Trend Day on April 7tth

Discussion in 'Trading' started by Brandonf, Apr 7, 2003.

  1. Brandonf

    Brandonf ET Sponsor

    There is a popular game played at carnivals, the object of which is to hit the head of a joker as it pops out of one of multiple holes. Most people will "lose" this game by continuing to watch where the joker once was. When I watch many market players reacting to the markets natural coiling and uncoiling tendency, I am comically reminded of this game. After an explosive move to the upside (Think last Tuesday) everyone is all hyped up and ready to go. Unfortunately for them it is normally at this point that the market volatility cycle begins to coil, and in the process separates most traders from their money. After several days of chasing the joker (momentum), traders become disgusted with themselves and the market. They decide now is the time to play it safe, or stand on the sidelines. Its at this time that our joker will jump out of his box and make a surprise return.

    A heads up, the joker is still in the box and if you listen very carefully you can hear his giggle as he is preparing for his brief return. The market is currently coiling tighter than a mad Arizona Rattlesnake ready to strike. Fridays 9.7 point range in the SP500 gave us an IRD (Inside Range Day) trading day, which as displayed by Toby Crabels research in his book "Daytrading with Short Term Price Patterns and Opening Range Breakouts" commonly occurs before a strongly trending day. Additionally, the intraday ADX values are coming down to relative lows. This shows us a high degree of trendlessness in the market. Often, this precedes a period of explosive trendyness. What does this tell us? It simply tells us not to be watching where the joker just was, because he is going to return right over there! Our little Joker (Mojo) is about to return. His presence will be fleeting, but for those who are ready and nail him on the head the carnival barker has a nice prize.

    Finally, as I write this the futures are up sharply on GLOBEX. As those of you who have been with us for any amount of time know, this is a significant event that traders should take note of for a few reasons. First of all trend days often occur after a large gap. Large gaps are emotional events, and this is at the core what causes a trend day, extremes in emotion. Secondly, large gaps have a tendancy to not be filled on the day they occur. While there are certainly no gaurantees in life or the market, the odds are favorable that tomorrow will be one of those days that the market gods throw us a "gift" in the form of a trend day. Show up ready.

  2. JT47319


    I agree. Long on the spoos for me come Monday.
  3. dbphoenix


    If the NQ opens high enough, that would constitute a "Trap Gap", correct?

  4. lundy


    agreed brandon...

    for the NDX... if it opens up in the upper portion of Fridays range, I see an outside bar forming, closing down. Opening completely above Friday's range should be very bullish.

    but even if my outside bar doesn't come thru, the easiest way to play a range bar is following the moving average.
  5. Brandonf

    Brandonf ET Sponsor

    No. The traps often preceed trend days though because they are very emotional. An example of a trap woud be yesterday the market opened at or near its low and closed at or near its high. Then, todays open is under yesterdays low. 8/22/02 on the Nasdaq is close to a trap. I'll find a specific example for you tomorrow, I'm just getting ready to go to bed now.

  6. Hendrix


    Looks like a nice call Brandon.....have a look at the Asian markets......pretty much all are enjoying good trend days...recently, they seem to have been a day ahead of the US markets.....usually they are a day behind.
  7. dgmodel

    dgmodel Guest

    very nice call...
  8. dbphoenix


    That's why I used the NQ as an example. It opened at its high, closed near its low, and today's open, so far, is above Friday's high.

  9. Brandonf

    Brandonf ET Sponsor

    You just have to ignore half of what I say at 2am :)
  10. nice call, BUT the morning action was up.
    #10     Apr 7, 2003