How I Look At Every Trade
The September S&P
futures (SPU and ESU) opened Monday’s session with a +2.25 point gap
to the upside after Housing Starts posted a fresh 17-year high. The size of the
gap and the weak closing PREM from Monday gave a good probability of a “gap and
trap” open. Locals were sellers off the open until a delayed release of the
Michigan Consumer Sentiment Index, which came in lower than expected, triggered
some heavy broker selling that pressured the contract to close the gap and then
some. But, the weak sentiment number and violence in the Middle East wasn’t
enough to deter the bulls. The contract fought back to post a new high before
running out of buyers and settling into a tight lunchtime range. After taking a
dip to a new low, the futures took their cue from the strong bond market close
and clawed their way back to the highs of the day.
The September S&P 500 futures closed Tuesday’s
session with a gain of +4.25 points, and finished just off the high of the day.Â
Volume in the September ES was estimated at 437,000 contracts, which was ahead
of Monday’s pace but still below average. On a daily basis, the contract formed
a hanging man after 3 days up, and right at 7/31 high resistance. On an
intraday basis the ES is holding its 60-min channel (see chart) and the 3-Line
Break chart closed with a long bias and a Break Price of 1,002. The VIX posted
an inside day with a slightly lower close as it still sits below 20.
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Economic data takes the day off on Wednesday, so
the futures may play off the bond market, the moon phase, or Tarot cards for
lack of anything else.
Analysis Paralysis
I’ve gotten numerous emails asking for my view of
a trading situation and I’m happy that I can offer my assistance on the majority
of them. But, on the others, my response is that I wouldn’t have done anything
because I wouldn’t have even been in the trade. The reason is that I look at the
time frame the trader mentions and it will be during the “lunchtime lull” when
the ES will have been trading in a 1-2 point range and volume will have jumped
off a cliff. Most of the best opportunities during these dog days of summer
have come in the morning hours, with a few nice ones in the last hour. Don’t
miss these opportunities due to “analysis paralysis,” which means that you’re so
overcome by the need to pick apart and analyze a setup that you entirely miss
the opportunity.Â
Then, after missing a few good opportunities, you
feel that you have to take a trade and then you get caught in a low-volume
range. The analysis and homework should be done when the market is closed, and
the market hours should be spent reacting to set-ups and managing trades. Part
of gaining an “edge” is being aware of the times of day when you’re on target,
and those times of day when you can’t hit the broad side of a barn. When a
signal is given, hold the conviction that the trade will be profitable, based on
your methodology. Look at every trade as an “IF and THEN” scenario. IF the price
does this, THEN I will do that. By doing this, if the trade doesn’t do what you
want, it doesn’t come as a big surprise. It’s merely one of the “IF and THEN”
scenarios.
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Please feel free to email me with any questions
you might have, and good luck with your trading on Wednesday!
P.S. Learn to trade the E-minis in my new
interactive CD-ROM training module! Click
here for details.