I love the Russell 2000 E-minis, here’s why

Tuesday’s session in the minis was a
two-stage sell off.
Early attempts to hold intraday support and press upward
failed, with early lows in by noon. The anticipated FOMC minutes’ release at
2:00pm spawned a bit of short-covering reaction, which failed at layers of
intraday resistance and sold to new lows from there.

Past the opening wiggles, it was a rather easy
session to trade. Staying on the short side once intraday support broke was
where the money was at… lots of it, especially into the afternoon drop. As is
usually the case, ER had much more range & profit potential than ES did, which
was fine in itself. For comparison sake, the NQ covered just 16pts or $320 per
contract range from highs to lows yesterday while the ER traversed 12pts or
$1,200 per mini contract range from tip to trough. Literally four times the
dollar distance… far easier to wrest +$400 per contract trades in the latter
than former. Would you agree? Mathematically, it is impossible to disagree with
that fact! ;>)

ES (+$50 per index point)

S&P 500 has 1197 as swing trade resistance with
1200 and then 1204 further layers above. The double-bottom here from previous
lows last week will be an interest test… sold break there leaves 1125 as the
next real big magnet of attraction below.

ER (+$100 per index point)

Russell 2000 broke its double bottom yesterday
and has 629 as next level of significance right below. If that one gives way,
say hello to 615 in a hurry.

Status No

For the past couple of years, intraday traders have either adapted to or
learned within stock markets at decades’ low volatility levels. Intraday price
ranges have been some of the most miniscule we have seen with index price levels
this near to all-time highs.

The past week has ushered in volatility and
price ranges reminiscent of the wild 2000 ~ 2002 period in time. It would be my
guess that we should expect more of this in the months and years to come, less
of the comatose ranges and nil volatility that plagued stock index traders
before. All good and bad things must come to an end… and traders need be
nimble enough to flow where the tapes go.

I’ve been using -$100 per mini contract stops
for quite some time now. Back in the wild days, a -$200 to -$300 per contract
stop was necessary to avoid normal market noise in the S&P. For newcomers
shocked at that type of initial position “risk”, please drag your charts
backward to July 2002 and see how those one-minute chart scalps using -1pt S&P
stops would have fared. Not good.

What works at the bottom end of volatility
ranges will not work as market activity returns to normal… that being far from
what traders have adapted to these past two years.

Instead of seeking one modest to decent price
swing per day potential, we now see several swings up & down that each exceed
entire session ranges before. Get used to that, expect it more often than not
and adjust your trading method – system – approach to perform accordingly.
Results can be bigger profits in one single session than we used to see in
several days to a week thru dead market periods.


The tapes are rangy and sometimes wild, but there is methodical
action inside the madness. Downside has the bias, but any sharp drops right off
the open are subject to powerful short squeeze reactions. Those squeezes may
only last a brief time and get sold into again, or they may power up the charts
as stubborn shorts get clobbered along the way. Do not marry any direction or
bias today… shorts get the nod but long signals must be respected if price
action drills a hole early on.

Trade To Win

Austin P


(free pivot point calculator, much more inside)

Austin Passamonte is a full-time
professional trader who specializes in E-mini stock index futures, equity
options and commodity markets.

Mr. Passamonte’s trading approach uses proprietary chart patterns found on an
intraday basis. Austin trades privately in the Finger Lakes region of New York.