Trade the Core Price Action

The SPX resolved its ST/OB condition by making a 1768 low at the 50DEMA on 12/18/13, and then advancing +4.6% to a new bull cycle high of 1849.44 on 12/31/13 to close +30% [29.6] on the year at 1848.36. Congrats to the Fed, or should it be said the master of the Ponzi Scheme.

The most accurate correlation for 2013 was the Fed’s Balance Sheet and the SPX, but you certainly can not say the same for economic reality and the SPX. The U.S. index funds crushed the active managers as a whole, and until proven otherwise 2014 starts out with the same theme. This was evident as equity trading revenues for the major sell side firms were down significantly in 2013.

The SPX closed at 1848.38 yesterday which is essentially unchanged from the 2013 1848.36 close. The price action for the most part in 2014 has been on light volume and narrow range until the -1.3% decline on Mon and +1.1% reversal on Tues. The SPX price action appears to be mostly computer driven and will probably remain so as long as the Fed continues to manipulate the market, and the Obama administration policies crowd out the Private Sector.

Regardless of the computer driven market the high probability low-stress day trading strategies continue to provide ample trading opportunities on a daily basis.

I have included several examples of actual trading setups from the last two days. The ACN setup is what we call a 1st CBO [consolidated breakout] to new intraday highs from a tight pattern and the stock made a good move as it advanced to the +2.0 Volatility Band level:


MMM broke it’s down trend line from the previous day and formed a 123 Higher Bottom setup, which was also a Gap Pullback [GPB] as it pulled back from the 135.67 high to 134.77 The trade result was an advance to the +1.5 VB level:


LYB was a tight [relative to its volatility] opening range contracted volatility pattern which expanded to the +2.0 VB level [1 Day +2.0 Standard Deviation]:


There is a certain criteria for Focus list trading stocks, and also other specific pattern guidelines, in addition to symmetry that supports the trading decision, but these are just three examples to give you an idea of some contracted volatility setups. Trading contracted and expanded volatility price action will always be a core staple for High Probability Low-Stress Day Traders.