June 2, 2014

I Can Only Imagine – Monday’s Chart $NQ_F

When there is nothing to trade per se with small pockets of activity here and there it leaves many traders standing firm with positions waiting for the next move.  There was some switching with treasuries taking a nosedive as capital exited the US bonds in favor of buying Eurozone bonds.  If the EC Brotherhood gets their way the next round of free money stimulus with a catch will be on the backs of Eurozone citizens as the one %’s refill their already burgeoning coffers.  US equity markets need to pay closer attention to the prospect of higher margin rates and stop believing that higher rates in the US is bullish for stocks.  It might be for the TBTF banks, but this isn’t something I believe would trickle down beyond the 1%.

running in placeForty-five minutes before the close and the broader indexes are basically ‘running in place’  – getting nowhere quick – are sharply unchanged.  Volume in the $NQ_F remains more favorable than the e-mini, $YM_F or the $TF_F, keeping it my number one market to turn for trading.  Volumes overall remain very lackluster at best.  Equity traders chose to focus on what seemed to be a capital rotation back into DJIA stocks.  Somebody needs to come up with a better idea – like I said on Friday, it is the same money jumping from one sector to another and then back again – it is really looking tattered and worn.

As I did my “last hour” look around I made myself laugh as I imagined the conversations likely taking place as to whether 3729 in the NDX, 1922 in the e-mini or 16733 in the $YM_F was a point to buy or a point to sell.  To me the conversation is reticent in that the writing on the wall remains clear – correction dead ahead.  How severe or what will kick it off remains to be seen.  The unrealistic thought would be that it wouldn’t happen.

As a ‘trade the number’ trader running algorithms the more important take away might be to step back take a break and see what direction the market needs to go.  Eventually, the point will be made once there is something more “tangible” to hang on to as a reason to continue to buy or start to sell.

At the moment it seems that once the seller or sellers move in and start there isn’t any follow through and the algorithmic computers turn around and crush the day traders.  I don’t think it is intentional but merely how it plays out once the index arbitrage and options traders start selling what little premium there is.  Obviously these traders are either slitting their own throats just to trade or have cut profit targets to way less than one tick.  Eventually it becomes a number so small that you would have to trade huge volume to be profitable.  This type of trading is left to the large HFT firms and the TBTF boys, leaving the rest of us to circle the table looking for crumbs that fall.

Still I will add that the $NQ_F provided plenty of trades and remained my #1 choice on Monday.  Check out today’s chart for trades and discussion.

6-2-2014 2-02-25 PM_NQ_FALCON


Trading the number remains key to being able to reduce and separate the “noise” from opportunity.  This takes knowing and executing a well-defined strategy and allows you to see opportunities amongst the “chaos” and by trusting the mechanics of your strategy, be able to take advantage of them. 




Opportunity continues to knock on our doors.  While it doesn’t come without risk, risk can be defined and more manageable. Volatility and broad moves are exactly what a day trader desires and being able to respond without questioning is a luxury many are unaware of.