The best day for action is today — Here’s why
Stock index
futures opened Tuesday’s session lower as higher crude oil prices offset a
friendly PPI reading for August. What started out as another range-bound
day, albeit a lower range than Monday, broke down after the first hour with
confirmations from the VIX, breadth, and the TRIN. But, after basing out
in a sideways grind through the lunchtime lull, the wacky world of options
expiration took over, with the futures erasing 4 hours of losses in about 15
minutes, and then rolling right back over and taking out the session’s lows.
While we did see a bit of range expansion from Monday’s NR7 day, I don’t think
you can take much from today, until we start to see of the bigger leaders start
to crumble.
The
December SP 500 futures finished Tuesday’s session with a loss of -7.50 points, while
the Dow futures posted a loss of -64. Looking at the daily charts, the ES
reversed off of Monday’s doji, while the YM confirmed its evening star. On an intraday basis, the 60-min charts
broke their rising wedges and trend lines, with the trend lines now acting as
resistance.
For you daily 3-Line Break followers, the ES remains long with a Break Price of
1221.75, while the YM is long with a Break Price of 10480.
Wednesday
morning gives us August Retail Sales at 8:30 ET, along with August Industrial
Production and Capacity Utilization at 9:15. Aside from the regular
economic reports, we’ll also have the weekly energy numbers from the API and the
Energy Dept. at 10:30. With it being options expiry week, Wednesday is
usually our best "action" day, so be sure and eat your Wheaties.
Is
Risk a Positive For You, or Are You Held Prisoner By It?
Many traders will differ in their appetite
for risk. With regards to volatility, many times, the greater the risk
point, the better the trade seems to be. An active, swinging market has
more to offer than a narrow, quiet one. If there’s a positive expectation
for a trade, then the risk should be quantified and assumed. A positive
expectation is not based on a win/loss ratio. You could risk 3 ATRs to
make 1 ATR and win 66% of the time, but still come out a loser. Once
you’ve quantified the risk, then you have to become consistent in your approach.
There are more "outlying" events than most people and models can take into
effect. Much risk-taking rests on opportunities that develop from
deviations from the norm, or market inefficiencies.
Risk can be controlled by the amount of time spent in the
market. The shorter the time in the market, the less the risk. We
want to maximize the areas where we have control over risk, and minimize the
areas where we don’t. We can control leverage, time exposure, and fixed
stops. We can’t control factors such as volatility, overnight events, and
liquidity. One of the keys to good money management is the degree of
leverage used. In other words, we manage our risk with the size of the
position. The majority of the "big problems" come from situations where
too much leverage was used. When managing a trade, take off a piece and
"push" the other piece. Always think about putting yourself in a win-win
situation. Taking some type of action will do this because complacency is
our worst enemy.
Becoming profitable isn’t really winning the real game.
The real game is the mental side of this business. This is the game of
understanding risk, the importance of having and sticking to a game plan rather
than running from 1 method to another every other day, the important role that
patience plays as we wait for conditions to be right for entering a trade, and
the tremendous amount of mental fortitude it takes to endure the slow, boring
times. You must determine the overall market environment and whether it
even favors your play. It would be the same if you were going out fishing
on the ocean in a 20-foot boat, but there were 10-15 foot swells. Are
those conditions favorable for your fishing? Only if you want to risk
getting your brains scrambled or worse. It’s hard work to stay focused and
push aside all the distractions that try to come between you and success.
Concentration, routine, and ritual are the most powerful tools at our disposal
to help ward off the distractions, and help temper the emotions and anxieties
that hinder good performance. Obviously, being consistent is hard work,
otherwise everyone would be a winner in the markets and that’s certainly not the
case.
Daily Pivot Points for 9-14-05
| Symbol | Pivot | R1 | R2 | R3 | S1 | S2 | S3 |
| INDU | 10622.25 | 10649.22 | 10700.99 | 10727.96 | 10570.48 | 10543.51 | 10491.74 |
| SPX | 1234.32 | 1237.45 | 1243.69 | 1246.82 | 1228.08 | 1224.95 | 1218.71 |
| ES Z5 | 1241.08 | 1244.67 | 1250.33 | 1253.92 | 1235.42 | 1231.83 | 1226.17 |
| SP Z5 | 1241.07 | 1244.43 | 1249.97 | 1253.33 | 1235.53 | 1232.17 | 1226.63 |
| YM Z5 | 10672.00 | 10704.00 | 10754.00 | 10786.00 | 10622.00 | 10590.00 | 10540.00 |
| BKX | 98.26 | 98.55 | 99.09 | 99.38 | 97.72 | 97.43 | 96.89 |
| SOX | 482.20 | 485.60 | 488.99 | 492.39 | 478.81 | 475.41 | 472.02 |
Weekly Pivot Points for Week of 9-12-05
| Symbol | Pivot | R1 | R2 | R3 | S1 | S2 | S3 |
| INDU | 10607.39 | 10767.09 | 10855.62 | 11015.32 | 10518.86 | 10359.16 | 10270.63 |
| SPX | 1234.71 | 1249.90 | 1258.32 | 1273.51 | 1226.29 | 1211.10 | 1202.68 |
| ES Z5 | 1239.42 | 1259.58 | 1270.42 | 1290.58 | 1228.58 | 1208.42 | 1197.58 |
| SP Z5 | 1240.77 | 1258.03 | 1267.57 | 1284.83 | 1231.23 | 1213.97 | 1204.43 |
| YM Z5 | 10647.33 | 10808.67 | 10898.33 | 11059.67 | 10557.67 | 10396.33 | 10306.67 |
| BKX | 98.94 | 99.51 | 100.09 | 100.66 | 98.36 | 97.79 | 97.21 |
| SOX | 477.74 | 487.46 | 492.77 | 502.49 | 472.43 | 462.71 | 457.40 |
Please feel free to email me with any questions
you might have, and have a great trading week!
Chris Curran
Chris Curran started his trading career at the
age of 22 with a national brokerage firm. He combines fundamentals and
technicals to get the big picture on the market. Chris has been trading for 15
years, starting full time in 1997, and has never had a losing year as a
full-time trader.