The 3-2-1 Approach: A Simplified Method for Trading Any Market

Market Breaks After 5 Year Auction

F2 Comments: The analysis was to sell 118-15/19. The day session high was 118-175. The market idled into the 5Y auction hitting 118-15 at auction time.

The auction was sold and the market broke hitting 115-25 after the day session’s close. If we hit 115-18, the market will be 3 points below today’s auction.

Sell rallies. Thursday’s news is likely to be ignored shortly after the 0830/1000 EDT news. The Dealers should try to support the auction sometime tomorrow. So while we want to get short for the first trade tomorrow and see if we can extend the range lower, if the market doesn’t break, we can trade form the long side.

Given the crash after the day session’s close, the sell zone has moved lower. The sell band is 115-07/15 with a cover, if 115-25 holds.

 

Support Holds and the Market Trades Higher

F2 Comments: The market opened and tried to break support. Support held and the rest of the day was filled with steady buying. The early news was bullish for the financials and EOW/EOM profit taking pulled in more and more buying as protective shorts were triggered by the rallies.

The close was strong. The analysis favors a retest of resistance and/or higher prices.

Some news to negotiate on Monday: Personal Income at -.2%, Personal Consumption at -.2%, Construction Spending at -1.8%, and ISM Index at 42.0. The focus should be ISM Index.

Can trade from either side on Monday. Can buy early weakness to see if we can extend the range higher. If not, will begin to trade form the short side. Sell failure at 118-00/08. Buy weakness at 117-09/13.

 

Goodmorning Thomas,

could you please explain what made you think that longer term want to get short?

Thanks,

G.

 

Hi Gordon,

My reasoning would be that, looking at the Note, this is the lowest we've been in the last 6 months, with the trend clearly lower based on the monthly market profile.

More importantly, supply and demand. The supply is rapidly increasing to fund the debt of our government and the demand has been getting a bit, shall we say, shaky, based on the recent bid to cover ratios.

I ask Charles Cochran if his reasoning differs from mine. If so, I'll post his opinion also.

 

Thanks for your reply, Thomas.

Is the monthly profile the one in red on the right side of the screen?

 

The histogram in red on the right side of the screen you see each day is 180 days worth of volume. This is the standard daily market profile chart most everyone sees and works from.

The monthly market profile is another chart completely. In that chart, every TPO represents one day instead of a 30 minute time period.

 

Can you please post a monthly chart, just to make evidence of what you're discussing?

Thanks,

G.

 

I changed the scaling so you could see the last 6 months.

 

Now I see the monthly trend, thanks for the picture, Thomas.

Seems that this month we got through November's vacuum and we will meet some resistance in case we try to move higher.

Cheers,

G.

 

Financials Sell Off Again

F2 Comments: The market was heavily sold again today. Friday’s brief respite was due to EOW/EOM profit taking as some shorts covered their positions and rolled them into September positions. The selling took prices from 116-24 to 115-08. The close was weak. The analysis favors lower prices Tuesday.

Little in the way of news to stop the selling. Best support will be a sell off in the ES. If ES is sideways to higher, want to sell the Note. If 115-00 then holds, will cover.

Tuesday’s news: Pending Home Sales is expected at +.5%. Sell band is 115-19/23. Back up sell is 115-27/31. Cover, if 115-00+/- holds.