Yesterday’s strategy opined that if 1762 was penetrated and held, then upside targets ranging from 1766 – 1775 could be achieved. That scenario played out like a “well tuned fiddle” as bulls remain dominant and quite enthusiastic regarding continuation of $85B QE, which the Fed is unlikely to change given recent economic weakness. More than two straight weeks of up days suggests on any metric the market is short-term extended and is subject to a pullback. Shorts that have been anticipating that pullback continue to bleed red as the inevitable correction has not materialized…”TRICK or TREAT”…Shortie!

Overnight trade has price extending further above prior day high and has reached the X-Zone (1771.25 – 1772.75) where price is currently trading as of 8:45 ET posting. Continued trade above PDH suggests further upside potential to 1776 – 78 zone.

Traders need to be on high alert of “buy rumor…sell fact” scenario when Fed decision is announcement later today. Given the recent parabolic rise in prices, early trade strategy will be to trade short-side against current overnight high, looking for initial support at PDH (1768), then additional support within CPZ 1761 – 1766 zone. Violation of CPZ low increases probability of 1754 – 58 zone being tested.

Prepare for Anything…Trade the Probabilities.

Good Trading…David

Habitude Two
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.

Recent high at 1762 handle remains in place but bulls also remain very dominant, as every pullback meets enthusiastic buying. Currently in overnight trade the recent high at 1762 is being challenged.

IF this high can be penetrated and hold, THEN further upside targets 1766 – 68 zone and extreme zone between 1770 – 75. Failure to break above and hold suggests buyers lose interest and could attract sellers…There is narrow support 1757 level with greater potential support at 3D CPZ 1750 – 52 zone.

Dynamic Levels will be updated in live trading room.

Good Trading…David

Habitude One
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.

There is building evidence that recent buying which has pushed SnP index to all-time highs of becoming exhausted…not to be mistaken with “buying climax”…just getting a bit tired. Overnight highs which mark 1762 handle has fired a “Prime Turn Alert” signal which suggests a potential for short to intermediate high. As such caution is warranted for new long (swing) positions.

Overnight High (1762) is “marked resistance” until proven otherwise…Trade strategy is to short against this level until penetrated…Current CPZ is 1749.25 – 1752.25 and marks initial potential support zone. IF violated, THEN deeper downside suggests 1745 – 47 zone (3D CPZ). Additionally, failure to find solid buy response indicates that a more important sentiment shift is in the making, which would lead us to “sell the rallies”.

Prior Day Low (1742.75) is the last line of defense for bulls and if violated targets 1738 – 1731 zone.

Remain focused and take valid trade setups.

Good Trading…David

Habitude Twelve
I am disciplined. I behave in a way to reach my goals. I do what I intend to do. I have the intent to win through right actions. I will be patient for patterns to emerge and mature. I am decisive. I decide easily and act promptly. I act in the right way and right on time. When there is nothing to be done, I will wait.

Yesterday’s trade strategy blog opined that the bulls needed to hold the 1736.00 level in order to “keep the recent drive alive”. Well, the bulls did just that, as “da bears” tried to break through that important level unsuccessfully. This set up a retest sequence of the current high at 1750 handle in the overnight trade…Currently, as of 8am ET buyers have been rejected from pushing price above the Prior Day High (PDH). They will need the full liquidity of the pit session to muscle through the 1750.25.

IF the PDH is penetrated (and hold) THEN upside targets project 1754 – 56, 1758 – 60 zones respectively. Failure to breakout above calls for a retracement test of the 3D CPZ at 1742 – 44 zone. Violation of this zone suggests another attempt to retest 1736 where the bulls will need to mount an even stronger defensive response.

Remain Disciplined and Focused…Take Profits Relentlessly!

Good Trading…David

Habitude Eleven
I am courageous and I always act, even in the face of uncertainty and possible loss. Do not say, no fear. Feel the fear and act anyway. I may be frightened, but I still saddle up. I am not reckless. I act promptly in accordance with my methodology. I respect my calculations. I have a healthy respect and I balance that respect with my courage. I am an explorer. I am on a hero’s journey.

Yesterday’s price action saw an aggressive push higher into the daily money-box zone only to reverse down as quickly as its ascent. This type action has potential of marking a short-term high. Violation of 1736 will confirm 1754.50 as high…Bulls need to hold 1736 to keep the recent drive alive.

Violation of 1736 (and hold below) suggests a sentiment shift with downside targets 1730, down to 1723 – 26 zone. Currently, as of 8am ET, price is trading at Three-Day CPZ (3D CPZ) 1739 – 41. We will mark this zone as “key support” and evaluate the pit session’s response.

Dynamic levels and setups will be actively conveyed by room moderators.

Good Trading…David

Habitude Ten
I know anything can happen, and I can handle anything that does happen. I am open minded. My thoughts and perceptions are clear. I know what to look for. I have rehearsed everything. I adapt to change. I will listen to my indicators and the patterns that emerge. I will adjust and not demand that things continue as they first started.

S&P futures is currently consolidating recent gains, holding steady above 1736 support. Delayed Jobs Report is due to be released Tuesday with analysts expecting 180K…

Further upside has been kept in check at the 1740 level, so until that level is clearly penetrated and tested (hold) the 1740 – 42 zone is resistance. Penetration (and hold above) of this level keeps the Bull intact with upside targets ranging from 1743 up through 1750. Initial support is 1634 – 36 zone. Violation of Prior Day Low (and hold below) calls for deeper correction down to 1728 40 zone where anticipated buy response should develop.

Stay Focused…Remain Disciplined.  Always use stops!

Good Trading…David

Habitude Nine
I will identify my mistakes and learn from them. I am optimistic, realistic and honest. I will not make up stories about the good or bad things that occurred in the past or are happening now. I admit when something is not working. My optimism gives me faith and courage. I will not fall prey to blame and fear.

Last week, the battle in Washington was settled (at least for now). The market, which had been struggling to gather volume conviction, finally made a definitive statement–new highs on big volume. This ended the correction and rocketed the Nasdaq to new multi-year highs and the S&P to all time highs.

Prior Day High (1740.25) should be considered initial resistance as sellers filled-in all buyers during prior session. Pullbacks are buyable as long as Prior Day Low (1727) holds. Violation of PDL would suggest buyers are done and sellers become more aggressive, targeting 1722 – 25 zone…Below that level and 3D CPZ comes into play 1716 – 21 zone.

On the upside, if buyers continue to materialize in sufficient quantity to overcome supply, then 1746.50 – 1749 zone is in-play.

Good Trading…David

Habitude Eight
I can recover from any setback. I have an attitude of abundance. I affirm abundance in the universe. I know I cannot begin to count the stars. I realize the ocean doesn’t care whether I go to it with a bucket or a teaspoon. I know the market provides a river of opportunities. I invest in my capabilities. I will be happy with my results.

Congress voted an 11th Hour Budget and Debt-Limit increase deal ending the stand-off….Until the next time…continuing saga….(DEFCON 5)

Back to the trading business….

Prior Day High at 1717.00 will be necessary to overcome for higher prices…Sellers filled every buyer into that level yesterday…Anticipate additional supply if retested. The daily Central Pivot (1707.00) is overnight support…IF violated, THEN lower levels to consider 1704 – 05…Below that is 3D CPZ 1700 – 1703 which should provide ample responsive buyers if tested.

Bullish structure remains intact, so continued trade strategy is to buy pullbacks to key price zones…If price retests recent highs and fails to penetrate, then aggressive shorts can be taken against failed levels.

As always remain disciplined…

Good Trading…David

Habitude Seven
I take the long term view. I am willing to lose in the short term. I understand that losses are a necessary cost of doing business, like inventory to a merchant. Drawdowns are viewed as temporary. I realize that my wins and winning periods are part of the broad process. Each trade is but one in a string of trades. What is happening now is one piece of a much larger puzzle. Because of this I do not get overly euphoric or despondent.

The Budget and Debt-Limit talks has reached the point of an outright “showdown” that can be analogous to the famous gunfight at “OK Corral”. One side will be left standing in the end.

As the World holds its breath from all the drama, investors/traders continue to believe the a default will be averted.

Prior Day Low (1689.50) was reaction low as we opined in yesterday’s blog posting…Key Marker today will be 1698 handle (look for continued support there)…Violation of this level suggests retest on prior low. Penetration of PDH  and hold targets 1710 – 1714 zone.

News Algos remain turned on so stay focused and take the best trade setups.

Good Trading…David

Habitude Six
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.

Markets remain optimistic that a deal will be agreed upon, but still a bit edgy. Markets opened lower yesterday as expectations of a weekend deal fell apart, only to rally back to notch new highs as word spread that Senate was close to agreement. Whatever compromise is reached verdict is still out as to House of Rep. acceptance.

With early low established yesterday at 1680.75 and price closing on highs, clearly bullish sentiment is intact….As such, pullbacks should be considered buying opportunities at key retracement zones. Central Pivot Zone (CPZ) today is again fairly wide between 1694 – 98 so anticipate a buy response should this zone be tested. The Three-Day CPZ (3D CPZ) is 1686 – 91 which should provide stronger support on pullbacks.

Penetration of PDH (1706.00) and hold targets 1711 – 15 zone. In the event of negative news and a total breakdown below PDL, then  1676 and 1670 become lower objectives.

Good Trading…David

Habitude Five
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.