Become A Specialist — Here’s Why
Stock index
futures opened the new contract month at the flat line, after filling pre-market
downside gaps on news that Weekly Jobless Claims had posted the largest decline
in nearly 3 years. With December becoming the front month today, much of the
session’s action was dictated by the bigger spread players, who were still
rolling contracts over from September to December.
The
December SP 500 futures closed out Thursday’s session with a loss of -1.25
points, while the Dow futures slid -48 points. Looking at the daily chart, the
ES essentially bought time by posting a 2nd doji under its weekly resistance.
The SPX has now failed 3 times to hold the 1120 area, so Friday could be a “make
or break” day. The YM reversed off Wednesday’s doji and settled back on its
200-day MA. On an intraday basis, 60-min and 30-min triangles broke and are now
acting as resistance. In the small-caps, the ER2 showed good relative strength
as it tests its 200-day MA again.
The
Semiconductor Index (SOX) reversed off of Wednesday’s doji and is testing its
upper wedge line and 20-day MA resistance. The Banking Index (BKX) has
completed a textbook bearish Gartley, giving a 1st target of 95.63. Also, keep
an eye on the Transports (TRAN) here as it tries to completes a double-top
Gartley.
Friday
morning at 8:30 ET gives us the August PPI, which is expected to report a 0.2%
increase. While Hurricane Ivan is supposed to maintain a course into the
Eastern Gulf of Mexico, any indication that it may make a left turn could lead
to a surge in crude oil prices and additional pressure on the equity markets.
Specializing In What You Do
In the everyday world, we take
our specific problems to a specialist. You want a mechanic who specializes in
the particular make and model to work on your car. You seek the opinion of an
orthopedist for a problem with your knee. To address specialized problems, we
look for experts with specialized knowledge, information, and training. The same
goes for trading. In trading however, the trick lies not in finding an expert to
address your problem, but in becoming that expert.
Once you’ve decided to trade,
you must determine the kind of trader you want to be. What kind of time and
energy do you want to commit to trading? What are your personal reward goals? Do
you think that you should be a day trader? You may find that it’s too stressful
during the day if you have to sit in front of a monitor and make trades every 15
minutes, when you could be doing other things you enjoy. In other words, your
trading strategy must fit with your personality. Many traders have a broad
understanding of many approaches to trading, but most rely primarily upon
technical analysis as the basis for their short-term decisions. However,
technical analysis is a vast body of research and literature, covering
everything from simple chart patterns to complex computer-based neural network
systems.
Personal interests may play a
roll as you narrow the field of technical-based approaches to the one most
suited to you. For example, if you have an engineering or mathematical
background, a statistical system such as Moving Averages and Bollinger Bands
will likely make more sense to you. If you are a visual person, then recognizing
patterns such as triangles, wedges, and Butterflies may come more easily.
There are 2 schools of thought:
The first says that it’s best to focus on a group of securities, such as a
basket of futures contracts or stocks, and learn how they move and what forces
drive their movement. The second school says “trading is trading” and everything
can be traded the same way. I personally follow the first school. Here’s a true
story of somebody that followed the second school. After I had been in the
business for a few years, I had a client referred to me that was a pretty big
trader in the SPoos, and had done pretty well. He wanted no advice from me,
which was perfectly fine with me because I knew it would be a waste of breath
anyway. He thought he was George of the Jungle when it came to trading SP
futures, so now he was going to use his expertise to trade Pork Belly futures.
He knew somebody in the industry who had given him the “inside scoop” that there
would be production cuts, and the charts looked oversold to him. So, he loaded
the boat long, ignorant to the fact that Bellies pretty much ignored both
fundamentals and technicals, and also traded in light-volume bursts with limit
days quite common. He also had no idea that the Pork Belly pit was made up of 3
commercial brokers and about 5 locals, who didn’t want to share their playground
with anyone else. After 4 limit-down openings in a row, and a couple of margin
calls, he finally was able to get out with a sizable loss. Needless to say,
after that, he stuck with what he knew best.
Daily
Pivot Points for 9-10-04
| Symbol | Pivot | R1 | R2 | R3 | S1 | S2 | S3 |
| COMP | 1858.47 | 1867.56 | 1884.49 | 1893.58 | 1841.54 | 1832.45 | 1815.52 |
| INDU | 10306.73 | 10343.96 | 10374.57 | 10411.80 | 10276.12 | 10238.89 | 10208.28 |
| NDX | 1382.23 | 1391.09 | 1405.41 | 1414.27 | 1367.91 | 1359.05 | 1344.73 |
| SPX | 1117.06 | 1120.51 | 1124.74 | 1128.19 | 1112.83 | 1109.38 | 1105.15 |
| ES Z4 | 1118.00 | 1122.25 | 1126.50 | 1130.75 | 1113.75 | 1109.50 | 1105.25 |
| SP Z4 | 1118.10 | 1122.30 | 1126.50 | 1130.70 | 1113.90 | 1109.70 | 1105.50 |
| ER2 Z4 | 563.67 | 570.33 | 575.67 | 582.33 | 558.33 | 551.67 | 546.33 |
| YM Z4 | 10292.00 | 10319.00 | 10360.00 | 10387.00 | 10251.00 | 10224.00 | 10183.00 |
| ZB Z4 | 110.56 | 110.90 | 111.54 | 111.88 | 109.92 | 109.58 | 108.94 |
| BKX | 99.07 | 99.37 | 99.70 | 100.00 | 98.74 | 98.44 | 98.11 |
| SOX | 360.65 | 365.51 | 378.95 | 383.81 | 347.21 | 342.35 | 328.91 |
| QQQ | 34.49 | 34.85 | 35.11 | 35.47 | 34.23 | 33.87 | 33.61 |
| SMH | 29.13 | 29.93 | 30.50 | 31.30 | 28.56 | 27.76 | 27.19 |
| IWM | 112.62 | 113.54 | 114.40 | 115.32 | 111.76 | 110.84 | 109.98 |
| SPY | 112.46 | 112.90 | 113.31 | 113.75 | 112.05 | 111.61 | 111.20 |