What’s More Important Than Patterns, And Other Thoughts

The beat goes on
— for now — as both major markets finished again in the light-green this week
,
with ES gaining 3 and NQ tacking on 18. The markets provided something for
everyone this week with a wide assortment of gaps, wild Globex ranges, Bank of
England spooks, and employment data that once again provided as much fuel for
effective short traders as for longs — we’ll touch on that in a minute.

The markets ended this week with one of the better-paced rhythms in recent days
on Friday, as the 13, 30, and 60-minute charts all took their turns providing
supports and resistance throughout the morning session. The BKX.X in particular,
provided a stellar natural 13 vs. 60 triangle — as shown below our standard
charts — which helped influence ES as it was balancing the banking rhythm with
the “never say die” SOX.X.

Traders should take note that once both the SOX.X (13-minute) and BKX.X
(60-minute) lost their respective key supports late in the day, bids disappeared
quickly on ES in a late-afternoon sell-off which may provide for potential
pullback short entries on Monday’s open. Of course, last Friday also closed
weakly, with the game changing rapidly when Monday’s early trends became better
defined.

Let’s go to the charts and then touch on a few random musings.

S&P 500



Nasdaq


Moving Avg
Legend:
15MA
Larger Timeframe 15MA

See https://www.donmillertrading.com
for Setups and Methodologies

Charts © 2003 Tradestation


Random Thoughts

I thought I’d break things up this
weekend and share a few random, yet hopefully relevant musings — in Andy Rooney
style:

Ever wonder why some traders and “journalists” get so “excited” about large
daily market runs? Dow +300 means nothing folks; Your account being up based
on your style
is the only thing that matters. Some of my best performance
days have been where the market has moved a net total of +/- 10 points, yet I’d
probably be thrown into a padded room if I ran around screaming that the market
had a great day. Turn off the hyperventilating media and “trading” journalists.

And speaking of hyperventilating media, have you noticed the increasing number
of excessive “gaps and traps” on positive opens lately? We should all once
again thank our friendly bull market sirens for luring the flock into buying the
opens. Hmmm, doesn’t it feel a tad like 1999 where many traders made their
daily, weekly, and monthly keep by fading the gap (with appropriate
triggers and stops of course) and leaving work after 10:00 AM ET. Gee, I wonder
what phase comes after this one.

Do you ever why some folks who narrate to bar chart patterns never mention the
“ability to fill” issue? (It’s a rhetorical question of course, as most don’t
trade.)
In my view, order execution ability is as important, if not more,
than the patterns, which is one of the reasons why I’ll never provide
educational material
without including unedited live trading, warts and all. Gee, did one contract
tick on that pullback bar or 1,000? Do you bid/offer wholesale or enter/exit
retail? What order routing did you use? For a longer-term swing trader, these
issues may seem to be irrelevant, yet for a short-term trader — especially
an E-Mini trader — ability to fill and the corresponding strategy is as
critical as power to your PC.

Do you ever give morning profits back in the afternoon? (Been there.) You may
want to see if you locked yourself into doing the same thing that worked in the
morning — when the passage of time has resulted in different trend
supports and afternoon triangles given the loss of momentum.

Did you know you can trade the E-Minis (long and short) with an IRA
account? It’s not only possible, but I’ve recently begun doing it at this end.
At the risk of flooding this weekend’s mailbag —

and with the heavy caveat that I
DON’T advocate newer or unproven traders learn to trade with their retirement
dollars
— check with your futures broker
to see if they provide an option where you can allocate funds from an IRA
account to trade the E-Minis. Some brokers work with third party companies that
house the account and allocate a designated amount to the broker for futures
trading purposes, while others actually house the account. For skilled
traders that are tired of the “no-short, no-margin” IRA handcuffs aside from
bear mutual funds (on the short side), it may be an option worth checking.

Good Trading and Have a Great
Weekend!


Don Miller