Whether the market pops or drops, here’s you’re plan of attack

The last three sessions this week
include plenty of economic reports, month-end and quarter-end mutual fund
results, index rebalancing acts and approach of fiscal-year end for most big
funds. If that isn’t a witches’ brew to keep tapes roiled, I’m not sure what

Previous Session:

ES (+$50 per index point)

S&P 500 traded profitably to the short side off
early morning resistance failure, then spent the midday in sideways
consolidation. We bought into the afternoon lift, accumulating full positions at
1219.25 average price.

When the market popped to 1221.75, I trailed my
stop to entry (par) for a free trade while expecting upside squeeze toward 1225+
levels. As fate would have it, price action slammed right back to stop out that
position on lows for the afternoon just before launching into the expected
squeeze for straight-up profit potential.

ER (+$100 per index point)

Russell 2000 played the same game: scaled into
longs at 660.20 average, stopped out by one tick as price action hit 660.10 and
then drove nearly +6pts upward in surge candle fashion.

After profiting from early downside action, we
had the correct trades on and fully expected that late-day squeeze to resistance
levels where sellers stepped in. The sole mistake I made (and it was costly)
might have been crowding trailed stops to par for free trades. I assumed price
action would launch straight up and never come back into the stops.

In the future I will give afternoon moves more
room to work following earlier congestion and specific patterns contained in
these charts. We’ll detail the key reversal patterns visible in charts above
Thursday night in the “Technically Speaking” educational section here.

This Session:

ES (+$50 per index point)

S&P 500 has been flagging inside this ascending
channel since the 20th. Overall it is a distribution pattern with highs at 1245
and middle of congestion near 1220. The 25pt span between highs and middle of
the flag project downward -25pts lower toward 1195 zone before next real support
is found. We’ll see how that plays out, but charts predict further drop ahead.

ER (+$100 per index point)

Russell 2000 futures are in a less symmetrical
pattern with same overall consolidation concept. 675 highs to 660 middle of the
pattern should resolve itself to 645 or slightly lower before a solid bounce
might occur. That type of breakdown could happen inside one session, possibly
this week.


The month-end and quarter-end event this week along with some index
rebalancing should keep tapes roiled right into the closing bell on Friday.
Stock index markets appear ready to drop further, but artificial buying pressure
into the weekend could negate that. Last few sessions have been sideways,
jittery and gyrational. Conditions are building for the next directional pop or
drop, and we’ll be ready for it either way.

Trade To Win

Austin P


(free pivot point calculator, much more inside)

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.