Positive 3-Day Cycle

The S&P e-mini notched another Positive 3-Day Cycle during slow Labor Day Holiday trade. This most recent “Power-Cycle” which began on August 8th has produced eighteen (18) consecutive up sessions. Market Breath metrics support the recent bullish price action, so it is best to remain aligned with market forces than to oppose them. Price is perhaps due or overdue for some consolidation, but just don’t get overly bearish if price pulls back to find a higher solid level of support.

Today is Cycle Day 1 and as such we should be anticipating some price weakness to establish a new cycle low point from which to stage the next up auction cycle. Average Range on CD1 = 18.75; Max Range = 21.75; Odds of Decline > 10 = 70%; Odds of Decline > 20 = 40%; Projected pullback support is 1988 handle based upon Average Decline on CD1.

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

Today’s Hypotheses:

Scenario 1: Overnight High is 2006.25…IF this level is penetrated and converted during the pit session, THEN price targets 2009.50 – 2010.00 zone. Having reached cycle targets, the more likely scenario will be a pullback.

Scenario 2: IF the overnight high fails to convert that will be viewed as short-term resistance from which to initial short-side trades. Prior Day’s High (2001.50) is first line of defense for bulls to respond…More important zone is the Three-Day Central Pivot Zone (1996 – 98). Failure to illicit a buy response from this zone increases odds of a short-term tradable high from which to initiate shorts on bounces.

Trade Strategy: As traders return from long holiday break, it may take a few days to fully “gear-up” with more normalized volume and range. We recognize the increased possibility for a tradable high and short-side trade should any bounce fail to convert, but we continue to defer largely to the bullish scenario on pullbacks to key decision points (DP’s). It won’t be easy to unravel the strong momentum that is currently in place…As such we remain disciplined to follow our trade plan by staying aligned with dominant forces as they shift throughout the trade session.

Remain Flexible to Long and Short 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.



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