Webinar Today

T & BI just fin­ished the slides for today’s webi­nar on Tops & Bot­toms. There are 60 slides cov­er­ing how to read a top and how to read a bot­tom.  I think you will like them.  We will have a thor­ough dis­cus­sion on mar­ket tops and bot­toms, includ­ing the all impor­tant struc­tural char­ac­ter­is­tics, how mar­kets behave in these loca­tions, entries, use of the Weis Wave, bar-by-bar read­ing of tops and bot­toms, recent major tops and bot­toms, and much more.

Join us tonight at 5:00 East­ern time (New York time zone).  We will run about two hours, maybe a lit­tle more.  Every­thing will be recorded.  Come learn how to read the next top or bot­tom by click­ing on this link: Tops & Bottoms

Trading Losses

Accept Your LossesTrad­ing losses are tough to han­dle for many traders.  Not only do many try hard to avoid them, we may even try hard to avoid think­ing about them!  In my arti­cle pub­lished on TraderPlanet.com, I explain why not think­ing about our losses is a poor psy­cho­log­i­cal play.  You can read the arti­cle at the link that fol­lows.  Below the arti­cle there is a sec­tion where you can make com­ments and add to the dis­cus­sion.  Here’s the link:

Accept Your Losses and Be A Bet­ter Trader

 

Follow-Up in the S&Ps

Yes­ter­day, resis­tance was iden­ti­fied in the area of 1965 — 1970.  Today, the mar­ket stopped it’s upward move­ment at 1968.25.

2014-07-09 Daily ESToday–marked A on the chart–was an up day.  Although it was up, it also traded inside the range of the pre­vi­ous day.  We had good vol­ume, but the mar­ket remained largely range-bound.  We could be see­ing the mar­ket accu­mu­lat­ing around sup­port as we have seen on sev­eral pre­vi­ous swift dips down.  That is entirely pos­si­ble.  We could also be see­ing the start of a larger pull­back. Frankly, it is dif­fi­cult to tell.  There cer­tainly has been some weak­ness, but we are also sit­ting on top of sup­port, hold­ing that sup­port, and in an over­all strong uptrend.

The key level to me is the 1970–1975 area.  I’ve high­lighted this area with a small red rec­tan­gle.  For tomor­row, I would expect con­tin­ued fol­low through to the upside from today’s action.  Nonethe­less, the area around 1970–75 is likely to be dif­fi­cult for the mar­ket to over­come.  Watch this area care­fully, espe­cially if price reaches this level early tomor­row morn­ing (US ses­sion) assum­ing the mar­ket goes up there.  Push­ing through this area will indi­cate the buy­ers remain in con­trol. Fail­ure at this point will indi­cate sell­ers want to try for another push down.

Should the mar­ket pull back overnight (Asian & Euro­pean ses­sions) or dur­ing the US ses­sion, pay atten­tion to the 1965 to 1960 area.  We can see intra­day sup­port develop in here.  Push­ing below this level indi­cates sell­ing has resumed.  Hold­ing this area (again, if it comes down to here) sug­gests buy­ers are act­ing on their con­vic­tions and higher prices are likely.

 

 

Progression of a Top

2014-07-07 Daily Chart 1I showed Daily Chart 1 of the S&P e-mini futures in a free webi­nar held by TradeGuider yes­ter­day (Mon­day) morn­ing. You can see that Monday’s bar C was still in progress. We noted that we were likely cre­at­ing a top and could expect at least a mod­est pull­back. Here was the rationale:

The daily chart had reached the Weekly Sup­ply Line (red trend line) on Thurs­day last week (B).  We noted that the vol­ume had less­ened con­sid­er­ably at B indi­cat­ing lack of buy­ing on the highs and that this was the last day pre­ced­ing the Fourth of July hol­i­day, which is typ­i­cally a bull­ish week.  Ear­lier on Tues­day at A, the mar­ket broke above the 1960 resis­tance level on good vol­ume, but the close and the sus­tained vol­ume gave the tell­tale sign of sell­ing into the rally.  This added to the story of a poten­tial pull­back.  At the time of the webi­nar, we dis­cussed a move down towards 1964, if the mar­ket could push below 1971.75.

2014-07-08 Daily Chart 2Later that night in a make-up ses­sion for the weekly Deep Prac­tice group, we dis­cussed the S&Ps and the next likely move in Daily Chart 2.  I added a lit­tle more detail.

We noted that sup­ply clearly came into the mar­ket as seen by the poor close and increased down­side vol­ume at C.  We dis­cussed how the next day or two would likely see a run down into the 1960 to 1954 area.  This is high­lighted by the large rec­tan­gle. Because of the  close under the top of A on Mon­day, the odds of much of a rally the next day (today) were low, and the small rec­tan­gle high­lighted the area where we would look for any rally up to die out.  The short term daily trend chan­nel was also added, giv­ing us an ini­tial tar­get for the reaction.

2014-07-08 Daily Chart 3You can see the result in today’s (D) price action.

Although today stopped at the antic­i­pated sup­port level, some dam­age has been done to this mar­ket.  Any rally up tomor­row is likely to have dif­fi­culty between 1965 and 1970.  If the mar­ket shows some unex­pected resilience and is able to get above that level, stiff resis­tance will be met around 1975.  Because we have had two days down in a row and today had heavy sell­ing, sup­port is likely to come in a lit­tle lower, around the 1950 level. Should the mar­ket want to sell off again tomor­row, and push through 1950 deci­sively, it could eas­ily slide down to the 1940–35 area.

Under­stand­ing tops like this (and bot­toms, too) is the sub­ject of a new webi­nar we will be hold­ing on July 22nd.  Learn how to read tops & bot­toms and dra­mat­i­cally improve your trad­ing.   You can learn more about the webinar—including the cur­rent dis­count offer—by click­ing on the Trad­ing Tops & Bot­toms but­ton at the upper left of the web­site or here:

Trade Tops & Bot­toms

 

 

Happy Fourth of July!

Happy Fourth of July everyone!

Helen and I wish every­one a won­der­ful and safe hol­i­day weekend.  

Declaration of IndependenceFor read­ers who may not know, the Fourth is our national hol­i­day cel­e­brat­ing our adop­tion of the Dec­la­ra­tion of Inde­pen­dence from Great Britain.  This occurred in 1776. We actu­ally sev­ered ties from Eng­land two days ear­lier, on July 2, 1776.  On the 4th, our gov­ern­ment adopted the Dec­la­ra­tion of Inde­pen­dence, which explains why we sep­a­rated.   The Dec­la­ra­tion is one of my country’s most impor­tant and mean­ing­ful doc­u­ments, next to the Con­sti­tu­tion.  It was the actions behind the Dec­la­ra­tion that cre­ated this coun­try and all of its ideals.

 

Fourth of JulyToday, the Fourth of July also marks the begin­ning of sum­mer in the US.  Many fam­i­lies take off for he beach or moun­tains, enjoy pic­nics, hot dogs, etc.  Lots of fun and a nice way to cel­e­brate our country’s found­ing.  Have a great Fourth!

Brain Freeze

I was inter­viewed recently by Kira Brecht on the topic of Brain Freeze.  Kira was act­ing as a free-lance jour­nal­ist for this arti­cle, but is also the Edi­tor of TraderPlanet.com and a very good writer.

Brain FreezeBrain Freeze” isn’t a tech­ni­cal term, and it’s not what kids get when eat­ing ice cream too fast–it’s what some describe as becom­ing immo­bi­lized by fear.  It’s actu­ally a part of our genetic cod­ing and forms a por­tion of the fight-flight response.  (Sci­en­tists view the full response as the fight-flight-freeze response.)  The freeze is eas­ily seen in prey ani­mals who have been cap­tured by a preda­tor (say a gazelle and a lion), who freeze and appear dead caus­ing the preda­tor to lose inter­est and walk away.  Moments later the gazelle stands up, shakes her­self off, and runs away. It’s a last-ditch effort at sur­vival used when flee­ing or fight­ing have failed.  Think of play­ing dead if con­fronted by a bear.

Traders mean some­thing dif­fer­ent than an adapt­able sur­vival response when they refer to brain freeze.  Per­haps the best exam­ple is a trader deeply under­wa­ter as the mar­ket swiftly falls.  Rather than being able to close the posi­tion, the per­son freezes, unable to act–not very adap­tive.  This is dis­cussed in the arti­cle and at the end, I give a few sug­ges­tions on how to release one­self from being frozen.

The arti­cle is in TD Ameritrade’s Ticker Tape Monthly and can be read here:

http://www.tickertapemonthly.com/2014/june/?accept

 

Fed Day Trading

Fed Day trad­ing almost always involves con­trac­tion of volatil­ity in the morn­ing ses­sion and expan­sion of volatil­ity right around the announce­ment.  Often, like today, the pick-up in volatil­ity will trig­ger an after­noon trend.

2014-06-18 ES 3K TickIn yesterday’s post, I high­lighted my take on key resis­tance and sup­port for today’s trad­ing. These are out­lined in boxes on the 3,000 tick chart. We see volatil­ity con­tract through the Asian and Euro­pean ses­sions, and shortly after the US open a small upthrust trig­gered in the resis­tance area.  This brought price below yesterday’s high and sig­naled a down morn­ing ses­sion.  Later, at the Fed announce­ment, we get a nice spring off the morn­ing low where sup­port was antic­i­pated.  This pro­pelled the mar­ket into new highs.

2014-06-18 SPY QQQ DIA DailyYes­ter­day, we looked at the three major mar­kets (SPY, QQQ, DIA).  They were help­ful today dur­ing the Fed announce­ment.  Note that only the Qs–identified as rel­a­tively weak yesterday–was the only mar­ket to fall below yesterday’s lows.  The S&Ps and Dow held higher.  This indi­cated that the spring was a good one and odds favored an up afternoon.

The mar­ket is clearly bull­ish.  Weak­ness seen the rally of the last few days has been erased by today’s action.  Any dip down tomor­row morn­ing into the 1940 area would likely set up a buy opportunity.

So Far, It’s Been A Pretty Weak Rally

When we look across the three major US stock mar­ket indices, the best we can say is, So far, it’s been a pretty weak rally.

2014-06-17 SPY QQQ DIA DailyLast Mon­day (June 9), all three mar­kets made new highs.  As the week pro­gressed, the Nas­daq (as rep­re­sented by the QQQ ETF) tried to hold onto the newly got­ten gains, but the Dow (DIA) and the S&Ps (SPY) gave them up.  You can see this at the area marked A.  The Qs had rel­a­tive strength.

On Thurs­day (June 12), all three mar­kets saw sell­ing come in.   The Naz remained rel­a­tively strong, how­ever, as the S&Ps and Dow had larger moves down.  Big­ger cap stocks got hit.

Now we see — thus far — a pretty weak rally.  Notice the Naz.  It is now weaker than the other two mar­kets, clos­ing under Monday’s high.  Both the S&P and Dow man­aged to close above yesterday’s high.  Although the mar­kets may sud­denly gain life and rally higher, usu­ally when a rel­a­tive strength leader turns weak it isn’t a good sign.

Tomor­row, for the S&P futures (ES), watch the 1935–40 area to present weak­ness. Inabil­ity to hold today’s high (1935.75 — N.B.: this isn’t quite in as the futures haven’t shifted to the next day yet, but this should be close) tomor­row will indi­cate a down morn­ing (US morn­ing ses­sion).  In other words, watch for an upthrust of yesterday’s high tomor­row.  Sup­port is likely to man­i­fest around 1927–30, which could be a good buy area, with stronger sup­port a lit­tle lower down around 1920–15.

 

Follow-Up to Yesterday’s Post

I2014-06-09 ES 3K Tickn yesterday’s post, I noted that there was less vol­ume and less range on Fri­day, indi­cat­ing that buy­ers were becom­ing tired and to be aware of a poten­tial intra­day rever­sal. Sup­port was iden­ti­fied in the 1940–45 area and resis­tance could see the mar­ket lose steam around 1955–60.

Lows were made first today when the mar­ket pulled back on low vol­ume into 1946. Min­utes before the US Open, the mar­ket had a spring (A) at antic­i­pated sup­port that pro­pelled a nice rally to the day’s high of 1954.75 (B).  It was at that point where intra­day resis­tance coin­cided with higher time frame resis­tance caus­ing the mar­ket to reverse and retrace all it’s gains for the day.  Not bad for a Monday.

I was asked whether Fibonacci pro­jec­tions were used to esti­mate sup­port and resis­tance. There are no Fib, pivot point or other cal­cu­la­tions used in my analy­sis. Sup­port and resis­tance are based on mar­ket struc­ture, noth­ing else.  Mar­ket struc­ture is taught in Chart Read­ing Mastery.

Sum­mer Sale of Video Tutorials

Helen has extended the 20% dis­count on all our video tuto­ri­als.  We will put up a sep­a­rate post about this later in the week, but you can get a head start by using the code May20 at check­out for the 20% dis­count on any of the video tuto­ri­als, includ­ing Chart Read­ing Mastery.

Bullish Market — What Will Turn It Down?

The market–as rep­re­sented by the S&P e-mini futures–has cer­tainly been bull­ish.  We have had a run of sev­eral up days or near up days in a row.  The mar­ket struc­ture has been con­ducive to a bull run and the run has been impres­sive.  At some point, how­ever, the cur­rent rally will end and we will see a pull­back of some degree.

What Will Turn This Market

2014-06-08 ES Day WeekWhile I don’t try to pick tops, I do pay atten­tion to the con­di­tion of the sup­ply and demand in the mar­ket and note the areas within the struc­ture where the mar­ket may turn.  If and when the mar­ket reaches those area, I am alert to the mar­ket chang­ing its recent behav­ior. I am also alert to the mar­ket not being will­ing to change its behav­ior at these points–that is impor­tant infor­ma­tion, too.

The last two days have been very bull­ish, but we saw less vol­ume and less range on Fri­day, poten­tially indi­cat­ing that the buy­ers are tir­ing.  Longer term sup­ply lines on the weekly exist just over­head.  We may see the mar­ket lose steam up here.  For Mon­day, watch the 1955 to 1960 level as poten­tial resis­tance.  Any pull­back is likely to find sup­port com­ing in around the 1945 — 1940 level.

Video Tuto­ri­als are 20% Off

All of our video tuto­ri­als are dis­counted by 20%.  You can save a nice amount by using the code: May20 at checkout.