of time. Do not get confused with seeing what you want to see. That will hurt you as well. Being and staying objective is the name of the game. Don’t make up your mind and say that you are sure this or that is going to happen. If conditions change and you do not stay open minded, you will become blind and start forcing trades where you have no business to do so.

Be humble and trade with confidence and exercise trading discipline. If you don’t have confidence, build on it, then it will come.

Below is a video of some of today’s trades, I called the last trade pretty nicely but I did not trade it. Overall a rough start with three small losses then some nice trades to end the day in the green.

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Market Sentiment Numbers Helped Take the Market Down

Friday, May 7th, 2010

Today is Friday May 7th and the market filled the gap down after its massive price reversal yesterday.

Just a comment, before I start. I had a very nice article I wrote in yesterdays post, but I see it never got uploaded. It was a good recap of all the action in yesterdays market and why I thought it dropped like it did. Discussed market sentiment and how it played a big role in the drop. I pains me to think the thousand word article is gone. Well, I can not begin to reconstruct it, but the only thing I will say now is, the Market Sentiment numbers did hit the trigger point of over 55% by getting to 56% as they were released on Wednesday morning before the market opened. That right there gave the institutions a good enough reason to take the opposite position as they often will do when a market extreme is reached. This extreme has called the last three big moves in the market just as of lately. The first top in the market for January, the bottom in the market in the first week of February and now the secondary top just earlier this week. All have been met with selling and or buying almost on Que as those number extremes have been met. I won’t carry on with it, but I had been warning and talking about just this thing for weeks now and my readers know that.

So, the market sentiment numbers did it again, calling larger market turns of 10% or greater. It is a good timing tool for the large directional changes that take place in the market. A simple little strategy for making money with this is to sell index options in the opposite direction of the current signals generated. As they will never get in the money because the price is moving in the opposite direction. If you sell deep out of the money calls at a turning point as the market is ready to drop, they will expire worthless for sure. When you add time decay to the factor, they will dry up faster than a grape lying in the hot sun. Just a passing thought for my readers. You can get the link for that sentiment survey service in the resource section of my website. I have been following this little know tool for about 25 years and I have seen it work like nothing else for calling large directional changes. They publish the numbers for free, but release it two days after the fact, Thursday night. Having the information on Wednesday morning would have made a world of difference. I don’t advocate to blindly follow those numbers, but it can give you insight into the current price action on the daily and weekly charts and can lend itself to your overall day trading strategy. There are about 3 to 5 good signals per year and it is very timely overall.

I posted a nice real time video of my trades yesterdays and I see it never made it up with the original article, so I will post it here again, for anyone who wants to watch it. After hearing myself on it, I notice myself saying WOW a lot, pretty funny, because the movement was off the hook. Anyway, the first video is from yesterday and the second one is from today. Both are profitable with yesterday having several trades all gains, I did have only one small loss for 6 ticks on small size, the others were much bigger with one trade good for 12 S&P points. This is yesterdays video below.

The second video is from today, in which I only took one trade for about a 6 point average profit. I scaled out of three contracts mostly all in the same area and that was it for me. I have moved my stop to 6 ticks to adjust for the larger volatility but in this trade I did not need it. I did enter a touch early as far as the indicator I have up on the screen, but I don’t really follow the indicators like a text book. I trade the price and the indicators at times tells me, if it agrees or not. I would be well served as well as anyone else who would just follow the indicators I have up on the screen, but it is not the best way to trade the markets. You need to understand “Why” the indicators are saying buy or sell. That will help you to better understand what and why you are doing what you do, if that makes any sense.

Many times the indicators can help you see what you can not “Yet” see with your eyes what you should or could see in the future. With time, you will be able to see the same thing and that is what you want to achieve. With all that said, trading the indicators can help in the beginning and it can be a general road map to help you with timing. Lets face it, trading is all about “When” to pull the trigger and then managing the trade after that. I have other tools and indicators that help with that, that I do not show. This is really all I can show to let you see, that there is a reason to go long or short. Often, trading programs are difficult to understand and it becomes hard to know when to buy or sell. This is one of the reasons I am trying to show my readers when to go long or short. Again, I am not saying what the indicators are up on the screen, but it is a fraction of the total and it is only a glimpse of what is possible.

You still need to know how to trade and handle the pressure of putting on a position. Having good timing tools can help increase your confidence, but the rest of the process is then knowing and learning why you will go long or short and which trades are better than others. When watching the video below, you only need one or two trades to make a good day. I only took one trade late in the day, that was plenty. The market is not usually this busy, but the process and the signals are the same. This works great with stocks, ETF’s as well as commodities and of course E-Mini Futures. So take a look and if you have questions don’t hesitate to ask.     Have a great Weekend.

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Trading Lesson and Live Trade on S&P Futures Video

Wednesday, May 5th, 2010

Today is Wednesday, May 5th and we saw a little follow through from yesterdays sell-off.

Today we saw some follow through to the downside from yesterday, it is certainly understandable. All the investors who did not get a chance to sell on on Tuesday, did so today. Did they make the right choice? Time will tell. I do see the market trying to shore itself up as the the S&P 500 futures came 10 points back up off its low today. It had a nice retest of the early lows late in the afternoon, followed by a pretty good rally. That too is pretty typical, as traders and investors like to buy double bottoms. It can be a risky move and I feel you need a little more market know how than to blindly buy because it is a double bottom. Some say it is a sucker play and under certain circumstances I would agree.

All to often, the market will bounce off a double bottom and you will see buying interest come in. That typically would be the sucker play, because just when you think you made the right move as the market starts to go your way, selling pressure comes back in very quickly, you suddenly get panicked as your profit is now gone and you are staring at Red. A few moments pass and you are hoping for a turn around, it does not come but goes down further and takes your stop out as well as most others who are right with you. When all the stops have been cleared out, large buying volume comes back in as the market has taken off without you, while it left you with some parting gifts, a stop loss.

I see that happen all the time on all kinds of time frames. What is a traders to do. It is best to learn how to read price moves and get very familiar with all of the tricks. Support and Resistance is really what it is all about. Without going into it to much, support shows itself in various ways as does resistance. Traders need to think like the traders who are trading there market. Don’t do what they do, but look for insight into what is happening and prepare to do the opposite. Often, patterns are developed to make you think that the market is going to go one way. Successful traders need to see the setups and or traps that are being laid out for them and do the opposite. Meaning don’t take the bait.

When you get familiar with these trade patterns and games, you too will be able to counter it by positioning yourself on the right side, the side everyone else does not see. If everyone saw it, there would not be a market to trade, so be thankful for that. We just need to know and feel comfortable with how the game is played. This takes time. To often, traders will blow out so fast and wonder, “what happened”, meaning to there account. They may reload and attempt again to recover as they feel sure, this time it will work. All the while very little time has past and they have virtually no additional knowledge or experience of how the market fleeces the unprepared. If you don’t want that to be you, you need a plan, method, time, experience, patience and of-course disciple. If you have limited funds, don’t rush in to live trading until you are ready. That is a difficult thing for most people, because to many times, traders always think they are ready far to soon before they actually are. If you are going it alone, who is going to tell you, “You are ready”.  We think more highly of our abilities before its time, is the point. To counter that, preserve your equity and learn to trade by following the markets price. I would say, use no indicators at first and look for price patterns that you can exploit.

If traders did that first, then look for indicators that line up with your new understanding of how to harness the power of support and resistance, they would be on there way. You can always build on this model. If you only rely on indicators, you are leaning on the secondary, not the primary. Learn the primary first and the secondary will make much more sense to you.

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In today’s trading, I took only one trade. I could have stayed in longer but got out with my daily goal. The momentum was clearly down and as far as indicators are concerned, one of my was saying relax go with the flow and ride it out. That could have gotten me about 2.50 or 3.00 additional points, but I just took what I could easily get. I was in the trade for about 10-12 minutes I think and the bottom of the move lasted for another 20 minutes.  I had a great couple of days last Friday and Monday and have just been on cruise control yesterday and today. I have a video of the trade below and most of it is a live trade if you care to watch. Again, if you don’t have time, sold short in the afternoon sell off as things started to turn down. I scaled out at several spots between 2-3 points or so and that was it. I did see the possibility for the market to just continue as I talk about in the video, but again, no struggle, no pain, no problem. We will see what tomorrow brings.

Lastly, I see the market trading up to 1166-1167 and catching some resistance there, if it can get above, 1168, there is a good chance there will be a lot more after that. On the other side, a break of 1158 could send us down yet again, I do see support trying to build in here and it is possible 1145 could be touched as I said a couple of days ago. I think we will again see trades on both sides of the market for tomorrows session.

Until then, good trading.

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Big Market Drop Today

Tuesday, May 4th, 2010

Today is Tuesday, May 4th and the markets dropped like a rock today.

That was the general theme for the day, down she goes. Yesterday I mentioned that I thought this drop was going to come on Wednesday, a day late, but did mention that we needed to watch 1182 on the S&P futures. If that got taken out, it was going to tell us a lot about the markets intentions, is what I said. I was also watching Fridays high, but that never came into the picture because the market drop started well into the night trading.

The 1182 got taken out and we saw for a session low today of 1164. Overall, the market was down 26 points at 2.36%. The Dow was off 225 and 2% with the NASDAQ coming in as the biggest looser at minus 3%.

Where do we go from here? Well, it does look like there can easily be more downside, so I would keep that as the likely directional play, but I would bet we will see some backing and filling also, giving opportunities on both sides for day traders. Traders should give the market a little time to let itself be revealed and the picture will become clear as to direction. I do see support in the daily charts coming in around S&P 1145 for rest of this week. I can’t say for sure that it is going to get there, but it very easily could. I will be watching that area if in-fact we do drop down to that level for a bounce at least short term.

I just took a few trades today and have them in a video below if you care to see, but for those short on time I scaled out of a couple of trades for a modest daily goal in the middle of the session. I do show some potential signals and trades in my T-2 trade model. I have stripped everything else off the screen but a couple of indicators, one above and one below. I don’t say what they are but they are a small piece of the total on how I see and trade the markets.

I am going to keep my post short today, but will have some trading idea’s and or lessons in the rest of my posts this week, so stay tuned and check it out.

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Fibonacci Level’s holding at 62%

Monday, May 3rd, 2010

Hello everyone, today is Monday May 3rd and the market has been moving.

We saw a very nice rally today on Wall Street with the index’s moving back up off there recent lows from last week. I think today’s rally surprised a lot of traders. They may have been thinking another big down day, following through from last weeks wipe out. The market rarely does what the majority expects it too.

I traded very little last week, as I made my way to the S.F. Bay area to visit family and friend amongst other things. I made up for any lost opportunities with Fridays and Today’s gains. I had a real smooth day on Friday with all gains. Took 5 trades with two scaled out trades. The market was moving pretty big on Friday and caught some nice moves. Today was the same, mostly all gains, 9 trades, eight profitable and I did catch the big move that took traders by surprise.

I have a equity chart of Fridays session below and today’s trades below as they were taken. I took a couple of counter trend trades in my scalp screen today, so it may not match up exactly with trade indicators, but most of them do as I was trading out of my T-2 screen as well. In addition, I don’t trade the indicators, I trade the price and the indicator follows.

If I think the market is going to be contained or choppy, I will trade for only small moves, 2,3,4,5 ticks or what ever I think I can get, but small bursts of movements. My risk is also contained to averaging a one to one ratio or better. If the market is not going my way and struggles or I feel I have lost the edge and or momentum, I will get out with a break even or small loss, one or two ticks, while I am trading with a safety net of 1 point or 4 ticks. If I am targeting 3 or 4 ticks on the S&P, which is 12.50 per tick x the number of contracts traded, 5, than each tick is $62.50 and it takes 4 ticks to make up one S&P point, so 4 ticks is equal to $250 dollars.   One point can be had in minutes or less.

Key area’s to watch are Fridays session lows and also Fridays session highs on the S&P futures, 1207 and 1182.  I feel that both of those numbers are very important to watch and should tell us more about the markets real intentions. We are in very tricky spot right here. The market looks like it is on the right side of the chart and that is why I am sure a lot of traders were thinking after a slight retracement of Fridays sell-off that the move would resume short. So, this market could be setting itself up for a pump and dump action for Wednesdays session or there could be some additional juice left in the glass for this market to move on. We are still at this 62% market retracement and the longer the market hangs out in this area, the bigger the move.

Its to bad, I wont see the new sentiment numbers on Wednesday morning as they are released. I wait until Thursday night and get the delayed readings. A lot could happen in Wednesday and Thursdays session, but I will be watching both of those numbers especially the lower one. If 1182 gets broken and soon there after another key number traders will be watching is 1177, I can only see lower prices from that point. Until then, it looks OK, but extreme caution is in order right now.

With today’s big move, I believe it will spur only additional optimism as that has been the trend over the last weeks. A rising level of exuberance is being displayed and more and more investors and traders too are feeling better about this market. That is when you need to be careful and at least be aware of the opposite taking place. That way you won’t get caught up in the excitement of a rising market. Last week we had some big sell-offs and even in the face of that sell off, the sentiment went slightly higher. If tomorrow session stays in the upper end of today’s trading range, that is going to have an effect on the professional news letter writers that forecast there opinions on Wednesdays market open.

We could see a spike to over 55% mark which is traditionally the trigger point for a market reversal. Currently we are at 53% and change and in position for this setup. So, you can’t say you didn’t know if it hits. The significance of the market making it all the way back up to this upper end retracement level is high, meaning highly significant. This too is a key area that traders look at and could in-fact be that Fibonacci retracement trigger point as we break the two numbers I mentioned above. Fibonacci numbers are nature rhythmic area’s that the market likes to move into as it makes it way onto higher and lower destinations. I can speak more of this another day soon.

I see the volatility increasing and that is a good thing for traders. When you see large market swings, that is a time to let your profits run. I teach and talk a lot about scalp trading, because that is what I do, but when you see market moves for extended points like on Friday and even today, I feel traders should have in there bag the ability to take advantage of that. You don’t have to trade that way every day, but if you train yourself to catch the large moves when they are happening  it can make up a lot of ground in a hurry for days you may not have traded and or making up for past losses.

The thing is don’t be enamored with the big moves all the time, it will cloud your judgment on other trades. The market only trends about 30% of the time with the other 70% confined to trading ranges etc. Keep that in mind and be careful, but do not trade in fear.

Good Trading to all.

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