  Pattern Signal Firings | On-Line Course | |
For further information about The Pattern Trapper contact
Bob Hunt at RHunt@PatternTrapper.com or call at 952-892-5550.
A two week free trial is available by submitting a Trial Request Form.
S&P; 500 Mar SPH1 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ TODAY'S S&P; 500 COMMENTARY We have three Pattern Signals fired for today's trading in the S&P;, the first of which is the NR7. This signal tells us that the market has gone through a period of contraction with yesterday's range being the narrowest of the last seven days. If the market were thought of as a spring gradually being compressed, this signal represents a potential trigger point for releasing that pressure. A good clue as to if and which direction it might break can be determined by today's market action near yesterday's high and low levels. A break of either is a likely indication of the new trend direction out of this contraction period. An aggressive trader can enter on the breakout. A conservative trader might want to wait until a return to the breakout level, which often happens before a sustained move begins. Some initial clues to breakout direction can often come from early rejections of these levels. If the high is approached, repelled, and price then moves through the DP, the likely breakout direction is the low. Likewise, if the low is approached, repelled, and price goes through the DP from below, the likely breakout direction is the high. Another clue can often be found in price action near the DP. If price is unable to move through this level, the likely breakout direction will be the same side as it originated. The second Pattern Signal fired for today is the 2 Day Rate Of Change Buy. This signal is the Raschke and Connors way of quantifying the swing trading methods as taught by the Taylor Trading Technique. This technique teaches that there is a natural pattern to the sequence of buy and sell days. The 2 Day ROC Buy signal is telling us to expect today to be the "buy day" part of that pattern. The second Pattern Signal fired for today's trading is the Momentum Pinball Sell. The Momentum Pinball Buy and Sell Signals represent an attempt to identify periods of very short term buying and selling exhaustion so as to capture a likely move in the opposite direction. Before any action is taken, however, the Momentum Pinball Sell signal requires a breach of the first hour low for confirmation. Because Momentum Pinball Buy/Sell signals are intended to flag the end of a short term trend, it is not unusual to see, on the same day, other Pattern Signal firings which indicate likely movement in the opposite direction. When this occurs we know that a break of the first hour high/low represents a market bias in the opposite direction as originally indicated by other Pattern Signal firings. On the S&P; Half Day Chart, all three of our Cycle Indicators moved higher with yesterday's activity. Cycle Indicators continue to display mixed and choppy behavior, suggesting that we should wait until they've have had a chance to normalize and return to more normal short term cyclical behavior before using them to help determine any sort of directional bias. Economic reports on today's agenda include the Producer Price Index, Building Permits, and Housing starts at 7:30CT. Industrial Production/Capacity Utilization is released at 8:15CT. The Michigan Sentiment Survey comes out at 9:00CT. ADX levels on 5 and 60 minute charts are below a value of 18. When this occurs, we know that it is a good time to keep an eye out for any developing triangles, wedges, flags, or channels in the respective time frames. We can use breakouts from these patterns as either a trigger into a trade or to help determine directional bias. The NR7 signal will be the real key to today's trading. Whenever a Narrow Range Day Pattern Signal fires we can go into the trading day with two key pieces of information at our side. 1) We know that in all likelihood, price activity should essentially trend in one primary direction. And (2) clues to the direction of the potential trend day breakout will most likely be determined by price action relative to the prior day's high and low, and to today's DP as described above. Also keep in mind that the Momentum Pinball Sell signal is indicating short term uptrend exhaustion with a likely move in the opposite direction. If today's first hour low is breached we'd want to more seriously consider a bearish bias. The aggressive trader can enter on the break. The more conservative might want to wait until a return to the breakout level, which often happens before a sustained move begins. As always, our most confident entries are accompanied by Reversal Patterns and/or Oscillator Divergence along known levels of resistance.
Nasdaq 100 Mar NDH1 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ TODAY'S NASDAQ 100 COMMENTARY We have two Pattern Signals fired for today's trading in the Nasdaq 100, the first of which is the NR7. This signal tells us that the market has gone through a period of contraction with yesterday's range being the narrowest of the last seven. If the market were thought of as a spring gradually being compressed, this signal represents a potential trigger point for releasing that pressure. A good clue as to if and which direction it might break can be determined by today's market action near yesterday's high and low levels. A break of either is a likely indication of the new trend direction out of this contraction period. An aggressive trader can enter on the breakout. A conservative trader might want to wait until a return to the breakout level, which often happens before a sustained move begins. Some initial clues to breakout direction can often come from early rejections of these levels. If the high is approached, repelled, and price then moves through the DP, the likely breakout direction is the low. Likewise, if the low is approached, repelled, and price goes through the DP from below, the likely breakout direction is the high. Another clue can often be found in price action near the DP. If price is unable to move through this level, the likely breakout direction will be the same side as it originated. The second signal fired for today is the 90-10 Low Continuation. This signal originates from the 80-20s set-ups as described in "Street Smarts". But, rather than using the 80-20 guidelines, the parameters have been narrowed to 90-10, thus reducing the pattern's frequency of occurrence, but increasing its probability as a forecasting tool. The 90-10 Low Continuation signal is fired when the day's close is within the bottom 10% of the day's range. This signal is telling us to expect morning continuation of the downmove. On the Nasdaq 100 Half Day Chart all three of our Cycle Indicators moved higher with yesterday's activity. Cycle Indicators continue a period of mixed and choppy behavior. It would be best to wait until they've have had a chance to normalize and return to more normal short term cyclical behavior before using them to help determine any sort of directional bias. Economic reports on today's agenda include the Producer Price Index, Building Permits, and Housing starts at 7:30CT. Industrial Production/Capacity Utilization is released at 8:15CT. The Michigan Sentiment Survey comes out at 9:00CT. ADX levels on 5 and 15 minute charts are above 30, indicating that the trend to lower prices is still intact in these timeframes. If we were triggered into a short position by a price reversal pattern and/or Oscillator Divergence near the 20EMA in either of these timeframes, we would have the makings of a Holy Grail setup. A trade based in part on a Holy Grail pattern can take as its minimum profit target a return to the most recent swing pivot extreme, which would be yesterday's 2350.00 low. If the move to that level can occur on Momentum Confirmation, there should be even more downside in the making. Although the 90-10 Low Continuation signal is hinting at further downside activity, the NR7 signal will be the real key to today's trading. Whenever a Narrow Range Day Pattern Signal fires we can go into the trading day with two key pieces of information at our side. 1) We know that in all likelihood, price activity should essentially trend in one primary direction. And (2) clues to the direction of the potential trend day breakout will most likely be determined by price action relative to the prior day's high and low, and to today's DP as described above.
US T-Bond Mar USH1 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ TODAY'S T-BOND COMMENTARY We have two Pattern Signals fired for today's trading in T-Bonds, the first of which is the 2 Day Rate Of Change Sell. This signal is the Raschke and Connors way of quantifying the swing trading methods as taught by the Taylor Trading Technique. This technique teaches that there is a natural pattern to the sequence of buy and sell days. The 2 Day ROC Sell signal is telling us to expect today to be the "sell day" part of that pattern. The second Pattern Signal fired for today's trading is the Momentum Pinball Buy. The Momentum Pinball Buy and Sell Signals represent an attempt to identify periods of very short term buying and selling exhaustion so as to capture a likely move in the opposite direction. Before any action is taken, however, the Momentum Pinball Buy signal requires a breach of the first hour high for confirmation. Because Momentum Pinball Buy/Sell signals are intended to flag the end of a short term trend, it is not unusual to see, on the same day, other Pattern Signal firings which indicate likely movement in the opposite direction. When this occurs we know that a break of the first hour high/low represents a market bias in the opposite direction as originally indicated by other Pattern Signal firings. On the T-Bond Half Day chart, all three of our Cycle Indicators moved lower with yesterday's activity, and are now firmly entrenched in oversold territory. This does not necessarily mean that we should expect them to soon turn higher. If short term cyclical patterns have returned to normal behavior, we should see a period of base-building develop before they launch their next cycle higher. Our first clue will come from a turn in the 7 period %K. A turn of this indicator from its overbought or oversold zone is usually a good indication that a new trend has begun and at least several more bars of new short term direction should follow. Economic reports on today's agenda include the Producer Price Index, Building Permits, and Housing starts at 7:30CT. Industrial Production/Capacity Utilization is released at 8:15CT. The Michigan Sentiment Survey comes out at 9:00CT. The Bond market is closing at 1:00CT today for the President's Day Holiday. It would be best to enter today's trading without a directional preference, but with strict attention to market action relative to important support and resistance levels. In today's early going, pay particular attention to price behavior in relation to the 103-11 Daily Pivot. Significant activity above this level will imply further upside. Activity below will hint at further downside. Also, keep in mind that the Momentum Pinball Buy signal is indicating short term downtrend exhaustion with a likely move in the opposite direction. If today's first hour high is breached we'd want to more seriously consider a bullish bias. The aggressive trader can enter on the break. The more conservative might want to wait until a return to the breakout level, which often happens before a sustained move begins. As always, our most confident entries are accompanied by Reversal Patterns and/or Oscillator Divergence along known levels of support.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ YESTERDAY'S T-BOND TRADING
Market Commentary Page
For the S&P; 500, Nasdaq 100, and T-Bond Futures Markets
Pattern Signals - an automated pattern identification process which
identifies today's most likely market scenario based on recent price behavior.
NR7 Signal (narrowest range of the last seven days)
This signal indicates that range expansion is highly likely.
If, during the day, yesterday's high is exceeded then either buy the breakout
(aggressive) or buy the retracement to the breakout (conservative).
If, during the day, yesterday's low is exceeded then either sell the breakout
(aggressive) or sell the retracement to the breakout (conservative).
2 Day ROC Buy
Momentum Pinball Sell: If price action is weak enough to break the
first hour low, then a bearish bias should be assumed. Look to either sell the
breakout (aggressive) or sell the retracement to the breakout (conservative).
Pivot System Support & Resistance Levels - used by floor professionals to determine
value based on prior day price activity. Shifts in market psychology often occur near these levels.
R3·1346 R2·1342 R1·1338 DP·1332 S1·1327 S2·1321 S3·1317
Range Projections - This market will have a tendency to trade within the Normal
High/Low Range today as noted below. If those levels are exceeded, use the Extended Range.
Pattern Signals - an automated pattern identification process which
identifies today's most likely market scenario based on recent price behavior.
NR7 Signal (narrowest range of the last seven days)
This signal indicates that range expansion is highly likely.
If, during the day, yesterday's high is exceeded then either buy the breakout
(aggressive) or buy the retracement to the breakout (conservative).
If, during the day, yesterday's low is exceeded then either sell the breakout
(aggressive) or sell the retracement to the breakout (conservative).
90-10 Low Continuation: Morning follow through
on yesterday's weak close is likely. Look for shorts.
Pivot System Support & Resistance Levels - used by floor professionals to determine
value based on prior day price activity. Shifts in market psychology often occur near these levels.
R3·2526 R2·2469 R1·2413 DP·2381 S1·2325 S2·2293 S3·2237
Range Projections - This market will have a tendency to trade within the Normal
High/Low Range today as noted below. If those levels are exceeded, use the Extended Range.
Statement of disclaimer: This information was compiled from sources believed to be reliable, but its accuracy cannot be guaranteed. There is substantial risk of loss in stock and futures trading. There is no warranty, express or implied, in regards to the fitness of this information for any particular purpose. Past performance is not a guarantee of future results.
Pattern Signals - an automated pattern identification process which
identifies today's most likely market scenario based on recent price behavior.
2 Day ROC Sell
Momentum Pinball Buy: If price action is strong enough to break the
first hour high, then a bullish bias should be assumed. Look to either buy the
breakout (aggressive) or buy the retracement to the breakout (conservative).
Pivot System Support & Resistance Levels - used by floor professionals to determine
value based on prior day price activity. Shifts in market psychology often occur near these levels.
R3·104´21 R2·104´06 R1·103´22 DP·103´11 S1·102´27 S2·102´16 S3·102´00
Range Projections - This market will have a tendency to trade within the Normal
High/Low Range today as noted below. If those levels are exceeded, use the Extended Range.