Before You Even Consider Trading, Do This…
Stock index futures opened Tuesday’s session
with upside gaps after reacting favorably to the first drop in the Core
CPI since November ’03. It looked like it was going to be a repeat of Monday’s
sharp move higher, but good broker selling came in after the first 30 minutes to
slap the SP futures back down through the opening range. The rest of the day
was spent in a choppy range but the upside gaps were left in place.
The
September SP 500 futures closed Tuesday’s session with a gain of +5.50 points,
while the Dow futures gained 43 points. Looking at the daily chart, the ES
cleared its May/July low resistance at 1080, but ended up posting a shooting
star right at its 20-day MA and 50% Fib retracement of the August down move.Â
The YM posted similar action, and was stopped on the upside by its 20-day MA and
Fib resistance. In the small caps, the ER2 cleared its 10-day MA but was
stopped at May/July low and daily downtrend line resistance.
               
September
bonds (ZB) got a boost off the CPI data, but are still hanging below the 78.6%
retracement of the year’s decline. The Semiconductor Index (SOX) is forming a
bear flag as it retraces up into its 10-day MA and daily downtrend line
resistance.
Wednesday
is free of economic reports, so the focus will probably shift back to crude oil
prices, for a lack of anything else. The Google fiasco is expected to start
trading on Wednesday, and while it probably won’t have that much of an
influence, this market is also hungry for directional catalysts.  Where does
that leave us? We’re still gonna need to see some good volume selling in crude
oil and good volume buying in stock futures to change the fact that we’re still
in just a retracement of an overall downtrend.
Plan Your Trade and Trade
Your Plan
Before you even consider trading, it is
important to take the time to seriously question your intentions in the market.
Do you see futures trading as the means to a quick profit? Are you trading for
excitement or a rush? Are you interested in trading because you seek
satisfaction on a purely intellectual level? Do you see trading as a hobby or
as an additional diversification of investment? Are you looking for a way to
fund your early retirement, or do you see trading as an opportunity to augment
your savings? Do you desperately need the profits that trading might bring to
cover debts, like your mortgage, or other financial commitments?
You’d think it would be an easy
question, but I’ve come across many traders who simply don’t know why they want
to be in the market. By taking the time to honestly evaluate your reasons for
trading, not only will you learn more about yourself but you’ll also be forced
to justify your commitment of hard-earned capital to the market gods. Remember,
if your rationale is unclear, so too will be your trading. On Friday, I’ll go
over some issues that are good to keep in mind prior to entering the futures
market, and the pitfalls that all too often cut short the career of an aspiring
futures trader.
 
Fair Value – (.10)Â Â Â Â Â
Buy Program Premium – 0.86
Sell Program Discount – (1.06)
Closing Premium – 1.39
Closing Bias – If the futures gap down at the
open, watch for a retracement up towards the gap fill.
Please feel free to email me with any questions
you might have, and have a great trading week!