Archive for 2010

« Older Entries
Newer Entries »

What Is Sniper Day Trading?

Tuesday, November 9th, 2010

Today is Monday November 8th, 2010 and we saw a slow narrow range today as the S&P and Dow backed off their most recent new high ground with the Dow off -37 and the S&P -2 for the day.

We saw a slow narrow range today as the market gaped lower to start things off. We did see another gap filled today, but it took most of the session to get it done. As you can see over the last few weeks, most all the gaps have been filled within the same day or by the open of the next session.

We do have a large gap that is still open from a previous session and would be a good idea to remember where it is and when it happened. It happened 3 sessions ago at 1198 and as mentioned is still open.

I would be watching 1215 for Tuesdays session as an important area of interest. If that area gives way, it is possible the market will work its way back down to fill that gap. Currently in the night session the market is off several points and sitting just above that number, by about one point, so we shall see what happens in the morning.

One interesting thing to note is the Dow never came close to filling its opening gap even though the S&P did. That too is important to know and remember going forward.

In yesterdays blog, I was talking about how important it is to understand how a certain elements work together to give a trader the statistical trading edge. The elements are “time, space and energy”. Space would amount to the movement of price, since its travels are done in an element of space. Understanding all of these elements are important. Some do have a higher value than others, but all are essential.

The element of time is the first one, which traders are required to wait. That waiting is a component of time and essential for the price to work its way into position for its next move. Without time, space (price movement) would not exist and so is needed. It is in passing of time that allows traders to establish there positions and creates price movement, the second element. There is a right time and a wrong time to enter a position. You want to learn when to enter at the “tipping point”. An exact point of time that prices move in your favor with little draw down. That is not always easy to do but it is possible. Enter to soon and you incur additional risk and potential for loss. Enter to late, when the move is now seen by all and you risk being the answer to someones exit, by taking the other side along with everyone else. It can be summed up in two words, “Trade Timing”.

The second element is space, where prices move. Price moves through definable boundaries created by its participants. Those boundaries take place over time and are often well established. If you can spot the trade boundaries and allow time to work for you, you will begin to possess the trading advantage. So, you are allowing time to pass so that price can establish trade boundaries that are definable to you, the trader. So far we have the first two elements working together to create and give you that trading advantage, time and space.

That brings us to the last element, trade energy. This element is not often thought of, but is key in working with the first two. The energy is essential to the move in that, it is what drives the price higher and or lower. That happens at a specific time as discussed, but the energy is what moves the price through space, the second element. All three are working together. As time passes, energy is often building, depending on the definable boundaries discussed above. The way that happens is again first by the passing of time as traders establish positions above and below boundaries that they feel is important to them. When you can identify which area’s are of greatest importance to the largest group of traders, you will often be able spot “stored energy”. It is just sitting there. Here again, you will need the passing of time to allow that stored energy to build.

Generally the bulk of traders and investors think alike. Thinking as they do to better spot where there stops and being prepared to do the opposite can be one way see these area’s. Price establishes itself through space by creating highs and lows. Each high and low says something as pivot points are created. Its understanding this language and the combination of all three elements that creates the trading advantage we seek.

Sniper Day Trading seeks to exploit those three elements to put the statistical trading advantage on my side of aisle. When I can do that, I pick up winning trades. We don’t need a lot as we all know the futures market is highly leverage. The key is better to keep risk low and gains consistent, even if those gains are at times small.

There are key spots on a trade screen that represent small windows of opportunities. If we hit these windows of opportunity right, we keep risk low and have a high degree of success in hitting at least a modest target. We come to learn what price should do at these small windows and when it doesn’t do as it should, getting out does not have to be letting your stop get taken out. Managing the trade is very important, but doing the first part right, this part is much easier as you will be looking to take your profits and not running for cover.

All of this takes time and an understanding of how price action works in conjunction with the elements discussed. Trade indicators are only a reflection of the three trade elements discussed above. They can help you see what is on the screen already, but are not able to identify, because of lack of knowledge and screen time. This is something that can and needs to be learned, so don’t be down or hard on yourself if you are not make the progress you hoped for. More tomorrow……. Today’s trades below.

Tags: , , , , ,
Posted in Trading Lesson | No Comments »

Fridays Scalp Trades

Sunday, November 7th, 2010

This is for Friday’s market November 5th, 2010 as the S&P closed up 3.75 and the Dow +9.

A last minute rally on Friday put the market back on top for the day and week, as things turned out well for those long the market. We hit my mental target on the daily charts of S&P 1120 with now a few points to spare. On Thursdays blog post I mentioned that we would likely push up the rest of the way to hit the 1120 S&P area I had been calling for months back. That is done and satisfied.

This market looks like it might have a little more juice in it, but I am not calling for any additional moves at this time. I would just like to see how the price action handles this new high territory. The max I could see if the market wanted to continue is rough 1148, but we may need some time to move over in the charts before we see that. As time goes by the target does potentially have more room to move, but there are many opposing forces at work here.

Just a quick note on the Fed move from last week. I knew that day would come when the gov would price there way out of the problem and they are. They put a fancy name on it, Q2 Quantitative easing. I just can hardly believe it, that they are doing this with a straight face. They have signaled to the world that the dollar is dieing and now even more so. Who would want to buy treasuries after know what is going on. That in and off itself is amazing. We gave control over to the Fed in, I believe 1913.  The Fed is a private corporation for profit and has nothing to do with them being a government agency. That would be like saying Federal Express is run by the gov.

All of this is no secret and is these days very public knowledge. It wasn’t always like that, but the Fed has gotten a lot of press these days. Somehow the markets are viewing this as a good thing. Well, it won’t always be like that. There is a lot of anger floating around the world as the dollar is the world reserve currency.

This is just want happen. The world is having a party and all the countries are invited. They are serving lemonade as the main beverage and in the beginning it tastes great. But as the night moves on, someone is adding just water to the lemonade. They keep doing it through the night hiding at first, but as it get later, they are just pouring straight water in with everyone to see. The thing is, the participating countries have put in to throw the party and now are starting to feel like they are getting the shaft.

A corny example, I know, but its still accurate. There will be some fall out for this coming. When I can’t say, but the longer it goes the worse it will be.  It has been like that for years and we will see change, that is for sure, just like it was promised.

Gold and Silver are spiking as confidence is waning in the U.S.  How it will all shake out, is not a pretty picture and won’t begin to speculate.

As traders, we need to prepare for increased volatility. That may mean, bigger moves and a little more risk to match that. It is vital to a traders survival that he or she knows where to get in with a minimal amount of draw down. Doing so, affords, gives and creates opportunity. Coming back from a 3 point loss in the S&P emini’s is at times hard to do. If it came to you in one trade, you will need the three points + additional points to make a profit. It the market is not giving it up, you have a problem. On the other hand, if you took a 4 or 5 tick loss instead, that is very easy to make up and likely can be done in one very small little move, of which happens all the time.

Trader timing is critical, which is one of the three key elements for success that is needed. The three elements are “Time” , “Space (price”) and “Energy”.  The middle one, space, is just that price moves through space to get where it is going.

I will pick up from here in tomorrows blog where I left off on this today. It is an interesting subject and is the basis for how I trade.

Fridays scalp trades below, Good Trading this coming week.

Tags:
Posted in Price Action | No Comments »

Market Moves to Two Year Highs Across all Index’s

Thursday, November 4th, 2010

Today is Thursday November 4th, 2010 and we saw the extension of yesterdays closing break extended to today’s session in new market highs across the board with the Dow + 220 and the S&P + 23.

Well, we finally saw resolve to the upside as I have been saying for some time. Support had been holding and all the news was out, so the last thing was for the market to do its thing and it did. I would say, it took a little longer than I thought, but in retrospect I can see why. The main point is that support held until the final break took place and I had reported that all along the way. I gave a few parameters that needed to stay in tack for this extension to continue and we stayed well above those levels.

Yesterday we saw another gap filled just before the take off after the Fed announcement and must have made it like 10-12 gaps filled in a row. It pays to watch for that, but today we have yet another large gap. Will it to be filled, say by tomorrow, which has been the pattern? Well that we don’t know yet, but what we do know is that we are 1.25 points away from hitting the long awaited target I had been calling for since the market bottom.

I was waving a flag saying this market was not going to drop back in late August, but everyone was jumping on the band wagon that a crash was coming from those levels. They were sighting things like the “Hindenburg Effect”, which was giving signals that a crash was coming as well as a list of other reasons. I knew and reported that it was not likely and very improbable it was going to happen and was stating  just the opposite.

A very large rally was coming and would take the masses by surprise. The current price then was  S&P 1040 and wrote many times in my blog that a confirmation would be given that we are underway once 1060 was breached. You can go back and read by blog posting then to see it as I am saying. That is not the first, second, third, forth or even fifth time this last year I had called ahead of time a large market move, before it happened.

From the 1040 area, which was the initial break and confirmation at 1060, that puts this move at +180 and +160 S&P points from that call in late August early September. The target was S&P 1220 and we are currently at 1218.75. I would say, the market could go a little higher, but once we hit the 1220 number, I would call that one filled.

Being able to call the daily market is really no difference than calling an hourly, minute or tick chart. The movement is the same as the market is fractal in nature. You will see the same type of moves in all types of time frames giving you results that you can come to expect. If this, than than can be expected, as price builds into discernible formations.

I would love to see the market continue to move higher as I said earlier, but from this 1220 level, I see resistance coming. The market sentiment would say that there can be more. The trend is up and we will see how this move here at the upper end of the channel will express itself.

Currently the Investor Sentiment did move up and is currently only 46%. It moved up a whole 1% since last week. Their is still 9 % to go before a market extreme is reached and would suggest higher prices are possible. That is all I can say once 1220 is reached, likely tomorrow.

Given the potential additional room and being in traditionally a strong market month, “November”, we could see more over the next few weeks. I will say that what I was looking for has been satisfied and leave the rest the others who want to call the exact top. I may give commentary on this ahead as I look at my work, reading the daily market, but I feel satisfied in reaching this verbal target.

Tentatively, I see big trouble ahead and it is some pretty scary stuff, but nothing as of yet. I will let all my readers know when the danger zone for a market crash is at it highest and most likely, but again, currently all is well. Don’t let your guard down though as in the weeks ahead, things will change. How fast, I can’t say at this time, but I should be able to see it coming ahead of time, just like I have called all the major market turns this last two years since I have been writing my blog.

With all that said, I started late today following the markets, around 11:30 am West Coast and did have a loosing day. I was up against my daily loss limit and did elect to take a small recovery trade to lessen the damage, but I just gave up towards the end. I saw myself trying to force the trades and I knew I was out of sync. That is to bad because today early on, we had some real easy market reads and know if I was trading early, I would have hit those trades for some early points.

That did not happen and felt the afternoon pressure of time running out on me, as for about an hour, things went very slow. There, I just needed to wait it out, but I got anxious and tried to force trades, not entering where I should have. As I look to my indicators, they don’t line up at all. That is not the method but a guild to show me that I am off in my entries. It happens and it happens to everyone. If you have an off day, just don’t let it be a wipe out day. I am up more than enough since my weekend hold over and score of 10-12 points on good size, something I rarely ever do, but did to try and capture the move like we had today.

Tomorrow is a new day. I need not be concerned of trying to get even, the new gains will take care or those. Good trading to all.

Tags: , , , ,
Posted in Market Call | No Comments »

Bull Market Move Still on Course

Wednesday, November 3rd, 2010

Today is Wednesday, November 3rd and the bull market move is still on course with a new high breaking the 1193 S&P I had been calling for, closing at 1197.

The surprise was to the upside as I had been saying as the market closed above the important S&P number of 1193.  I know a lot of people thought we would go down, but it rarely ever happens the way most people think it will.

The Election is virtually over and the Federal Reserve did do the “Quantitative Easing” they had talked about. Their will be at least 600 Billion dollars used to buy up Treasury Notes over the next 12 months with another few hundred Billion as a back up if they need to. I can’t for life of me, see how anyone thinks this is a good thing. It is manipulation and sends the wrong message to the world. Various countries are now raising interest rates to keep inflation down, but the U.S. is pushing for a much higher inflation rate by doing this. Well, I won’t get into the argument and I am sure people can make anything sounds good if they want to try and prove a point, but I don’t think its a good thing. The markets will eventually agree, but, I guess not just yet.

A double dip recession is just around the corner in my opinion. I would love to see it pushed out as long as possible just like everyone else, but all the stimulus in the world is not going to fix the problems the country has. The Republican House now elected is not going to save us. Well, again, too deep a subject right now.

I do see higher prices in the index’s coming, mostly because no one else thinks they will. Support has been tested and retested and then tested again and it holds. We are up above the well established resistance now and all one can do is wait and see if we have follow through. Many times at a market top, you will see a spike to new highs and then a quick drop off. That is to get the weak hands to invest at the top so the strong hands have liquidity to get out. Big institutions take a long time to unwind positions. It can be weeks, before they get the market to absorb their inventory without spooking anyone in the process. So, we will see how much more this market has.

As of last week the market sentiment was sitting in total neutral ground, creating the possibility of more room before a market extreme is reached. I did a video a few days back on it and is posted in one of my recent blogs, pretty interesting I would say. Anyway, their is still a lot of pessimism floating around and that can mean more fuel to continue the advance. I was looking for S&P 1220 since the bottom of this leg and we are getting pretty close. Going back to the market sentiment, I will be able to see the release for tomorrows blog. Those numbers are out today, but I won’t be able to see them until tomorrow. A reading of 35% or less is very bullish, and a reading of 55% or more is considered very bearish. We were at 45% as of  last weeks reading and there for two weeks in a row, right in the middle. A increase for tomorrow and another next week if we continue to rally will be getting us closer to that top in the market everyone is trying to find.

In today’s trading I took 4 trades, all gains as the market was getting closer to come to life at 11 am West Coast. The afternoon session had a  punch to it as the Fed announcement came in around 11:15 am.  Trading on Fed Day can be hazardous to your wealth, but it can be done if you know how to handle yourself. All of my entries had no back wash to them. That is a new term I just made up, as I was thinking of how best to describe it, (LOL with my own self). Where prices don’t come back against you, is the best feeling, because you know you are hitting the hole, where demand is great. You have enough time to get in, get filled and prices give you and instant gratification, that is what I always shoot for, but you need volume and today we had it.

There is something to it, to be able to make it happen again and again. That does not happen by accident or by getting lucky. It happens by understanding how prices work in a synergistic fashion as well as a reflection of past data. The moves get reflected back onto the market as that expression.  I am able to see moves coming as data is building. It is something that can be taught and I teach it to those interested.

Tomorrow is again a new day, what ever happens, up / down and or sideways market I am confident I will be able to get at least a few points. Until then, I wish all my readers the very best in their pursuits. If you need help or just want a little advise on what you are doing, I am always available to try and help. You don’t have to be a student of mine to ask a few questions about your own trading and how it could be better. I don’t pressure anyone to sign up for this or that. That is not my style and I don’t need to do that anyway. That would defeat my purpose. I like to help traders where I can. I wont’ be able to reveal my trading method in full, but I can possibly help give you idea’s and redirect you to a clearer path. Good Trading to all,   Vince.

Tags: , , , , ,
Posted in Bull Market | No Comments »

Traders watching Election and Federal Reserve Wednesday

Tuesday, November 2nd, 2010

Today is Tuesday November 2, 2010 and the two things on traders mind right now Tuesday evening, the Election and the Fed.

Both of the above will soon be revealed and both will express onto the market their feelings. Their is plenty of stored energy in the market right now as we will soon see. Which way will it go, well, anyone following me for any length of time knows I am still bullish on the market until we break on a closing basis, 11,000 on the Dow and 1170 on the S&P. I think both of those will hold for now as the surprise will likely be to the upside, again. I know many trader and investors are thinking that this market has to go down, because of this or that, I say “why”.  It will go down when it does and not before. I sounds like a funny answer, but it is the only one we know for sure. In trading we can only go on “If ” statements. If this, then that. Until a change becomes established, you have to stay with what is and that is UP.

A few days ago I laid out all the reasons why we will likely move higher and all of those are and still remain in effect. Yesterdays blog, I said that we would retest the 1193 highs and we did that today to the exact tick and again backed off. Not a surprise, by any means. Traders are waiting for information and we will be getting it by tomorrow. Then all of the stored energy that we have seen building up, will be released back onto the market as I mentioned above. That energy is real and it has an real expression that will have wave after wave of movement tied to it. Those that are on the wrong side of the market will have no choice but make adjustments to their previous established position. That adjustment will also add to their pain.

I have been looking for S&P 1220 since the bottom of this move back in late August early September and so far so good. It may only be a week or two until we see it, but a closing break of 1193 is the first thing that has to happen before the later.

Today we had another gap open higher and it looked like for many traders we would see a repeat of about the last 9 sessions of gap after gap after gap filled within the session or the morning after. For that to make it to number 10 or so, we would have to drop down to S&P 1183 and we are currently at 1193 in the after market. I said for yesterdays market, “we were likely to gap open higher and this time we may not come back”.  I may have been a day early on that one if we move out higher in tomorrow session and don’t come back. It is looking like it is in position to do just that, but we will see.

In today’s trading, I started later than I wanted to and saw the market action was very slow. In the waiting and anticipation of news events, I could see movement was going to be slow and shallow, so just elected to nibble at a few bites size pieces to make up a few points. Took 5 trades, all gains, but all small. Still, they add up just the same, except for a touch more commission costs. All trades for today are below.

Trade what you know and leave the rest, Good Trading to all. Vince

Tags: ,
Posted in Market News | No Comments »

Price Rejection off of 1193, second attempt on Election day?

Monday, November 1st, 2010

Today is Monday, November 1st and the market made a nice attempt at the 1193 area, hitting 1092.75 before price rejection kicked in.

Yesterday, I wrote that I felt we would soon break and close above 1193. Well, today we hit 1192.75, one tick shy before we started to fall back. Today we had another large gap opening and today was no exception on getting the gap filled as the opening gap was again filled a little later in the session. Amazing. The charts are still in tact and we will likely make another attempt at the 1193 area tomorrow. Will we break and hold, we will have to see, but I still do think their is a good chance.

Tomorrow, their are two events that will have a big impact on the days and weeks to come. The first one is a Federal Reserve meeting which will be discussing how the Federal Reserve will handle “Quantitative Easing” going forward.  A fancy term for how the gov will work the system to help things keep rolling along, or break it. The outcome has yet to be determined, but what they have done up to this point has not helped a whole lot, but likely just keep things afloat.

The Fed is the buyer of last resort as far as Government Bonds are concerned. If no one is there to bid at the current low interest rate, the Fed will come in and buy up those bonds. Question? Where is the Fed getting the money from?  Well, the only answer is, create it, out of thin air. How this helps, is that it keeps interests rates artificially low. That keeps the Governments costs down when paying out on those Bonds. Decades ago, I was following this national debt issue and I knew that this day would come, when the demand for government bonds fades, they themselves will hold up the demand by buying these I.O.U’s

It has been said that their has been 1.7 trillion dollars injected so far this last year and tomorrow they will be talking about allocating another 500 billion to 1 trillion more. Those are scary numbers. It will help in the short run if a large number is settled upon, but this is not good news overall long-term. So, look for what comes out of the Fed. I believe they are meeting tomorrow but don’t know when any information will be released?

The next event is the Election. That should be a barn burner, meaning, it is sure to stir things up.  A possible shift in political power is always a big deal, so look for the markets to get heated up as far as volatility.

Lines in the sand to remember.  The S&P should stay above the 1167-1170 area on a closing basis. The Dow should stay above 11,020 before a possible break down of this move could come into play. It is always important to know where things will change no matter how sure you think a move will come. If you don’t map out the possible reverse of what you think, you will not see the reverse of what you think. You will only see the market through your one sided view and that can be devastating. Don’t do that. Look at both sides just in case you are wrong. This goes for your short term trades in the Emini’s as well. You don’t have to reverse your position if you think you are wrong, but knowing exactly where you will get out if wrong is an absolute must.

The market is extended and a sell off is surely on the ticket for many, but the market needs to show itself first before that can be confirmed, until then, the trend is still up.

In today’s trading, I just closed out my extended week-end hold, just a little after today’s open, as the market was moving closer to that 1193 area. With the gap again today, I had to leave open and accept that we may just move up to the resistance area and then work on filling the gap. That is exactly what it did and I did play just right, selling into early strength along the way. A chart showing the closing positions from today below. Good Trading, Vince

Tags: , , ,
Posted in Market Call | No Comments »

S&P and Dow in Position to Move Higher

Sunday, October 31st, 2010

This post is for Fridays market October 29th, 2010 as the S&P gets into position to move and close above 1193.

Well, that is my opinion and not investment advise, but I now see the market ready to push out of this range. We may see yet another gap opening on Monday as the S&P futures are very active + 6 points as I write this. This early move higher right now, does not really mean anything as we saw every day last week show us gap openings on to see the market reverse and move lower. A gap lower to only see the market close the gap and move higher. All in all, we have not seen any market movement for the last 13 trading sessions. That is about to change as I see the price action getting ready to move out as stated.

I did a little video that I posted on U-Tube and will post it below this article. There I show how I used market sentiment and price action to identify daily market turns. This is not anything earth shattering, but applying simple market psychology and an understanding of time and space as it relates to the trading markets. Time is a very important element of trading and always needs to be factored into any trading method.

The market establishes a base camp so to speak and when its time to move, all the troops move at once. Some will stay behind only to catch up later and still other will never make it in the advance, difficulties in participation. The point is, a good  advance forward always starts from a strong base. A retreat is in order at times to regroup, but then another advance against new high ground is often quickly followed.

Currently the long advance looks like it may be tired and in need of a retreat. That may be the logical move but their are other factors shaping up in the market place. We are approaching the 1st of the month and you will more often than not see strong market advances during the first three days or so of the month. While not reading anything more into that and if you go back in time and check that out, like say, about 80 or 90 years; you will see that there is some strong correlation to what I am saying. Often times when something is found out to show strong consistent results and it is made public, then and only then does it seem to stop working,( example Dogs of the Dow).  Well, for some reason, this one has not and it is something to just keep in the back of your mind as a market dynamic that often times will come into play. (Tomorrow is November 1st)

Next point, we have an election in just a few days, perfect timing for those in control to give the market a helping hand and keep the people happy for just a spell longer. This is a factor, at least it is to me. A large market sell off is not the kind of message “Those People” want to send, so look for a nice helping hand from where ever it will come from to boost the market into new high ground.

Next point, we are only in the middle of the market sentiment range currently at 45%. The last time we saw a similar market wave was this February to May. A very similar percentage move lasting a similar amount of time and a very similar market top lasting better than two weeks, before that market fell hard, fast and furious. The market sentiment just before the drop was sitting at a bullish extreme which acts in the opposite direction and is actually considered very bearish. The professional market newsletter writers inform their subscribers of what to expect in the days and weeks ahead and then I would guess the public makes their play, with most often being wrong. I don’t see anything professional about that. The point is, with a similar play in place and the market sitting on a perfect “time play” as talked about above, we can look for things to get heated up. There is 10% more or 50% of the range to see market extremes of 55. (The range is 35 to 55 )  Again we are sitting at 45, right in the middle and enough room for us to see the 1220 longer term target I forcasted two months ago at the bottom.

Next point, we had a nice “inside trading day” on Friday, which means the market was bound between Thursdays high and low for the session. This adds even more power for a power move once the upper and or lower barriers are breached. With the night trading up a bit right now, it does not mean a whole lot by itself but in light of all the other points I am making, will likely have greater significance and maybe the possible gap opening that does not come back?

Seeing all of these and other factors ahead of time, I calculated that it was worth taking a chance to leave my position open from Friday and try and ride through the highs and lows of that session to take advantage of what I am writing about now. So, we wait and see.

Good Trading to all, Vince

Tags: , ,
Posted in Market Call | No Comments »

Day Trading and the Opening Gap

Wednesday, October 27th, 2010

Today is Wednesday, October 27 2010 as we saw the market bounce off of key support.

The stock market has moved sideways for 11 days now.  It has been consolidating and moving sideways while it gets into position for its next move.  Time is a key element when following the stock market.  It is a major component that propels prices in one direction or another.  The buildup of market pressure can only come with time as players position themselves above and below key levels.  Today we saw one of those levels and prices respected it, with support by reversing its direction back up.

In yesterday’s market we saw a gap opening lower, followed by a quick retracement back up, to close that gap.  Yesterday marked the second day in a row with opening gaps.  Today marks the third day in a row with an opening gap that again was almost filled near the end of the session.  We can look to tomorrow’s open to continue and close today’s gap.  The market momentum is to the up side and we should see prices follow through at least on the open.

The last three trading days have been a good time to get familiar with trading the opening gap.  I cannot remember a time recently where we saw three trading days with three large gap openings and seeing them filled within the same day.   Yesterday’s opening gap was filled quickly and depending on the size, that is fairly typical.  All traders need to be familiar with the market pressures behind these gap openings.  There are days wherein you will see a runaway gap and it never comes back.  Some traders look to market internals to better gauge if a market will keep running in the direction of the gap.  I basically use Technical Analysis, the study of price, to determine which way the market will continue in.  Technical Analysis takes into consideration all market news and events that may be taking place during the day.

Yesterday, I did not post anything but did have a nice quick easy day picking up my daily goal.  I was up for the open and had three trades.  The first trade was a loss for three ticks as I entered early.  The next two trades were both good with nice returns and that was it.  The total time trading was just 45 minutes, I would call that a good day. You can see in the chart below how the gap was filled in a time chart with night trading removed, to the tick. Having a chart up like this is a quick easy way to see what you are up against as the market opens up. In Trade Station, it is the contract symbol followed by a (.d) after it, that will remove any Globe-X session.

In today’s trading I had another good day and after it was over took 5 trades for the day with one loosing trade of only 1 tick, my first trade. I have a different view for you here, as on this chart it is the middle time frame view that I use which matches my smaller chart, as far as indicators that I show here.  This is a limited view, as I can’t show it all, but some is better than non. In this chart, below, I have some of the trades marked that could have been taken and or ones that I might have considered. They are identified by the matching signals below. I don’t follow the indicators as a trading method, but use it as a guide, to tell me if I am on track.  I don’t and would not take every signal as you see in the chart, because certain conditions are not met. So, passing on some signal trades is in order. The trade signals are a good indication if your timing is on or off. It is clear to see that the third trade identified as “Bad Trade” was just that. I did have a touch of fear creep in, which was fear of loss opportunity. I saw that big move coming and did not want to miss it, but  needed to trust my trade method as the next entry was clear as day the right entry and posed low risk. My notes on the screen will show you more.

The bottom line is, that was the trade and I did plan on giving it more room but didn’t think I would see it come so close to getting stopped out. I had smaller size so the draw down was less, but I don’t plan on doing that again any time soon. At large turning points, the market does and can get a little extra tricky. I tried to allow for that, but really didn’t need to. Tomorrow is a new day and a chance to do it all again.  Until then, good trading.  Vince

Tags: , , ,
Posted in Market Consolidation | No Comments »

Trading the Opening Gap

Monday, October 25th, 2010

Today is Monday October 25th, 2010 as the markets took off early on to only fail late in the session.

The Dow was still up about 30 points and the S&P up a few points also, but could not hang on to the early gains. Much of the move came early in the night session and the mornings open prices jumped to catch up to what the futures traders deemed as fair value. That value was later adjusted in lower prices as the session went on.

Often times when you see a gap opening, it gets filled. Most of the time depending on the size of the gap, it gets filled quickly, but not today. When you see a jump in the opening prices, their are no stocks that had a chance to trade in between that gap, again after the open. Prices tend to fall back and “fill the trading gap” as it is called, usually around 70% of the time and do it rather quickly. So, having a good strategy for playing the gap openings, is a good idea.

As traders, you need to have an entry that is low risk. You can not just sell after the open, because you see a gap higher. You need to know exactly where your lowest risk entry will be and then you can enjoy the strategy. At times it does not come back all that fast as in today, where it was dragged out for some time. Only until late in the session did prices give up their hold on the market to adjust itself. The S&P filled the trading gap to the tick and held while the Dow still has about 30 points or so for its gap to get filled. We are likely to see it filled in the early session tomorrow, then we will see what the markets true intentions are.

When you have gap days, it is best to get the gap filled quickly, because it tends to pull on the market. Once filled, the market is somewhat re-balanced and it can continue on with normal market flow patterns.

This is just something to be aware of, if you see it again in the future. I have one screen devoted to little or no indicators and on that screen I have a separate window using a 2 minute chart of the S&P futures and a 2 minute chart of the cash Dow. For the futures, I use a continuous contract chart with a .d after the symbol. In Trade Station it is @es.d    for a continuous contract chart of the S&P 500 emini without the globex or night trading in it. So in this chart you only see the price action start at the open. It is very easy to spot where any trading gaps are by using this type of chart. In addition, it is no secret that I trade using tick charts, but I do look at time charts for a variety of reasons. I glance at them to see if their are discrepancies between the two style charts. Time charts show me when the market is slow at a glance as bars are being posted with little or no movement behind them. In addition, support and resistance analysis can get thrown off when using different tools. Also, this shows me, what the bulk of other traders are looking at and how they might react.

I am sure the 80/20 rule would apply to the amount of traders that use time charts to tick charts, 80% using time charts and 20% using tick charts or some other style. (range charts, volume charts)

In today’s trading I did not make my daily goal. It happens sometimes and I am not crying about it. Losses are apart of trading and I had some today. It wasn’t bad in that I was only down about 1.50 points or so, but it didn’t have to be that way. I had a good trade working and added one more contract to it and was up about 4 points at one point, just what I was looking for. Problem was, I had to leave the room for a few moments to long. With stop in place, the market ran up and immediately ran right straight back down to my original stop for -3 ticks. To go from +4 points and see it closed out at -3 ticks is not typical for me, that is for sure, but it happened and felt a bit stressed looking for trades before the market closed on me at the end of the session, not usually a good idea.

I didn’t really have a choice but to check on something and it cost me. Of all the days to see a top like that come so quickly with a hard reverse.  I could have had a target and cancel set up, so if my target was filled, my stop gets canceled. I didn’t have it set for that and would have to have it in place at the time of entry, so I live with it. Tomorrow is a new day and new opportunities and I am sure I will find them.

Until next time, good trading.

Tags: , , , ,
Posted in Uncategorized | No Comments »

Dow Jones Industrial In Position for New Highs on Year

Saturday, October 23rd, 2010

Today’s post is for Friday’s market 10-22-10, as we saw the market put in an inside day as it gets into position for new highs on the year.

Well, that is how I see it and the markets resilience in not letting up its bullish tone which has been impressive. I am sure it is making a lasting impression on the “Bears” who thought this market was done. The last eight weeks have all but took that crash and burn scenario to the grave, at least for now.

The Dow is sitting within striking distance on setting new highs for the year. Some will call it Alice and Wonderland, while others just don’t argue with fact. Price tells all, even if it defies all logic. Under all the news releases, their has not really been a lot of good news to push this market higher. This is truly the wall of worry, because I know their is much to worry about.

We all need to keep our minds open at all times. Many months ago, I called and seen the March 09 bottom, and by April had confirmation that the market was going to move up to exactly where it did. The first target was a little lower at S&P 1120, but later called for the new push to new highs. We did all of that and completed the move more or less as I thought. Once completed, I had in mind that the market would take some time to put in a top and we would then go down to retest the lows or lower. I am sure that is what a lot of people thought, but they did not keep an open mind as to the current environment. They likely only saw what they thought would happen and was not ready for what did actually happen. I could see in early July that the market was not likely to fulfill my early layout and adjusted my mind to see  and call the market rally at that time. Again, in late August was the big move that we are still in and I was waving a bull flag for some time right their at the bottom. The market could have tanked as many were calling for, but that was not the likely outcome.

The moral of the story is not to say that I am so smart, I could have been wrong, but to always look at both sides of isle. If we get so convinced that we are right about a market direction, it can embolden you to trade out of character. Risking to much on any one trade and over extending yourself can work, but it usually leads to a wipe out of some sort.

Market psychology can be a hard thing to understand, but it often plays a bigger part in market direction than most realize.  This ties in with the above, as at most all of the daily market turning points the majority have always been wrong. How do you not become the majority and think independently. Their are many ways, but understanding how market rhythm plays into the flow of prices is one way. Another way is think in the opposite way of the majority as market extremes are met.

I often report on “Investors Intelligence” weekly market survey of “Market Timing Newsletters”. We have been seeing a steady rise from a market extreme as of late August. This is one way that showed me that the majority was wrong about a large sell-off. I mentioned in Tuesdays blog writing that since Tuesdays market was a real downer, it was likely to take steam out of the continual bullish rise in the sentiment numbers. I was right, as that was the first decrease in market sentiment since late August. Every week since then has increased by just a little. Last week we were at 47%+ bullish and after Tuesdays close and the new poll taken, moved down to 45%, a neutral reading. This is going to give more room for an upside advance if the market co-operates.

With the Dow just under new highs for the year, a push up to reach that level is very likely. The thing about that is, the S&P is trailing and will likely offer some additional room their as well. From the way it seems to me, we continue the advance up and make slightly new highs in both index’s before we slow down and reverse back off this move. A new high in both index’s will get headline attention and all those who waited, will be kicking themselves for not getting in at lower levels. They won’t be able to handle a continued advance without them in it and will buy in at the very top, only to see the market drop and a whole new set of pain develop. So that is what I see and what I saw from the bottom. If things change, I will have to adjust that, but so far so good.

Today’s article is mostly about the daily markets, but the lesson in that is, don’t follow the crowd. Learn to think on your own and try and understand why and how the market moves. This is same for smaller time frame trading, which is what I do. I am a scalp trader by nature and like to not overexpose myself to the markets. Getting in at low risk spots to take what the market will freely give is what I like best. I do often scale out on some trades, but the power and momentum is on my side. When I loose the edge, I get out. If after entry, I start to loose the trading edge, I get out. Sometimes the trade still works out, but the price has to prove it before I re-enter.

Below is an equity chart of my trades from Thursday and Friday. I did struggle a bit on Thursday, but came back before I hit my daily loss limit and Friday was much easier.                                    Enjoy the rest of the weekend !

Tags: , ,
Posted in Trading Lesson | No Comments »

« Older Entries
Newer Entries »