The “Dog Dayz of Summer” are definitely here…Low Volumes, Low Volatility, Choppy Range Action. As traders we must learn to accept what Mr. Market gives and take full advantage when an opportunity exists, since it may be a bit longer than normal until the next one.
The FOMC Meeting Announcement today at 2:00 pm ET…A full complement of economic releases throughout the week topped off with the monthly NFP report on Friday. Any or any combination of these releases can have a direct impact on price action, so with relative low volumes, best to be mindful and aware of what’s on tap.
Every attempt to sell the SNP down gets a solid buy response, though buyers have not been willing to move price above key 1688 marker…So that remains important level to penetrate for further upside action. Any failure to breakout as we saw in Tuesday’s session attracts aggressive sellers, only to be met buy equally aggressive responsive buyers near prior lows. This is classic “range-bound” or “bracketed” price action where the strategy is to buy dips and sell rips until a clear directional signal is given.
Prior Day HIGH (1688.50) and Prior Day Low (1677.25) are the main boundaries…Multi-day Midpoint remains 1682…As sung by the Talking Heads…”Same As It Ever Was”.
Talking Heads: “Once In A Lifetime” http://www.youtube.com/watch?v=I1wg1DNHbNU
I am at peace with uncertainty. I know there is no such thing as a sure thing. I have no particular need to be right. I understand that being perfect has no place in trading. I am flexible. I am willing to change my mind. I am alert to scenario changes. I accept the information that tells me I am on the right track or on the wrong track.
Trade continues quiet and rangebound as Fed begins it’s two-day meeting. Investors/Traders await further clarification on Fed’s intents to begin it’s QE Tapering process…Last month Big Ben released a “trial balloon” and the market’s response was not to favorable…He then spent his time jawboning all month to reassure that the “crack pipe” will remain lit for the foreseeable future. That seemed to quiet an addicted marketplace.
Two-Day High sits at 1688.00. Penetration could give a boost up to 1695 – 1700 zone. Multi-day Midpoint resides at 1680 handle, so that could provide some back n fill support. As long as trade remains greater than 1680 price has higher probability to reach upper targets.
IF price fails to breakout and gets rejected, THEN traders will view negatively and potential heavy selling could begin. So all is mainly dependent on “Fed Speak”.
Lower target zones are PDL 1676.50, then 1671.50 down to key 1665 marker.
I think in terms of probabilities. I do not know, all I have are probabilities. Probabilities are at the core of my decisions. Through consistent application of the probabilities, I will win.
Having reached a peak last week near 1695 the S&P has pulled back to form support at 1670. Price action is now “bracketing” the upper and lower edges. This mid-summer consolidation is anticipated to continue until either 1665 is violated to downside or penetration of 1695 high. Midpoint of this range is 1680.
Friday’s reversal off lower “Money Box” Zone produced a strong upside move closing price near high of day. Be watchful at the D-Level Money Box Zones as these are expected target/support zones for high probable trade opportunities. What is needed from these zones is a “reversal signal”…In the twitpic link below the reversal took shape with a classical “tweezer bottom” pattern.
PTG Twitpic: https://twitter.com/TradePilotPro/status/360909022632755203/photo/1
Currently price is near middle of 5 day range with overnight price movement neutral and subdued. The general strategy in range or “bracketed” markets is to buy dips and sell rips at “price edges”.
IF price penetrates 1689, THEN potential would be to test upper edge of range near 1690 – 95 zone. Pullbacks to 1670 – 75 are considered buying opportunities till proven otherwise.
I am at ease with controlled risk. I will risk and I will win. I am courageous. I will take a chance. I manage risk to my comfort level. Risk keeps me on my toes, keeps me alert and at the top of my game.
Price has consolidated sideways for two days following new marginal high last week. This action is a “slow grind” for traders…Support structure remains intact, so path of least resistance is higher as bulls continue to target the 1700 handle. Today is Day 3 of Bullish Cycle and would be a good opportunity for bulls to push price to 1700 – 05 zone for upper target.
Solid support resides 1684 – 86 zone. Any violation of this level reverses the bullish attitude and lower projected targets back down towards 1673 – 75 zone.
Volatility remains very low which means Mr. Market is complacent…Big moves can occur seemingly out of the blue with this type of atmosphere, so remain vigilant and disciplined with stops.
I am willing to accept loss. Losing is an integral part of the process. I know and accept that individual losses and losing periods will happen. They are endemic to trading. I do not like loss. I do not expect loss. I simply accept loss as a cost of doing business.
The summertime slowdown is in full force with narrowing ranges and volatility. Perhaps it’s a good time to plan your “beach party” and go have some fun in the sun.
If you are a diehard trader that just must stay in front of every up and down tick then at least have some lemonade to help ease the boredom.
As for today’s trade strategy: Marginal overnight new high pushed into X-Zone without any continued appetite from the buyers…Price currently is about 3 handles off this high. Prior Day High (PDH) 1694.25 is the necessary marker for the bulls to stay above in the Pit Session…1700 remains the target for bulls…Failure to do so could attract some new selling back down to 1690 initially and possibly back to Prior Day Low (PDL) 1685.50.
Though the path of least resistance remains upwards, there always remains a chance of reversal happening at any time. Since volatility is low, it’s best to reduce position sizes for those multi-contract traders.
Time to have some fun!
I am detached from the results. I think in terms of the process and the validity of the process. I understand that I am more than the trading. I do not tie a fragile ego to any day’s trading results. I have faith that over time I will make money. The results of any one trade are statistically unimportant. I think in term of probability. A single trade says nothing about me as a person.
Summertime equals Low Volatility…The Average Daily Range (ADR) continues to contract from the historical average of 17.50 handles. The most recent ten (10) sessions have been well below this historical norm…The Volatility Index (VIX) is also currently near the lows of it’s historical range. As such, price continues to grind slowly higher each session as value expands, making it extremely challenging for short-side traders. If you are to consider reversionary shorts, do so only at extreme statistical readings and do not over stay your welcome. For directional traders, tactical strategy remains buy pullbacks to known markers until they fail.
Prior Day High (PDH) at 1690.50 is today’s first “key marker”…IF price can remain above this level, THEN bulls will be targeting the 1698 – 1700 level. As price nears key inflection points, it tends to be a battleground for opposing forces…so remain vigilant.
Any pullback should find some initial support near 1683 – 85 zone. Failure of a buy response can send price deeper back to 1675 – 78 zone for pivot test.
As always, stay disciplined and flexible.
I am ready to trade. My patterns are verified. My homework is complete. My mind is clear. I have rehearsed everything. I am prepared strategically, emotionally, and financially each and every day.