How Great You Are.
This is the best 4 minutes you will spend today. Thanks to ComicFx at the SoH for bringing this to my attention
There are sharks in the water, things in the shadows, and doubts in the trader’s head. In spite of the, the market will go up and it will go down within any time frame you care to choose. You do not have to be right, just successful.
The market is not going to put in a top and reverse simply because you decide to go all in short, hang the consequences. The market is not going to fall because of fundamentals. The market is not going to fall because you have insight into the way the financial world works and it must. The market is not going to fall because your money and cause is more noble than the scittering creatures who are robbing the treasury. The market will rise and fall anyway, within any time frame you care to choose.
A trader can fight the current, picking up pennies in front of the roller coaster. A trader can ride the coat tails of wherever the big money wants to go. It can be warm beneath the dragon’s wing. It can be warm inside a broken clock.
SPX went higher than a line drawn on a chart. Now everyone believes that 1200 is coming up. I don’t care. I don’t worship at the altar of Theta. And I’m certainly not going to leave my money sitting in the market, based on a bias, so some other trader can have that nice Swiss chalet.
I’m still working on my statistical analysis and the first improvement is to go from 7 sections on a bar to 5 (following Gatopeich’s footsteps). There is too much noise with 7 sections. 5 may still be too many , but we’ll see. I’ve changed the numbers on the SPX daily chart.
For intra-day trading, the most attractive bars are those where the open and the close are not at either end, and they are close to each other. So 23, 34, 33, 44 are all GREAT bars. The segments are 0 – 20% – 40% – 60% – 80% – 100%, nothing fancy. A ’23’ would mean that the bar opened between 20% and 40% of the HOD – LOD, and closed within 40% – 60% of the HOD – LOD. Intra-day trading, IMO is best when there is movement above and below the open.
On this scale, yesterday was a ’35’. I was expecting the close to be below the open, based on the probabilities and other stuff. I let a bias influence my trading in ES. I still made money – but that bias was there whispering in my ear.
A ’35’ in a positive trend SPX, is most often followd by a ’15’ or a ’51’. Notice that ’52’ is next. But, the probability of being 31, 32, 41, 42 (i.e. a mainly down day) and the reverse 13, 23, 14, 24 (a mainly up day) are about the same. When SPX is in an up trend, and the bar took a ’35’ shape, the probability of CLOSE being above OPEN was only 39%. The probability of the Close being BELOW the open is 52%. The probability of CLose and Open being in the same bar segment is 9%. That is tradeable.
Developed Asia was green excpet for Hong Kong. Emerging Asia was all red. Hard to interpret this except risk takers weren’t. Europe is solidly green following the Januaryt industrial production data this AM. Then, a major IB put a 1.45 target on the EUR, with stops at 1.33 – looks like a good bet. EUR took off at 5 AM, and dragged the ES a bit along. Notice that the ES is not ramping big time – which is what you would expect after the HOY was taken out.
I think that caution is the order of the day. I’ll pay the Geronimo calls as appropriate. I’ll play the expectation of a greater chance of the close being below the low. This means to fade any move above the open – using appropriate TA and rsk management OF COURSE.
- R2: 1154 = This isn’t that far away, anymore. But ES is sluggish behind the EUR move. I would fade this, depending on momentum and volume when attained.
- R1: 1150 = Just overhead. SPX has already beat the JAN. high, but it hasn’t closed there officially. This could be a decent base camp for an assault on 1200. But it needs to close here and maintain next week.
- Neutral: 1142 = There is TD rsupport between ESM0 and this level, at 1146.50 and 1145. I would expect any move down to hesitate there, maybe even revers once or twice before getting to the pivot. In other words – choppy trading which is never fun if you use tight stops.
- S1: 1138 = Certainly would be a surprise to many – especially the bulls. I guess that it would be interpreted as a small pullback for consolidation. I would see it as failed distribution.
- S2: 1130 = Not likely today. Given that next week is OPEX, maybe but not a high probability.
I guess that my opinion is being coloured by the probability of SPX staying above tthe 55 DMA. If it doesn’t close below next week, then we have at least 5 – 10 trading days of winter (SPX above the 55 DMA) beyond that, minimum.
EUR is touted to get to 1.45. On the weekly chart, it has not yet broken out of the channel. The 10 and 21 week MAs are bearish still. On the daily chart, EUR has poked its head above the channel but hasn’t tested the 50% non-channel FIB (horizontal) at 1.3814. Give where TD Pressure is, it is not a given that EUR is about to run up. There is the bullish cross on the 10 and 21 DMA, just two days ago. This is often used by traders and Algos to change a bias. Still, the rule of disappointment suggests that we would see a retest of the channel top before moving higher. If EUR closes above, then the chances of moving up strong go up.
I’m short and underwater. My EUR gains from this week cushioned the fall – as they were supposed to in my trading style. I’m looking for a squaring of positions to take the EUR down into the close. The ramp came from weak short covering and stop running, IMO. The big shorts are apparently hedged by calls and they will just sit on their positions until this wave passes. At some point, if sentiment shifts, I would expect them to cash in the calls and short some more – if the conviction is still there.
Notice that I’m not sure of the time frame for the 1.45 target – it could be months, it could be weeks.
Bottom line: I’m going to intra-day trade ESM0. I’m going to watch the EUR for my own exit. I’m going to be aware of the sharks in the water and that they need to unload their positions to someone. What if you threw a party and nobody came?