There's an old market
saying that "Amateurs control the open, while professionals control the close."
If indeed that's the case, yesterday's closing bell collapse clearly shows the
powers that be are dumping supply on hapless bottom-fishers with reckless
abandon. No big surprise... we've seen this all before.
S&P 500 futures made a +10pt gap-up open to work
off oversold conditions. There it was... the long-awaited relief rally!
When that move failed to advance one inch further
by afternoon, institutions stepped in and sold the index into oblivion. If the
session had another hour to go, S&Ps probably would have dropped another -20pts
from lows. Sellers simply ran out of time as they ran over stubborn bulls who
were steamrolled in the fray.
We had short signals all the way from mid
afternoon onward, as would any valid trade approach that will stand the test of
time.
ES (+$50 per index point)
ER
(+$100 per index point)
Russell 2000 futures flopped around early, then
cratered along with everything else when the volume floodgates were opened.
Bombs away!
Which is exactly what many of the failed-approach
emini traders did who persist (for a little while) in building long positions
while price action falls = build short positions while price action rises.
Eventually, scaling in against the trend is a fatal decision. Yesterday's
afternoon delight for swing = directional traders likewise ended many trading
careers of budding tape fighters. Blown out accounts, broken dreams and lessons
learned about fighting the tape.
ES (+$50 per index point)
Looks like 1240s are next for the ES, with
1270ish solid resistance for now. We'll probably see 1200 or event 1175ish in
the medium term ahead.
ER
(+$100 per index point)
Small caps stopped dead on the trendline we drew
several days ago. Who ever said that markets don't have memory? 680 ~ 670 zone
appears to be next if downside trend continues.
According To Plan
Luckily, you & I both knew that this would all happen exactly as it has. We
didn't know when, we just knew that markets would behave precisely as they are
right now.
For months on end we've been talking about how
the tight-range, listless price action would inevitably break in a big way. Here
it is. We've talked about intraday ranges opening up with volatility increased.
Have they ever!
We know that a majority of stock traders have a
one-way (bullish) bias while a different majority of all traders alike have
entered the game well after our last bear market period. These groups only see
stocks on deep discount right now... they cannot see potential for a bottomless
pit. After all, how could they?
A couple of decades ago, I worked for a major
food company in its fresh vegetable processing plant. Half the workforce
consisted of locals while the other half were mostly residents of Puerto Rico
who worked seasonally in the fresh vegetable operation.
One night, a live skunk wandered into the plant
along with a truckload of fresh picked sweet corn. The locals took one look at
that black & white critter and ran for the doors. The non-resident workers had
never seen a skunk before, and they wondered what all of the fuss was about. I
was a supervisor at the time, and I'll never forget one of the maintenance
workers saying something like, "el gato, el gato... here kitty-kitty" to the
skunk. As he walked over to pick up the kitty cat, it turned tail, hoisted its
furry plume and cut loose with a full load of essence on that 40+ year old man.
Needless to say, all of the non-native workforce
immediately learned that skunks are not cats. They may look alike, but there are
vast differences. So too with aged bull market runs versus the next inevitable
bear market correction. No one on earth knows where the current swoon may end.
The S&P and NDX could bounce right from here to new all-time highs, or they
could drop another -200 points into the hole. Either scenario is possible.
Traders still around who worked thru the 1999 ~ 2003 period know exactly what I
mean.
Pundits will call for a bottom at every stop
lower in the charts. We both know that charts heading south are selling
opportunities on every lift until that ceases to work. For the past two weeks it
has worked like crazy, and I would expect such short-side delight to persist for
quite some time to come. With overnight futures roiled in volatile fashion,
today should be another stellar session to trade!
Trade To Win
Austin P
www.CoiledMarkets.com
[Online
video clip tutorials...
open access]
Austin Passamonte is a full-time
professional trader who specializes in E-mini stock index futures, equity
options and commodity markets.
Mr. Passamonte's trading approach uses proprietary chart patterns found on an
intraday basis. Austin trades privately in the Finger Lakes region of New York.
