Feb 202013

Today turned out to be two days in one: before the 2pm EST Fed minutes and after.  As you can easily tell from the level chart above, today was a down trend day; the second trend day in a row.  The day started with the morning PPI and housing numbers came in mixed and if anything, they were slightly bearish.  However given the bullishness over the last couple weeks, mixed news or no news usually means bullish.  So I started the day looking for a long opportunity as price started working it’s way down after the cash close.  A couple long opportunities unfolded from the bounce off the DTG 24.50 level and again in the DTG 27.00 level.  Price simply didn’t rotate far enough to make much profit from those long opportunities and my long trade lost.

I posted a chart in chat showing that the trend was down and thus started considering trend continuation trades.  Once price broke through the morning lows and the pivot point, I was confident the area would become resistance when retested.  Upon posting this information to chat, I became aware of at least one member who had taken a long trade from the DTG 19.50 level.  Thus I found myself in a situation that hasn’t happened for a long time; I was looking for a trade with knowledge that it was potentially against a member.  I do my best not to influence member trades in chat, but rather give opinions, point out market conditions and potential opportunities as they might unfold.  I decided not to point out a short continuation opportunity from the pivot point area that unfolded.  The market could have easily found a bottom, the resistance area could have been penetrated and a long trade might have worked.

My low frame for the day was 1519.50 to 1522.50.  This is where the ES camped out while waiting on the 2pm Fed minutes.  This initial reaction to the Fed minutes was positive, but then price started working it’s way down and broke through to new lows.  Whenever my low frame is broken, I’m thinking trend trades.  As I posted in chat, it would have been great to get a big pullback into the S1 pivot area; but that never happened, the trend became strong and the pullbacks small.  It didn’t matter when or how one chose to get into a short trade, there was at least 10 points of movement down from the low frame.  Most days if the day frame is broken, price either comes back in or it dies.  Not today; as I posted in chat “now it’s about finding good places to catch the trend”.  It was a nice 6+ pt move down from there into the close.  If a strong trend can be identified, I’ve got to jump on it; those opportunities do not come along very often.

Since the down trend was so strong today, most long trades were losers and most short trades were winners.  Also, 6 (almost 7) DTG levels were touched which could spell disaster to fade traders without good risk control.  For most our members who trade systematic models, today was a day of all losses.  No example trade chart today.

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