Today’s market was up again with the Dow +71 points and the S&P +6 . What a resilient long lasting uptrend we are seeing since Thanksgiving. This market has gone up more than I thought it would given all the bad news, but it goes to show you, when you throw money at something what can happen. Is this smart money or some other kind?  That is the question on everyone’s minds these days.

The bullish market sentiment dropped last week by a few percent which is a little odd with such a strong market. Tomorrow, after the close, the new weekly poll will be taken by the professional newsletter writers and there stand on the current market conditions are noted. This gets sent out to their subscribers all over the world and I am sure people act on a lot of their recommendations. Those market opinions get tracked and recorded and are part of the numbers I look at. I don’t subscribe so, I only see these numbers on late Thursday.

The point is, we have been in an extreme market condition since Thanksgiving, which is very unconventional. This means these guys are finally getting one right. That is amazing. Usually, you will see the opposite happen at certain thresholds just like clock work, unless something bigger is brewing. This may be just one of those times.

With the market showing no signs of letting up, I will only point out that we are currently up against some very strong overhead resistance. It has happened before, but the element of time helped to relieve that market pressure, but what about now?  If we blow past these levels in the days ahead, I would be surprised. Is it possible?  Anything is possible, but I think the odds say that we move sideways to down as more time is allowed to pass.

I do think the easing on the part of the Fed, is a very big part of this market rally, but who could prove that. The timing of their easing policy is right in line with the Thanksgiving take off. In any case, we are very extended and caution if nothing else is in order.

I got back to trading today as the data issues at Trade Station were resolved. I took 4 trades with three of them for OK gains and had one loss for only 1 tick on the S&P emini futures.  Take a look below if you care to.

The loss I took for only 1 tick was an early entry and elected to exit it almost right away. Looking back, it only went against me by 3 ticks, but I did not know that then. Getting out was safer until the better timing entry just a few moments later, which happened to be at the same spot, but was then in a much better position to move out. I did not worry much about the two ticks of draw down after the second entry, because now things were in place. I missed one trade as marked with a no fill that would have been a good 1 point trade, but came up with a new long a few minutes later.

The price action in the market is very narrow and shallow, light volume. I often say, take what you can get easily and without struggle. If you start slugging it out, you are not entering at the most opportune time. Day trading is about timing and entering at the most advantageous times is what we should be shooting for. Don’t try and pick tops or bottoms, because you will be fighting the current momentum and anticipating a market reversal. The market loves to break through double bottoms and tops only to then reverse, but not before it takes you out.

Being exposed to price movements takes time. If, you look at the market price movement in any time frame, their is order there. It may look just like a bunch of up and down moves to the person with an untrained eye, but their is often predictable order within the charts. Not every move or section of the day displays this order, but much of it does. That is the part that you act on. Only that which you know to be true based on similar conditions of the past. We have all heard the term, “History repeats itself”, well, this is no different.  It does not always do it in the exact same fashion, but elements of its past always present itself in the current days charts, enough for us to take action on.Three types of trade orders, buy -sell-wait.

This only comes from knowing what to look for and when to take action. There are three choices when making a decision about the markets. Some think that their are only two, buy and or sell. Those are two of the choices but their is a third, to WAIT.  This is just as much a trading decision and would have to boil down to the most import element not only with the third choice, but within all of the day-trading experience.

Waiting to make a move has tied to it, “trade timing”. You are waiting for the best opportunity for you to extract your piece of the market and transfer that into your trading account. If you don’t wait until the time is right, you will force trades and your then your struggle begins. That is why I say, I like to take the easy and obvious trades with little struggle. The move should move out just after my entering. If it does not, then I may have been to early and have to question my entry.

When trading we always need to keep in mind capital preservation. If we are always shooting for the big move, we to often get nothing and minus nothing, a loss on the day. Sure, we may leave some on the table, but that is emotion of greed speaking there. We trade for income, so find your way to safely get what you can, limiting your risks while doing it and enjoy the fruits of your labor.   Good Trading to all !

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1. Trade Decisions

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.

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1. Successful Scalp Trading, Is It Possible ?
2. What is Sniper Day Trading ?
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We saw a  6 point advance on the S&P, 44 points on the Dow and 22 points on the NASDAQ, pretty good. Overall the last four trading days have been contained and we have a consolidating market at this point. A period of rest is normal and expected after the previous advance of the last few weeks. There is room for the market to pull back inside of today’s low and Fridays high.  A breakout from Fridays highs of 1165 could send us higher yet again while at the same time we could easily trade inside of today range and possibly retest it? This part is unsure, but those are the major points of interest for long and short.

Traders will have opportunities which ever way the market moves, but we will have to read it. Just like reading the newspaper or even reading this blog. You were not born knowing how to read, but with practice and persistence you were able to do better and better and with time you could quickly pick up any piece of literature and just read it, to then see what it is saying. From that information, you are able to take action on your understanding of what you just read. That understanding can lead you to many rewards in the your field of interest.

The same is true with the trading markets, we need to be able to look at a chart and just read it as in the above example. By doing so, you are not dependent on indicators or any other outside influence. The markets have a rhythm to themselves and it is best to try and pick up on that trading rhythm and get in sync with it. Trade with the path of least of resistance and you will maximize your returns.

The trading markets advance and then they rest, advance and rest. This cycle is repeated over and over and is the basis for us to read the market. All of this is called “Reading the Price Action”. That is what I call it anyway. Other traders may call it something else, I don’t know, but this is how I see it and trade it. Let me give it to one more time, what exactly is price action.

“Price action day trading happens every day the markets are open. This is the study of price movement or price bars in any time frame and that alone, no indicators or anything else. Most traders use indicators to help them see what the charts are saying, but a pure play is in reading the chart alone in this manner.” That is my definition.

I believe traders are best served to learn how to read the market in this manner. I know I have said this before, but trading indicators only reflect what the price is saying. That is really important to understand and should be the basis for us to learn to trade in this way.

I can go pretty deep in this area and break down all of the points that make up the process in learning how to read the market this way, but that is reserved for my trading subscribers. I don’t often talk a lot about how I do what I do, but try and show what I can here and there for traders to see and understand that trading for a living can be mastered.

I talk a lot about trading psychology because that is an area that gets overlooked by many traders and many times is the determining factor for them becoming profitable.

Learning how to read a price chart and trade off of it successfully with nothing else on it, with a very low risk per trade is something that is not going to be picked up overnight. You will not read about it in books and you rarely see it used and talked about. It is the same if you tried to pick up a foreign language and master it in a couple of months. You may learn some of the words and phrases and get some of its structure down but it is going to take time. Are you willing to stay the course and learn this language? It takes focused energy and commitment, but you need to keep your life balanced at the same time.

The traders that want to achieve this skill are the ones you will not give up. The key is, do not put the things that are important to you at risk while pursuing your goals. We always need to maintain control when we are pursuing any dream. If not, the cost can become excessive and all we hope to achieve has gone in the wrong direction. Don’t let your passions blind you from maintaining balance and patience in your life. Again, if not, you only push off that dream farther into the distance.

Getting back on point, reading the market is where traders need to go. Price action is the study of price and its movement. Become an expert in this study of price movement and the emotions that are tied to it by the majority of those who trade it and you will always be moving in the right direction of your goals and dreams, because with that knowledge you can position yourself to take what you want from the markets almost at will. That is not meant to seem like a cocky statement but one of confidence and expectancy, all the while staying humble and balance.

Today’s trading I started later than I am used to, but picked up the low side of my daily goal on a little smaller size. The smaller size is because I started late. I will often do that if I trade late in the day because I do not have time left to come back if I have draw downs. My results below.

Trade On, and be safe !

Related posts:

1. Price Action Day Trading
2. Price Action Rules When Trading the Markets
3. Price Action Trading – Key to Long Term Success

Today the markets made a nice late rally to recover from a steeper sell off it was seeing earlier in the day. The Dow was only off around 65 points, not too bad. With a close up off the lows, it sets the tone for an early rally tomorrow, but we may not be done to the downside. I

have no predictions on where prices are going at this point. I will tell you that we did hit an upside objective with the 940 S&P number being hit and completed that I had called. We are still in an uptrend, there has not been any damage to the chart and until then, you have to give the benefit of the doubt to the bulls.

There is some heavy resistance at the 940-950 area so that is going to be a very critical area to watch. I previously had in my mind that we would see some kind of a pull back and a lot of people will think this is more of a correction than it really is and start shorting the market. That could be a mistake. A pull back would be normal from here, but everything about this market right now is not normal.

I do  think overall we will see higher prices over the summer, that I am pretty sure about, but be careful, I don’t think it is going to last. By this September and October, we are going to have problems holding on to any meaningful gains going into the end of the year. I am a bear long term and do think the lows on the S&P and Dow are going to get taken out in a very big way. For now enjoy the mini Bull and get some of that 401K money back.

I am a bit cynical about how things are run around the good old USA. I believe the powers that be know exactly what is going on and when any changes are taking place. If you ask yourself, did “THEY” know that the market was going to tank last year?  Here, let me answer that one for you, YES.  Did they know that it was going to turn and when?  I can’t help myself, let me answer that one too, YES.

Our leader came out on the airwaves three days before the bottom on the S&P at (interesting number, I did not pick it) 666. That would make him a pretty good market timer if you ask me. Just three days earlier everyone thought the very worst. After that third day people who took his advice have done really well. I don’t know if anyone knows that, but it’s true.

What if people put a lot of new money in the market and it did not work out? Mr. O would not be looking too good right now and he could not have that.  The reason he could come out and make a stock market call like he did was because, well, you make your own conclusions. We hear that things are getting better and I am all for that, Ya-Ya.  I always say to keep an open mind and think for yourself. This will be one of those times, even as I give my opinion. That is all it is, my opinion.

In today’s trading, I did well, had taken a few small trades early, some up and some down, but saw a very nice high probability trade to capture a big move to the downside. I put it on, took not one tick of heat and picked up 6 & 1/4 points on that trade. I held it for a while which was painful in and of itself. I am not usually in a trade for as long as I was, but I played it for the extended move out of a higher time frame and that is what it gave me. I got in just as the market told me and got out just as it said “get out”. I did give it a few extra ticks of room, just in case it was a fake out. I have a chart of it below.  All in all, 3 times my daily goal. A lot of early trades were split trades with different exits.

Trading Lesson: Below is a short video of how you can use support and resistance by plotting  parallel channels. I cover how you can use them in your trading to give you some possible insight on where prices can go before they get there. It is not a science but it is something that gets played out everyday. Take the insight that I give you here today and check it out on the markets. It may take some time to be able to spot these, but when up and down trends play out, you should be able to apply some of these ideas to give you an edge.

Technical analysis is the study of price movement through patterns, support and resistance, and general price fluctuations. You can draw conclusions as prices move from one area of support to another area of resistance and use that information to trade accordingly. Even if you spot these patterns, you still have to know how to play it, with low risk entries in mind.  Check back for more insight and ideas.   Anyone interested in learning more please feel free to email me. I will do my best to answer your questions.

http://www.screencast.com/t/LuSFBV59R Today’s equity chart

http://www.screencast.com/t/3bLxmtzYZI One of today’s trades

http://www.screencast.com/t/HMBxbNpJ7 Trading lesson, 5 minute video

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1. Technical Analysis Video of Major Index’s
2. Technical Analysis for Today’s S&P 500 E-Mini
3. Trading Lesson and Live Trade on S&P Futures Video

In Friday’s trading, I did not have a very good connection, I was traveling and not in my home office and my data was freezing because of that, so I elected to just make a few calls on direction but not trade at that time. Later in the session, I was able to link into a faster data connection and took a few trades to a get double daily goal.

I was trading small, but picked up my points with no problems. I remember taking 9 trades and only had one very small loss of  1/2 point. I had some split trades in there, half the order comes off first and the other half later (T-2) , usually at a better gain.

The market sold off on Friday during the last 15 minutes of the day, another close at the lows of the day after trading higher through out the session. That again should have an impact on Tuesday’s opening market.

Trading Lesson:    Generally, when the market sells off early in the session while it is in an uptrend on the daily, you can often see the market come back and close at the highs of the day. The same is true when we are technically in a down market. You will see the market rally early in the session, only to close at its low of the day. We have been seeing exactly that the last three trading sessions. It happens all the time, so it’s one of those things to keep in mind. If you don’t know if we are in an no trend or downtrend, you have work to do.

Where do we go from here?  Since last week, we had broken the wedge that was forming to the upside, that I had been talking about for weeks, but we do not yet have a lower low from our most recent pivot point. Some of my daily indicators are pointing down and some have yet to turn down. From the price action that has recently taken place over the last three trading sessions, I had become bearish on the daily, but with caution.

On Wednesday I stated in my blog, the short term top was in and lower prices were coming off of the price rejection I saw that day and hitting the adjusted outside purple line that I had talked about for a month. All of that has happened and now we will have to see if the last pivot low is going to hold. There are things happening that say it can hold and at the same time, there are things that say it will drop down and break the low, which will bring in more selling. I don’t know which one it will be yet. Pure price action says there is no violation yet, while momentum says it should break. I am going to have to let the market decide and you should too at this point.

We have come off 50 S&P points from the top at 930 to Thursdays low of 879. A month ago I had said 940 or so would be the top of this little run and was off about 10 points. I just needed to re-adjust my lines and last Wednesday I saw that.

Anyway, let’s just let the market decide. If it does break the low, we could see a move down to 847 to 850 on the S&P. It’s not too steep but it would naturally find initial support there at a parallel channel taken from the most recent tops. That lower end of the channel comes in at around the level I just mentioned. Again, we will have to see what happens first. It would appear that is what is going to happen, but if price action changes to reflect something different, I will look to re-asses. With the Gov looking to take control of GM, that could tip the scales south for now.

The financial networks always try and come up with a reason why the market did this or that, but fail to realize that much of the price action would happen that way regardless of the news – just a personal observation.

Last week I was talking about “Price Action”. I wanted to clarify one thing, the difference between price action and price patterns. I believe I was pointing out a “Head & Shoulders” formation that developed in a 5 minute cash chart of the S&P from Wednesday’s sell off. Anyway, there is a difference between the two and I wanted to make that clear.

Price Action is a collection of price movements based mostly on support and resistance. Prices are pushed above and below their mid point.  While price pattern is the collection of price movements that cluster to form identifiable patterns. When those patterns are broken, you can draw a conclusion that will yield a highly predictable outcome. Price action is what takes you to the point where you can see the formations coming together. It is almost like, which came first, the chicken or the egg?

In this case, price action comes first, then comes price patterns from the price action. I hope that helps clear up any questions you may have had about that. If you were not even aware of the difference, you now have it explained.

http://www.screencast.com/t/lcQ9oHq5q Friday’s equity chart

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