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.