Let the Games Resume

The time has finally come for the big guns to resume trading after the summer holiday. Now is the time of year when the big hedge funds and top traders begin ramping up their position size. What does this mean for you and me or any other traders pushing around less than 100 lots on the ES, more participation, a more technical market, and more follow through.

Futures Trader: Tomorrow is rollover meaning the volume for the contract month will shift from the current expiration month September (U) to December (Z). Make sure to update your charts and execution platforms accordingly.

Options Trader: Since tomorrow is rollover this means next week is Options Ex. Any new positions should be taken in the months of October and later unless your strategy involves selling premium.

Stock Trader: More volume equals ease of entry and exit for those smaller less liquid stocks.

Our short term outlook is a move down to 1072 at which point we will either bounce and move higher, or sell off to new swing lows and potentially beyond. It’s time to ramp up the trading into the end of the year, so get ready for a wild ride.

Daily Reflection: 09.01

For what was a very big move up today you may notice it was rather “slow.” This is known as a gap and go day where the market gaps up and then moves sideways the rest of the day. This keeps the majority of market participants out of the market. The only way to catch these moves if you have not positioned yourself in the pre-market or overnight sessions is to be long or short stock, option, or overnight futures positions. Find a balance between intraday and overnight setups that suits you.

Today we saw a close on the Trin of .25 and while this is bullish for the day, tomorrows actions will dictate the likelihood of a sustained rally, or decline. If we fail to sell off to some degree tomorrow and instead rally, then the markets are in for a longer term sustained rally. We have lots of news tomorrow including Jobless Claims, Pending Home Sales, Chain Store Sales, and Bernanke Speaking so expect a wild morning.

Daily Reflection: 08.23

Well that rally was short lived. We were immediately sold into on the open at the daily short level of 1080 on the S&P. The target on this trade is 1053 and there’s no reason we can’t go there tomorrow on the Existing Home Sales report. Regardless, now is a great time to be hedged.

If you are flat, then a 70/30 bearish/bullish weight to your positions would set you up nicely to take advantage of a violent down more, or steady up move. The key here is to balance the portfolio in a way that you can sleep at night (if you are holding overnight positions) and allow you to think clearly throughout the trading day. If you are sweating over a position, chances are you are positioned to large.

Daily Reflection: 08.11

Look out below! We have now clearly broken trend line support, where land nobody knows. Well, not quite. An inverted head and shoulders could potentially be setting up with the left shoulder trading in June, Head in July, and right shoulder forming in August. Regardless, the VIX has jumped back into the mid 20s and the sense of fear and uncertainty is back in the markets (if it ever left to begin with).

Daily Reflection: 08.10

This week is going to get ugly so hang on. If you don’t already have it, grab yourself some downside protection expecting for the worse. As of late good news has lead to down moves in the market and bad news to up moves. Today’s Fed announcement was far from good news. The market is a forward looking instrument.

Daily Reflection: 08.09

The FOMC Meeting Announcement tomorrow is likely to cause a whipsaw around 1:15 CST and the time leading up to it. No trading will take place tomorrow from 1:00 PM to 1:30 PM, at least on our end. No sense in getting chopped up or impulse trading any sort of news. It’s never worth it.

Daily Reflection: 08.06

A slow week to say the least. Today’s Jobless Claims # added a little volatility to the markets, but overall we continue with the sideways action. We bounced off trend line support today and this candle will be used for the bullish/bearish line in the sand, bullish above, bearish below.

Daily Reflection: 08.05

This week we have been trading within the value area each day resulting in complete chop. Looking at a daily it’s clear that we are in a period of consolidation. The more we move sideways after a gap the more likely we are to break in the direction of the gap once the consolidation is over. Therefore, we are looking for a resume to the trend and move higher.

Tomorrow’s Employment Situation is the big news at 7:30 CST so be ready for some volatility.

The day’s value area is defined as 70% of where volume took place during that day. Below is a value chart. More on this can be found here.

Daily Reflection: 08.04

Two consolidation days after Monday's move up. Expect a reaction tomorrow. Also, keep an eye on the VIX as it has been drifting lower.

Daily Reflection: 08.02

Given that we hit our 1122 target on the S&P. The next expected pullback level would be 1187, however since we traded back at a 50% level of 1085, we have another unfilled target at 1134. The longer term bullish line in the sand will be 1078, bullish above, bearish below.

Daily Reflection: 07.27

We saw nice breather for the markets today. The line in the sand for tomorrow will be the 1114 on the ES (e-mini S&P). If we move above this level we should have no problem making it to our 1122 target. A pullback would not be a bearish signal just yet and sideways action is considered bullish in this case.

Daily Reflection: 07.26

A very technical day in the markets today. Expecting a great week for trading. Looking for that 1122 on the S&P this week. If we sell off from there we will look to get long again around 1086.

The VIX continues to fall and is about to breakdown out of a decending triangle. This is a pivotal level and we should see some strong moves in the market this week.

Dailly Reflection: 07.22

A Choppy week, but the bulls are winning the battle thus far. We will look to break highs of the week tomorrow on our way up to 1122.

Daily Reflection: 07.21

Today’s bearishness was purely reactionary. Market orders after Bernanke spoke this afternoon sent the market lower, closing off roughly 14 S/P points. We didn’t even break yesterday’s lows. Yesterday the bulls took control in full force and today I feel it was simply some of the bulls jumping ship, rather than the bears taking over. If we break below Tuesday’s close then I can see us retesting lows and more than likely breaking yearly lows. Looking at the chart below, we could just as easily gap up tomorrow morning, sell off to today’s close (filling the gap) and rallying to new swing highs.

Daily Reflection: 07.20

And just like that we are on our way up again. 1051’s traded today to the tick on the ES early this morning. We are now in a long with a target of 1122.

Daily Reflection: 07.19

Looking for a move on the S&P to 1051.

The line in the sand for tomorrow, bullish above Monday’s highs on the S&P, bearish below, hence we will use a break ABOVE Monday’s high to cover shorts, and a break BELOW Monday’s low to cover any longs.

Daily Reflection: 07.15

Tomorrow is Options Expiry. Expect some funky price action especcially during the first half hour. We are expecting resistance at the S&P 1110 level.

Daily Reflection: 07.12

Welcome back. Last week posted the biggest gain in the markets this year. Volume however was extremely light. We are getting in to earnings season with Alcoa (AA) kicking things off tonight after the bell. Things could get choppy as we tend to gap at the open throughout big earnings announcements like GOOG, MSFT, CSCO, etc. Keep your eyes peeled.

Daily Reflection: 06.30

Heavy volume on these last two down days. The market has shown it’s hand and we are on our way to the S&P 995 target.

Daily Reflection: 06.29

Pump the breaks, looks like the market gave us the fake out. From a technical perspective signs were pointing to a bounce, however today’s price action put things back in check. Suddenly that 995 S&P Target doesn’t seem so far away. A few weeks back we talked about getting short at 1127; our target is the $995. We also talked about the importance of hedging. When the market is up, you must think about downside risk, and when the market is down, you must think about upside risk.