Trade Strategy 09.01.15


It’s another stormy day for stocks across the world after twin surveys showed China’s manufacturing sector in the grip of its worst slump in several years. China’s official Purchasing Managers’ Index fell to 49.7 in August from the previous month’s reading of 50.0 – the weakest showing in three years, while the Caixin China manufacturing PMI showed a final reading of 47.3 in August, the lowest since March 2009. The figures detail an even sharper slowdown in the world’s second-largest economy, reinforcing fears that have triggered heavy global market selloffs.

Today’s Economic Calendar

Auto sales
8:30 Gallup US ECI
8:55 Redbook Chain Store Sales
9:45 PMI Manufacturing Index
10:00 ISM Manufacturing Index
10:00 Construction Spending
1:10 PM Fed’s Rosengren: Economic Outlook


Monday’s trade was pretty much as expected with sideways consolidation with NEUTRAL SPILL. Even Market on Close had $1.2B Buy Imbalance. Many market participants view 1963 SPOT as key over/under. That level was breached in after hours and overnight trade.

Today begins a new Cycle and is NORMAL SPILL DOWN as price probes for a new “secure low” with renewed buy response, from which to stage the next rally attempt.

Cycle Day 1 (CD1) Odds of Decline > 10 = 72%; Odds of Decline > 20 = 42%; Average Range = 18.75; Max Average Range = 22.25; Possible HOD = 1943.00; Possible LOD = 1920.00

***Note: The odds highlighted are NOT predictions or trade recommendations, rather a guide based upon historical observed occurrences.

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Today’s Hypotheses: September (U) Contract

*****The levels outlined below are more general framework within a larger range…They are to be used are reference prices from which to consider trade opportunities, not hard trade levels.

Scenario 1: Price has reached CD1 Violation Target and possible LOD at 1920 handle. IF price can hold above this level during cash session, THEN initial rally attempt target 1934.50…Should price continue to find strong buy response next upside targets 1943.00. Above this level measure 1953.25 – 1956.50 STATX Zone.

Scenario 2: Price has already declined in overnight trade to reach Average Cycle Decline (1936.75) and CD1 Violation Level (1920.00). Failure to rally and convert 1936 handle suggest sellers remain in control with potential for additional selling to unfold. IF price violates 1920 handle, next major level is 1910.00 SPOT.

Trade Strategy: Our tactical trade strategy will simply remain unaltered…We’ll be flexible to trade both long and short side from Decision Pivot Levels. Continue to focus on Bull/Bear Stackers and Premium/Discounts. As always, remaining in alignment with dominant intra-day force increases probabilities of producing winning trades.

Stay Focused…Non-Biased…Disciplined  ALWAYS USE STOPS!

Good Trading…David

“Knowing is not enough, We must APPLY. Willing is not enough, We must DO.” –Bruce Lee



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