New Contract Highs

Yesterday’s key marker at 1912 held throughout most of the session until finally all the supply was absorbed, which pushed price upwards into stated price target zone between 1917 – 1918.50 into settlement. Trade opportunities were scarce as most of trade occurred within a very narrow 8 tick range until the breakout…Lack of rotation resulted in PTG Traders to “sit the session out” and watch the paint dry. There was a bit more trade opportunity in other contracts such as NQ, TF and CL…So, as traders we need to be seeking out available valid trading opportunities across other indexes and markets…Don’t Sit Idle…Be Proactive.

Today is last day for investors/traders to “Sell in May and Go Away”…It actually seems as though many have taken early vacations with trading volumes and volatility at historical lows. The slow grind higher is good for investment accounts, but tough on trading accounts. As the uptrend continues to grind higher, there is a growing threat of a “melt-up” that forces shorts to capitulate, and as such we continue to trade along with dominant force and not get caught on wrong side of the trade.

Upside penetration and conversion of Prior Day High (1918.00) targets 1920 – 22 zone with extremes reaching 1924.25…1925.75…1927.25…1930. Failure to convert PDH suggests a pullback to prior support (1908 – 10) to attract renewed buy response. Below this initial support zone are layered acceptance zones (1904 – 06)…followed by (1900 – 02).

Trade Strategy continues to favor buying pullbacks to key reference zones until there is a shift in the underlying price structure and momentum. REMAIN FOCUSED and DISCIPLINED!

Good Trading….David

Habitude Three
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.

Coiling Consolidation

Another relatively quiet trading session on Wednesday with a slight improvement in range above the prior day…Still at the historical low end of average daily range and nothing to get excited about. It clearly seems that investors/traders have simply “Walked Away in May”.

Price continues to consolidate recent gains forming a nice symmetrical coiling triangle on the sixty-minute chart. This coiling typically leads to a directional breakout, but what is considered “typical” these days could be candidate for definition change. Remain vigilante.

Prior Day High (1914) hit early in the overnight session…Yesterday’s intra-day pit session high is 1912. We’ll use this level as “key marker” for upside penetration and conversion. IF this scenario unfolds, THEN upside targets 1914 – 15 STATX Zone, followed by 1917- 1918.50 …1920.25. Key Support is now between 1905 – 07 (3D CPZ). Failure to hold this zone on pullback suggests a near-term high in place…Next significant zone for support is back between 1888.00 – 1894.

Prepare for Anything…Trade the Probabilities

We would like to extend a Warm Welcome to PTG’s two newest Members:

Jason Leib and Woody Woodward

 

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.

Advance/Decline Lines Remain Bullish

As the S&P continues it’s slow grind higher it is supported by improving Advance/Decline Lines together with a bullish Inverse Head and Shoulders continuation pattern. Small Caps have been the recent laggard, but there are now early signs of relative improvement, as the Small Cap AD Lines are at critical inflection level. Until the underlying Market Internals turn negative, the bear case as many continue to support (wrongly so), is difficult to defend. All the evidence continues to be supportive of the bullish case.

Yesterday was very quiet trade with a range of just 6.50 handles, which is historically low. We had only one trade in the ES mini, netting +2 pts that took nearly two-hours to fill…now that is slow. Hopefully, this is not a prelude of summer trade which is normally quiet.

Overnight trade is marginally higher as price reached our stated target zone in yesterday’s Daily Trade Strategy. Price is currently above the PDH (1910)….IF this level holds on any pullback, THEN initial upside 1915, followed by 1917 – 1918.50…1920.25. Failure to hold 1910.00 suggests deeper pullback into prior support zones…1906 – 1908 with Three-Day Central Pivot Zone between 1902 – 1904.

Maintain Focus and Discipline…ALWAYS USE STOPS!

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.

 

Where the FIGAWI?

Good Morning Traders!

Welcome back from an extended Memorial Day weekend…Hope you enjoyed some R&R. I spent the weekend with friends enjoying the Northeast’s first major Regatta colorfully named: FIGAWI to kick off the official start of summer season on Cape Cod and the Islands (Martha’s Vineyard and Nantucket).

So…Where the FIGAWI in the Markets? New Contract Highs in S&P 500 e-mini!!

Bulls used the slow holiday weekend to push the SP500 e-mini futures to all-time contract highs…The key will be whether or not these new highs can be sustained. We have been giving the benefit to the bulls for quite some time, correctly so, though with recent divergence with 10 year bonds yields, there seems to be at least a short-term disconnect (yields down….equities higher). Their normal historical relationship is expected to realign at some point…We’ll let Mr. Market figure out the proper timing. In the mean time, we continue to “trade what we know and verify what we see.”

As price have continued their trek higher, volatility has progressively compressed with the VIX at 11.36 and the Average Daily Range (ADR 5) now at 10.50. Complacency has definitely set in with investors/traders which typically is a harbinger of price corrections, so we must maintain strict discipline and vigilance.

Let’s get to the numbers:

IF price continues to expand above the Prior Day high (1904.75 and convert, THEN initial upside targets measure between 1906 – 1907.50, with the next zone between 1910 – 1912.50, followed by extremes 1914.50 – 1916.00. Failure to sustain current buying price is vulnerable to pullback to 1896 – 98 zone…Next major confluence of accepted activity is within 1890 – 1893 zone.

We anticipate continued relatively light volume across markets today and will update dynamic S&R levels throughout the session.

Remain Focused on the Trading Process….Not the Outcome  ALWAYS USE STOPS!

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.

 

 

God Bless Our Troops!

In yesterday’s DTS Briefing we highlighted that price had reached initial 3-Day Cycle targets, and that any additional strength could carry higher into 1892.25 – 1894.50 zone. The actual high of day was 1894 even…so effectively a dead hit. Bullish price structure and directional momentum remain intact ahead of the long Memorial Day weekend. Our recent trade strategy of buying the pullbacks has worked nicely, so there is no change in trade bias.

Overall trade hypothesis remains the same with some minor adjustments. IF price can penetrate the 1894 level and convert, THEN upside potential targets 1896.00…1898.50 followed by 1900 – 1902, with layered extremes up through 1908.

IF Cycle High is complete, THEN pullback zones of recent acceptance are 1884 – 86…1880 – 82…Very strong support zone between 1876 – 78.

We are anticipating a relatively slow trade session ahead of holiday weekend…As such, we will remain acutely disciplined in trade selection and management…AS ALWAYS!

*****PROGRAMMING NOTE

There will a PASSWORD CHANGE to access the Trading Room next week, so if you are currently a trial guest, and are interested in joining the PTG Trading Group, you will need to subscribe prior to next Tuesday. Below is membership subscription options page:

http://polaristradinggroup.com/subscriptions/

 

*****This weekend the United States honors Our Brave Fallen during Memorial Day ceremonies. Please take some time to remember those Men and Women (True Hero’s) that have given the ultimate sacrifice to preserve precious freedoms that we take for granted. 

Polaris Trading Group is a Proud Sponsor of Wounded Warrior Project in support of those brave Soldiers that continue their personal fight back home to perform simple life tasks because of their battlefield injuries. Please find it in your heart to contribute a small amount today to the Wounded Warrior Project in support and honor of these brave men and women.

Wounded Warrior Project Link: http://www.woundedwarriorproject.org/

Thank You and God Bless Our Troops!

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.

Three-Day Cycle Intact

Mr. Market’s Three-Day Cycle Rhythm of establishing an extreme low swing followed by an up swing to an extreme high has hit on cue for several cycles now during current consolidation phase.

The current swing is bullish having reached initial targets in overnight trade at 1890 handle. IF price can penetrate this level, THEN additional upside price targets 1892.25 – 1894.50, followed by extreme high at 1898.50.

IF this Cycle High is complete, THEN pullback to 1880 – 1882 zone is anticipated to illicit a buy response. Layered zones of acceptance have been 1876 – 78 with Three-Day Central Pivot Zone 1872 – 75.

Trade Strategy will be buy pullback to key reference zones highlighted above as larger degree price action continues to favor the bullish case.  STAY DISCIPLINED!

Remain Focused on the Trading Process….Not the Outcome….ALWAYS USE STOPS!

*****We would like to extend a Warm Welcome to PTG’s newest Member:

Alberto Clerici

*****This weekend the United States honors Our Brave Fallen during Memorial Day ceremonies. Please take some time to remember those Men and Women (True Hero’s) that have given the ultimate sacrifice to preserve precious freedoms that we take for granted. 

Polaris Trading Group is a Proud Sponsor of Wounded Warrior Project in support of those brave Soldiers that continue their personal fight back home to perform simple life tasks because of their battlefield injuries. Please find it in your heart to contribute a small amount today to the Wounded Warrior Project in support and honor of these brave men and women.

Wounded Warrior Project Link: http://www.woundedwarriorproject.org/

Thank You and God Bless

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.

Same Old Song and Dance

The Title Song..”Same Old Song and Dance”..by Aerosmith comes to mind as I review recent price action this morning. Price pushes higher to key resistance…chop…chop..Buyers get their fill..and WHAM!…Algos enter and smash price lower to key support…chop…chop and the “same old” sequence repeats. This has been the pattern the past 4-weeks, and will likely continue until there is a definitive dominance shift between bulls and bears.

The KEY Bull/Bear Zone remains 1859 – 1861…Any violation of this zone and successful conversion calls for reassessment of Bulls resolve…Lower price targets deep into 1847 – 1850 zone.  Near-Term support is 1865 – 67 zone which has held in overnight trade…The Three-Day Central Pivot Zone (3D CPZ) has begun to overlap around the 1872 handle, suggesting more range-type consolidation trade anticipated. Key price edges we’ll be focusing on are 1865 – 1878…Price is fairly loose and can move freely within this zone.  STAY FLEXIBLE!

Stay Focused on the Trading Process….Not the Outcome….ALWAYS USE STOPS!

*****We would like to extend a Warm Welcome to PTG’s newest Member:

Budi Rustandi

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.

Buy the Pullback Theme Continues…

As we have seen so often this year that every deep pullback in price into Value finds renewed Responsive Buyers. As well, when price reaches upper extremes, buyers dry up and Sellers Respond. This action simply is Range Consolidation between upper and lower value zones, which has made for excellent intra-day trading.

Price currently is at the middle of recent swing (1882.00) and upper value of larger zone. It is going to take increased buying to penetrate 1882 – 85 zone and convert for another challenge of recent high. Successful conversion of PDH calls for 1885.50 – 1887.50 zone to be tested…Failure to convert keeps price contained within 1866 – 1876 zone.

Initial pullback support zone is between 1874 – 78…Three-Day Central Pivot Zone (1872 – 74)…Stronger High Volume Node (HVN) support between 1864 – 68 zone. Anticipation today is for early rejection from PDH (1883)…back n fill into 1874 – 76 zone to look for responsive buyers. Dynamic S&R Levels will be continuously updated within the Trading Room.

We had a solid trade session yesterday for members going 3 for 3 following the trading rules and being patient for opportunities.

Stay Focused of the Process of Trading….Not the Outcome…ALWAYS USE STOPS!

****We would like to extend a Warm Welcome to PTG’s newest Members:

Chuck Tossman  and Eric Meixner

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.

 

 

Key Support at 2014 VWAP

Last week’s “Island Reversal” High and subsequent swing lower remains within the overall context of a normal retracement pattern within  the larger bull uptrend. Also of key importance is that price tested and remains above the “2014 WVAP”…at 1858…Each retracement swing has consistently found support along this rising weighted average price. Bullish structure remains intact until there is a clearly defined violation of this VWAP.

Key support marker now becomes the 1858 – 60 zone for any future retest…Failure for buyers to respond to any additional selling pressure weakens price structure…so we continue to be vigilant at key price zones. IF prior day low (1861.25.00) is violated, THEN initial downside price target measure 1859 test,  followed by 1853 – 1850 – 1847.

Initial intra-range support resides at the 1866 – 68 zone…Successful buy response off this zone supports the short-term bullish response off extreme lows. The Three-Day Central Pivot Zone (3D CPZ) is between 1876 – 78…This currently is initial resistance on the upper edge of recent range. Penetration and conversion of this zone displays increasing strength and targets 1880 – 1885 zone.

Expectation is for trade action to remain within recent upper and lower boundaries 1862 – 1876…which is within the context of the 10-day Average Daily Range. Trade Strategy will focus on Range Trade Strategies until a new defined trend direction is established.

Focus on the Process…Not the Outcome.  ALWAYS USE STOPS!

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.

Reversion to Value

This week’s auction failure on retest of April 4th high reinforces that level as resistance. Yesterday’s sharp sell-off creates an “island top” type formation at the high end of multi-day range. The recent pattern has been to push higher creating extremes, only to reverse back deep into value, before longer-term traders (OTF) step-in with responsive buying. This pattern seems to be becoming more of the norm than exception, as price ranges have exceeded greater than 20 handles intra-day thanks to the High-Frequency Traders. As many of you know, I have been advocating trading more at the “statistical extremes” (STATX) zones, (prices edges) anticipating mean reversion type moves, and not getting caught trading in the median zone, where it is easy to get “run-over” by the friendly Algos (yeah…right!). Best way to trade is always with the dominant force…bull or bear…and know where those extreme price edges are located. STAY DISCIPLINED….NEVER CHASE MOVES!

Today is options expiration…simply…anything goes directionally, as early order flow may be influenced by the expiring contracts. We continue to trade the numbers and levels.

Prior Day Low (PDL) at 1859.00 marks excess and test of May 7th low. IF selling continues and this low is violated on high volume, THEN lower prices target 1856 – 53 zone, with extremes between 1850.25 – 1848.25. Below this level and long liquidation would be anticipated to unfold. Upside retracement levels are 1869.25 – 1873.75, with layered levels 1875.50 through 1881.50.

Remain Focused….Follow the Rules….ALWAYS USE STOPS!

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.