Yesterday morning was extremely bullish in both European markets and US Futures. The first 15 minutes developed a high of 1343.50 and a low of 1338 with a 0930 ET open of 1339.75. Then we got a 50% correction prior to the 1000 ET report. Many time you will get one bar that will test the 50% correction lows and then bounce to the upside in bull markets, as happened yesterday at around 0955 ET. This bar is typically a signal to go long when all indicators are green.
At 0955 ET, the NYSE Advance - Decline Line also started to trend higher. Also notice that in the first 15 minutes, the $TICK hardly closed below zero and the averages and pivots were all well above the zero line, indicating a bullish sentiment. Again at 0956 ET, both the average and pivot lines turned green confirming a long trade setup.
Irregardless of the long range trend, the short term market makes a sine type of wave, which consist of 2-5 days of crest formation with a Distribution phase, and 2-5 days of trough formation with an Accumulation Phase, and is best seen on 60 minute charts. The crests and troughs are formed by slow moving, narrow range days, while the Distribution and Accumulation Phases are formed by fast moving, wide range days. During the crest formation and Distribution Phases, it is best to concentrate on short trades, while during trough formation and Accumulation Phases, it is best to concentrate on long trades. Always be aware of which part of the short term cycle that you are currently trading. 04/01/08 was obviously an Accumulation Day.
When analyzing the short term market, look at Market Structure first, then be aware of the market cycle, then confirm market movement with the NYSE Advance - Decline Line and $TICK.
Charles
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