Morning Review - 08/25/08

The fast moving average on the 620 tick chart has been red all morning, along with the fast moving average of the 5 minute $TICK.

We got a small correction on the 1 minute chart between 1008 ET and 1032 ET, when the market resumed the negative trend. I like to see a bigger correction, but the small corrections is all that we get when the market is pretty much one directional.

Charles

Weekend Thoughts - 08/23/08

I got a free copy of September's "Technical Analysis of Stocks & Commodities" magazine in the mail. This issue has a great interview with Suri Duddella, the author of "Trade Chart Patterns Like the Pros". I do not have a copy of his book, but I am familiar with his work through the TradeStation Forum.

In the interview, Suri has a nice discussion about the Trader Vic 2B and ABC or three-wave patterns. The ABC pattern is probably the one that I pay attention to the most, but should also pay more attention to the 2B type of setup, which is similar to the 1039 ET $TICK / Price divergence that we saw yesterday.



The first 30 minutes of open market activity can be an extremely profitable or unprofitable time of day to trade. It has not been my best time of the day to trade. It is a time of day when proper money management is truly important, since the market has a tendency from time to time to turn on a dime during this emotional and volatile period.

Yesterday, the market was bullish during this period due to Lehman news and the upcoming Bernanke speech. As the market bounced off the 38 Period EMA on the 630 tick chart, a good trade setup would have been an entry at 1284.5 with a stop at 1282.75, which was a risk of less than 2 points. The potential reward was close to 10 points, which could have been based on the up surge from 1277 to 1288 with a 50% correction to 1282.75. An example of assessing potential reward to risk.




Even though you should not rely much on the $TICK in the first 15 to 30 minutes, it did confirm the bullish attitude of the market in the first 30 minutes to help develop confidence in the trade.

In the case of yesterday morning's Price / $TICK divergence trade, you are not sure what the potential reward might be. The risk is the high. What can be done here is to trade in multiples of three contracts. Phase out 2 contracts as the market goes in your direction for two points, and keep the third contract for possible large moves with a breakeven stop for the third contract.

Charles

Afternoon Review - 08/22/08

1310 ET - The market gave us a correction all the way back to the 0930 ET open, and found some support. At 1221 ET, we got another price / $TICK divergence, but this time to the long side. We currently have a 62% correction to the upside. This divergence was significant because it occurred at the 0930 ET open, which in this situation some may view as support.

1410 ET - The $TICK started to show some weakness at 1336 ET, but the market came back and tested the recent high. The downside correction at 1401 ET appears to be working. The market typically is more likely to move at 1400 ET than 1330 ET, while going into the energy market close.

Charles

Morning Review - 08/22/08

1011 ET - Still have good up momentum with both price and $TICK. Little selling activity in the market ahead of the Bernanke speach at 1000 ET. Dollar stengthened overnight. Oil weakened a little.

1030 ET - $TICK starting to weaken a little. An hour a way from the European close. Will have to wait and see when short-term equity traders start taking profits.

1100 ET - Large divergence occurred between price and $TICK at 1039 ET. Market may be topping out.

1120 ET - Getting a nice correction following the divergence. Entering the lunchtime period and the European close.

Charles

Interesting Observation

The market stopped yesterday right at the 50% correction point of the last swing wave.

Charles

ESU08 Range and High/Low Analysis

In the above chart, the True Range is based on the 0930 - 1600 ET time period. As can be seen, the daily True Range is seldom below the 10 day average for more than three days. Tomorrow's range may be larger than the average.

The Open in the above chart is the 0930 ET open. As can be seen, we were due for an up day. We may see the short-term trend start to revert back to the down side.

Charles

Afternoon Review - 08/21/08

1315 ET - The ES market lately has had some decent sized moves following the close of the European markets at 1130 ET. Lunchtime sometimes is not as quiet as it used to be. Momentum started changing back to the upside at 1252 ET. Little leary of that indication suspecting a false indication, since the market is at the top of its range for the day. However, it jumped to the upside by 4 points. I'm always a little hesitant to trade this time of day. But, the fast moving average on the $TICK 30 minute chart has been green since 1600 ET on 08/19/08, the fast moving average on the 5 minute chart turned green at 1300 ET, and the 1 minute chart turned green at 1252 ET. When all three time frames turn green, the indication should not be ignored. The market then jumped at 1302 ET.

1515 ET - Well, the short-term up cycle won over the bad news bears, at least for today.

Charles