Cycle Push to New Highs

Yesterday was Cycle Day 1 (CD1) as price probed lower to our anticipated support zone between 1986 – 88…The actual LOD was 1987.50. The current Cycle Price Targets range between 2001.25 – 2004.50 based upon historical observed cycle average expansion ranges.

In overnight trade price is currently trading 2002.00 which is exactly the distance of an average historical range observed on cycle Day 2 (CD2). Current price momentum has enough energy to push higher to reach cycle penetration expansion levels before the long Labor Day holiday weekend.

Average Range on CD2 = 14.50; Max Range = 22.25; Odds of Rally > 10 = 83%; Odds of Rally > 20 = 45%; Cycle Price Target Projects 2009.75 based upon historical 3-Day Average Cycle Rally.

***Note: The odds highlighted are not predictions, rather a guide based upon historical observed occurrences.

Today’s Hypotheses:

Scenario 1: IF price penetrates and converts PDH (1997.25) THEN odds (57%) favor push higher to reach initial STATX Zone between 2001.25 – 2003.00. Above this zone are layered expansion levels: 2004.50…2005.75…2007.00 (Breakout Target)…Xtreme Zone 2009.75 – 2010.75.

Scenario 2: Failure to hold penetration of PDH (1997.25) targets lower support zones for renewed buy response…1996.00 – 1997.25 3DCPZ…1994.25 – 1991.50.

Trade Strategy: As the month of August (end of summer) comes to a conclusion, we continue to favor the Bullish Case, as simply there has been no signs of a top developing and pullbacks continue to offer solid buying opportunities. Our intra-day tactical trade strategy remains solidly in alignment with dominant force (Bull) on pullbacks to Key Decision Points (DP’s). This does not preclude us from taking short-side trades prudently, but the long-side has been simply most profitable.

Remain Focused…Take The Trade…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

Back n Fill

S&P e-mini failed to push higher and violated the 1998 “key marker” we laid out in yesterday’s report. Having violated this level sets the 2002 handle as a short-term high. Price will need to get back above 1998 handle to reestablish the upside momentum.

Overnight price has moved lower to “key support zone” between 1986 – 88, following reports that Russian backed rebels have officially “invaded” Ukraine, further increasing tensions in that region.

Today is Cycle Day 1 (CD1) which begins a new cycle to probe for solid support. The 20-Day Average Decline on CD1 = 13.25…Maximum observed decline on CD1 = 21.25; Odds of Decline > 10 – 70%; Odds of Decline > 20 = 40%; Average Range = 18.75; Max Range = 21.75.

***Note: The odds highlighted are not predictions, rather a guide based upon historical observed occurrences.

Today’s Hypotheses:

Scenario 1: Price is currently well off the Prior Day High (2000.50)…IF this level is ultimately converted, THEN price targets between 2004.50 – 2008.25. The 1998 level is “key marker” which is also the 3DCPZ zone. This should act as resistance until proven otherwise…Any price bounce to this zone is anticipated to illicit a sell response, and as such, is a shortable zone.

Scenario 2: Price has pulled back to “key support zone” between 1886 – 88…which is equal to the Average Decline on Cycle Day 1 (CD1). IF this zone can illicit a strong buy response, THEN odds favor a bounce back to 1996 – 98 3DCPZ. Failure to find responsive buyers in sufficient quantity suggests further lower probing to find a secure low from which to stage this cycle’s up auction. Lower levels to be mindful of are 1982.75, with Xtremes down to 1979.25.

Trade Strategy: We are not going to give up on the Bullish case just yet, so we’ll be looking to enter longs from lower zones IF price can stabilize and selling dries up. We’ll also consider short-side now given upper key marker has been violated…So bounces that fail to carry higher we’ll look to fade for push lower. As traders we remain flexible to trade both sides withn key price edges.

Follow the Rules…Focus on the Trading Process…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

Quiet Pre-Holiday Trade

Average Daily Range in S&P e-mini continues to contract from a high of 20 handles down to 11 handles over the past ten (10) trading sessions, as price continues to grind higher to new contract highs. Below average volume suggesting low institutional participation is typical of August, as money managers take vacations and trading desks are lightly manned.

Contracting trading ranges and lowering volumes make it a bit more difficult for intra-day traders to execute their trade strategies…So what’s a trader to do?…Simply adjust trade expectations and positions sizing to reflect lower volatility. Remain Flexible and Follow Trading Rules!

Today is Cycle Day 3 (CD3) and there remains potential for higher prices during this current cycle. Average Range on CD3 = 17.75; Odds of 3D Rally > 10 = 82%; Odds pf 3D Rally > 20 = 54%

***Note: The odds highlighted are not predictions, rather a guide based upon historical observed occurrences.

Today’s Hypotheses:

Scenario 1: Prior Day High (2002.75) IF price converts this level, THEN there is a 60% chance of continuation higher to reach STATX Zone 2003.75 – 2004.50, followed by TargetMaster Breakout Target 2007.75 – 2008.50 zone, with Xtreme Target 2010.50.

Scenario 2: Failure to convert PDH (2002.75), suggests continued consolidation within recent ranges. Key Marker is 1998 handle which is Prior Day Open Range Rotation Average (PDORR). Violation and conversion of this levels suggests a short-term high in place and a corrective pullback is necessary to find renewed buy response. Key zone to be mindful of on pullback is 3DCPZ 1991.00 – 1993.25.

Trade Strategy: As stated above, low volumes and range make it increasingly difficult to execute trade strategies…So we will continue to focus our attention staying in alignment with dominant force and tread lightly with trade selection. This is NOT the time to be a “bold” trader and force trades…Remain Disciplined…Patient…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

A Bulls Bull Market

This current “power cycle” qualifies for a “Bulls Bull Market”…Price strength with shallow pullbacks to prior breakout levels that hold strong. The longer higher prices get absorbed the more underlying strength builds for next assault higher. It would take a significant change in sentiment to derail current bullish momentum

Monday’s CD1 never produced the anticipated probe for low..to the contrary…buying immediately from the opening bell, followed buy midday consolidation into settlement. Volumes are sub-par as expected during a big vacation period for money managers ahead of the long Labor Day weekend.

Today is Cycle Day 2 (CD2) which could end up being a choppy session with a continued upside bias to push S&P e-mini above the 2000 psychological level. Average Range on CD2 = 14.50; Max Range on CD2 = 22.25; Odds of Rally > 10 = 83%; Odds of Rally > 20 = 45%

***Note: The odds highlighted are not predictions, rather a guide based upon historical observed occurrences.

Today’s hypotheses:

Scenario 1: Prior Day High (1999.75) IF this level is penetrated and converted, THEN there is a 60% chance of price reaching 2003.50 TargetMaster Level. Further upside targets based upon Average Cycle Rally  are 2005.50 – 2007.50 zone, with Xtremes measuring 2011 – 2012.25.

Scenario 2: Failure to convert PDH (1999.75) suggests continued consolidation within recent ranges. Pullback levels to be mindful of for renewed buy response are 1992.25…1989.00 – 1990.50 3DCPZ, then lower TargetMaster Level at 1986.00.

Trade Strategy: Path of least resistance remains up as bullish momentum is firmly in place. As such, we will continue to tread lightly on the long-side during the low volume, pre-holiday trade sessions. This does not preclude us from shorting on auction failures from key upper levels…Just be aware that going against momentum in low volume trade is greater risk.

Focus on the Trading Process…Not the Outcome…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

 

 

Consolidating at Highs

Price consolidated throughout Friday’s Session as the aggressive buyers decided to take a break and catch their breath as we highlighted in prior DTS Report. This current “Power Cycle” that has driven S&P Index up 100+ handles in 10 days is not going to be reversed quickly. Though there may certainly be days where price pullbacks to probe for renewed buyers, the momentum is certainly favoring the Bulls. We maintain our posture to stay aligned with dominant forces as this keeps probabilities of profiting consistent.

Monday begins a new cycle which typically results in price probing lower for a new or in the case of the current power cycle, a “renewed” secure low from which to stage the next up auction cycle. The prior Cycle Day 1 CD1 was relatively shallow, which actually was a very strong bullish signal of continuation of upside momentum. As we have said, we would not be surprised and actually welcome some additional back n fill price action, so look for some early weakness to probe lower, but don’t get to bearish on any pullback. Market forces are eyeing S&P 2000 in their sight-finders.

Average Range on CD1 = 18.75; Max Range on CD1 = 22.00; Odds of a Decline > 10 = 70%; Odds of a Decline > 20 = 40%; Average Decline = 13.00 which targets 1978 handle on any pullback.

***Note: The odds highlighted are not predictions, rather a guide based upon historical observed occurrences.

Today’s Hypotheses:

Scenario 1: Friday’s consolidation continues to have bullish dynamics…IF price can penetrate and convert Prior Day High (1991.25), THEN there is a 55% chance of reaching STATX Zone between 1993.25 – 1994.50, with layered levels 1996.75 – 1997.25 up to Xtreme 1999.50 – 2001.00 TargetMaster Level.

Scenario 2: Failure to convert Prior Day High (1991.25) suggests additional consolidation is necessary to absorb recent price gains. There are multiple layers of potential support on pullbacks…Three-Day Central Pivot Zone (3DCPZ) between 1980 – 1982.50 should provide a good long-side buy response. Average Decline on CD1 targets price zone 1975.50 – 1978 50.

Trade Strategy: Continue to look for buying the dip opportunities from Key Decision Points (DP’s) highlighted in the above scenarios…Remain flexible…As price continues to back n fill , there will be ample opportunities both Long and Short to satisfy all traders.

Focus on the Process…Take The Trade…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

Catching Breath after 100 Handle Move

S&P notched a new contract high and reached current cycle targets laid out in yesterday’s DTS report. In overnight trade price stalled at high and violated initial support pivot at 1989. Price has traded lower to test 1st line of Key Support between 1983 – 1984 zone. Following +100 handle move in the index, it’s not surprising that buyers take a break to catch their breadth.

Today is Cycle Day 3 (CD3) and having already hit minimum cycle targets, price is anticipated to enter a period of “back n fill” consolidation. Bulls remain squarely in charge, though more two-sided balance trade may begin to develop.

Average Range on CD3 = 17.75; Max Range on CD3 = 21.25; Odds of 3D Rally > 10 = 82%; Odds of 3D Rally > 20 = 54% Projected High Zone on CD3 = 1997.50 – 2000.25 based upon penetration and conversion of CD2 High (1992).

***Note: The odds highlighted are not predictions, rather a guide based upon historical observed occurrences.

Today’s Hypotheses:

Scenario 1: Having reached initial cycle targets, some back n fill price consolidation is welcome to absorb recent gains. To maintain the bullish tone, pullback to 1983 – 84 zone will be viewed  as opportunity to buy the pullback. IF price can hold above key levels and convert prior day high, THEN there is a 65% chance of reaching STATX Zone 1992.87 – 1994.50. Above this zone projects multiple levels between 1997.50 – 2001.00

Scenario 2: Failure to exceed prior day high suggests some consolidation necessary to absorb recent gains. Initial Key Support 1983 – 84 zone. Strong support is the 3D CPZ between 1980.00 – 1982.50.

Trade Strategy: Our tactical trade strategy today would be look for more two-sided trade developing as price consolidates recent gains with a bullish skew. We will be open to trade selection both long and short from Key Decision Points (DP’s) as outlined above and dynamically created throughout the Session.

Focus on the Trading Process…Take the Trade…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

New Contract High for ES

Price notched a new contract high for the S&P e-mini (ES) in Globex trade albeit marginally. Yesterday’s Daily Trade Strategy’s Scenario 1 played out perfectly as price reached upper price target 1986.00 to the tick. Here’s excerpt:  IF price can convert Prior Day High 1978.25, THEN there is a 55% chance of achieving 1981.00 – 1982.25 STATX Zone, followed by 1986 handle prior contract high. Initial pullback support is 1973 – 74 PDVTMP zone. Price will need to hold above this level and convert PDH to increase probabilities of achieving upper price targets.”

The current “power cycle” produced a shallow low on CD1 (1973) as anticipated, with high odds of notching new highs. Today is Cycle Day 2 (CD2) with projected Cycle Target 1989 based upon historical average cycle rally.

Average Range on CD2 = 14.54; Max Range on CD2 = 22.25; Odds of Rally > 10 = 83%; Odds of Rally > 20 = 45%; Projected Cycle Targets: Min = 1990.25…Max = 1995.50

Today’s Hypotheses:

Scenario 1: IF price can convert prior day high (1986.00), THEN there is a 60% chance of price reaching 1988.75 – 1989.50 initial cycle targets. IF bullish momentum continues above initial target, THEN upside projects 1994.25 – 1995.50 maximum cycle targets.

Scenario 2: Price is currently above prior day high (1986)…Failure to hold above this level suggests a potential auction failure with increased odds of selling. Lower support levels to be mindful of are 1980 – 82 zone…1976 – 78 zone and 1972 – 75 3D Central Pivot Zone.

Trade Strategy: Our trade strategy has been focused on the long-side during this power-cycle and correctly so, as underlying market dynamics have been very bullish. We will continue to favor long-side cautiously as price tests contract highs. There is strong potential for a stop-run push higher then failure. Until there is a definitive structure shift in price dynamics, we must remain aligned with dominant force, which is currently the “Raging Bull”

Focus on the Trade Process…Not the Outcome…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 FUTURE RESULTS

Approaching Test of Contract High

This recent swing in the S&P has pushed up price 90 handles off the corrective low in what we have described as a “Power Cycle”. This cycle has the energy to test recent high and perhaps notch new contract highs. With summer slowdown upon us and below average volumes it won’t take much to push new highs, so we remain disciplined to not fade the price action and go with the flow.

Today begins a new three-day cycle. Typically on Cycle Day 1 (CD1) we would anticipate a decline in price to probe for a new higher “secure low” from which to stage the next up auction sequence. The current “power cycle” has good momentum energy, and as such, any pullback in price may be relatively shallow compared to prior CD1 probes.

Average Range on CD1 = 18.75; Max Range on CD1 = 22.00; Odds of a Decline > 10 = 70%; Odds of a decline > 20 = 40% Average Decline on CD1 = 13.00 which projects 1965.25 pullback target.

Today’s Hypotheses:

Scenario 1: IF price can convert Prior Day High 1978.25, THEN there is a 55% chance of achieving 1981.00 – 1982.25 STATX Zone, followed by 1986 handle prior contract high. Initial pullback support is 1973 – 74 PDVTMP zone. Price will need to hold above this level and convert PDH to increase probabilities of achieving upper price targets.

Scenario 2: Failure to convert PDH (1978.25) and subsequent violation of 1973 – 74 zone suggests an auction failure and potential for deeper probe to find responsive buyers. There are several layers of potential support below, as this current cycle is a strong power cycle.

Trade Strategy: Though today begins a new cycle, expectation is for any pullback to be relatively shallow with bulls continuing to dominate trade. With multiple layers of structural support below, tactical trade remains buying pullbacks to key Decision Points (DP’s). As always, we remain flexible to trade opportunities on both sides but remain in alignment with dominate force, which is currently the Bull.

Follow the Trade Rules…Take the Trade…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

 

Summer Slowdown

The remaining two weeks of August mark a high vacation period for many investment professionals and lower than average trade volumes, so with the Summer Slowdown upon us, now is not the time to become “bold traders’. Stay disciplined to your trade plan, do not fade price direction, go with the flow and you will be much safer and happier.

Today is Cycle Day 3 (CD3) and cycle targets have already been achieved. Residual momentum may push price higher to Xtreme Zone between 1974.00 – 1976.50. We’ll be on higher alert for possible auction failure against these levels.

Average Range on CD3 = 17.75; Max Range on CD3 = 21.25 Odds of Rally > 10 = 82%; Odds of Rally > 20% = 54%

Today’s Hypotheses:

Scenario 1: Bullish momentum has carried over into Globex Session and price is currently above the Prior Day High (1969.00). IF price can maintain it’s momentum, THEN there is a 55% chance of reaching 1974.00 – 1976.50 Xtreme Cycle Zone.

Scenario 2: IF price falls back below Prior Day High (1969.00), odds increase for lower probe to find support. Key levels to be mindful of are 1962 – 1964 PDVTMP, followed by 1956 – 58 zone.

Trade Strategy: We must continue to respect the current bullish cycle momentum, and as such, buying pullbacks to key support Decision Points (DP) remains the tactical trade. Lighter volumes and lack of price rotation make it dangerous to fade price action. If price violates key Support DP’s, then we will consider the short-side trade. Otherwise, remain disciplined…follow the rules…

Be Prepared….Be Profitable    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

 

Bulls Dominate

Friday’s quick sell-down was related to a geo-political news driven event giving the bulls an opportunity to “buy the dip”. Scenario 2 upper and lower target zones hit perfectly…here’s an excerpt:Price is very near to expansion targets between 1959 – 1962 expected high…Cycle Day 1 has a high probability of getting a decline of greater than 10 handles…As such, caution is warranted for any new longs…Failure to hold PDH on any pullback targets 1946 – 48 initially, THEN 1938 – 41 zone.”

Today is Cycle Day 2 (CD2)…Having found what appears to be a secure low 1937.25 on Friday, and having initially rallied from that low to close strong, expectation is for continued upside to reach upper cycle expansion targets.

Average Range on CD2 = 14.50; Max Range on CD2 = 22.50; Odds of Rally > 10 = 83%; Odds of Rally > 20 = 45%; Projected High Zone on CD2 = 1964.50 – 1969.25 based upon penetration of CD1 high.

Today’s Hypotheses:

Scenario 1: Penetration and Conversion of CD1 High (1961.00) there is a 56% chance of price hitting initial target zone of 1962.50 – 1965.50 STATX Zone, with a projected Cycle High Target of 1969.25. Price will need to remain above PDH (1961.00) during Pit Session for bullish scenario to continue to play out.

Scenario 2: Failure to hold overnight gains and remain above PDH (1961.00) suggests a pullback is necessary to find renewed buy response for this cycle. Initial pullback levels to be mindful of are VTMP 1960 handle, ONL 1956, THEN 1953. The 3D CPZ is between 1945.00 – 1949.50 and should offer strong buy response support if price trades down.

Trade Strategy: There is significant supply/resistance above 1963 handle…As such caution is warranted for new swing longs. Daytraders can continue to play current upside momentum swing until there is a definitive shift violating key support levels. We will continue to follow our game plan, which is to buy pullbacks with bullish momentum intact. Evidence of auction failure highs at key Decision Points (DP), then short-side trade can be considered.

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