Who Will Get The Last Laugh?

I get the sneaky feeling that today will be a day where lines are drawn in the sand. Will the bears have the last laugh or will the bulls hold strong? As of 5:30 AM PST, the bulls do not have much to cheer about, but we all know how lower openings can result in some wonderful rallies back to the upside. Time will tell.

Yesterday's action, with the exception of the last hour or so, was extremely choppy. Refer back to your one- and five-minute charts of the S&P futures yesterday and you will see a classic chart of a market that is best viewed from the sidelines. Feeling that the day was pretty much over, and not wanting to give back any of the money I made in the morning, I left. It is debatable whether or not that was a bad move. I certainly did not expect that move in the afternoon, but with options expiration, anything is possible. The move lower did appear to be a drip, rather than sharp moves up and down. Nonetheless, it has set the stage for some potentially great trading today. As Kevin Haggerty says: "Put your helmets on." I would love to end the week with an extremely volatile session. Nothing says relaxing weekend like shooting fish in a barrel on Friday.

Below are a couple of ideas I see setting up on the hourly and 15-minute charts. With either trade, make sure you have the market at your back and always use a protective stop, better yet, use a trailing stop given how volatile the market can be.

Given that it is options expiration and a Friday during the summer, be extra careful not to trade during the slow time (8:30-11:00 AM PST). I cannot tell you how many traders I have seen over the years exhaust themselves during this time with nothing to show for their efforts, only to be so "punch drunk" by the time the good trading begins after 11:00 AM that they cannot see the setups if they were right in front of their face. Trading, especially HVT, is an incredibly intense activity. It is like having your body on a heightened sense of awareness for the first hour-and-a-half. I do not know about you, but that is tiring. A nice break each day for an hour or so is the best thing you can do for yourself, and preferably that break involves walking completely away from the monitors.

Key Technical Numbers (futures):

As always, feel free to send me your comments and questions. See you in TradersWire and have a great weekend.

Dave