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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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Major Index’s Currently at 62% Retracement Levels

Thursday, April 29th, 2010

Today is Thursday, April 29th and today we saw a nice reaction rally to Tuesdays sell off.

A pretty good day on Wall Street with the Dow up over 100 points and the S&P up about 15. Most of the movement came in the night trading and the very early opening push. After that, it looked like the market went to sleep. We did see a close right at the days high on the S&P 500 futures and that is a good thing overall.

Tonight I will see the market sentiment numbers and any changes that might have happened from last weeks push higher. If I remember it ended up at around 53% bullish which is very close to the 55% signal. That is generally an area that you will see a reversal take place. With the big sell off that we had on Tuesday, that may have influenced the poll taken at the close of Tuesdays session, but can not be sure. If the numbers backed off, that is going to be a good sign, anything below 50 I will consider good for the bulls. If the numbers increased in the face of the sell off, that would not be good.These numbers are released from Investors Intelligence, which tracks Investment Newsletter Writers opinion of the Stock Market Direction. These numbers work in the opposite way that you might think. As they consensus gets more bullish, it acts as a contrarily indication that the market is ready to go against them. Since these writers send there advise to the general public at large, you can see how the people get feed the wrong information at critical times, just before a big shift in direction of the stock market. You may be wondering why people pay for such bad advise, I can’t figure it out but only come up with, “human nature”.  Wanting to believe in something which will take them to the other side to financial freedom.  I will comment on this in tomorrows posting.(Just saw the numbers come in a minute ago. They are currently at 54%. which is only one percentage point away from the 55% percent historical trigger point. If we get one more good week through Tuesdays close next week, that should put it over the top and signal a potential drop. It is possible the drop can come now, but the only way to work off the high level of built up optimism is a sell off, for the most part, so be careful going forward as far as the large major trend is concerned.

Below I have a chart of the major index’s with the S&P and Dow as the main point of topic. This is a monthly chart showing that we have come back up from the sell off of last year exactly 62% on these two major index’s. That is significant in that it is a nature target area that is followed by many. The two key area’s are 50% and 62% retracements. We hit the 50% retracement mark months back and it did result in a pretty sharp little pull back, but it was only seen as a buying opportunity by many and the market pushed its way back up and then some, which brings us to the 62% retracement area. This is not enough to say that one should sell, in and of itself, but it is just an important area of interest that is being looked at by many. That is the reason we too need to look at it and see if others things will confirm to us that this may be a top or least a temporary top. In my opinion it is too soon to tell, but tomorrows sentiment numbers will shed a little light. The technician part of the equation has changed a little negative, but there have not really been any concrete shifts in the balance of power as of yet.

When looking at these area’s of interest as I have called it, it is important to remember what others are looking at and focusing on. As day traders, this is also what we need to do in the daily struggle that takes place over key area’s of support and resistance. Many times hundreds of traders are looking at the same thing, trying to out flank thousands of other traders before the move becomes apparent. The masses are rarely right and if they are, it is usually not for long. We need to be thinking contrary to the masses for a trader to be consistently successful.

Many traders feel that the market seems to know where there stop is, like it just wants to take them out and continue on its way without them. In a way that is true, in that the market lives to stop traders out of there position and leave without them. Knowing that, what are you going to do about it?  Are you going to just take it, or are you going to fight back, not with force, but with strategy. We need to think but not act like the masses. You need to take the other side of the majority and you can only do that if you know what they are up to.

All of this happens at every level of the stock market. It first takes place on individual stock issues across the board and those stocks make up the index’s, which make up the Index futures market.

Below is a monthly chart of the major index’s with the retracement levels shown. Again, these are just common area’s of interest that are often times followed by turning points. The second chart is a screen shot of my T-2 trade screen showing the turning points for that time frame present.

On a different note, I have had some issues with my hosting company this last week and I know I have missed some emails messages from a few people who expressed interest in Sniper Day Trading. If you could please resend me any correspondence again, that would be appreciated. I have fixed the hosting of my website but working on restoring my email. A alternative temporary email is vinnietarantino@yahoo.com .  I am sure I will get all of this resolved shorting.

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Trading Tuning Points – S & P Emini & Two Stocks, Video !

Friday, January 29th, 2010

Today is Thursday, January 28th and the market did not follow through from yesterdays run up.

At the open, the market was in a very good spot for a pull back, because in the night trading, things moved up pretty nicely. We saw close to a 10 point move with the follow through from yesterdays close. It wasn’t the 20 points I thought we might see but it was still a good move. Well, since that move came when no one was able to trade it, the market at that point set itself up for a nice retracement, which was exactly what we had. Just after the open, it rolled right off a nice little ledge and dropped pretty hard for the next few hours. After consolidating at the bottom for a spell, we did see a nice rally back up of some significance, only then to fail again. Pretty typical market action

Currently, the daily momentum is down as well as the 120 minute time frame (2 hours bar chart). If the market is going to attempt a reaction rally from this point, it is going to have to first get over 1088, then the next hurdle is 1093. Those are two area’s that need to get taken out if the market sell off is going to slow. Other than that, the momentum is pointing down currently and the path of least resistance is that direction. Each day unfolds more pieces of the puzzle and pretty soon, the picture will become clear what the next move will be, straight down or reaction rally, putting in a pivot.

Over all, I still do expect that the market will trade back to the middle of its long-term range on the daily and weekly charts. That is quite a long ways away still and it could take some time to get there.

Tomorrow I will be back in my home office and will do a little trading sometime in the morning. It should go well. The price action is pretty normal and I am sure, enough good trading moves to get a few points.

Below is a video from yesterdays price action. I almost made it to the end of the session. There were some nice moves that you may not have seen, but I think you will get the picture.

With yesterdays post in mind, the chart is marked as the turning points take place. I don’t say that I could or would be trading all of those turns, I would only need 1 or 2 small trades from the pool that is on the video to make my daily goal. Once a traders goal is had, I feel it is best to close it up and move on to something else, but that is me. There is a good reason for that. You keep the trading struggle to a minimum, as I know I have said before.

This is a trading method that I follow. The indicator that I brought up afterwards,  just happens to matches the overall method. This can bring some degree of confirmation to a trader, who is trying to bring it all together.

Again, all of these turns are not really meant to be traded. It takes a lot of concentration to keep up the pace of trading for the whole day like this. Again, that said, this is really pretty typical of the trading day. After looking at todays price action, I don’t see anything that is very much different. A lot of really good trades. Using discretion on which trades to take is defined in the trading method itself. I often, do take trades counter trend, but other less experienced traders may not feel comfortable doing that and that is fine. Going slow and only taking the best trades in the direction of the trend is really probably the best strategy for new traders, but you will have to exercise your discipline and patients to wait through some of the setups.

The turning points that I have marked, is really something that happens everyday, and those turns are identified by something other than the indicator I have up on the screen. I don’t say what that is or how I changed it, but it is something that is not going to change. If it did, the markets would have to do something it has never done, since its beginning and I don’t that is going happen.

The second video is the stock charts that I mentioned in yesterdays video. A 60 minute bar chart of AAPL, Apple computer and daily chart of Rimm. The same is true here as I have said above. The signals are generated by the trading method, which is as I said yesterday, not rocket science. If I were to put up one of the indicators I use, like the one in the first video, It will match near perfectly generating the same signals, which only confirms or coincides with my trading method.

I think you get point, so I will end it for today. If anyone has any questions, feel free to contact me, vinnie@sniperdaytrading.com .  I do have my email back up and running and getting my computer back up as well, it was a lot of work and slowed me down, while traveling, I am glad that is over.

Good Trading to All !

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Key Stock Market Turning Points

Wednesday, January 6th, 2010

Today is Tuesday, January 5th and we got just what we needed, a rally.

Yesterday, I did not post an update, but we had a nice rally to start off the year. I did see that the volume was light and that is still to be expected. It is easy to get vacation fever, I had a touch of it myself. The bigger volume will not typically come back until Monday’s session next week. That is what I remember from past years.

The market was sitting on key support. I remember I said, we could not afford to close down 1 S&P point and still maintain the long-term momentum from the March 6th lows. It held and pushed higher. This is shaping up nicely. I am sure if the short-term momentum can continue for a little while, a week or so, it will inevitably turn the ”stock market advisers” bullish, pushing the numbers to the potential trigger point of +55%. Currently it stands around 50%, but these guys are trend followers and I can only imagine they will turn bullish here right at the top. Many of them have already been bullish and good for them, but the ones that have been neutral will soon BIT. Once that happens, you can bet we are going to get a big sell off, mark my words.

We are currently at 9 years highs in the numbers when you combine the two together. That kind of excess will not sustain itself indefinitely. The only thing that will be able to work off the exuberance, is a sell off. Let me remind you, only 15% of professional stock market news letter writers are bearish. That is a small number and the majority will be proven wrong. It always happens this way, I see nothing to say, “it is different this time”. Some how, the market knows and seems to be waiting for the bullishness to catch up as well. Then in my opinion, you will have the makings for the perfect stock market storm. We are not there yet and I am only giving my opinion and not stock market advise here. I will share with you when I think all of this is going to play out. About a month ago, I did get a little excited when I saw the bearish numbers turn up so low, but the bulls were still cooking. I came back down to earth in a day or so realizing that, it was not time. 

Those numbers I am talking about are published on a website called investors intelligence, you can look it up if you want to. I just look at those numbers to get an idea of how much bullish/bearish sentiment there is out there and these numbers have proven to be very accurate in the past at very key stock market turning points.     

In my personal trading, I took one trade yesterday coming off the top. At 10:45 am West Coast, I went short at 1029 on the S&P and covered half at 1027.75 and the other half at 1028. I had unexpected company and did not have time to continue. No trading today, although today had some real nice moves to it. Just taking care of a few loose ends. I plan to get a good schedule for myself starting on Monday, this coming week. The volume will be back, I am sure the moves will be back and I will be back. I will be posting my trades from the first hour of the day at least.

The first 90 minutes of the day are where the best volume is going to come in. After that, from 11:30 to 12:45 I feel are the next best times to trade. As a “Scalp Trader“, I feel I can trade any time and still squeeze out a few points for the session. I have been doing this for some time now, but  to often last year I did not trade the open, but closer to the slower time of day. That just makes it take longer, which is really not my style.

As a “S&P Emini Day Trader“, we should all trade accordingly to our strengths, not our weakness’. If you have the patience to wait long periods of time for the trade to work and be OK with that, swing trading might be your style. If you feed off of the fast pace you may be geared to a shorter term time frame. There is a lot in between and every trader needs to really figure that out. You will not be at your potential if you are not matched up properly with your personality and trading strengths.

If anyone needs or wants helps with this, I am available. This is free advise, I will not ask you for anything, or will not try to sell you anything, but I will try to see where you are at, ask you some questions and help you identify your strengths to make sure you are going in the right direction. I don’t worry about doing this for free, it all works itself out in the long run. But helping people overcome their trading challenges brings me a lot of satisfaction and it helps me more clearly define my own strengths and allows me an avenue to express my experience to those who will listen.

So, don’t be shy and send me an email. You can get contact information at www.sniperdaytrading.com  I use Skype to communicate and my Skpye name is SniperDayTrading.

Good Trading.

http://www.screencast.com/t/ZTFlZjY1   Yesterdays one and only trade

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Do You Know How The Stock Game is Played?

Monday, November 9th, 2009

Today is Monday November 9th and I wish I would have updated my blog over the weekend.

Well, I can’t cry over spilt milk now.  Actually never really lost any milk. Let me explain.

Over the weekend, I was thinking about which direction this market was really going to take. I could see on Fridays close their was not going to be any big changes by mid day and that we were going to close the session neutral. I was talking to a trader on Friday and made that comment to him after a target area was hit.

Sure enough, we closed pretty flat and or neutral on the session. Earlier on, we did hit a target area that I picked out from the previous day. Fridays flat day built up a lot of positions on both sides of the fence and as I commented a few days ago, that the “Market” was soon going to show its hand.

Today gave us a little more insight. It sure looks like the 50% mark will be completed and are currently less than 100 points away from doing so. As I was saying a few weeks ago, “So close, but yet so far”.

Todays close on the Dow was 10,227 and the exact number on the 50% mark is 10,314.  So, that is 87 points away. It sure is going to be interesting to see what happens after that number is hit ? The S&P’s number is 1120 and that puts us at 27 points away. With the average S&P point equivalent to about 10 Dow points, we are 270 Dow points away, based off of that relationship. That right there would put us up roughly 200 Dow points over the 50% mark if the S&P hits its 50% retracement point.

It is clear to see that investors are running a bit scared, but not scared enough to stop buying. They are buying quality issues as represented in the Dow. I mentioned this a couple of weeks ago. It does not always mean the rally is over, but it is rotating.

One thing I had heard was, that Jim Crammer on Mad Money (TV Stock Show) was saying that he was bearish. Then I looked up the sentiment numbers on Market Harmonic’s and saw that the bearish sentiment did increase by 2.5% last week. That tipped me off, that there was a high degree of likelihood we would in fact at least see one more push to 10,314 on the Dow.

We made it through October, typically the worst month on record for the Stock Market, a plus. Would it not catch a lot of bears off guard if the Markets shot up to the higher range of its retracement levels of 62%. Now that would get some attention and all the bears by then would turn Bullish, a clear sign a short-term top at least may be in place?

Here is Thursdays statement from my blog for the days ahead:

Let me spell this out, very clearly. The Dow and S&P have to break a new high to keep this thing alive and It needs to happen here soon. If the last pivot low on the Dow and S&P get taken out, you are going to see a lot of selling. More than we have seen in some time. That is the long and short of it. The market can do what ever it wants, I only identify that there is overhead resistance just above us. If it gets taken out and a rally comes in, great. That is what I like to see right now anyway. All I know is, the move from the March lows has almost been satisfied by retracing back 50 %. (S&P 1120 and Dow 10,300) I don’t know what that is going to do to the overhead resistance? Will it be that if it gets broken, it will clear the way for yet higher prices, no one knows?

Just wanted to put Thursdays comments up. It still hold true. investing with long-term money I would stay invested as long as the Dow and S&P do not make a lower low and so far, they have not. The Nasdaq on the other hand has. The broken support can act as resistance as it trades back up into the overhead supply. We shall see, it is almost like a “Thriller Mystery”, or maybe a better comparison is “A Big Time Wrestling Match”, where the outcome has all ready been decided, it’s just that we the public don’t know it yet. That is a topic for another day, but I would say and interesting point for conversation.

Below is a cash chart of the Dow, S&P and NASDAQ Index’s. Actually, it is a short video, showing the three charts side by side. I have a few clear turning points based on this time frame as well. Also, I have some circles marked, showing the occasional reversal by what I call a “Tail”. I did it in an hourly chart, then changed it to a 2 hour chart. Still about the same. No big deal, but at those tail or reversal point, usually prices turn in the opposite direction. Another example of flushing out the public first before the money can be made, against them, (the public).

Currently we have established the highs and lows, so making any trading decisions will not be that hard to spot. Before the market changes direction, it will not be obvious to most people, that is why, when prominent people on TV start talking about new directional changes, I automatically think the other way. It has always been like that. Over decades, I remember “Time Magazine” making and calling tops and bottoms, always wrong. Newsweek the same, once it is obvious to the public, only then will the market turn against them. That is how the game works. Those who don’t know how the game is played, GET PLAYED, dont’ let it be game over.  

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Can you say “REVERSAL DAY”

Tuesday, October 27th, 2009

Today is Monday, October 26th and the markets took investors for quite a ride today.

Yesterdays blog, I stated that it appeared that we had broken the down-trend late in Fridays trading and a move back up to the 1086 + level was likely. That is exactly what happened in this mornings session. Here is the quote from yesterday.

It looks like the down-trend has been broken but we really still need to get over the last minor pivot high at 1080.50 . Once that is taken out we will have a good chance to get back up to 1086 + in quick fashion.

Well, the break came on the open, in quick fashion, I might add and did shoot up to 1086 +, with the plus being another 5 points for a total of about 12 points in the first 35 minutes. This is from the cash S&P.

The next move after that came at 7:37 & 8:14 am, West Coast time. The move at 8:14 was real nice. It cut right through all the stops from the mornings open like a hot knife through butter and kept on going to take out the critical support I mentioned from Thursdays pivot low. In the S&P E-Mini’s, it broke about 9 points past the low, before it pulled up to take a breath. Over the last 5 trading days, the momentum in the hourly cash S&P market has been in a down-trend and still is as of now.

Today we saw a 27 S&P point swing from high to low, that is a lot. Currently the cash S&P support is about 7 points lower from its current level. The next support comes in at around 1045-46. The short-term momentum is pointing to the downside but the daily and weekly is still up. This is where you have opposing forces at work from different time frames. Who will win the battle. You really need to let the market decide this one  and go along for the ride.

http://www.screencast.com/t/lAkJmeVoGY4z     a couple of trades I took towards the end of the day.

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Investors Intelligence suggest higher prices ?

Friday, October 23rd, 2009

Today is Thursday, October 22nd and what a rebound we had today.

I have some interesting insight into today’s market action. There was no following through to the sell off from yesterday and that does not surprise me. I tried not to form a opinion about direction today, because I thought it could go either way. initially the market continued its sell off, but found support and started its come back, up about 12 S&P points for the day, more than most people thought would happen, I am sure. The shorts tried to establish a foothold and got slammed hard. They ran for cover as the buying came back into the market pretty much all day long.

This is the volatility I thought was going to show up and it has not disappointed. There is a lot of uncertainty and money managers don’t want to underperform. They are being forced to make a decision to hang in there or start lightening up. If they don’t start scaling out of there positions as the rally continues, there is going to be a mass exit for the door once we run out of gas, but that could be from higher levels.

In the past I have mentioned the Investors’s Intelligence weekly survey of market timers. They give their opinion on market directing in there newsletters they write. They, as a whole are usually wrong and the numbers prove it, time and time again. Very interesting developments here. The sentiment numbers have been going down for the last 3 weeks as the market has been making slightly higher ground. What do you think that is saying?  Well, I will tell you what I think. These guys are getting nervous and are expecting a drop and so they have become more bearish. That is really good news for the bulls because that says that there is still GAS IN THE TANK, for higher prices. Usually, you will find the numbers at bullish extremes right at the top. If this were the top, these guys for sure as a group, would get it wrong. That leads me to conclude higher prices on the index’s for at least a little while, what do you think?

I know we will be coming into some important resistance pretty soon, (10,300 Dow / 1122 S&P ) but that is just the first area of resistance. If the market can get through that the 62% retracement area would be the next major area of resistance. I only entertain the idea and say it is possible, but we will need more time for the chart to move a little sideways, this will clear a path for higher prices if  the support holds.

I will say the next move for tomorrows open to me looks like it will start off to the downside. The S&P support should     come in at 1084 or 85 and the Dow around 10,000. “If” we get a pull back to the middle of the todays range then we will then again have a couple of key turning points established for the next move, which ever way it comes. A break of todays low and or todays high, will see big moves in the directions of the break. We may consolidate inside this range for a day or two which will only add to the built up pressure that will form. Strong positions will be established on both sides. Now all we have to do is wait.

For those playing the smaller swings inside these ranges, as I do, we will have no problem seeing which way to trade, we let the market decide and ride the emotion that builds on both sides. There were a lot of nice trades in todays market action. Some for 6-8 points if you rode any out. It is days like today and yesterday, that can get a trader to abandon his trading plan. He see’s so many available points ripe for the picking and gets anxious, saying, that today is payday. ”DON’T SAY THAT”, that is a no-no. You only create more problems for yourself.

You need to enter the day, calm and relaxed, confident but cautious. The way you start your trading session is very important. The days I rush into it, I notice I tend to stray from my own trading method. It is clear as day, but we all at times can be deceived into thinking beyond our trading plan, call it human nature. I strongly encourage you to take some extra time to get yourself in tune with the markets. Do not form to strong of a bias and just read the price action against your trading plans or method. If you do this, you will not have to fight the markets or yourself. You will be flowing with the rhythm of the price action. We see it every day.

The markets move and they rest. After the rest, often comes an assault on the move to take it down. After the assault, it to will rest, until either more troops come to continue the assault or it is overtaken by a whole new army of buyers that decimates the attackers and new high ground is taken. Be sure you are on the winning side.

Within every chart, no matter the time frame there is an equilibrium, a center point. Traders need to find the center and trade in the direction of the winning side. There are very clear and precise turning points where this happens each day. Once the decision has been made by the winning side, prices often move quickly away from that center point. These points are constantly being adjusted through out the day and battles are won and lost in these areas.

More on this another day.

http://www.screencast.com/t/GicDJVFb9H8                     Today’s turning points in a higher time frame, no sound

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“TURNING POINTS”, what are they ?

Wednesday, October 21st, 2009

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.

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Screen Shot, S&P 500 Cash Index with Commentary

Friday, October 2nd, 2009

Today is Thursday, October 1st and today we got our answer. That answer came early on in the session.

The sell off came early on in the session and did not look back all day long. Today is what you call a solid “Trend Day Sell Off”.  The whole session was pretty much lower and lower to the close, all one way. You usually get about 3 of these a month.

Earlier in the week, I had talked about watching the market after the rally back up. That was going to set up a pivot point that was going to be critical. If that got broken to the downside, then you will likely get a move down to the lower end of the wedge, around 9300 for the Dow and 1010 or so on the S&P. That is about 19 points more on the cash index. This is one of those conditional situations. If this, then that. Today was the “if this”, in the breaking of the pivot low. The daily momentum had already slowed so it was reasonable to expect the break down. But had the event turned up and broke out of the tight consolidation range it was building, then you could have looked long one more time, but again that did not happen.

Today’s break, told traders to play the short side, the previous rally down and back up, just added more fuel for this break and this time, it did not come back up. At critical turning points the market does not like to make it easy for traders to establish themselves. If you know where the pressure points are, like today, as the sell off got under way, you take a shot at it and hold on.  I could see the wedge building and it looked likely, but I don’t like to get surprised if something happens that I have not thought of. Contingency plans are a must.

As I stated once before, you can not get into only thinking one way. If the move has not happened yet and it appears that a downside break is coming, you still need to see the possibility of any other play. If that play comes alive, you will not be surprised and can then easily adjust your mind around to the long side of the market. It is phycology. You will in essence created a mental block for yourself that could cost you a lot of money, needlessly.

You become to sure that the market is going to do something and when it does not, you then are only seeing what you want to see and not what is actually happening. This can cause you to take multiple stop outs  in a short period of time and that will only start to create a whole new set of problems.

Now that we know that the markets have broken the upper range to the downside, a trader can be looking to the short side of the market as the dominant trend and look to take short entries from that side of the market, giving him the largest return. The trader could have been doing that from the open this morning, as the break had become clear in the smaller time frame charts.

The market may be in a position to mount a counter trend rally. It is in a parallel channel at the lower end of its trading range in the smaller time frame. This rally could come early on in Fridays session. Until it happens we don’t know how to play that, (If this, then……..) Do you see what I mean.

If we get a momentum shift to the upside early on tomorrow, I see a minimum 10 point S&P rally. Notice again that I said “IF”.  It is a conditional statement and represents something that has not happened yet. In addition, “IF”, after the first hour of trading we don’t get an upside break, but instead continue the break, the selloff could be just like today, back to back. Traders need to be prepared for both scenario’s, just in case. That said, it appears that there will support at current levels at least for that bounce of 10 points plus.

http://www.screencast.com/t/wVzrqS1jdbI8          Daily S&P 500 cash market “still shot”

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Day Trading Turning Points for Monday

Tuesday, September 22nd, 2009

Today is Monday September 22nd and the markets still a little quite out there

We had a pull back below the pivot low that I had mentioned on the 60 minute chart from the other day and we did break it, but the buyers quickly came in to support the drop. That is a good sign, although still to early to tell. The drop was mostly done in the weekend night trading and the cash market just dropped to catch up with futures. Often the market likes to fill the gap, as it is called and trade back up to the upper range in a strong market and that is pretty much what happened today.  We need about 6 more S&P points back up to turn the momentum back to the upside. Tomorrow should tell us a few things. If we do, it is likely the move will continue up with 1100 + on the S&P as a target. The Index’s are so close to the round numbers of 10,000 on the Dow and 1100 on the S&P that I am leaning to the side that it will get hit, before any meaningful pull back starts. It seems like a date with destiny for both of those numbers to get hit, we shall see.

Below are the turning points for today in the 400 tick chart. These are the turns my method gave me and said to buy or sell at these levels. It is all backed up with a solid reason,  (not shown or explained) you just need to pull the trigger. We  aspire to hit just a couple of these trades and only really need to book 2 points per day, but every day with a high degree of success. That will, over time and a gradual contract increase, will take care of the need to swing for fences, usually not a good idea.

We use only a 4 tick stop and have a 4 point stop out point for the day. Go minus 4 points and you are done for the day. That would be about 4 losing trades and we stop. We can make it up on another day, but we live to trade again, is the point. Everyone has a bad day and sometimes the market is not very forgiving, but with my approach, it is very conservative and attainable. The turning points below.

http://www.screencast.com/t/Ov2BC7KJK                      turning points video for S&P 9-21-09  400 tick chart

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