More Please
Finally,
after multiple trading sessions of lackluster trading, the trading gods
threw us a bone yesterday. Why the
sudden change? Frankly, I don’t know
the answer, nor do I care. Those of you
who read yesterday’s piece will know why. Borsellino
had reported that a large hedge fund was an aggressive buyer of roughly 2500
S&P contracts.
Those of you who are not
familiar with my style need to know that volume is essential as well as intraday
moves of 3-5 points on the S&Ps. We
had both yesterday, as well as good institutional participation in both the
futures and equities. Take a look at the
charts below and compare them to Tuesday’s price action…there’s no
comparison. Recognizing these narrow-range
days will allow you to scale down your share size to prevent getting “chopped
up.”
Take a look at Chart 1 below.
Notice the range between the two horizontal red lines, roughly 3.75
points. The range between the green lines is a little better at roughly 5
points.
On Chart 2 however, the ranges
between the same lines is dramatically higher, a little more than 8 points and
10 points, respectively.
This is what made Wednesday,
combined with good volume, a better trading day.
When you are trading stocks off the futures, you need at minimum a 5-point
move in the futures to take any significant money out on the move.
Combine a narrow range with light volume and you have a tough task facing
you.
Looking ahead to today’s
session, the futures are slightly higher in the pre-market with a positive jobs
report. Will there be follow through
similar to yesterday? Perhaps some of the
$2 trillion that is reported to be on the sidelines will begin to be put to
work. On the open, look for support on
the S&Ps at 1226.8 with overhead resistance at 1237.
A close above 1250 would be very positive.
The NASDAQ, still seeking a close above 1757, is within striking
distance. Look to 1716 for support.
Assuming we see good volume and
range like yesterday, it requires that you step up and take advantage of the
better trading given how fickle the market has been combined with heading into
the heart of summer. Seize the
opportunities if they present themselves and don’t be afraid to sit tight
until good setups appear. The market will
always be there, make sure you are.
Until tomorrow…trade
selectively and stick to your plan.