I traded well today. No major mistakes. +9.50 pts. 3.5 from Globex and 6 from RTH.
My plan tweeted before the open:
ES RTH Plan: Yesterday ES had overlapping value (slightly lower) and finished on the low, away from value. ES had a strong Globex session finding balance around 1305 which is just under the MCVPOC at 8.50.
I think it’s very possible that ES tests yesterday’s low around 99.75 and if that holds as resistance, tests 95.75, 93.50, 91, & 89.25. This is my primary hypothesis and I want to see 1303-04 hold as resistance to tell me this is in play.
If ES should probe up, I am watching overhead levels 1310.50, 12.75-14.00, 14.75 (yday VPOC), and 1318.75. I expect sellers at the overhead resistance levels, so if they turn into support that will have me re-evaluate my plan.
Yesterday I found reasons not to take short trades on pullbacks. When we have a potential trend day, I need to be more aggressive with the trend direction.
Finally, news seem to give ES a lot of strong support overnight. There is talk about a EU fiscal union. I don’t understand what all that means but it appears the markets are taking it as positive. I do not want to argue for fight that.
So summary: 1303-4 resistance = go for yday low and beyond. 1310 and more so 1312.75-14 support = bias is long. I want to avoid trading around 8.50 where I expect chop.
What actually happened wasn’t exactly in my plan, but having done my plan I was prepared for it. ES faked down and I got short and stopped out. So I was expecting 10 & 14. But it couldn’t break out of the Globex trading range and broke lower again. So I shorted again for yday low. I could see potential for a huge squeeze and when we barely broke yesterday’s low and then came back in yesterday’s range, the squeeze was looking likely. I waited for support overhead and got long 1 lot because my entry was risky and my stop was > 2 pts. I thought I’d add to it if I got a better entry. It zoomed up.
Statistically we’ve had some very improbable events happen.. several times in a row. Back to back wide range days, ranges > 16 pts, neutral days, etc. There is a lot of fear and uncertainty in the markets. The Greek elections is one of the major items, Spain and a European fiscal union are two others.
I’m not going to bet that improbable things will happen, but I’m not going to bet that they won’t. I hope that makes sense. I’m expecting anything can happen. And most importantly, this is not an environment to call tops & bottoms! The Bund had a huge range today, its biggest of 6 months and it wasn’t just slightly bigger than recent days, it was 50% bigger. And over 3x bigger than its average range just a month ago. We have major volatility going on. Anything is possible.
In this environment I play more for continuation, which means waiting for the market to show its hand and entering on pullbacks. But reading order flow and analyzing the context is very important. For example, those who shorted the pullback after we tested yesterday’s low took a hit. If one saw the potential short squeeze happening, one can avoid that. But even if one didn’t see it (I usually don’t), take the small loss and look for the pullback in the other direction. An example of this is after we made new highs, ES pulled back to the OSH where it did a double bottom. I was eating dinner but this is a nice place to get long.
I’m going to a school fair tomorrow morning so won’t trade the European morning session.