I expect this pattern to unfold before today's close

Wednesday's session was a rolling range. All financial markets knee-jerked to Fed Gov Bernanke's initial testimony to congress event. He appeared to be visibly tense, and so were stock indexes. An upside program-slam burst just past 10:00am EST halted, coiled sideways for a bit, drifted lower, found support and plodded back up to finish the session near early highs.

S&P 500 futures bounced from just above their pivot point to just below R1 value. A return trip to the pivot broke a few candles (depending on timeframe chart) below said support before buyers jumped in again to press back toward morning highs.

Not a wide-range day by any means, but enough travel distance in the swings to offer solid profit potential a few times around.

ES (+$50 per index point)

ER (+$100 per index point)

Russell 2000 futures launched from pivot point support right to R1 resistance, sold back down to bounce from lower-high support midday and finished back above the R1 highs thru some afternoon gyrations. Buyers continue their lovefest in the small caps, which is essential to any further upside potential forward from here.

ES (+$50 per index point)

S&Ps closed back above the bearish retracement grid, now eyeing 1278 as new support. If touched, that value could easily be the low for today. In order for bulls to dominate the tape, price action must take out 1292 and then 1300+ on accelerated volume. Until that happens, assume this index to be range bound and directionless... trading the intraday periods with equal bias.

ER (+$100 per index point)

Small Caps are within a couple points of breaking near-term resistance and resuming a run toward new recent highs again. We'll know that when it happens... for now the market is coming off a successful pull back and should break higher. In order for bulls to breathe easy, 728.50 has to cleared on a daily close basis.

Summation
This remains a day trader's market, and nimble one at that. Absolutely to complaints about the recent return to (somewhat) normal intraday ranges and price swings. Instead of the 6pt ES daily ranges, we now enjoy several swings greater than that inside most sessions. That's the way it should be, and eventually wider ranging yet. Traders who cut their teeth in the decade's low volatility and ranges would naturally assume that is the norm, but veteran traders know better.

Speaking of which, a number of emini traders have been practicing a dangerous, often deadly (to their trading account) technique. It goes something like this:

Expected upward reversal point support in the ES is 1300
When price action hits 1300.25, buy one contract
If price action hits 1299.75, buy one more contract
If price action hits 1299.25, buy one more contract
If price action hits 1298.75, buy one more contract

Essentially that has said trader "scaled in" at an average price of 1299.50 with sell stop on four (or whatever) contracts just below. Risky business trying to build a scale of contracts with price action going against the position. That approach tends to work out in perfectly sideways, low range conditions. After all, when intraday ranges are tight, price action seldom goes very far against a trader's position.

However, once market action returns to normal as it recently has, that type of approach leaves the reversal trader taking on too big a position while expecting (praying for) the turn. In most cases they are stopped out for larger losses than are prepared for. They weren't prepared for the big loss, because they learned (or were taught?) that such an approach is the safe way to trade.

Trust me on this one: there is a very big difference between a large account balance trader playing this game versus a $5,000 to $50,000 account balance trader. The big player can absorb hits during trend and wide-swing days that modest account traders cannot survive.

Furthermore, days like yesterday tend to blow out scaled traders going both directions. When a market overshoots expected resistance and likewise support in subsequent swings, traders trying to scale into markets heading towards them tend to get gutted like fish.

Truth is, emini traders have no need to fret over complex scaled entry or partial exit attempts. Trade the right method and you will be absolutely fine coming all-in at the clear entry signals and going all-out at predetermined or trailed stop profit objectives. It sure is a lot less fuss, angst and confusion to just get in and get out where you should. In almost every case, a lot more profitable too. Why create complexity and stress for yourself where there is simply no need to do so? Basic human nature, I guess.

Summation
Today is the last session of trading for Feb contract index options, of which there are a plethora of open put option contracts near the current strikes. Expect a sideways "pin" to be orchestrated by the close of trading today... potential swings between the bells are probable to go out right near Wednesday's closing values.

Trade To Win
Austin P
www.CoiledMarkets.com
(Online video clip tutorials... open access)