This observation was quite interesting. A few bloggers devoted to market maker/"smart money" behavior study have also noticed such behavior pattern change first time since march 2008. Does it imply the beginning of new intermediate trend (reverse of current trend) or even the long term trend? How many people expected such price move within only 3 consecutive trading days would have last 30 days' steady advance. Just look at the way it broke 50 MA and landed on 100 MA. It was quite different from last 6-9 months price action, when 50 MA provided support for every major pullback.
1-25-2010 Total trades: 1 RT winner: 1 Net p/L: 1 pt (ES) Trading time: 11:45 to 12:55 pm ET. My work schedule was quite busy today so I was not able to watch the market for most of the time. I was able to watch market from 11:45 to 1pm ET. I could draw a down channel since 6am ths morning until 11:30. The price was moving between the top 50% channel until 10am when price broke into lower 50% channel and it met resistance everytime it bounced up to top 25% channel line. Went long at 12:19 as price bounced at 100min EMA and above to top 25% channel. Enter 1194.50 (stop 1194), original target 1196.50 (the supply line of down channel), but took profit at 1195.50, the resistance from 12:05 to 12:10. 12:20 another bounce from EMA and 25% channel line, but I didn't enter any position here. reasons: 1. the big down bar at 12:25 canceled out the most price gain prior to it. 2. the supply channel is moving down, so the price might run into resistance again which potnetially limited the up price target. After price broke the supply line of down channel at 12:40, there was another opportunity to go long is at throwback. however, I didn't like the shadows of those bars. I had to leave my desk at 1pm ET. I just got back my desk at 5pm ET. I spotted potential good short play around 3:40 as price failed to stay above 100 min EMA, and a HS pattern breaking neckline 1195.75-1196. A measured target would be 1193 (equal distance from head to neckline). 1 to 1.25 pt stop should not get hit. There is going to be some major change to my job role at my work place. I will not be able to watch market a lot starting Feb.. I assume I would be able to watch market from 2:30 to 4pm ET (my lunch time at west coast time). I will do my best to continue to observe, learn and practice ES day trading as much as I can.
1-26-2010 Total trades: 3 RT winner: 2 loser:1 net P/L: 1.25 pts Started 12pm ET SPX price broke the 50% center line of down channel drawn since the last broadening top swing high on 1/19. Price was moving down from top 50% channel until 1/21 when it broke the 50% retrace at 1120. Price were inside lower 50% channel since. Long at 1097.5 around 12:15 and out at 1098.5 at 12.23 (11:30 to 12:30 consolidation patern). This was second attempt to break the resistance. It was forming a mini ascending triangle from 11:40 to 12:30. I missed the 3rd attempt to break 1098 at 12:35. Long again at 1:15 at 1098.75 expecting a bounce from the possible throwback at extended ascending triangle bottom trend line. Stopped out at 1097.5 a 100min EMA. Reenter at 1097.75 seeing some support at 1097.25 to 1097.5. Price broke micro supply line at 1:38. Exit at 1099.50 at 1:50pm. The second attempt to break 1110 (ES) at 2pm failed. Potential double top formed. Short at neckline 1097(second time break down) or above it at pullback would all be good scalp. A good short opportunity was at 2:15-2:20 as 100min EMA became resistance again for the pullback. 1098.5 to 1099 is likely some support for SPX. If it breaks , the price can retest the center line of down channel by the end of day at 1096 (SPX). 2:47 now, the price bounced from 1095. It broke the micro supply line. 1097.25 100min EMA+double top neckline is first resistance. If price breaks thru, there will be more upside. If it fails here, it can go down more as this move becomes a throwback after breaking double top neckline.
I did a paper trade shorting at double top breakdown with throwback at neckline. Short 1097 (stop 1097.75) original target 1093, covered at 1094.25. Second leg down could touch 1093. (1093.25 is down channel line). If it breaks 1093, it could expand the down channel. SPX touched 1096 center line of down channel (throwback). I expect some bounce here. 1094.75 is teh center channel line at 4pm. When these channel lines work, they provide good ideas where price might be going. 1092 is also a support level at 11am on ES. Market internals are not favoring bulls now. Financial index is also very weak. Buyers are probably done for the day. It could be just some short covering. 3:45pm Downtrend 2X expansionand price hit 1088 (ES).1086 was open range low. Retest low possible. Very nice price mobvement today. A short at double top breakdown and throwback at neckline 1097 will be 9-10 pts trade if swing with adjusted stops.
Amazing how quickly we went from buy every little dip to sell every little rally. The bulls would never have allowed the market to become this oversold without serious buying action. Maybe the running of bulls is coming early this year...
1-27-2010 Today is FOMC day. I will wait for 30min after 2:15 before resume trading. Went short at 12:30 as price broke the micro demand line after a throwback at 1086 around 12:25. To me, it looked like a inverted cup&handle to break 1084 soon (tha would be a secpond leg down). Short at 1084.5 (stop 1085.75 a 12:32 2min bar high), original target 1083.25 (expect o touch 1083). My problem was I covered right before it broke the 1084. The longer it consolidate, the more violent when it breaks out. I guess I forgot about it. I have a down trend on my screen. The price ranging around 1083-1083.5 (the center 50% channel line) after breakout. This could be another consolidation and it will move to lower 50% channel to retest day low 1081-1082. I am a bit indecisional here since the next would be 3rd leg down and daily support at 1082-1081 is nearby. I would short at 1084, but I didn't pull trigger when there was an opportunity a few minutes ago. Anyway, I would not be looking for long here since on SPX 60min chart, the price is still below 50% center down channel line. Sellers are in more control since 12:15 based on my reading from SPY TOS and price action.
I am done trading fo rthe day. I didn't trade after 2:15pm since the volatility was a bit too high to my comfortable level. Total trades: 2 RT winer: 1 loser 1: net p/l: -0.25 pt. Here is my reading of the market. At 2:35, the price broke the down trend channel. This was a long opportunity. Second long opportunity was at 2:50 with 38% retrace to 1088. The second attempt to break 1091.75 failed. If buyers were in control, I would expect a cup handle with 3rd atempt. However, the retrace belwo 100min EMA and <50% then <61% retrace implying probably long side is not over yet. I don't like the lower high and lower lows here. The breakout to 1091.75 was too fast and it looked like a bulge now. The price would probably retest the 1084-1085 the trendline again as a big throwback after first breakout at 2:30. Until that holds, I don't think buyer has gained control yet. Now the price is bouncing back to retest the mini double top neckline at 1088 (38% retrace). If it fails to breakthru it, there would be more selling, just like yesterday. The price bounce was too fast and I don't trust it was due to good buy. Most likely they are short covering. If I were to look for long, I would wait for more confirmation such as taking out 1091.75 otherwise it could just be a trap to long. 1098 is 25% channel line on SPX.
Buying above resistance or selling below support with stop order is considered valid approach to profit on breakout. My observation is often there are many failed breakouts, if blindly entering breakout with stop order will not necessarily lead to positive return over time. When to play breakout with stop order (trigger entry)? My experience is enter a breakout with stop order at below conditions 1. after long tight consolidation period (the breakout could be very powerful) 2. at 3rd or 4th attempt to break R/S (ideally with some kind of cup&handle shape) 3. when market volatility is high with high average vol. With short consolidation, low volatility, during middle of the day, or at second attempt of breakout, it would be better to enter near bottom of consolidation range (stop loss can be tight, may take quick small profit if breakout fails).
1-28-2010 Total trades: 4 RTs winner: 3 loser: 1 net P/L: 2 pts. Started at 11:45am ET. SPX touched 25% channel line and reversed back this morning. It broke the 50% center channel line and broke yesterday's low. It stopped a little above 75% down channel line. I have drawn two down channel's since openning. Selling climax occured at 11:30. 1080 was the neckline. From 11:30 to 12:30 it ws double bottom and then broke thru neckline 1080. It was forming a bear flag/rising wedge from 12:45 to 2. Entered two longs between 12 to 1:30. The neckline 1080 was also 23.6% fib retrace and 50% center line of down channel drawn from openning. Price broke 38% and failed to reach 50% fib and went down to retest neckline. I missed short as it broke the bear flag/rising wedge. Price tested neckline and broke it, but sopped at 25% down channel line. The pivot point at 1:45 was also the up supply line of the down channel. I went long at 1082.50 at 2:30 as price hugging the down channel supply line after getting above the 100min EMA. I got stop out at 1080.25 as it retest neckline second time. I thought of setting tight stop at 1081.5 (the swing low of previous 5 min bar), but I failed to do so thinking there might be a quick shakeout to run stops there. reenter long at 1081.75 at 2:46 as price broke the down trend channel supply line again. Exit at 1084. from 2:15 to 2:45 was another W shape patern, the price broke the neckline of the mini W at 1083 and retest 1082.75. It is 3:20 now. It looks like the price is dowing second retest of 1083 again. The move up since 11:30 was not strong. It had many fairly large retrace and retest. There are many good scalping opportunities today. There are also some good price movement within nicely defined mini channels. The up move since 11:30 (or 12:30 second bottom with low vol) is 3 step up-down-up. There is a nice AB=CD symmetric pattern with similar slope and duration. They are good for swing trades for 6-7 pts each leg. When market volatility is up, there are many good swing opportunities. I want to develop some swing trading skills to be able to profit from relatively big price movements. At 3:30, SPX is approaching the 25% channel line again. The entire move since 11:30 could just be a big 2 leg bear flag. The swing low at 1090 (a round number) on 1/22 is giving some resistance to SPX. It looks like there have been very organized and well planned selling over broad market at last 30-60 minutes since 1/19.
1-29-2010 Total trades: 1 RT winner: 1 net p/L: 1 pt Staretd at 12 pm ET SPX reversed at 10:30 and hit support near 1078 at 12pm. Two leg correction. Tried to break 1084 3 times failed. I have observed 3 important price levels today, 1080 (11:30am selling climax (second selling wave, some sort of EW w3), 1077.75 and 1077.25. At 2pm price tested 1077.75 intraday low and got bounce, but it failed to hold above 1080. This was a good place to go short. Price tested 1077.25 3 times from 1:58 to 2:22. It broke thru it at 2:32. This was another good place to go short. A throwback at 2:42, the 3rd opportunity to go short. I had to be away from my computer from 1 to 2pm ET. the down move since 1:30 was in a nice down trend channel with high vol down and low vol pullback and expanded channel since 3pm. All bounce backs were just some short cover (or brave dip buyer). The off hour low 1070.5 was also tested and violated. The consolidation between 12 to 1:40 looked like a big bear flag. The down move after breakout the bear flag had equal pts as the first leg from 10:30 to 12 pm swing low. It was very nice symmetric AB=CD pattern (bothe down trend had similar slopes) and symmetric time periods. I am not trading well recently. I am not very comfortable doing scalping with the high volatility and large range price bars. When price moves fast, I missed many opportunities. If I had acted decisively as I spot some opportunities, such as entering breakout on stop, I could probably have taken 2 more trades today to make another 2-3 pts. However, with such nice price move (20pts range), scalping a pt here or there might not be the best way to trade this high volatility large price raneg day. I am thinking of doing two contracts and use one to scalp and another one for swing with breakeven stop once they are profitable. I will do some paper trading to get comfortable with this approach. Starting next week, I would have much less time to watch the market during normal trading hour due to my job role change. I'll probably still be able to watch for the last 60-90 minutes prior to 4pm market close.