How The Final Hours Of Thursday’s Trading Sets Up Friday’s Trading

Stock index futures opened Thursday’s session lower
after an overnight attempt to move higher was stifled by lower-than-expected
July Retail Sales, especially the ex-auto number.  A quick fill of the gap and
steady grind higher had the makings for a trend day, but the buying simply
died.  Any number of reasons could be given, the most popular being another
record high in crude oil, but the equities market put on its thick skull again
and showed good resiliency in the last 2 hours.

September SP 500 futures finished Thursday’s session with a gain of +4.75
points, while the Dow futures showed a little bit better strength with a gain of
+64 points.  Looking at the daily charts, the ES and YM posted inside days, but
were able to claw their way back above their 20-day and 10-day MAs.  On an
intraday basis, symmetrical triangles broke to the upside and should now act as
support.  For you daily 3-Line Break followers, the ES remains short with a Break
Price of 1247.75, while the YM remains short with a Break Price of 10717.


The Daily Mental Checklist

Since the great majority of my trades are
intraday, I wipe the mental slate clean each morning to ensure that I maintain a
uniformity of attitude throughout the next session. My goal is a consistent
minimization of the unexpected by adopting an open attitude towards any and all
possible outcomes. My greatest vulnerability as a trader is the sudden
deterioration of a sound and patient mindset that can occur at any moment
throughout the trading day, so here is a helpful checklist that I’ve used to
remind myself each morning of the elements most important for my performance.

1. Attitude: Are you optimistically patient? Can you picture yourself not
trading at all today if no opportunities arise?

2. Preparation: System implementation and account management. Have you noted any
possible set-ups forthcoming for optimal entry and the actions entailed?  Have
you noted your max drawdown limit for the day and the willingness to honor it?

3. Balance of Concentration: Trading is as much anticipation of changes in your
mentality as it is the market. Don’t let yourself get completely absorbed by the
"flickering ticks" and stay equally grounded on both sides of the monitor.

4. Self-Control: Concentrate on staying collected under fire, no matter how wild
the market can get or how quickly losses may come in succession – keep the ship

5. Visualization: Visualize each of the following:

– Seeing a system signal, and entering the trade without further thought

– A stop-loss triggered almost instantly, and just as quickly forgotten.

– Waiting for the market to come to you before entering.

– Shutting down without hesitation when maximum daily limits are reached.

In each of these there’s a keyword or image that literally rings a bell in my
mind that helps to crystallize the intent behind that particular checkpoint and
provides a mental shortcut. I think this helps in eventually making the
run-through of the entire checklist an automatic process, a routine that
hopefully embeds certain actions and attitudes within that same part of the
brain that operates other habitual motor processes such as typing or driving.

Please feel free to email me with any questions
you might have, and have a great trading week!