This Is The Reality Of Trading
Stock index futures started out the new week
with downside gaps as geopolitical concerns took center stage again. Good broker
selling hit the market from the offset and provided good pressure the first
hour. The ES looked like it wanted to try a blow-off bottom, but the sellers
took the upper hand again and bled the contract through the lunchtime lull to
finally break the session lows.
The June S&P 500 futures closed
Monday’s session with a loss of -14.00 points, and finished in the lower half of
its daily range. Volume in the ES was estimated at a heavy 972,000 contracts,
which was ahead of Friday’s pace, and above the daily average. Looking at the
daily chart, the ES confirmed Friday’s key reversal and gapped down through its
100-day MA, leaving 1106.50 as gap resistance. On an intraday basis, the
butterfly patterns had both wings torn off as the ES followed a descending
channel throughout the session.
The Dollar Index (DXC) posted a
key reversal down off of its 100-day and 20-day MAs and a break of last
Thursday’s low would set up a test of its 50-day MA at 87.07. June bonds got a
boost from the “flight to safety” and settled back above the 10-day MA. The
Banking Index (BKX) confirmed Friday’s key reversal and the break of its daily
bear flag. The Semiconductor Index (SOX) gapped through its 200-day MA weekly
Fib support into play at 446 and the daily head-and-shoulders target in the 435
area.Â
Which Moves
Will Pay Off?
Do you
spend a lot of time and energy trying to figure out
which moves will pay off, and
which moves will not pay off? Do you use a basketball analogy (head fakes) and
an engineering term (noise) to describe moves that don’t work out profitably
according to your analysis and plan? It seems trite to say that the future is
uncertain, and that we cannot know what will happen with certainty, yet this is
the REALITY of trading.
I personally don’t view the market as either true moves or fake moves. I
consider all moves that are of a minimum range to be true and moves that are
less than the minimum range that I’m looking at are pullbacks within the trend.
I don’t believe that the market is ever wrong – it just exists and moves. So by
my definition, there is no such thing as a fake move.
Our job is to be aware of what the market is ACTUALLY
doing. To achieve this, we have to be DETACHED from
the market in order to objectively see the reality that is going on in the
market, like an impartial spectator, rather than as a fan who roots for one side
or the other. We can then use our analysis and plan to see if any of it applies
to the current situation. This requires being objective and true to our plan and
not fudging it to make it fit the situation.
Please feel free to email me with any questions
you might have and have a great trading day tomorrow!