Constructive Day in the S&Ps

Constructive Day in S&Ps

Constructive Day in S&Ps TodayIt was a constructive day in the S&Ps today. Although it didn’t completely erase all of the selling from yesterday (today painted an inside bar), we see solid price action and good volume come back into the upside.

We had several days with narrower ranges last week, so volatility has naturally picked up.  We may see some additional volatility over the next day or two as the week comes to a close.  Because today was a constructive day in the S&Ps resolving volatility to the upside, the coming employment and GDP reports may serve as a catalyst for additional volatility and upside potential.

Today’s Action

We expected the rally today, though truthfully, it ran higher than what was anticipated.  We can never be perfect in our trading, and especially in foreseeing what the market will do next.  That is the nature of trading.  It can be difficult to be operate in so much ambiguity, there is no doubt about that.  It’s one of the reasons I find mindfulness to be of such value.  We have to keep our minds in the moment, and not let what we think the market will do have too great an influence on our trading actions.

What’s Likely After a Constructive Day in S&Ps

Tomorrow is likely to rise higher since the buyers took back control today.  Look for a pullback to the 2115-13 area where there has been lots of back and forth over the recent past.  If the pullback is weak and price action in that area suggests support, it could be a choice point for a long opportunity.

A deeper pullback could take the market back down to around the 2106 level, or slightly higher.  If the market closes below this level tomorrow, sellers are saying they haven’t given up.  I think the odds of that occurring are rather low, though, given the current structure.

Anticipating A Day Trade

Anticipating A Day Trade

I always like to be anticipating a day trade.  Usually, anticipating a day trade is easiest early in the US morning session.  It is a major reason to create a game plan the night before.  In last night’s post, I indicated that the S&Ps (ES) were likely oversold by yesterday’s strong downside action.  We could therefore anticipate a rally or pullback.  I marked the 2113 level as a good target, based on market structure.  I was hoping the market would get a little more oversold by going underneath yesterday’s low this morning, but the markets don’t usually comply exactly with my wishes. That’s really no matter.

Anticipating A Day Trade: The Context

Anticipating a Day TradeComing into the US morning session, the first thing to notice was that the S&Ps had moved up off the lows of yesterday.  The idea of buying a weak dip underneath yesterday’s low for the first trade of the day was immediately nixed.

Two other things were noteworthy: First, there was little supply seen on reactions since the lows were made yesterday.  Second, the market made a higher high (B) over yesterday afternoon’s swing high (A).  In the backdrop of being oversold, this context suggested higher prices this morning.

Anticipating a Day trade: The Setup & Exit

The reaction back to C drew downside volume, but the volume didn’t produce a new low.  Instead, price held the demand line and gave clear price bar behavior it would rally.  A few minutes later, it tested the trend line and drew no supply with more confirming bullish price action.  Either location offered long trade initiation.

As anticipated last night, the 2113 level was a reasonable target for a nice day trade.

US Market Sells Off

US Market Sells Off

The US market sells off today.  As posted over the weekend, the odds were increasing for a down move.  The run down went a little farther than originally expected, but the direction was clearly down from the beginning of Monday’s trading.  Volume increases on the way down, indicating significant supply.  Today’s action was not constructive for the market

Trading After the Sell Off

US Market Sells OffAlthough there is likely more downside to come, we appear to be a bit oversold coming into Tuesday.  I’ll look for a buy opportunity in the US morning session only around yesterday’s low—especially if we drop a little farther down below yesterday’s low (2096) without drawing downside volume.  If the market does continue its selloff tomorrow, however, yesterday’s lows won’t hold and we will see good volume come in to continue the selling.  If that occurs, I’ll scrap the buying idea and look for short opportunities.

Even if the selling ends in the morning tomorrow, I would anticipate the upside to be limited.  The 2113 level would be the likely area that any weak rally up dies, if it gets up to that level.  This level could offer a good short opportunity for a retest of yesterday’s low or lower, depending on how the market trades tomorrow.

S&P e-Mini Market Analysis: Where Are We?

S&P e-Mini Market Analysis

Every S&P e-mini market analysis is asking the same question: Where are we?

If you are a bull, you would have to say, “We are in a good place.”  Last week, we broke to new highs (2134 via the June S&P e-mini contract) and held those gains during the week.

If you are a bear, you might also be saying, “We are in a good place,” because although we did break into new high ground, there has been no follow through all week.  Prices could head lower.

Isn’t this always the way?  We often seem to be able to make rational claims for both sides of the argument.  Well, let’s not bicker with ourselves.  And let’s be neither a bull nor a bear.  Let’s just get down to the facts and be prepared for whichever way the market wants to trade.

S&P e-Mini Market Analysis: Details

S&P e-mini Market AnalysisAs is always the case in S&P e-mini market analysis, the details reveal the market’s next likely moves.

To do a thorough S&P e-mini market analysis, I like to keep a daily chart alongside a 4-hour chart (240-minute chart) annotated with market structure, wave movement and key levels of support and resistance—both obvious and not so obvious.

A good run up began on May 7th labeled A on the chart.  It started with strong movement up and, although we had a sizable initial reaction from that first rally, the rally kept on going to last week’s high at B.  A nice run.

Notice, however, the rallies became shorter as the market moved higher.  I pointed this out on Tuesday night after the market made its new high in my Deep Practice Program—our weekly trading group where we learn and practice deep chart reading and psychological skills.  We discussed how the market was likely going to pull back to the 2113.50 support, and maybe go lower if good quality selling came into the market.  We went to 2115, found support, and then had a Wyckoff Spring of Wednesday’s low.

Okay, so now where are we?  Well, the market rallied up off the spring as expected, but couldn’t make new highs as there was just no fuel (volume) to take it higher.  On Friday, the market just went sideways and closed down, again on low volume.

S&P e-Mini Market Analysis: What I Anticipate for Early Next Week

I note that the rally volume on the Weis Wave has been diminishing with each progressive rally.  Buyers may be tiring; they are certainly showing a lack of energy in pushing prices higher.  Consistent with this, each push up has seen the market travel up less and less.  What hasn’t been seen yet, however, is supply.  Buyers have weakened, but sellers have not stepped in, at least yet.

The market closed Friday sitting just above the 2122.75 level.  We could see the market hold here, or a little lower, and begin driving higher back on up to the 2134 area.  To see this occur, we will need to have decent upside volume come into the market to fuel the rally.

Maybe more likely, is to see a weak rally reaching around 2130 and unable to push above the congestion around Friday’s high to trigger a sale.  Should that occur, I would anticipate the market revisiting the 2113 level, and perhaps go down lower into the hidden support of the 2106 area.  Should we close poorly (below 2113) and do so on an increase in downside volume, then we are likely to see a greater downside push as the days go by.

Deep Practice to Develop S&P e-Mini Market Analysis

For those who may be interested: You can join our weekly Deep Practice Program where we spend 90 minutes each week walking through and trading various markets with traders from all over the globe.  We assess market context, make a game plan and take, manage and exit trades.  We alternate between swing and intraday trading.

Practice can make perfect when done correctly.  Deep Practice is designed to give the trader true chart reading and mental skills based on over 40 years of psychological research into what actually makes great performers great.  If you are interested in developing your ability to read the market and do so with mental clarity, then you can learn more about my Deep Practice Program here: Deep Practice 

Think Mindfulness Doesn’t Apply to Trading? Think Again

Mindfulness and Trading

Mindfulness and TradingMindfulness and trading: Most traders I talk with are interested in mindfulness as a way to improve trading.  Once in a while, though, someone will have an unfounded objection to mindfulness. For example, Ricky, a currency trader, said, “Isn’t that going to make me passive and not want to take money out of the markets?”  Nothing could be further from the truth.  Mindfulness and trading go together nicely.

Mindfulness, Marines, Athletes & Corporations

Today, mindfulness is even used by the US Military.  A marine unit scheduled to deploy to Afghanistan Mindfulness and Tradingconducted its training with mindfulness. Some in the unit were taught meditation and mindfulness techniques.  Their initial reaction to sitting quietly in meditation was, “This is ridiculous!” But in the days leading up to deployment, the unit went through one last training event: an intensive, highly stressful war-game exercise designed to imitate what they would soon be facing.  Those who learned mindfulness had significantly better response to the stresses of that training. They felt more relaxed, had a better physical reaction to the high stress, and recovered more quickly. Seeing these results in their comrades, those marines who initially shunned the mindfulness training now wanted to learn it.  The study was recently published in the American Journal of Psychiatry.

Many now practice mindfulness on a routine basis.  Executives and employees at Apple, McKinsey, Target and Google represent a few of the corporations that encourage the practice of mindfulness. Members of the Seattle Sea Hawks practice mindfulness as a part of their preparation for competitive games.  Even traders at Goldman Sachs come for company sponsored mindfulness training “in droves.”  Goldman’s classes, according to this article, “… have waiting lists several hundred long.”

Mindfulness for Traders

Mindfulness has numerous benefits for traders, too.  Brain scans show growth in the area associated with decision-making and shrink those areas associated with loss aversion and the stress response.  One of the most valuable of all the numerous benefits has to do with what we tell ourselves.  Through mindfulness, we can learn that all those unhelpful and critical voices in your head are really just lies.  The voice that that tells you to “get out” of a winning trade and then chastises you for cutting that trade when it continues in your direction will be seen for what it is when mindful–just thoughts.  And those highly toxic, self-critical voices saying you’re “not good enough” will be seen for exactly what they are–lies.

Mindfulness and Trading