ES 11-17-2008

Thanks for the mail you have sent.

But remember folks, I do not intend this to be an advisory service. My aim is to  share my process of thought. I hope that the blog will assist you in acquiring and adopting a probability mindset and a business framework to trade.

Speaking of the business of trading, let’s talk a little about managing ‘Thursday’s trade’.

If I were a 5-d swing trader or less, and I had gone long on Thursday’s 5-day Spring (see Nature of Trends) Change in Trend pattern, Friday’s bar was one that would have rattled my cage. The bar was a bearish conviction bar with normal range and volume. This is not the kind of bar I want to see after a Spring.

The rational of the pattern is this: after a prolonged selling bout, there is one last attempt to push the markets lower. When that fails, we find only exhausted sellers left. This results in strong buying coming in; the upmove is aided by weak shorts tossing in the towel. For this reason. any correction immediately after the move up ought to be on lower than normal volume and/or lower than normal range.

The normal range and volume on Friday suggests the sellers have something in reserve. One possible result of this observation: we may end up seeing 3 Drives to a Low rather than a Spring Change in Trend.

If I were a 5-d trader and long on Thursday, I’d be out of part of my positions (around 1/3 to 1/2) by end of trading Friday or the latest some time in today’s night session. By reducing the position when the trade does not look quite right, I am acting in accordance with the perceived probabilities of the trade.

5 thoughts on “ES 11-17-2008”

  1. Ray

    Having just come away from your webinar on devising a trading plan, I wish to add this.

    During such rough economic times,if we creatively study the markets and try to devise an innovative trading plan, we will increase our odds of profitability.

  2. hi Ray, I get the feeling that people are looking to buy but every time they do, some more bad news comes out ie General Motors the other bad news from Japan. The fear factor you mentioned, i think is really shaking the tree. I cant wait to see what happens next. cheers baz

  3. Hi Rob

    Yes it does. Ideally I’d like to see a time relationship as will as price for the pattern to be perfect, In this case, the structure in the first wave was a less contracted than the first.

    Nevertheless the pattern is one I’d classify as 3 Drives.

    BTW the answer to your question on the Horizontal Terminal is on last night’s videos. Drop me a post if you have any more queries.

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