More Weakness

Yesterday’s weakness has follow-through in the Globex Session pushing price down into “deep extreme” territory outlined in prior trade strategy scenario 2:Extreme downside projections measure 1956.50 – 1954.50, with deep extreme at 1952.75.”

Based upon a violation of Cycle Day 1 (CD1) Low (1956.50), odds favor price reaching lower extreme of 1947.50. If reached, expectation is for a strong buy response as bulls will continue to buy deep pullbacks.

Today’s hypotheses:

Scenario 1: Price having reached deep downside extreme at 1947.75, there is a high probability of a strong buy response which should push price back to CD1 low (1956.50). IF price can convert this level, THEN upside initial upside objective 1963.00 handle, followed by 1966 – 68 zone.

Scenario 2: Since price is currently below CD1 Low (1956.50), Failure to convert this level puts momentum squarely on side of sellers…Potential test of Overnight Low (1947.75) would be anticipated to check for a secure low…Any violation of ONL would potentially usher in some long liquidation with downside projections ranging from 1945 – 1953 zone down to deep STATX Zone Xtreme 1936.50 – 1938.

Trade Strategy: We will look to play long-side if on any retest of ONL holds and price displays valid intra-day bullish shift. Any failure to convert upside Decision Point (DP) and we’ll take the short-side trade. Remain flexible and follow the trade rules…ALWAYS USE STOPS!

***Note: Odds of Rally > 10 = 83%; Odds of Rally > 20 = 45%; Average Range on CD 2 = 14.50

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

FOMC

The FOMC is expected to maintain the pace of the taper at $10bln per month, dropping asset purchases to $25bln per month, on track for a QE exit in October. There is no new summary of economic projection, a.k.a. “dot plot”, or press conference, so the market focus will be on the FOMC’s accompanying statement.

Economic fundamentals suggest the economic recovery in the US is back on former footing following adverse weather conditions during the winter months that impacted economic data, and the markets confidence in the recovery.  Source: livesquawk.com

Yesterday was Cycle Day 3 (CD3) that played out perfectly with both scenarios…Scenario 1:IF price penetrates and converts 1977.50 (2 day high), THEN there is a 65% chance of achieving a high between 1978.75 – 1980.50.”   Scenario 2:Failure to convert 1977.50 suggests further back n fill consolidation required, with initial support marked between 1970 – 72 zone, then 1966 – 68 zone. Violation of prior day midpoint targets prior low at 1960 – 62 zone.”

Actual High of Day (1979.50) within projected target zone…Low of Day was a direct hit @ 1962.00…So the Cycles are playing out as expected as average ranges continue to be satisfied as back n fill consolidation within larger bullish pattern.

Note: Today begins Cycle Day 1 (CD1); Average Range = 18.75 Odds of Decline > 10 = 70%; Odds of Decline > 20 = 40%

Today’s hypotheses:

Scenario 1: Prior Day Low (PDL) is 1962.00…IF this low does not get violated and holds any retest, THEN upside retracement targets the 3D CPZ between 1969.75 – 1971.25. which will be viewed as initial resistance zone. Penetration and conversion if this zone increases odds of 1973.50 – 1975.50 Breakout Target Zone being achieved. Failure to find buyers in sufficient quantity above 3D CPZ, suggests a pullback to test prior low at 1962.00

Scenario 2: Violation of Prior Day Low (PDL) 1962.00, suggests sellers continue to have control with 45% chance of 1960.00 – 1958.50 zone being achieved. Extreme downside projections measure 1956.50 – 1954.50, with deep extreme at 1952.75.

Trade Strategy: With today’s FOMC, trading may be subdued until mid-afternoon announcement…As such, we will look to trade both sides (long & short) from key Decision Point (DP) Levels. Current cycle (CD1) favors a lower probe for a “secure low” from which to stage next upside rally. So stay alert to dynamic opportunities. 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 FUTURES RESULTS

Cycle Day 3

The current 3-Day Cycle is playing out perfectly…Let’s review: Cycle Day 1 (Friday), we wrote in DTS cautioning for a deeper downside move, with 1960.50 as anticipated low (actual low 1960.75)…Cycle Day 2 (Monday) continued weakness pushed price down to projected average range low of 1961.75  per Scenario 2:IF Prior Day Low is violated and converted, THEN price projects 1964.75, 1961.75, down to 1958.50.” Actual LOD = 1960.75…So as far as we are concerned..direct hit!

Today is Cycle Day 3…As such, there is a 90% chance of satisfying the bullish cycle with a high above 1968.00 (Day 1 low) up to potential of 1986.50…based upon average 3-Day Rally.

Odds of 3-Day Rally > 10 handles = 82%…> 20 = 54%….These odds project upside price targets of 1985.75 – 1986.50.

Today’s hypotheses:

Scenario 1: IF price penetrates and converts 1977.50 (2 day high), THEN there is a 65% chance of achieving a high between 1978.75 – 1980.50. Extreme range targets 1982.00 – 1986.50 zone.

Scenario 2: Failure to convert 1977.50 suggests further back n fill consolidation required, with initial support marked between 1970 – 72 zone, then 1966 – 68 zone. Violation of prior day midpoint targets prior low at 1960 – 62 zone.

Trade Strategy: With bullish cycle intact, we interested in buying pullbacks to key Decision Point (DP) Levels highlighted above…Failure to exceed upside levels and we would entertain short-side setups…Remain flexible to two-sided trade opportunities…Follow the trade setup rules…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

Back n Fill…

In Friday’s DTS we cautioned to be on alert for deeper pullbacks developing as it was the start of new Cycle which is typically weak. Scenario 2 laid odds of decline at 85% with projected price targets ranging from 1973.50 down to 1967.50, based upon average decline for Cycle Day 1…Actual Low of Day hit at 1968.00.

In overnight  trade price extended marginally lower to 1966.50…The overnight high is 1973.25 which we will mark as initial resistance. Downtrend is currently the primary direction…The gap from 7.21.14 has been filled, hence “back n fill” style consolidation with a downward skew is currently the profile structure.

Today’s hypotheses:

Scenario 1: Prior Day’s Value Area high is marked at 1974.50…Price would need to penetrate and convert this level to signal higher prices…IF converted, THEN upside projects 1977.50, which is prior day high…Odds are relatively low (34%) for conversion of prior high.

Scenario 2: IF Prior Day Low is violated and converted, THEN price projects 1964.75, 1961.75, down to 1958.50.

***Note: Odds of a Rally greater than or equal to +10 handles = 83 %…Since the current low is 1966.50…the projected 10 Handle Rule would push price to PDH at 1977.50. Average Range for Cycle Day 2 is 14.50 handles.

Trade Strategy: We’ll continue to favor short-side as long as key upside reference levels noted above are not converted. This does not preclude us from nibbling long-side with evidence of valid stronger buy response…Expectation is for some back n fill type trade with a downward skew. Focus on valid Premium and Discount Trade Setups…Keep Disciplined…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.

Holding New Highs

S&P e-mini continued to consolidate recent gains holding new high territory, albeit on below average volume in addition to declining net cumulative delta readings…Not a strong combination for being at new contract highs…The story continues to unfold…Stay Tuned!

Yesterday was Cycle Day 3, which got an early push-to-fade as we laid out in yesterday’s Trade Strategy…Bulls continued to buy the mid and late day dips. Friday begins a new Cycle, which typically exhibits some weakness, so be on higher alert for deeper pullbacks developing.

Today’s hypotheses:

Scenario 1: IF price can penetrate and convert PDH (1985.75), there is a 60% chance of reaching high target of 1994.00

Scenario 2: Odds favor PDH (1985.75) of being firmly in place with an expectation of lower prices if this level cannot convert…There is an 85% chance of making a low below 1985.75 down to 1973.50 based upon an average decline on Cycle Day 1 of 12.25 handles.

Additional Handicapping: Average Range on Cycle Day 1 = 18.75; Odds of decline > 10 = 70%; Odds of decline > 20 = 41%

Trade Strategy: We are seeing some visual cracks in the bulls armor plating, though not quite easily penetrable…Short-side trade is beginning to have merit on auction failures, but don’t overstay your welcome…Take the 2 pt rotation and say thank you! Remain focused on trading in alignment with dominant force…Be Flexible. 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

 

PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS

 

The EverReady Market Bunny…”It keeps going and going and going…”

“The EverReady Market Bunny”…”It keeps going and going and going and going…”

Positive earnings releases from high-profile companies continue to keep the “buying drumbeat” sounding as S&P 500 Index notched yet another All-Time High, albeit marginally. About 77 percent of those companies that have reported results this season have beaten analysts’ estimates for profit, while 65 percent exceeded sales projection, according to data compiled by Bloomberg. Although price is viewed as being “overbought” by traders and investors, there just does not seem to be a catalyst to aggressively hit the sell button…YET!

Today’s hypotheses:

Scenario 1: IF PDH (1983.50) converts, THEN upside target STAT X Zone 1984.75 – 1986.00…Expansion targets range between 1987.25 – 1988.00, followed by 1989.50 – 1991.75.

Scenario 2: Failure to continue higher above PDH calls for pullback into prior day’s range with initial support  1981 – 82 High Volume Node (HVN)…Key Decision Point (DP) Support is marked between 1978 – 1979 handle. Violation of PDL(1976.75) targets 1973 handle with expansion levels measuring 1970 – 72 zone.

Trade Strategy: This cycles bullish price targets have been already achieved and exceeded…Today is Cycle Day 3…As such there is higher probability of early strength being faded (sold)…Any sign of failure to continue higher can offer short-side trade opportunities today, so we would entertain establishing shorts on failure reversals. As always, we respect the bulls strength as buying the dips to key DP’s has continued to be the most profitable trade. Focus on valid Stacker and Premium & Discount Setups that are in alignment with dominant market forces.

Focus on Trading Process…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 NOT INDICATIVE OF FUTURE RESULTS

 

Mr. Market Getting Tired?

Yesterday’s trade action conformed nicely to our Scenario 1 playbook…Early strength and conversion above 1970 lead to an upward move to top of multi-day range near 1978. Although price probed the upper edge of range, it failed to convert on a closing basis, as earnings from Mr. Softie and Apple were front most in investors view…Does failure to close higher infer that Mr. Market is getting a bit tired?  Perhaps…Bulls have done a remarkable job of supporting price on any downside pressure, but so far have not been able to stage a renewed high volume rally…So consolidation continues…

Today’s hypotheses:

Scenario 1: IF price can penetrate and convert 1980.50, THEN probabilities favor reaching 1982.50 – 1984.50 zone, followed by TargetMaster Breakout zone 1987.25 – 1988.75 based upon the 3-Day Cycle expansion projections.

Scenario 2: Failure to convert 1980.50, suggests some exhaustion and need to find fresh renewed buyers…As most of current long-side holders is considered “old business”…Unless new buyers materialize above 1970 – 72 zone, price is vulnerable to a setback, which could push down to 1968.25, followed by 1963.75 – 1965.75 STATX Zone…Below this zone and long liquidation is more likely to unfold…Downside extremes measure back to 1954.50 – 1957.25 zone.

Trade Strategy: We have been leaning primarily to longs side in recent days…We will now become much more flexible to the short-side if price exhibits further exhaustion signals as money managers absorb recent earnings reports…Without any high profile excitable earnings beats, price action may become heavy…We remain flexible to trade both sides in alignment with dominant market forces.

Stay Disciplined….Follow the 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 FUTURES RESULTS

Focus on Earnings

The main focus this week is Corporate Earnings…Some of the biggest Tech and Industrial Companies are slated to report quarterly earnings….As such, markets should remain relatively contained within recent trading ranges, though headline risk is always a wildcard which could affect prices at any moment.

Today’s Hypotheses:

Note: Monday marked second “inside day” trading…Price compression within 3-day range.

Scenario 1: IF price can penetrate and convert PDH (1970.00) THEN there is a 87% chance price can reach 1972 – 74 zone, with an additional handicap of 60% achieving 1977.50 – 1978 zone.

Scenario 2: Failure to expand beyond PDH (1970) keeps price tightening within 3-day compressing range…Initial Support is 1966 – 68 zone, then, 1962 – 64, with Key Marker Decision Point (DP), 1958 – 60.

Trade Strategy: Yesterday’s anticipated support zone (1958 – 60) held firm as bulls continue to absorb any supply…Trade bias remains squarely in the bull camp (buy the dips)…This does not preclude fading the upper edges with auction failures..So, our core tactical trade is to aggressively take Stacker and Premium & Discount Setups which keeps us aligned with strongest market forces.

DON’T EVEN THINK OF FADING STRONG MOVES….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

Well Defined Trading Range

Reviewing price action in S&P e-mini futures (ES) for the past ten (10) trading sessions reveals a well-defined trading range with 1945 lower edge and 1978 upper edge. We have opined that a Change of Character (COC) was developing…Uptrending action to now Range Consolidation. Investment Managers continue to evaluate corporate earnings reports, and as such remain responsive buyers at lower edge of range, as well as responsive sellers at upper edge of range. Sector Rotation and Market Internals continue to remain healthy…Until there is a marked change in sentiment, expectation is for continued back n fill price action. One “wildcard” which is always present and difficult to predict is the ongoing Geo-Political unrest in the Middle East and Ukraine. Further escalation is a real factor in destabilizing world markets.

Overnight trade has price slightly lower on average trade size…Price is firmly above Friday’s Volume-Trend MidPoint (1964)…which becomes initial Decision Point (DP) Marker.

Today’s Hypotheses:

Scenario 1:  Prior Day High is 1974.25…IF price can penetrate and convert this level, there is a 65% chance of reaching upper targets 1975.25…then 1978.75 – 1982.25 STATX Zone extreme. Initial upside marker to key from is 1971.50 for increasing bullish momentum.

Scenario 2: Key Marker for support to watch is 1964 – 66 zone…Expectation is for this zone to hold on pullbacks…Violation and conversion of this zone targets 1958 – 60 zone.

Trade Strategy: Price continues to oscillate within a wide range band from day-to-day…Intra-day trade has been trending within a wider cycle range (1945 – 78)…We will actively trade both sides at key Decision Point (DP) levels identified in the Live Trading Room…We will be buyers within 1964 – 66 zone with valid signals…Fade upper zone between 1971 – 74…Remain Flexible.

Stay Disciplined…Follow Your Trade Plan….ALWAYS USE STOPS!

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.

PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS

Potential Double-Top

Yesterday’s auction began in globex on a very weak note, only to trade back to prior resistance (1976) and fail to go any higher…That failure emboldened the bears to press…Later on, reports that a passenger airliner had be shot down by a surface-to-air missile in Ukrainian region sent shockwaves throughout the market sparking a sell-off, taking indexes down to key support (1942- 45) marker.

Price has rebounded approximately 10 handles from lows in overnight and early morning trade to 1956 on 255K volume as of 8:15 am.

Let’s get to today’s hypotheses:

Scenario 1:  Prior Day Low (1949) is marked as “key support” as this represents Cycle Day 1 Low…Any test in pit session will be critical to hold…We will be looking to take long trades on any successful test…Initial retracement resistance is marked between 1958 – 60 zone…We would be interested in establishing short-side trade on failure to exceed this zone.

Scenario 2: Cycle Day 1 Low (1849.00)…Violation and conversion of this level puts longs on the defensive, with potential for liquidation to unfold…Should this develop, lower price targets measure 1936 – 40 zone.

Trade Strategy: We continue to believe that a larger-degree Change-of-Character (COC) continues to develop…Investment Managers will begin to reassess their holdings and future outlook in light of recent and ongoing geo-political unrest. As always, our main trade strategy is to establish positions at Key Decision Point (DP) levels that are in alignment with dominant force…We do not want to “fight the tape”, rather embrace the unfolding of a never ending river of opportunities.

Remain Flexible…Follow the Rules  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.

PAST PERFORMANCE IS NOT INDICATIVE OF FUTURES RESULTS