Here’s my favorite scenario for Friday’s action
Stock index futures opened Thursday’s session at the flat line
after Q2 GDP came in as expected and crude oil behaved itself.The December SP 500 futures
closed Thursday’s session with a +9 point gain, while the YM posted a smaller
relative gain of +66 points. Looking at the daily charts, both contracts are
trying to negate their bear flags. The ES was able to clear it’s daily MA
resistance, but the YM was stopped right at its 50-day MA. On an intraday
basis, price has become a bit extended above MA support, so I wouldn’t be
surprised to see some retracement to it. For you daily 3-Line Break followers,
the ES is short with a Break Price of 1248.50, while the YM is also short with a
Break Price of 10720.
Friday morning gives us a
couple of economic reports with August Personal Income and Spending at 8:30 ET,
the revised Michigan Consumer Sentiment Index at 9:45, and the September Chicago
PMI at 10:00. With the window-dressing gods locking in a positive quarter
for the major indexes with room to spare, I would expect some oscillation or
retracement on Friday.
Mental Clarity
Going into the last month of
the year, it’s important to stay focused and not let mistakes screw up an entire
year of work.
Here are some things to
consider on a personal level to keep that mental clarity flowing:
Have you ever had a string of
winners that caused a sensation of euphoria?
There’s nothing wrong with
being happy about good performance, but in this case, you start to get a little
cocky or overconfident, start pressing a little harder, maybe risking more than
you usually do, and maybe blow a stop or 2.
Have you ever blown a stop?
The play moves right through
your stop level, yet you freeze and do nothing. On a rational level, we know
that we will have losses. We are traders, and that’s part of the game, right?
Yet, sometimes for some reason, we just can’t accept a loss. We start to indulge
in HOPE, as if the market owes us something, or wants to accommodate us.
Have you ever gotten in a play
in 1 direction, but the market doesn’t accommodate it, and sets up in the
opposite direction instead?
You close your play, but simply
can’t see the other side. In hindsight, you know that it was an excellent
set-up in the opposite direction, and that the play should have been flipped.
Yet, while the play is setting up before our eyes, we can’t see it.
Have you ever indulged in
“revenge” trading?
You’re down on the day, had
some bad breaks, but not due to anything you did wrong. On a rational level, we
know there will be days like that. But, that something inside of us compels us
to try and trade out of it. You start to have what I call “cognitive
illusions.†Do you have any idea what that means? You’re seeing set-ups that
simply aren’t there.
When it comes to mental clarity
on a micro level (meaning trade to trade or day to day), I’m not actually
putting and taking off trades to “get something” from the market. In other
words, external gratification in the form of money is the farthest thing from my
mind when I’m TRULY in the flow. The only thing I’m concerned about is being in
the proper state of mind to recognize opportunity, to act on it, and to stay
committed to let it play out. So, in a sense, I’m aiming inward, and not
outward. We’ve all heard this before, but if I play well in the long run (the
macro level), the money will flow into my account on a positive net basis. The
market is neither “for us†or “against us.” I can’t “control” anything
external, but I can control myself and my actions. Like Mark Douglas so rightly
says, every “edge” will have a natural distribution of wins and losses, and we
can’t control the distribution. Once you understand this, and you’re resolved of
your results on a micro level, the market simply can’t do anything to inflate or
deflate you. You accept whatever may come, and a win and a loss really become
one and the same. You begin to look at the market as 2 sides of the same coin,
which is OPPORTUNITY.
Handy Tip: Are you using the TICK to fine tune
your entries and exits?
The NYSE TICK can be used to “fine tune” your
entries and exits. Common sense dictates not entering long on a high TICK
extreme or entering short on a low TICK extreme. If you do, you’re
probably going to have to endure some pain unless price is fading the TICK
(which we’ll discuss more in detail next week). I consider a TICK extreme
to be +/-750, but I also use 60-length Bollinger Bands on a 1-min chart to get a
better feel for the TICK’s range. Give them a try and you’ll see that many
times, they contain the TICK’s range nicely and are a great tool for order
execution.
Daily Pivot Points for 9-30-05
| Symbol | Pivot | R1 | R2 | R3 | S1 | S2 | S3 |
| INDU | 10511.39 | 10604.76 | 10656.75 | 10750.12 | 10459.40 | 10366.03 | 10314.04 |
| SPX | 1222.64 | 1233.74 | 1239.80 | 1250.90 | 1216.58 | 1205.48 | 1199.42 |
| ES Z5 | 1227.50 | 1238.75 | 1245.75 | 1257.00 | 1220.50 | 1209.25 | 1202.25 |
| SP Z5 | 1227.47 | 1238.63 | 1245.47 | 1256.63 | 1220.63 | 1209.47 | 1202.63 |
| YM Z5 | 10538.00 | 10630.00 | 10685.00 | 10777.00 | 10483.00 | 10391.00 | 10336.00 |
| BKX | 96.19 | 97.34 | 97.91 | 99.06 | 95.62 | 94.47 | 93.90 |
| SOX | 463.34 | 470.52 | 474.69 | 481.87 | 459.17 | 451.99 | 447.82 |
Weekly Pivot Points for Week of 9-26-05
| Symbol | Pivot | R1 | R2 | R3 | S1 | S2 | S3 |
| INDU | 10471.71 | 10592.45 | 10765.32 | 10886.06 | 10298.84 | 10178.10 | 10005.23 |
| SPX | 1219.43 | 1233.50 | 1251.72 | 1265.79 | 1201.21 | 1187.14 | 1168.92 |
| ES Z5 | 1224.83 | 1238.92 | 1257.08 | 1271.17 | 1206.67 | 1192.58 | 1174.42 |
| SP Z5 | 1224.70 | 1238.40 | 1256.50 | 1270.20 | 1206.60 | 1192.90 | 1174.80 |
| YM Z5 | 10501.67 | 10619.33 | 10787.67 | 10905.33 | 10333.33 | 10215.67 | 10047.33 |
| BKX | 97.11 | 98.91 | 101.10 | 102.90 | 94.92 | 93.12 | 90.93 |
| SOX | 462.74 | 472.67 | 484.62 | 494.55 | 450.79 | 440.86 | 428.91 |
Please feel free to email me with any questions
you might have, and have a great trading week!
Chris Curran
Chris Curran started his trading career at the
age of 22 with a national brokerage firm. He combines fundamentals and
technicals to get the big picture on the market. Chris has been trading for 15
years, starting full time in 1997, and has never had a losing year as a
full-time trader.