When ranges contract, try this trading style
Thursday’s session was
virtually the same as Wednesday’s, chart example below. Friday’s
session will begin with employment report data revised from months’ prior like
that voodoo math usually is. If only we could balance our checkbooks with the
same type of favorable adjustments the employment reports often employ!
ES (+$50 per index point)
S&P 500 futures have traded between 1274 and 1282
at its widest since Tuesday afternoon. In actuality, the true range of 90%
volume was 1277 to 1281… a four-point “value” range in the past fourteen live
market hours of trading. Any way we look at that, it is unusually & historically
It appears that buyers are reluctant to keep
pressing new money to work after Tuesday’s ramp, but no one is willing to sell.
Pretty much describes range-bound conditions, doesn’t it? One thing we know for
an absolute fact: the longer and tighter any financial market coils, the bigger
and more extreme its resulting breakout will be.
A persistent pattern in 2005 and its historical
levels of low volatility was this cycle of ultra-small index ranges broken by
sudden surge moves up or down. These breakouts often came via gap & go sessions
that opened and ran straight away, momentum style. Soon after, indexes would
settle right back into unusually small ranges before the cycle repeated itself.
Of course there were times of directional swings
and mini trends moves scattered within. Also, a few periods of high
volatility… October 2005 comes to mind.
For the past several weeks index markets have
been mired in sideways patterns with a couple brief blips that took prices
higher or lower in rapid fashion. Days like Tuesday offer wild profit
opportunity intraday, followed by two straight sessions of scalper’s churn.
Whether this pattern will continue for weeks or months to come is unknown…
sooner or later, the indices will make a decided swing or trend move of
Until then it is a time for the most experienced,
skilled scalpers to work hard for small profit gains and a majority of index
traders without those ultimate skills to ply. Patience is a virtue, and the
lifeblood of successful trading.
We’ll see if clearance of anticipated employment
report gives license to equity markets for some true buying or selling trends
today. No excuses left for this session… fund managers are now on the clock
Trade To Win
(Weekend Outlook trend-view section…
Austin Passamonte is a full-time
professional trader who specializes in E-mini stock index futures, equity
options and commodity markets.
Mr. Passamonte’s trading approach uses proprietary chart patterns found on an
intraday basis. Austin trades privately in the Finger Lakes region of New York.