It’s nice to finish the week with a strong directional trade that quickly reached all targets. Today was a much anticipated day with the unemployment numbers released at 8:30am EDT. The Fed has made it clear that they are focused on creating jobs. If the unemployment report beat expectation handily, then that could be interpreted as a signal the Fed may start pulling back on their QE funding (i.e. the creation of $85B US dollars per month to purchase US bonds and notes to finance the US government’s huge debt and overspending). Anything else and most likely the bulls would consider the liquidity to keep on coming at the current pace which makes stocks more valuable as the value of the US dollar goes down. There was an indication about 10 minutes before the 8:30am EDT release as the ES started to break upward that the unemployment report was benign to QE. Unemployment rose to 7.64% vs. 7.5% expected which is generally interpreted by traders as there is no reason here for the Fed to take it’s foot off the accelerator.
After the initial news volatility and bouncing off the R1=32.50, the ES put in a low at the top of the DTG 25 level. The ES rebounded and tried several times pre-market to break the R1 area and volatility started to die down. Then at 9:30am EDT, the cash market opened and the ES started moving down, breaking a strong bullish trendline which started yesterday afternoon. The ES bounced 2t in front of the DTG 25 level. I posted in chat the the next retest was key for the bulls and if they could hold it; the ES would probably retest the R1. That opportunity is today’s example trade.
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