The S&P e-mini experienced a bit of a “shake-out” of weak longs in yesterday’s trade. Having stalled at recent cycle high (2007.00), we had marked this level as a short-term high in previous Strategy Report. Weakness continued from Monday’s Session as price probed and violated the key 1988 – 90 zone, forcing liquidation of weak longs. We do not think that the bull has been slaughtered given very strong Breadth Thrust Metrics in recent weeks, rather this action being of a “garden variety” pullback to work off buying excesses.

Tuesday’s trade conformed perfectly to Scenario 2 we laid out in prior DTS…Downside range price target hit squarely at 1983.50…Low of Day was 1983.25. Today begins a new Cycle…This cycle may be a bit tricky with Contract Rollover into December and Quad Witching on tap for next week. Rollovers tend to confuse the cycle range projections.

Cycle Day 1: Possible High: 2007.25 – 2010.75; Possible Low: 1985.75 – 1976.25; Odds of Decline > 10 = 70%; Odds of Decline > 20 = 40%; Average Decline on CD1 = 13.50; Average Range on CD1 = 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: Overnight low (1985.50) is a possible low for today’s session…IF price can hold above this level, THEN there is a 55% chance of reaching 1992.00, prior day VTMP…IF this level can convert, THEN upside projects 1997.25 – 1998.75 3DCPZ…Above this zone is Prior Day High 2003 and TargetMaster Breakout Level.

Scenario 2: IF the overnight low does not find responsive buyers and is violated, THEN probabilities favor further downside probe for a new “secure low” for this cycle. Lower levels to be mindful of are: Prior Day Low (1983.25)…STATX Zone (1979.75 – 1982.25)…TargetMaster Breakdown Level (1976.50).

Trade Strategy: Given recent violation of key support zone (1988 – 90) zone, we will be looking for evidence of resistance near 1992 handle. Should buyers fail to respond aggressively, we will be looking to short failed rally attempts from key Decision Point Pivots (DPP’s). Successful probe of recent lows will setup potential long buying trade. We remain open and flexible to either setup…long / short, as trade dynamics have become increasingly more fluid…Which provides excellent profit opportunities.

Follow the Trade Rules…Stay Focused…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.


Leave a Reply