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Broker: Advantage, Trading Technologies, OptionsCity, IQ Feed
Trading: CL, NG
Posts: 1,038 since Jul 2010
Thanks Given: 1,713
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Just to wanted to provide a very brief recap of the week and yesterday's price action. The start of the week being Tuesday as Monday was Memorial Day. Tuesday's open saw a nice gap up with a mixed day and the market closing at it's high's. There was speculation that this was influenced by the CME lowering the margin requirements for it's equity index contracts. This move/gap up signaled a break to the upside from it's resisting bearish trend line. I believe this move trapped many traders and appeared to be a bit of a pump and dump. As the remainder of the week was met with lots of selling and horrible economic reports. Yesterday, Friday, was another interesting day as the market opened gap down and attempted to close it's gap throughout the entire morning session which it almost did but most importantly closed at least half of it's gap which allowed the market to continue on with it's downward direction with price closing RTH right on it's lower initial balance level.
Looking at the big picture, we still have not pierced through the previous swing lows of 1290.25 and 1243.25. If you use 1243.25 as an anchor for a Fibonacci retracement to the recent high of 1367.25, 1290.25 happens to be the 61.8% level. A break in this could signal accelerated selling with an almost certain test of 1243.25 which is also where the 200 day moving average is sitting.
As I mentioned recently, there is quite a debate developing on whether the Fed will continue with it's Quantitative Easing efforts and what the next attempt will be. It's blatantly obvious now that the only thing the Fed has managed to do with their recent efforts is to inflate the stock market and provide artificially low U.S. Treasury interest rates. The side effects have been devastating with the price of commodities ripping higher and the USD getting crushed. The underlying economic problems of our country have not changed one bit with the Fed's efforts. I feel they may need to go back to the drawing board here and figure something else out. We've got a month left of the liquidity pump. Be sure to pay close attention to what's happening and what comes out of the horse's mouth in the coming weeks. When QE2 was announced, stocks ripped up full throttle, be ready for anything.
PB, are you still waiting for confirmation before you will start to build a short position? I am led by last week movement to believe the market is going for a big fall this June. It would be a perfect trap for the bears if the market would instead recover from here.
Broker: Advantage, Trading Technologies, OptionsCity, IQ Feed
Trading: CL, NG
Posts: 1,038 since Jul 2010
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Right now, I've just been trading the intra-day moves either long or short. My thoughts are to remain neutral until we hear from the Fed on what they're going to do next. I think everyone is predicting them to do the same as they have and that's where many can get into trouble. The Fed's economic models are derived from economic theory rather than common sense so it's difficult to say what they have planned next. But I feel the buy the dip and hold on is a crowded trade at this point which could mean we see a big move to the downside.
So going forward, I will continue to just intra-day trade the ES with an anticipation of establishing a swing position on news from the Fed. Also, in the past I've said I only swing trade ES, but I've change my mind on that lately. I feel there are only a few valid moves in ES throughout the day which doesn't get in the way of my trading of other markets. In fact, feel it compliments what I'm doing in other markets.
Broker: Advantage, Trading Technologies, OptionsCity, IQ Feed
Trading: CL, NG
Posts: 1,038 since Jul 2010
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Thank you! Regarding the way I draw trend lines, like everything in trading, you need to utilize whatever works best for you. My view on whether to draw a trend line from the body or the wick is this, wicks are areas of rejection and the bodies are areas of acceptance. So, for big picture trend lines, I prefer to draw from the body of the candles. The wicks never stick as they say.
Broker: Advantage, Trading Technologies, OptionsCity, IQ Feed
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The ES broke through the important support of 1290.25. As I mentioned before, a break in this should have the market test the next level of 1241.25. I believe I previously made a mistake on this level which was an issue with my charts but the correct level is 1241.25 which is now just below the 200 day moving average.
This morning's session was pretty slow but provided a decent short opportunity around 9:45 where price found support at the 1290.25 level and bounced briefly before rolling over again and eventually taking out 1290.25. Another day closing at the low's as well and sitting right on the -23.6% level from the recent swing high.
I would think we should see some sort of retracement next but this market just keeps falling. Look out below!
Broker: Advantage, Trading Technologies, OptionsCity, IQ Feed
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What a nice sell off this afternoon to finish off a mostly lack luster, tight range day. I would assume the market didn't like what Bernanke had to say. The morning's session acted like it wanted to fill it's gap but ended up just range bound with two attempts to go higher where it was met with an extension short 50% level which was also last week's low and got sold into each time. So, thanks to the "Bernank", we got a gap fill at the end of the day and then some. I was expecting a bit more of a retracement today but price just couldn't get out of the initial balance for very long before getting sucked back in.
From reading about Bernanke's speech today, it still amazes me that anyone would take him seriously. He lives in a world of keynesian economic models while reality laughs in his face on a daily basis. Funny thing that equities sold off today while Oil ripped higher breaking out above it's bearish trend line. But hey, it's just transitory...
Hi PB, I've been reading this thread lately with great interest because my macro economic acumen is sub par . I really lean a lot by reading and re-reading this thread. My concern is QE3...from this article from Zero Hedge is QE3 a done deal?
"Faith is the substance of things hoped for, the evidence of things not seen." --- "Therefore, I Believe it and I will see it. And every day and in every way, I am healthier, wealthier, and wiser."
Broker: Advantage, Trading Technologies, OptionsCity, IQ Feed
Trading: CL, NG
Posts: 1,038 since Jul 2010
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Good article. By looking at the list of Primary Dealer banks, it's a no brainer who received the most funds from QE2 but I think by saying no US banks received funds from QE2 is completely naive. US banks have simply parked a majority of their funds with the Fed as well. Also, I'm wondering if Bernanke were to be impeached (wouldn't that be a riot), why is there a case for QE3? I would assume the board of Fed Governors would either reassess the direction of the Fed while determining a new President or they would carry on with their QE plans, who knows. I will say there has been a lot of commentary from the Governors stating that no further QE is needed at this time.
All in all a good article with some interesting facts but how it relates to trading the ES, I would advise this. Continue with your day to day trading following your rules, set up's, etc. When we do hear word of what the Fed will or won't do, trade the market's reaction but stay within your rules (of course). Do not establish a bias based on articles you've read and assume the market will do the same as it has in the past. If you look at the QE's affect on the market, you'll see that QE1 had a greater influence on price than QE2. Should there be a standard QE3 of the same caliber, I'd be curious to see if there was a sustainable impact at all. But like I said, trade what you see happening on your charts vs what you're reading from the media and blogs.
As of right now, the ES is fading with a hot date with the 200 day moving average any day now (it's just about there). I would expect some sort of bounce at this level whether it be just a retracement to the next measured move or whatever. We also have our next swing low at 1241.25 which could provide support. But a break beyond the 200 DMA and the the swing low, could signal a big free fall. Of course, the flip side is the Fed finds another scheme to goose the markets back up and continue to extend and pretend. But at the end of the day, it's fun to analyze and try and figure what's next but we're trading to make money which requires us to just stay within our rules and trade what we see on our screens (sorry for the repetition but I really can't stress this enough). Stay safe!
. I really lean a lot by reading and re-reading this thread. My concern is QE3...from this article from Zero Hedge is 
"Faith is the substance of things hoped for, the evidence of things not seen." --- "Therefore, I Believe it and I will see it. And every day and in every way, I am healthier, wealthier, and wiser."