Wednesday Morning Briefing

Welcome to our morning briefing. Here we are reviewing short term setups ahead of the NYSE opening bell. If you are a scalper or swing trader then these setups may be of interest to you. As usual keep in mind that these are short term setups although they could be used as early entries for more longer term positions.

The recent gyrations in the spoos may have wiped out a few more retail accounts but for us steel rats it has actually produced some context we may be able to use. As I’m typing this we are still somewhat in limbo territory but the levels on the chart give you a rough overview of what I deem to be our current inflection points:

• 2100 is the center of our 10 handle limbo zone. We do have some NLSLs nearby which are in the process of being retested. Should they remain uncontested they will produce additional support in preparation for the NYSE open.
• 2105.75 is our current NLBL and needs to be breached to pump this thing higher. I also think it roughly lines up with that falling diagonal that’s been ailing the bulls for weeks now.
• 2095 is where we find the 100-hour SMA, which again is beginning to climb now. A drop below isn’t necessarily a death knell for the bulls but I expect the 100-day SMA to be revisited should be drop below it. Yes, there is a chance we continue lower in that scenario, if we do it should happen quickly. But quite frankly this is the outlier scenario at this point.

Talking about outliers – you know I’m holding my current short positions, well knowing that they are most likely going to be stopped out at break/even. I got a perfect entry there and don’t feel compelled to interfere with my campaign for a little green. Especially during sideways high volatility market periods my prime directive must be to plan the trade and then to trade the plan.

Yes, it’s personal – it always is. But not the way you may think. Although I’m the first one to adapt a campaign should new information arise I am not willing to make up the rules as I go. There is way too much noise right here to derive any new probabilistic information. And my focus needs to be on process, process, process. Confusion and volatility leads to emotion, which lead to trading errors, which lead to small losses, which lead to more emotion, leading to bigger trading errors, and in the end resulting in big losses or wipe out. You need to nip this in the bud early on.

Every single day the market is going to test you. If it’s running in your favor it’ll try to take advantage of your ego and your new found confidence in reading the tape. If it’s running against you it’ll throw everything you believe in into question – it will make you doubt yourself and the process. And if there is no clear direction and confusion ranks high then it’ll attempt to lure you in and to break your rules. Always stick to your rules, never let the tape drive your actions. Only let the tape trigger predefined activities you were prepared to make before placing a trade. I cannot over emphasize how important this is – and markets like these are a perfect crucible for testing your qualitative trading skills.

On to the futures: Gold isn’t really a setup (yet) and I almost missed this one. However on second view this is lining up to be a possible break out situation. The daily is budding against a soft resistance line on the daily and clearly this could still go either way. I think 1200 is a good inflection point here but for a better entry I would watch the hourly panel for entry patterns.

New setups below for our intrepid subs:

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You have been briefed – now have fun but keep it frosty. See you guys later this afternoon.

Cheers,