Thursday, August 13, 2009


Here is a 60 minute bar chart of day session e-mini trading and above it a five minute bar chart. I bought one unit five minutes before the pit open at 1008.75. Some of you are wondering why I did that if my day session range estimate was 1000-1015 (blue rectangle). Why didn't I wait for the market to get closer to 1000 before I did my buying?

I think one of the worst mistakes a trader can make is to have no position in a market that is moving in the direction he expects it to move. You are almost sure to take losses when you guess wrong about the market's direction. To stay in the game you have to book profits when you are guessing its direction correctly.

Near this morning's open I thought there was at least an even chance that the market would hit the 1015 level before dropping to 1000. Why? Late yesterday we saw a 9 point break after which the e-minis rallied to 1015.25 early this morning. After the 8:30 news today there was another very fast break of 10 points to 1005, a higher low. There was no follow through during the subsequent 45 minutes so I concluded that 1005 might well have been the reaction low, hence my purchase. I didn't want to see the market rally to 1015 or even higher without me on board the train.

In the event the market did drop to 998, a tad below the low of my range estimate. So I bought my second unit figuring that we would see a rally at least to 1008.

At the moment the market appears to be resting just about at the midpoint of its drop from 1015 to 998. I think this is in fact bullish action. The five minute bar chart at the top of this post shows clearly that the drop this morning was a classic shake out of weakly held long positions (green oval). The market dropped swiftly below two of yesterday's low points (dashed red lines). It then recovered and moved well above those low points and has so far retained its gains. Moreover, today's low occurred at midpoint support (purple dotted line on the 60 minute chart) and at the lower channel line (dash green line) that I drew yesterday.

I think this action means that the e-minis will make it to 1015 today. Moreover, this is only part of a short term move that should carry the market up to 1035 (green arrow on the 60 minute chart) or so during the next week. Note the position of the upper trend channel line (dash red line) which will be at the 1035 level tomorrow. Note also that a move above yesterday's high at 1011 which carries as far above that high as yesterday's day session range would carry the e-minis up to 1032 (purple rectangles).

As you know I think this bullish action is developing within the context of an up trend that should carry the e-minis up to 1120 by the end of October.

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