Pre-Market Analysis 8/29

Performance of Major Indices

Econ Data To Be Released Today

ER2

When I compare RUT with the other indices, it's obvious to me that it has relative strength over them. Whether that means anything, I'm clueless for now.

Both volume and open interest are still flat. While ER2 has rallied fiercely for the past 3 days, volume and open interest are not increasing significantly or even steadily. That tells me that despite the rise in price, market is fundamentally weak (I feel like a broken record).

Having said the above, the fact remains that price is going up. For now.

My monthly chart tells me a bullish story about ER2; my weekly chart tells me otherwise.

My daily chart's no longer talking to me.

Econ data's going to start coming out in less than 2 hours. Besides personal income and spending, I'm not sure the result of the others will have any bearing on ER2.

But we've not forgotten OIL, of course.

And the USD.

And Financials.

And workers going on strike and those getting laid off.

And the WEATHER.

And when I put everything together, the picture that emerge is....

A BEAR

In fact, I'm bearish right this moment, even as price is continuing to move up.

Am losing more than 1 point as I write.

But I'm not running until price hits 746 or when I have reason to believe that ER2 is going to immediately resume its upward trend.

To make it easier on my heart, I've customized the layout of my TWS (Interactive Broker's Trader Workstation) to NOT show me my unrealized LOSS.

It's dumb (coz I know exactly how many ticks and points I'm losing every second).

But it works for me. I simply can't stand seeing red under the unrealized profit column. When I see red, I make stupid decisions.

I'm not hoping for the market to do what I think it ought to do. I've simply taken a position.

And if I'm wrong, I'll get out with a loss that I'm willing to give to the market should I be wrong.

But of course I won't be watching when that happens.

D's the one who goes through the statements.

:-D

Pre-Market Analysis (ER2) 8/28

Performance of Major Indices

Econ Data To Be Released Today

ER2

ER2 is still on an uptrend, and I don't see how that's going to change if price doesn't fall to a lower low. That said, it's now nowhere near the high it made yesterday either.

I see some selling (probably profit taking) and then some buying...Buying might continue into the trading session (the active one I mean, from 930 to 4), and if price doesn't reach yesterday's high, then we could have another choppy session with people unloading what they have; and new sellers coming in for a ride down, then profit take quickly to avoid being trapped in a market that doesn't continue to go down.

It would be great if today's a seller's market. But after seeing what happened in the previous sessions, I doubt there're enough sellers with conviction to push price down to a level that screams "BEAR MARKET".

I would be equally happy if bulls will just come in and drive price through the roof.

The lack of decisiveness and COURAGE in the market is frustrating. A line that tells me vaguely what trend I'm in is simply not enough. We are in a situation where most are clueless (yes, that includes me) at every point as to whether a pattern is the real stuff or a fake, and if we are still in the trend that we thought we were in.

Open interest for ER2 has remained fairly flat (went down marginally yesterday in fact) although price and volume have gone up a little. So, I see that people are liquidating their contracts, but I don't know what to make out of that anymore.

Am staying out of the market to maintain my sanity.

I'd rather re-read "Reminiscences of a Stock Operator" and give Al and Keisha some loving attention and massages.

Charts, Fundamentals & Live News Feed

My response (sanitized to protect ME) to Propriety Trader (a great trader who has given me some very sound advice on trading...great guy who started his blog for the purpose of helping his friends who wanted to learn how to trade)'s email to thank me for inspiring his most recent blog entry :

You're most welcome :-)

I agree with most of what you said.

But I question the rationale of buying and selling based on news and data that can be interpreted in a myriad of ways. It doesn't help too that they have to be digested in minutes, if not seconds.

During the short period that i traded with live news on (briefing.com), I went in and out of my trades confused and frustrated. The additional input distracted me. When I did without it, I traded much better.

Unlike a typical daytrader, I hardly stay in a trade for more than 5 minutes. I'm usually in and out before the candle is completed. Because of my style of trading, I can't be choosy about my position. All I know is if I'm selling, I don't want price to go up. And I wait for the moment that I feel that price is going to CONTINUE to go down, and I take a point - if I can - out of a typical 3-point move. Sometimes I exit after a few ticks when there's hesitation. I don't like it when buyers and sellers pause to think. When they do that, the next move is sometimes drastic and will kill me if it's against my direction (losing money makes me lose sleep for days - happened only once but I'll always remember it).

I don't totally ignore fundamentals. I'm a news junkie. I read all kinds of things. So, i do know what's going on everyday. And what I know gives me a view about the market.

But I don't know how that helps me in scalping. When I scalp, I can buy in a downtrend and sell in an uptrend. To take a few ticks out of every retracement regardless of how shallow it is is surprisingly fairly easy once you know the chart of a specific time-frame intimately. For instance, I use only 5-min chart to scalp. I can't scalp with a 3 min or 10min chart coz I haven't studied their patterns.

ER2 is a very predictable instrument. Even the moves have specific ranges. I know that the first move is always 6 points on a normal day, retracement is 4 poitnts. The next move is 5 points and retracement is 3 points. On a trending day, you have 3 continuous moves and retracement is almost always 3 points. i don't even need to use Fib levels. The benefit of knowing this is that I can be late in my entry and still get 1 point. And I just noticed yesterday that the charts (for any timeframe) are divided into just 4 main "levels". An accidental discovery when I was drawing on paper the moves on different days.

I gather your style of daytrading is the kind that professional traders adopt - you sit tight and wait for a decent profit. I don't. Not for scalping. For me, scalp means "grab whatever's on the table and run".

But I'm really tired of doing that and I really don't want to have to do it forever. Swing trading works for me. Afterall, I've been looking at monthly and weekly charts for detailed study. But I have no use of them when I scalp. I have no use of daily charts for that matter when I scalp. So, I really appreciate your inspiring me to just hold a contract for as long as it should be held. That will also give me time to trade all the other things I've been wanting to trade, and also time to SLEEP (no more staying up til market closes!).

:-D

Bears Causing Rally??

This looks like panic bear-covering to me...I can't see any sense in buying at this level and under the current market condition.

Well, I went in for the ride anyway. At the wrong time though and got out slightly better than breaking even.

Not going to hold a long position, that's for sure. Tmrw's probably going to be the last day of any residual short covering.

D was asking why I thought bears would need to run. I said coz the market didn't plunge as it should. And bears who can't sit tight (yes, like moi...) would react and start covering. So I really think that it's the bears that are causing the rally. But then of course, when price keeps going up, you'll see some buying interest...and then when price fails to reach its previous high, reality will set in AGAIN, and ER2 should plunge.

Yup, I form stories in my head all the time.

Pre-Market Analysis (ER2) 8/27

Performance of Major Indices

Econ Data To Be Released Today

ER2 Daily

I don't know if something's wrong with my eyes, I keep seeing ER2 going up for today, even though it's been in the red for the past few hours.

These are what I see on my chart:

• A key support from June 12 (at around 719.6) which subsequently became resistance
• A head and shoulder that's forming, and the spinning top from yesterday's session could possibly be where the right shoulder starts to form
• And, of course, a spinning top (considering that we're actually still in a downward move from the top that was formed on Aug 15, a spinning top should at least stop ER2 from going down further)
• An upward trendline (in green) which was broken, yet the bears are still not in control (sideway move for the past 5 sessions!)
• ER2 closing above 200MA again!
  

Hence, I can't help but feel bullish about ER2 today. It looks like it wants to test resistance (trend line in green)....

Haven't really taken a look at DOW and S&P or RUT for today, but given that RUT had shown relative strength over the other indices for most part of yesterday's session (totally resilient and stubbornly refused to turn red when all the others were in negative region prior to release of FOMC minutes), my thinking is that RUT is going to be strong today, and the other indices are likely to close up too.

Pre-Market Analysis 8/26 & ER2 Trade 8/26

Performance of Major Indices

Possible market-moving factors (for Aug 25)

1. Financials down
2. Oil up

Economic Data to be released today

Dow Daily

Dow has closed below channel support but I’m not sure that it’s going to continue to go down. Another close below with more volume would be needed for me to get really bearish.

I’m thinking that today is going to be a choppy session of profit taking and short covering.

ER2 today

I’m neither bearish nor bullish. If I’m forced to take a view, I’ll prefer to be bearish than bullish.

Entered SHORT at 721.8; Stop Loss at 725

D's ER2 Trade 8/25

D's changed his trading strategy too...

1 trade, 3.3 Points, and he's done for the night too.

This is definitely a better way for him.

What Will I Be?

My conversation with D this morning when we were having our morning nicotine session prior to seeing him off:

J: You look happy on Mondays. There're sparks in your eyes. They are dead on Saturdays and Sundays.

D:....

J: Are you unhappy at home?

D: There's no simple answer....

J: I have my answer then. I'm not naive enough to think that there's anything simple (between us).

D:......

J: Is there something you want to do, and I'm stopping you?

D (shakes his head, and smiles ever so kindly and gently):....focus on trading....


Now, that's really the last thing I need to hear from anyone, especially from D.

I trade coz I love to trade. It's more than an escape to me. It is something I'm passionate about.

At least that's what I would like to believe.

Now I'm beginning to doubt myself.

What am I doing with my life exactly?

When will I ever truly accept that living for myself and no one else is the only way that I can carry on living?

When will I ever learn to be happy for no good reason?

When will my life stop revolving around a single person?

When will I ever stop DOING THINGS, and pulling all kinds of stunts to get his attention and get back at him for having stayed with me all these years simply because he felt I needed him, not because he loved me?

When will I ever truly find myself?

Will I ever learn to live just for myself?

When will I ever put a stop to pondering, analyzing, finding out the truth, blowing my top then retreating into my shell, only to emerge a short while later to carry on living, then start pondering again, and analyzing, and basically get sucked right back into the whole cycle again and again and again?

When will I ever accept that I've been with a man who has never ever loved me, and has stayed simply because the savior in him just couldn't desert me?

When will I ever stop hating him for wasting 15 years of his life on a totally unworthy cause?

When will he ever stop wanting to be a hero and an angel on a mission, and start living the life that he wants to live?

WHEN????????????????????????????!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Technical Analysis - DOW

When DOW first made its major decline in area marked A, drop was steep and increase in volume was anything but gradual. What it looks like to me is that selling was panic-driven. What happens after seems to be a period where confidence has returned to the market, albeit not with full force.

DOW Weekly

In the period I’ve shaded and labelled “B”, the decline seems more “controlled” and “purposeful”. After each of the first 3 sizable bearish candle comes a pause (deliberation, profit taking, short-covering?), and after that we have 2 long bearish candles in a row. Speaks volume about the “hopelessness” that is felt in the market…. The increase in volume is gradual this time, which suggests to me that selling was the result of more rational assessment of the market than mere fear and panic. It seems people have a better idea of where the US economy is heading – perhaps reality has finally set in that there is something fundamentally very wrong about the “resilience” of the US market.

Personally, what I see when I put volume and price actions together, is that the existing rally is merely a mishmash of profit taking and short covering.

But of course we could attribute the lower volume that accompanies the current rally to traders going on vacations.

In any case, until I start seeing price rising gradually with volume picking up equally gradually, I’m not going to be bullish in the months to come.

What I see on DOW’s weekly chart is a bear flag, and a strong resistance at around 11,895. Failure to break up above resistance in the next few weeks, or a break below the flag’s support with a surge in volume could send DOW tanking.

For the coming week, I’m more bearish than neutral as far as DOW’s concerned. What I see for the week that just passed is a “hanging man” at a price that’s in the region of Fib 38.2 resistance. Any confirmation that price is going down from here will, of course, need confirmation since the candle itself – without taking into account the price level it’s found at - is inherently bullish, given its long lower shadow.

So, I’ll be watching where DOW opens on Aug 25.

DOW daily

Aug 22 has closed above resistance shown in chart above, with unimpressive volume. For Aug 25, I’m going to take the view that it’s likely to be a session of profit-taking. Add to the equation selling pressure from rising oil prices, and we might just see a long bearish candle for Aug 25.

OIL

I can’t resist but have to say this about price of oil: unless global demand goes down, it’s just going to continue to go up. Even at $147 per barrel, oil was apparently still affordable. When oil becomes so costly that countries could no longer offer generous subsidy to their people, most companies could no longer operate, and the average US family could no longer afford to drive or heat up their homes, that’s when we will see demand going down. Until that happens, oil is not likely to stabilize.

Ring My Bells

Seabloke wrote the following on her blog on Mar 17 2008:

Ring My Bells
(Watch video)

Land recently posted an article about a "nice" song that made Sea twitch. Not that the song isn't nice... but... but... hmm..

Here goes the lyrics:

Ring my bell, ring my bells

Ring my bell, ring my bells

Ring my bell, ring my bells

Ring my bell, ring my bells

Sometimes you love it

Sometimes you don't

Sometimes you need it

then you don't and you let go

Sometimes we rush it

Sometimes we fall

It doesn't matter

baby we can take it real slow

Cos the way that we touch

is something that we can't deny

And the way that you move

oh it makes me feel alive

Come on

Ring my bell, ring my bells

Ring my bell, ring my bells

You try to hide it

I know you do

When are you ready?

Wanna us need come and get you

You move me closer

I feel you breathe

It's like the world just disappears

when you are around me oh

Cos the way that we touch

is something that we can't deny

And the way that you move

oh it makes me feel alive

Come on

Ring my bell, ring my bells

Ring my bell, ring my bells

Ring my bell, ring my bells

Ring my bell, ring my bells

I say you want, say you need

I can tell by your face

know the way it turns me on

I say you want, I say you need

I will do all your things

and I would never do you wrong

Cos the way that we love

is something that we can't fight

oh no

I just can't get enough

oh you make me feel alive

So come on

Ring my bell, ring my bells

Ring my bell, ring my bells

I say you want, I say you need

I say you want, I say you need

Ring my bell, ring my bells

Ring my bell, ring my bells

(End of song)

My favourite trainer once mentioned i'm a very "visual" person. All audio input inadvertently gets converted to images in my mind. How did he know? I dunno... remind me to check with him.

What was Land thinking playing me that song?!!

What was i thinking?

Make an educated guess.

(End of Seabloke's blog entry)

By the way, Sea, this remains one of my favorite songs...in fact, I'm playing it over and over as I write.

I'll be most happy to play it for you again and again!! :-P What was I thinking when I made you listen to it?

I wonder...

D, The Beautiful ER2 Open Interest Chart & U of A

This is the work of a professional:

For almost 2 weeks now, I've been working on coming up with something visual that D can use , and I came up with this pathetic looking table:


I told D that I've been seeing a clear relationship between open interest, volume and price. From the charts we've been using for trading, we can see volume and price bars, but no open interest bars. D asked why I haven't converted the data from my table above into bars.

I said I would if I knew how to. I'm an EXCEL idiot.

So D began working on my table and in a matter of minutes, produced a very decent looking open interest chart (see above).

I'm impressed.

D is, afterall, a computer engineer by training. Well, I can't be blamed for not remembering, coz he's been a banker for the longest time.

How could I have forgotten that 17 years ago, we were classmates in the Engineering faculty at the University of Alberta? It was our first year, and among the 200 over students in the lecture hall, less than 10% were girls, and there were maybe 3 asians? I was one of them so naturally, D and his friends noticed me. And of course when I disappeared after a year, they noticed too.

I lasted only a year in Engineering, not because I did badly for my engineering and physics classes. I excelled in them. But what I couldnt' do was FORTRAN, the dumbest programming language I've ever come across. I dropped out of engineering coz I needed to pass Fortran to go on to year 2, but FORTRAN's logics' just beyond me. It was much later on that I realized that the reason that I sucked at FORTRAN was becoz I was not good with logics.

So there you go, I am by nature, an illogical person. I was naturally attracted to anything that defied logics.

But after being with D for 15 years, I find myself now a more logical person than him. And definitely COLDER.

Hur Hur Hur....

Long Live The DOW!

I always think I'm going to die young, mainly because dying young seems to be the trend in my family. My father passed on in his 40s, so did my aunt and my uncle, and a close cousin. They killed themselves.

Putting aside hereditary (chemical imbalance??) factors, my lifestyle alone is enough to kill me slowly.

I smoke, live in a space that's air-conditioned 24 hours a day, hardly see the sun, hardly exercise anymore other than doing my daily push-ups (I've dropped skating, pilate and kickboxing all together ever since I found myself stuck to my chair and in front of my computer screens), hardly see other human beings, take no coffee or tea (I read somewhere that these are actually good for me??!), frequently took more pills than the dosage prescribed because I couldn't keep track of what I've taken, frequently took the wrong pills, sleep too little, have a heart that beats almost 100 times per minute on average, steadfastly skip all my yearly body examinations, and drive like a maniac.

My only consolation is that, longevity seems to run in the family too. Both my grand dads died in their 90s, and both died in their sleep. They were both perfectly healthy until, well, the day they passed on. My dad's mum is now in her 80s, and has a clearer mind than me. My mum's mum was killed by a nurse when she was in her 30s (she overdosed her with sedatives), a cousin died in the Pam Am air crash, another went over the Niagara falls...so I count those as accidents... Most of my other relatives are living healthy.

I may be a tad naive to go along with this, but it comforts me: and that is that as long as I don't kill myself intentionally or accidentally, and as long as I stay away from doctors and nurses, airplanes and holidaying, I should at least live to see DOW hit 20,000?

:-D

Now, if I ever REALLY, REALLY want to know for how long I'm going to be sticking around, I might just consider using this to get a ballpark figure.

LOL

Pre-Market Analysis (ER2) 8/22

Performance of Major Indices

Possible market-moving factors (for Aug 21)

1. Financials (Lehman’s rating raised to “buy”)
2. Oil (went up, helping DOW but hurting small caps)
3. Low trading volume amplifying price moves

Factors that will potentially move the market today:

1. OIL
2. Financials
3. Everything and anything else goes (refer to my earlier post)

Economic Data to be released today: NIL

_______________________________________________________________

Russell 2000 (E-Mini)

ER2 today

Price has been down for 5 days in a row now, open interest has dropped slightly yesterday, and volume has gone down a fair bit too (down about 20% from the day before, and the lowest in more than 2 weeks).

ER2 is now sitting just 3 points above Fib 38.2 retracement level, which might just provide the support it needs for a rebound. With volume and open interest dropping as price is coming down, it does seem possible that ER2 could go back up today.

ER2 Daily

A Scary Episode

D and I finally found something that's more horrifying than losing 10% of our account in one trade: a flying cockroach!!!

We were going to step out for a breather, and as D opened the main door, something flew past him in lightning speed. In less than a second, both Alberto and Keisha were dashing towards it and had it cornered in the common restroom. D took a peek inside the restroom and turned pale.

I had a really bad feeling about it and D confirmed my fear. What D did next was puzzling. He started to close all the windows in the kitchen, which was adjacent to the common restroom (before that, we've shut the restroom door, leaving Al and Keisha inside to play with their newfound toy). Then he explained that it was to prevent the disgusting creature from flying back in via those windows (the restroom window is right next to the row of kitchen windows).

After that we just looked at each other and wondered if we were going to let Al and Keisha take the fella out. That was when we saw it hanging right at the edge of the restroom window. I asked if we should just shut the restroom window. D said it's a good idea but he was too freaked out to get anywhere near it.

Perhaps it was just the kind of excitement I needed in the sluggish trading session (lunch time), or maybe there's really a man in me. I went right in, after asking D to keep an eye on the ugly thing to make sure it didn't fly right back into the restroom as I was shutting it.

And we did it. D saw the creature took a free fall down. 27 floors to the ground. Yikes!!! I hope it had opened its wings. Or do I really?

No way!

After this brief episode, we found it tremendously difficult to focus on trading anymore.

And Al and Keisha are now listless. They've had nothing to play with for the longest time. Back at our old place, we had strange creatures that found their way into our home because we were living on the 9th floor. Now that we are 27 floors high, almost nothing can get up unless i guess if they take the elevator....

Poor Al and Keisha will just have to settle for each other...for now...Al's getting tougher with Keisha these days and Keisha's getting more "manly". They are at least on level playing field now.

:-D

ER2 8/21 - Bear Flag

On a day that I totally ignore news, my chart speaks to me.

Today's chart is breathtakingly beautiful!

A bear flag that formed earlier:


Failed bear flag that followed, and now we're seeing something that's going to turn into a double-bottom:

Shows how important it is to WAIT for a breakout before trading a pattern. One could easily find himself on the wrong side of the market if he doesn't wait for a confirmation.

Personally, I like to see at least 2 closes with volume below support /above resistance.

Some days I just don't get my 2 closes, which tells me that those are not the days to trade. Not for me at least...

D, on the other hand, does very well in choppy markets. His guerrilla trading style is one of a kind, and one that's been working perfect for him so far. :-)

So, as far as trading is concern, there's really no one-style-fits-all method or system.

We learn the ways, and then find our own way.

ER2 - Finding Support & Resistance And Using 1-min Chart For Entry

I'm still trading 5 contracts after US market opens. Hence when I'm shorting, I won't want to go in just when price is moving up in the lower time-frame.

So, I keep my 1-min chart (see below) on. For my 1-min chart, EMA 14 and 21 and MA 15 are used instead (For EMA and MA periods to use for 5min chart, refer to my earlier post).

For support and resistance, I look for them on my daily chart and the previous days' 5min chart. So far so good.

By about 10am, I'll use fib whenever there's a clear trend.

ER2 - Range Per Move

The average number of points per move has been about 3 (used to be about 4, but I like to be conservative these days).

So I'll usually get out after price has moved about 3 points, and wait to see if support or resistance holds.

Supports/resistances that are not tested before, especially those that are 3 points away from ER2's previous move, I respect them.

As I write, ER2 is now consolidating above support at 722.57 (see below)

(Click on chart to enlarge)

ER2 Trades 8/21 - Pre-Market Trades

It's been a while now that I've based my entries and exits on price actions, news, and DOW's movements.

I've been finding it very challenging to trade in the first part of the trading session. ER2 has been diverging from DOW and S&P, and unaffected by oil and other news.

It usually took the later part of the day for patterns that I could recognize to form. So it's been awfully frustrating for me, coz all I could do from 0930 to 1400 had been to just sit back and watch ER2 the rebel clowning away.

Whenever I made a move in that "forbidden" time zone, I usually got clobbered and would need the later part of the day to recover my losses.

Yesterday, I decided to put my indicators back in to trade the first part of the day.

Combining the 2 seems to be working fine so far.

If I start getting overly dependent on indicators, that's when I'll throw them out again.

What am I going to get rid of for now?

NEWS!!

Pre-Market Analysis (ER2) 8/21

Performance of Major Indices

Possible market-moving factors (for Aug 20)

1. Financials (short covering of financial stocks causing price to go up....*&%^*#*??&%#*??!!)
2. Oil (price fluctuated throughout the day, and in fact rose on announcement of a much higher than expected crude inventories! *&%^*#*??&%#*....)
3. USD .....*&%^*#*??&%#*....
4. Trading volume.....*^...well, never mind.....
   

Factors that will potentially move the market today:

1. OIL (but since it’s behaving like a maniac, and ER2 is behaving like another, I’m going to have to give up keeping track on oil before I go crazy)
2. Financials (after short-covering, what now? More selling? More short covering? More bailing out policies?)
3. Econ data (yawn...)
4. Everything and anything goes. Who gives a damn anyway? JUST TRADE THE CHARTS! Which are, by the way, rather eccentric these days too. Volume’s low – lunch time is the worst – which explains the choppiness. D was saying the other day that if you go long when you really meant to go short, and go short when you really meant to go long, you might just make a killing.....food for thoughts??….

Economic Data to be released today

_______________________________________________________________

Russell 2000 (E-Mini)

ER2 today

Price has been down for 4 days in a row now, but both volume and open interest have started to go up. That spells trouble for ER2. For now at least, it looks like it’s going to continue to go south.

From chart below, I see a bullish flag forming, and ER2 is currently trading within the channel that forms the flag. Fib 38.2 retracement level is not too far below, and it’s possible for price to hit it if selling interest continues to rise.

ER2 Daily

Pre-Market Analysis (ER2) 8/20

(Click on charts to enlarge)

Dow Daily

S&P Daily and COMPQ Daily

Performance of Major Indices

Possible market-moving factors (for Aug 19)

1. Inflation concern
2. Housing
3. Financials
4. Oil
5. Tightening of lending requirement hurting consumers and businesses
6. Low trading volume amplifying price moves

Factors that will potentially move the market today:

1. Financials
2. Oil
3. Economic data report

Economic Data to be released today

____________________________________________________________

Russell 2000 (E-Mini)

ER2 today

Price has been on a downtrend for 2 consecutive days since it reached its high on Aug 15. Open interest and volume have picked up a fair bit yesterday, after dropping for 3 days in a row. This tells me that there are now more short selling, and it’s possible for ER2 to continue to go down today.

ER2 Daily

D's ER2 Trades 8/19

D's trades using 1-minute candles

Net: + 2.3 Points

Pre-Market Analysis (ER2) 8/19

(Click on charts to enlarge)

Dow Daily

S&P Daily and COMPQ Daily

Performance of Major Indices

Possible market-moving factors (for Aug 18)

1. Financials (Fannie Mae and Freddie Mac plunged; general weakness across the financial sector)
2. Housing
3. Low trading volume amplifying price moves

Factors that will potentially move the market today:

1. Financials
2. Oil
3. Economic data report

Economic Data to be released today

________________________________________________________________

Russell 2000 (E-Mini)

ER2 today

1. An evening star has formed on ER2’s daily chart, although I wouldn’t be too concerned.

Of all the candlestick patterns, it seems that the ones that are consistently more reliable than the rest are the hammers, the shooting stars, the haramis, the engulfing patterns, 3 white soldiers (this is more complicated though and depending on where it is, and whether the bodies are getting bigger or smaller, it can be a reversal signal or a trend continuation signal) and the belt-holds.

Of course they have to be at the right place to be an established pattern. For instance, a hammer is a hammer only when it’s at the bottom of a downtrend.

2. I am really wondering: will ER2 attempt to fade up today?

3. Open interest and volume (volume for Friday should have been 100 over thousand but I took the number off a daily chart which told me it was 500 over thousand. An error apparently, which completely threw me off. One more reason to not know more than what one needs to know to trade. But people don’t change. That’s why I’m still writing) have both been going down

4. When price goes down with a drop in volume and open interest as well, it should be a sign of strength. Coz as soon as the weak players sold all they have to sell, market will be ready to pick up again.

5. What I noticed is that ER2 has been trading in a range for 5 days now. Without an increase in open interest and volume, it’s not likely to break up or down.

6. I think ER2 is going to continue to inch its way up to the high of 765, with increasing open interest and volume. I think we will see a small bullish candle today that opens and closes within yesterday’s range.

7. After a series of upward move in price to the top, a drop in open interest again would signal that a reversal to the downside is imminent.

A recap on what I said about ER2 in the short-term (posted yesterday in premarket analysis 8/18):

ER2’s rally since mid July seems to be losing momentum and we are starting to see some sideway moves. A surge in volume on Friday that is accompanied by a drop in open interest tells me that the high of 754.70 reached is probably a result of SHORT COVERING.

Weekly chart shows that it’s possible that we could move up further, but declining open interest is telling of the topping of a trend.

If open interest were to drop drastically from this point on, and price of ER2 were to go down with it, it would mean that those who are in long positions are offsetting them, and ER2 will reverse to its previous downward move. Any chance of ER2 continuing on its current upward trend will depend on open interest stabilizing at the current level of around 570,000.

ER2 Daily

An Article a Day for D:

The Morning Gap (Part 1)

The Morning Gap (Part 2)

The Morning Gap (Part 3)

What's With the Market?

ER2 has gapped down on daily chart, and it doesn't look like it wants to fade up.

No play on any of 3, 5 or 10 min time frames. Extremely erratic price movements. Gaps and candles with long shadows and bodies everywhere. It's basically a market gone nuts. With ER2 at where it is now, it seems like if I go long, I'm euphoric, and if I short the darn thing, I'm an idiot.

I blame OIL!!!