5 short positions for the current market
Monday’s session was marked by comatose
markets. We expected predicted in the room before opening bells rang that
Tuesday had potential for a directional, large range day. One out of two ain’t
bad… intraday ranges were normal to slightly muted based on a five-year
average, but the directional action part offered one of the “money” days where
our chips pile up in a stack.
ES (+$50 per index point)
S&P 500 futures staged a very methodical
stair-step down session on Tuesday. That sure makes up for the “spilled
spaghetti” lines they traced across the same chart on Monday!
Sell signals at the pivot and successive lifts
into resistance happened to coincide with S/R values as well. It’s always nice
to have that sort of secondary confirmation to method signals, although it
doesn’t happen often.
The first trade went for exactly +2pts from bid
to ask before coming back into entry. The second short signal went more than
+4pts, the third went more than +2pts, the fourth signal went more than +4pts
and the last signal went more than +2pts.
Overall it was a perfectly methodical day in
the S&Ps, a real pleasure to trade. Long was definitely wrong from bell to bell,
but of course we knew that all the way.
ER
(+$100 per index point)
Russell 2000 futures were divergent off the
opening bell… but what else is new? Short signals into the opening spikes
resulted in two almost immediate losses (-1pt) before the third and fourth short
plays worked for more than +4pts each. A final short trade in the afternoon
covered +1.9pts from entry signal before coming back up to original entry point,
then drifted more than 2pts lower again.
Overall it was a directional day in the ER,
albeit a reluctant downside press. Hapless buyers tried to support the pivot
point and S1 values, only to have their buy stops whacked in the cascade surges
lower.
ES (+$50 per index point)
S&Ps continue lower from the 62% support break
(dashed red line) on Thursday and confirmed retest failure on Friday. The
current grid in play (solid lines) has initial resistance near 1269 with a solid
ceiling near 1273+ if tested again. Current 2006 lows are just a few index
points below, and should offer some type of reflexive bounce to test for double
bottom potential.
ER
(+$100 per index point)
Small caps have clustered support near 715+ to
712+ before the next air pocket to 704 is visible. This chart on its face
remains 100% bullish, but the engulfing red candle yesterday portends further
downside ahead.
Summation
All indexes except for small caps look near-term weak. Many of the major sectors
look totally bearish. Considering I hold open put-option positions in the
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SPX |
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SMH |
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RTH |
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IBM |
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GOOG |
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PowerRating) from higher levels than current, market weakness is a
welcome event if it happens.
No professional trader can afford to have a
market bias: up or down is equally fine. Show me someone who prays that any
given market only goes up or down and I’ll show you someone prone to making
emotional mistakes, suffering thru unneeded stress and angst more often than
not. Market direction is a variable outside of our control. Healthy markets
spend time moving up, down and sideways. That’s just the way it is, and rational
traders accept this fact.
Traders who adopt a directional favoritism
position themselves to be out of synch with price action 2/3rds of the time.
What sense does that make? Would you prefer to have market action moving in your
favor 1/3 of the time while harboring directional preference? Or would you
prefer to enjoy solid profit potential every day of your career regardless which
way price action happens to evolve next?
The honest answer to that question probably
tells each of us all we need to know about the true cost of directional
preference versus directional acceptance. The markets will move as
they desire regardless of all else… it is our job to work in harmony with
their rhythm.
Trade To Win
Austin P
(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.