Change of Character (COC)

S&P 500 e-mini (ES) is down 17+ handles in overnight action on a delayed reaction to release of Fed Minutes which confirmed the end to its bond-buying program in October. The plan will decrease bond purchases in three increments until October, when the last $15B reduction is scheduled.

We had recently opined that there was a potential “change of character” (COC) developing…Further deterioration in price without a significant buy response from bulls over the next several sessions may prove to be the tipping point.”  We can now say with increased confidence that a COC has occurred with a more significant deeper corrective wave developing. As such, market investors/traders are more likely to be looking to sell rally’s in coming days /weeks. 

Price has already reached today’s lower STAT-Xtreme price target at 1947.50, so it will be important how the bulls react in the Pit Session…Will they view this as yet another buying opportunity, or decide to stand-aside from new commitments and prefer to reduce long-risk by selling rallies?

Today’s hypotheses:

Scenario 1: Since price has already reached price targets at 1947.50, we’ll initially key off this level for a possible retracement bounce, if develops, has potential back to 1956, which is dynamic VTMP, then 1958.25, prior days Initial Balance Low.

Scenario 2: Failure to hold 1947.50, suggests lack of interested buy response, which could propel prices even lower to 1941 – 43 zone, down to 1936 – 38 zone (6/18 Fed Day Breakout)

Trade Strategy: It’s a tough one to call today, with a deep overnight gap…We’ll look to play cautiously both sides from key Decision Point (DP) Levels, with hard evidence (triggers) to support trade opportunity.

Remain Flexible…Do Not Trade Your Opinions…Trade the Numbers   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.


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