So it appeared that the session would resume where it left off on Tuesday with the broader indexes continuing lower. The DJIA and SPX actually put in slight new lows under what was seen last week with the NDX coming within 3 points of doing the same. As if the magic clock struck the top of the hour the markets began to turn and focus on the upcoming FOMC release of the September minutes. Now, to say that something new was coming would be not entirely true – but to say there was a complete turnaround to what we already were aware of after the September meeting would be entirely true. However, the markets it seems will take any reason to panic to the upside and create a good old fashion short squeeze in the process.
Oh, did I mention that it is still a total joy to be a day trader and not a position trader attempting to defend a short position or better yet attempting to defend your life after yet another rip roaring turn around that left more ‘blood’ on the floor than most shorts had remaining in their bodies. But I digress. The shorts should have realized that today marked the official opening of 3rd quarter earnings season and that alone adds enough volatility and anticipatory trading energy to jump start the old bull once again.
Ok, so where are we in the larger scheme of things? Off the hourly charts the broader indexes had reached some strong oversold readings, which includes the MACD. As the markets turned higher and picked up some strong momentum, the MACD finished the session back at its neutral position, while the stochastic pushed straight into extreme overbought. Volumes across the board surged as shorts turned to cover and get long, (if they could) and others found the rally a good time to do some binge shopping. Heck, it’s earning season and no one wants to be left behind.
On Monday, we left it that the markets were likely to drop down to support levels and then surge higher again reaching back towards the starting point of Monday’s decline. This would then form a neat A-B-C flat pattern and likely be labeled as the “bounce” off of the larger decline off of the last FOMC booster shot which took the DJIA and SPX to new all time highs and the NDX to additional new 14 year highs. Ok, so here is what I’m looking for from here – we need to leave open the strong possibility that the larger corrections are still in force with the broader indexes now moving to put the finishing touches on a somewhat larger “B” wave counter trend rally. If this is the case I would anticipate the rallies to complete in the areas of Monday’s highs. Recapping those would suggest a move to 17100 in the DJIA, 1978 in the SPX and 4048 for the NDX. The NDX exceeded that level slightly on Wednesday, which raises resistance to 4085 and considering this index finished up 1.88% on Wednesday after being up over 2% an additional 1.5% rally would surely raise the alarm for the bears.
Remember as well we continue to keep alive that the corrections off of the post FED highs are complete with the larger advances now back in force. Should that be the case resistance would be futile until new highs are again seen.
I am including charts on the YM, ES and NQ to once again point out that using the ATR and Eagle together to produces a series of mega winning trades. The trick of course is to actually employ the strategy – I’ve included trades today, which include losers as well as the winners. Also, to be fair to the argument outside of options positions I am always “flat” in the futures ahead of a “binary event” and allow the market to normalize before reentering to trade. So there are periods during this afternoon’s rally that I did not participate in, but others may have.
The Logical Signals Trade Room is up and running. We have an outstanding group of members that have already begun contributing across the board from trading indicators, patterns and products, to computer software and hardware.
Thus we are ready to move on to phase two of membership/subscriptions. Now that a core group has been established we have a few additional spots for other traders that may have an interest. Phase two, though will be somewhat more involved in that prospective members will get a chance to talk in more detail on their trading goals, experiences and expectations with me and possibly other members before deciding to join. At this early stage it is important to continue to steer the room in a direction that favors all of the members. Should you have an interest please check out the updated “Invitation to My Trade Room” under the Trade Room tab and get in contact with me? Presently we have 10 additional spots open before closing this room until next year.
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.
Steer the course and don’t compare yourself to everyone else. You are not they and they are not you. Remember to trust and believe what makes you unique at this moment in time and in this situation and allow others to choose for themselves. Don’t be swallowed up by the chaos and false emotions swirling around. Remember it’s just a number.