Friday, March 13, 2009

Last Trade and a New Range Estimate

Here is a 5 minute bar chart of the JUNE e-minis, the most active contract now. My thinking on this morning's trade went as follows.

I am bullish and I thought that today's high would be 760. Normally this would incline me to be a buyer on any break below 750 that took the market 5-7 points below the open (which today was at 752.00). But on each of the last two days the market had rallied strongly from exactly that size break from the open, and I thought a repeat for the third day in a row was unlikely. But, because I am bullish, I was determined not to let the market rally to 760 without me. So when I saw it recover well from its early low at 745.75 and rally back above 750 I went long at 751.25 and bought a second unit at 753.00 (green arrows).

The market rallied as far as 755.75. But then a danger signal appeared. The market showed a visible jump in volume on a bar with a down close (red arrows). In fact that price bar was an example of a closing price reversal (CPR) bar - something familiar to chart readers. Now in an uptrend such CPR bars sometime show up but they rarely have any follow through. In this situation, since I was a little skeptical of the possibility of a strong rally from the open for the third straight day in any case, I decided that I would get out of my whole position if there was any downside follow through to the CPR bar. Such follow through showed up about 10 minutes later and I stopped myself out at the blue arrow.

I am revising my range estimate for today's day session to 740-765 (blue rectangle).


Anonymous said...

Now I know, THANK YOU


Anonymous said...

there is a fair chance we are in the early stages of a commodity style short squeeze, the likes of which has not been seen since the northern pacific corner 3X36 year cycles ago in 1901.

in a short squeeze, usual metrics will not work.

Anonymous said...

ihave been following your blog for several months now.............THANKS for your efforts and making it available for others.

For those of us who would like to learn more about this type of trading methodology is there a place you could direct us to.

thanks again

Anonymous said...


I started following your blog several weeks ago and realy enjoy your views...the educational information...and the way in which you present it. Thank you so much for sharing with folks like myself. I have a question though. I just watch the cash s&p 500 index and am trying to get the right relationship between that and the June e-mini you are trading so I can have the targets correct for my trading. It seems the June e-mini is about 5 points that correct?

Anonymous said...

The closing today will hold many clues for next week-

Anonymous said...

June futures are trading 3 to 3.5 lower to spx(cash),thus trading at a discount to cash at this moment in time.

Anonymous said...

The way Carl trades and his thinking process will gives us clues for next week.

Anonymous said...

June mini futures(ESM)trading at a 3 to 3.5 discount to cash(SPX),at this moment in time(like the plane,747 for SPX).

Anonymous said...

No way we get to 765 today... Market is extremely overbought!

I am looking for 740 or below... And next week I am looking for a test of 725!!!