End of 2nd Quarter

The S&P added and additional +4.50 percent performance in 2nd Quarter as price broke out above the 1870 level. Other indexes had similar solid performance…The Bull remains healthy as investors continued to buy every pullback.

Key Support is solidly marked as 1938 – 40 zone, which corresponds with Fed Day (6/18) breakout. Price continues to consolidate above this level with key resistance zone now marked between 1950 – 55, with 1960 as excess high. Near-term expectation is for continued consolidation trade between these boundaries.

Overnight trade has approximately six-handle range (1948 – 1953.75) holding above Friday’s median level with a bullish skew.

Scenario 1: IF price can penetrate ONH 1953.75 and convert, THEN upside projects 1955.50 – 1956.75, followed by 1960.00 – 1962 zone.

Scenario 2: Failure to exceed PDH, suggests additional consolidation with 1946 – 48 zone as initial support, followed by 1942 – 44 zone., Extreme low is marked between 1933 – 1936 zone.

Trade Strategy: We will continue to anticipate two-sided trade action between highlighted boundaries as second quarter comes to an end with a shortened Fourth of July Holiday week.

Focus 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.

PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS

Fed Breakout Holds Strong

Another attempt to break through key support at 1938 failed in yesterday’s session, further affirming the Fed Day Breakout to higher ground. Almost a carbon copy of prior session where prices opened with an “Open Drive” sell down to key support (1938), only to be rejected, as buyers came in heavily snapping up contracts. This now reaffirms support and creates an important “Line in the Sand” over/under at the 1938 level.

We will restate the key zones highlighted in previous posts as they remain valid: More important resistance can now be marked between 1950 – 1955 zone and support between 1938 – 1944 zone. These zones will be critical barometers for future direction…Penetration or Violation of these zones will determine the Bulls or Bears resolve.”

Scenario 1: Overhead supply/resistance is 1950 – 55 zone…IF bulls can push price above PDH (1952.50) and convert, THEN upper targets 1954 – 55, followed by 1958 – 60 zone.

Scenario 2: Failure to convert PDH (1952.50), suggest overhead resistance is sufficient in quantity to satisfy the bulls appetite. Pullback support where expectation of buy response would be initially 1943 – 45 zone, followed by 1938 – 40 zone.

Trade Strategy: Multi-Day trading range is now well established between 1938 – 1955 boundaries. Our tactical trade strategy is now seeking opportunities to establish long or short positions at these boundaries…Within this zone, we’ll simply be on search for Stacker, Premium and Discount Setups.

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

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.

PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS

 

Key Support Holds Test

“Da Bears” could not stage a follow through day as Bulls defended “key support” (1938) and forced Shortie to cover, driving price back to Upper Value. Here is an excerpt from yesterday’s DTS: More important resistance can now be marked between 1950 – 1955 zone and support between 1938 – 1944 zone. These zones will be critical barometers for future direction…Penetration or Violation of these zones will determine the Bulls or Bears resolve.”

Prior Session’s Scenario 2 played out as scripted: “IF buyers respond in sufficient quantity and strength to any additional selling, holding key support (1938), THEN retracement zones are 1945 – 1946.50, followed by 1948 – 1950 zone.”

Let’s look at today’s hypotheses:

Scenario 1: IF buyers continue to dominate above PDH (1953.25) and convert, THEN initial targets measure 1956.00, followed by 1960.00.

Scenario 2: IF price fails to convert PDH (1953.25), initial pullback support is 1945 handle, followed by 1940 – 42 zone, with 1938 as key support marker.

Trade Strategy: Key resistance zone between 1950 – 55 will be an important test of bull/bear resolve. We are initially viewing this zone as supply, and as such, looking for short-side trade opportunities with evidence of weak buying interest. This does not preclude buying off of key support zones with proper setups..as we will remain flexible to seek out two-sided trade opportunities. Two well-defined Upper and Lower Value Zones may keep trade action contained within range-type trade…We’ll remain flexible with our tactical intra-day trades.

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

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.

PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS

Outside Reversal Day

Early strength in Nasdaq pushed the indexes to new all-time highs, then sold off hard on heavy volume leaving in its wake an “excess high” and creating an “Outside Reversal Day”. We have been concerned that traders have been lulled into complacency and there was an increasing probability for a Change of Character (COC) developing. Here is an excerpt from yesterday’s DTS: if supply continues to build and satisfy the buyers, price supply/demand equation may soon hit a tipping point…Stay Alert during Summertime…As Mr. Market tends to make swift and abrupt changes just when everyone is lulled into complacency.”

Each day we outline two scenarios (bullish and bearish) each with potential price targets. Yesterdays upside price target potential was 1958 – 60 zone…dead hit with 1960 HOD. Our lower projected price target zone (1938 – 40)…another dead hit as 1939.75 marked LOD. Recently price action has been very tight trading within very narrow ranges…Finally price ranges expanded offering PTG Traders ample directional trade opportunities with Bear Stacker and Premium / Discount Setups. An overall solid trading session for PTG Traders.

Yesterday’s reversal has left two distinct support and resistance zones on the profile…More important resistance can now be marked between 1950 – 1955 zone and support between 1938 – 1944 zone. These zones will be critical barometers for future direction…Penetration or Violation of these zones will determine the Bulls or Bears resolve.

Scenario 1: IF selling remains dominant with violation and conversion of PDL (1939.75) along with break of key support, THEN lower price targets project 1929 – 1927 zone.

Scenario 2: IF buyers respond in sufficient quantity and strength to any additional selling, holding key support, THEN retracement zones are 1945 – 1946.50, followed by 1948 – 1950 zone.

Trade Strategy: We will maintain a net bias to the short-side trade from key zones highlighted above as expectation of further COC development to favor profit-taking as the 2nd Quarter comes to conclusion. This does not preclude buying off of key support zones with proper setups..as we will remain flexible to seek out two-sided trade opportunities.

Focus on the Trading Process…Not the Outcome  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.

PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS

Quiet Consolidation High

Markets continue to trade below average volume and range in a quiet type back n fill consolidation pattern. Buyers are beginning to find ample supply (sellers) above the 1950 handle as price was not able to make further upside advances. Now it may be much too early to be calling for a final high, but if supply continues to build and satisfy the buyers, price supply/demand equation may soon hit a tipping point…Stay Alert during Summertime…As Mr. Market tends to make swift and abrupt changes just when everyone is lulled into complacency.

Price failed to exceed yesterday’s Open Range Rotation Average (1954.50) and Key Over/Under Level (1956), so that zone now becomes “Key Resistance Marker”.

Scenario 1: IF price can stage a strong enough rally to exceed “key resistance marker” zone, THEN upside price projects 1958 – 1960 zone. Beyond this zone pushes to 1965 – 1968.

Scenario 2: Failure to penetrate and convert “key resistance marker” suggests further consolidation is required to find responsive buyers. Lower levels of potential support are 1945 – 1948 zone. Lack of a buy response at this level, then sellers would need to probe even lower levels such as 1938 – 1940 zone.

Trade Strategy: As stated in prior DTS, we are “becoming more concerned” that a more important price correction may be developing, and we want to stay on alert…As such, our tactical trade strategy will be to play more aggressively on the short-side until “key resistance marker” is penetrated. This does not preclude buying off of key support zones with proper setups..as we will remain flexible to seek out two-sided trade opportunities.

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

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.

PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS

Market Magic Show

Markets turned in yet another positive weekly performance to close at new highs…With all metrics solidly positive, the bears are finding it more difficult, painfully so, to continue shorting…but as bears…short they must.

Perhaps Mr. Market has unlocked the secret to Harry Houdini or Criss Angel’s “Levitation Trick” because from all angles this market has definitely defied gravity (no strings attached). That being said, who doesn’t like a good Magic Show!

Overnight trade is relative light and quiet trading within above a 4 handle range. The 10-Day Average Daily Range of 11.50 handles is well below historical norms, as well as Volatility Index.

Scenario 1: IF price can penetrate and convert PDH 1956.75, THEN upside price projections measure 1962.25 – 1965.50.

Scenario 2: Failure to convert PDH 1956.75, and violation of 1952 key marker, lower price initially targets 1948 – 50 zone, with lower zones measuring 1942.25 – 1945.25, with extremes down to 1940.75 – 1937.50.

Trade Strategy: We’ll continue to respect the strength of the bull, though becoming more concerned that a normal price correction has not developed in quite some time…Even though this has not happened, it does not necessarily increase probabilities that it will…But we remain on “high-alert” of it occurring. As such, our trade strategy will continue in disciplined fashion proper trade selection following our trading guidelines. As traders we must remain flexible looking for trade opportunities both long and short during consolidation periods and trade with primary trend direction.

Focus on the Process of Trading…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.

PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS

Quad Witching Expiration

Yesterday’s DTS played out nicely, albeit at a snails pace, as price failed to expand above the Open Range Rotation (ORR) Average setting up our Open Range Strategy (short-play), which pushed price down to expected support level 1944 (LOD). Once price stabilized and retested support setup a long trade from 1945.50 which rotated back up two-handles for target. Finally later in afternoon a text-book Bull Stacker Setup developed off 1948 achieving another two-handle rotation target…So although price action seemed to creep ever so slowly along (summertime trade), it was a decent session. We need to remain focused and patient during this current low volatility summertime trade…Though there is very little momentum, price structure (support/resistance) is solidly intact.

Today is Quad Witching as options contracts expire, which may provide some additional crosscurrents early, otherwise expectation is for typical summer Friday trade. It’s forecasted to be beautiful weather this weekend, so traders are heading out to the Hampton’s early. OK..so now we know why the markets are trading so slowly…”It’s the Weather!”

Overnight trade is relatively quiet with 108K contracts traded within prior sessions range. Let’s develop a couple trade scenarios for today’s trade:

Scenario 1: IF price can penetrate PDH (1952.25) and convert, THEN upside price targets 1954.50 – 1956.25…Above this zone measures 1958.25 – 1960.00, with extreme at 1962 – 63.

Scenario 2: Failure to convert PDH, suggests continued consolidation within prior sessions range. Violation below 1944.00 targets 1938 – 40 3-Day Central Pivot Zone (3DCPZ).

Trade Strategy: Expectation is for continued back n fill 2-side trade within recent range and as such we’ll be looking to buy pullbacks to lower range edge and fade upper edge…avoiding the middle “chop-zone”. Specific price points will be highlighted in live trading room.

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.

PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS

 

Gellen with Yellen

Fed Chairwoman Janet Yellen Q&A session yesterday proved to be that catalyst that sparked a strong short-covering rally. There were no “gaffes” that marked here first press conference in March. Her single most important statement was in response to question regarding stock market valuations: “We think stocks are not overvalued, or are within the Fed’s fair value based on earnings…” That statement caused a short-covering rally into the close. The time-tested adage: Don’t Fight The Fed continues to apply!

Overnight trade is relatively light within a narrow consolidation band (1948 – 51)…Following a strong price move such as yesterday, some consolidation would be expected. Options expire tomorrow, so there may be some influence with price action…but we will trade the numbers.

Scenario 1: IF price continues its upward trek above 1950.25, THEN expansion price targets 1953.25 – 1956.25…followed by 1957.25 – 1059.25 extreme zone.

Scenario 2: Failure to expand above PDH suggests consolidation…Key pullback zones to be watchful for are 1944 – 46 …1939.75 – 1943.25.

Trade Strategy: We’ll focus on buying pullbacks to key reference zones stated above as we’ll anticipate two-sided trade to digest recent price gains.

Stay Focused…ALWAYS USE STOPS!

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.

PAST PERFORMANCE IS BOT INDICATIVE OF FUTURE RESULTS

 

FED Decision Preview

Greetings Traders,

Here’s what to look for when the Federal Open Market Committee releases its policy statement at 2 p.m. today along with new economic projections. Federal Reserve Chair Janet Yellen plans to give a press conference at 2:30 p.m.

  • Sticking to zero: Yellen will probably emphasize that the Fed will keep its main interest rate close to zero for at least a year even with inflation rising toward the Fed’s 2 percent goal and the job market improving faster than officials expected.
  • The 6.3 percent unemployment rate is already at the top end of the range that most officials in March forecast for the end of this year.
  • Similarly, the personal consumption expenditures price index, the Fed’s preferred inflation gauge, rose 1.6 percent in the year through April, a rate most officials expected at year-end. The consumer price index, a separate inflation measure, rose last month by 0.4 percent, the biggest gain since February 2013.
  • Yellen will probably say “rate hikes are at least a year away”; Fed policy is likely to remain very supportive of equities.”
  • Fed officials will probably lower their estimates of 2014 gross domestic product growth to account for a first-quarter contraction caused in part by harsh winter weather.
  • Fed officials’ estimates for growth this year will probably fall to a range of about 2.6 percent to 2.8 percent from 2.8 percent to 3 percent in March.

 

Early S&P e-mini trade is relatively light and within a narrow 2.5 handle range in advance of FOMC Rate Decision. Expectation is for continued light morning trade until release and news conference. Below are zones to be aware of throughout the trading session:

Price continues to consolidate within the 3-Day Range following last weeks sell-down. Currently price is at top of this range at the “sell break point” (1936.00). The Prior Day High at 1935.75 will be initial resistance marker.

Scenario 1: IF price can penetrate and convert PDH, THEN upside price targets 1938 which is a micro-composite Low Volume Node (LVN), followed by 1940.75 TargetMaster Breakout Level, with extremes measuring 1942.25 – 1944.50.

Scenario 2: If price fails to break above PDH, THEN retracement back into 3-day value zone would target 1926 – 1930 overlapping VTPOC and 3D CPZ. Lower Value marked at 1924 becomes key support on any pullback.

Trade Strategy: Expectation is for relatively quiet trade in morning session with increased activity for post announcement. We’ll remain very flexible for trade at upper and lower edges of stated range as it is difficult to pinpoint specific price points as market conditions are very fluid. Simply focus on the very best and well defined Stacker’s and Premium and Discounts.

Remain Flexible…Follow Your Rules…ALWAYS USE STOPS!

Good Trading…David

Habitude Four

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.

PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS

FOMC Meeting Begins

The FOMC begins its two-day meeting today to discuss current economic conditions and Interest Rate Policy. Expectation is for staying the course with scheduled tapering winding down QE Program. What will be of interest will be language relating to recent pick-up in Employment Situation to determine if mid-2015 interest rate hike is still likely scenario.

S&P e-mini is building a series of higher highs and higher lows in a complex-correction following last weeks waterfall sell-off. Support is marked at 1919.00 with retracement resistance between 1934.50 – 1936.50. Price is currently above  descending Three-Day Central Pivot Zone (3D CPZ) between 1926 – 27, so this zone becomes important to hold on any pullback.

Price is slightly above PDH (1933.50) in overnight trade top-ticked at 1935.00 which is dead center within yesterday’s target zone. This zone becomes our initial resistance retracement marker…IF price can penetrate and convert during pit session, THEN upper price targets 1939.00 – 1941.00 zone. Failure to expand above 1935 would suggest an initial probe to 1926 (3D CPZ)…Stronger support resides at 2-Day Lower Value Area (LVA) 1923.00.

Trade Strategy: With Fed Meeting and Options expiration on tap for this week, we will remain flexible to trade from both sides at key decision points. Expectation is for continued wide-range price swings within the two-day range will likely provide some decent opportunities.

Stay Focused…Follow the Rules…ALWAYS USE STOPS!

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.

PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS