2/15 - Presidents day - NO TRADES
2/16 - No good gap setup, decided not to take any other discretionary trades. NO TRADES
2/17 - Since it had been over a week since we've had a gap trade, and I was up pretty late last night, I decided to give myself the morning off and get an extra hour of sleep. Of course, MTG called a gap trade, though with a higher stop in light of some other risk factors. But in the end it was a successful 4 pt trade. I could have entered later as as price was still around the opening price but it had made one push down and then up and I thought that the fade play was done and I didn't want to go against the system.
At my Meetup tonight we were talking about a lot of things, one being the inverse dollar/stock market correlation. The presiding rule is that when the dollar falls the market goes up, and vice versa. One person was saying that tomorrow will be down, because the dollar strengthened but so did the overall stock market, which is contrary to the rule. And the theory is that currencies lead stocks, so the stock market will have to correct itself tomorrow, unless the dollar weakens overnight.
So I ran a comparison chart on Yahoo finance, comparing the SPY to the UDN. The UDN is an inverse ETF of the UUP, which is an ETF on the dollar index. So theoretically the S&P and the UDN should rise and fall in the same direction at the same time.
Attached is a 3mo chart of this correlation. Ignore the left half of the chart since it starts both lines at 0% it takes a while for the relationship on the chart to take form. Notice the days that the stock market doesn’t go in the same direction as the UDN and how the market corrects itself the next day. Notice each green highlighted box that I annotated. The left side of the inside of the box indicates the diverging direction and then the right part of the box is where the market catches up to the inverse dollar move. Then, look at the very right of the chart and today’s disjoint moves. This points to a weaker market tomorrow.
2/18 - I was seriously considering fading the gap today, but the pattern odds were not quite as strong as I would have liked, and when MTG decided not to go for it either I decided to stay away. Plus I was feeling kind of groggy and not quite "in the zone" which kept me away. With all of that said, the gap did fill nicely and quickly for a 3.5pt winner.
2/22 - There was a nice gap setup so I took it, put on the trade and jumped in the shower. By the time I got out the gap was filled I had hit my target for a 4pt winner. The MTG moderator used some discretion and had his target 2 ticks above gap fill right at Friday's highs and the beginning of that confluence zone but I just went for the whole gap fill anyways because I wanted to follow the system as expressed by the numbers.
2/23 - MTG decided to not fade the gap. The numbers looked good to me, except the pattern number, and it was 1 tick away from an adjacent zone which had bad numbers. With that in mind I still decided to take the gap but just with 1 contract. I targeted the last bar of yesterday 1107.75 instead of the Globex settlement 1107.50 which MTG targets. It did come up and touch 1107.50 but turned around lower. At that point I put my target back at 1107.50 and tightened my stop to -2pts. When consumer sentiment news came out much lower than expected it raced through my stop.
2/24 - Gap setup was funky, small gap and straddled two zones but in the end opened in a low probability zone so I didn't take a gap trade. Some guys in the chat room did fade the NQ gap because the numbers were so much better and it did fill its 11.5pt gap, though some got stopped out after it may 1 swing toward gap fill, got very close so some guys tightened their stop and got stopped out on the pre-gap-fill reversal.
New home sales came out at 7am (10am Eastern) and I thought I'd try a post-news range breakout setup I've read about and looked at on some charts but not really backtested. Anyways, I ended up scalping 2pts to the short side when it broke below the range. Decided not to trade anymore. It later re-entered the range and broke out the top of the range for what could have been another winner, but I didn't take it. At least I was able to recover yesterday's losing gap trade (which MTG didn't take).
2/26 - No good gap setups today, poor probabilities and the gap was less than 1pt so it was easy to not fade the gap. Yesterday was amazing as the gap did actually fill for a 14pt winner but the gap system I follow did not lead me to take it. I was just amazed at how it did fill right near the end of the day.
Took a short trade on the 6B for a nice, quick winner today on some new setups I'm researching. This was my first time trading the 6B. Unfortunately the tick value is 1/2 of the 6E but that's OK I'm still experimenting with this setup and could use it on any of the dollar-pair currency futures contracts as it's just an instrument to play the dollar.
3/1 - No gap trade, indexes closed in mixed directions on Friday (ES and NQ closed up, YM and TF closed down), market gapped up and since Mondays and the first trading day of the month are generally bullish it's not good for fading up gaps. It was a good call as a fade at the open would have resulted in a 5pt loss. I looked for long entries if price would pull back to, say, at gap fill or the daily pivot but I didn't get the price I wanted during the time I was watching the market.
I considered a scalp on the 6E but didn't commit to it. I walked away from my computer for a bit and missed the winning 30-tick trade. I worked on a strategy for this setup over the weekend but didn't finish it yet so I'm not sure how successful this is or how to best trade it yet.
3/2 - I slept through the open and missed a gap trade call by MTG, though there were some risks. After logging in later I noticed the gap still had not filled and I could have entered with a 2 or 3 point improved entry than if I had entered at the open. I debated doing this for a bit, considering how the probabilities are most likely the same, but now I can do it with a better risk/reward ratio than having entered at the open. In the end though I decided against it since it was not part of my trading plan and considering how most gaps usually fill in the first 90mins and it still had not filled. The gap never did fill, nor what would have been my stop, so most of those that took the trade just closed out their position at the end of the day for a small winner. The video wrap-up is here.