Remember These Three Things…
There
were two saber-rattling news bites yesterday,
and the major indices went south, and I
see that the early futures are red this morning. The major indices closed
yesterday below the low of the last swing point high. For the
(
SPY |
Quote |
Chart |
News |
PowerRating), that
swing point high is 85.80 on Feb. 18 and the low was 84.39. They closed
yesterday at 83.80, which was also below the last five closes, so there is
nothing positive about that. This 6.0% reflex up for the SPY was 81 – 85.80 low
to high. With the early red, the Trap Doors and volatility bands are obviously
in play this morning.
You should outline your
retracement levels to the SPY 81 low, and of course, to whatever else you trade.
The .50 retracement for the SPY is 83.40, the .618 is 82.83, and the .786 82.03.
Make sure you are familiar with this morning’s volatility bands for the
different indices and the
(
SMH |
Quote |
Chart |
News |
PowerRating)s. Yesterday’s 1.0 volatility band for the
SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) was 835.81, and the SPX closed at 832.58. You can’t get to
the 2.0 and 3.0 volatility bands until you close below the 1.0 band. I am always
aware of this looking for short-term changes in trend.
When you are prepared
with your levels, you can then concentrate on how price reacts at these levels
and decide or not to take a trade. I do the same thing on the upside reflex
where I might take a short trade after any move. That’s the difference between
being a trader or an analyst, and based on the many e-mails I get, the bigger
percentage of you are paralyzed with analysis in your short-term trading. It’s
the major stumbling block for traders, especially for newer traders. You don’t
get to be an older trader unless you can overcome that fault, or unless you have
unlimited funds and losses don’t mean much to you. Do yourself a favor and trade
the moves and leave the analysis to the media drones who couldn’t make a trading
nickel unless it was given to them.
I know I have said this
before, but when it gets real choppy, move to the higher intraday time periods.
I scroll the 60-minute and 30-minute charts all day looking for good setups. In
the next few weeks, the daily news noise will probably result in constant chop,
so trade less and only trade the best of setups.
There are air pockets
both ways, just as yesterday when the SPY declined -1.8% on just 30 million
shares. There was news and also a post-expiration trading day, but that
unfortunately is what we will be looking at for a longer period of time than
anyone wants. Overall, the NYSE volume was only 1.2 billion, a volume ratio of
19, and breadth -1151. All of the major indices declined from 1.8% to 2.0%,
while the SMHs lost 0.9%. Remember, good trade selection, smaller size and tight
stops continue to be a trader’s flag.
Have a good trading day.
Five-minute chart of
Monday’s SPX with 8-, 20-,
60- and 260-period
EMAs
Five-minute chart of
Monday’s NYSE TICKS