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S&P; 500 Mar SPH1 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ TODAY'S S&P; 500 COMMENTARY We have two Pattern Signals fired for today's trading in the S&P;, the first of which is actually a combination signal. The NR4 with an Inside Day signal is telling us that yesterday's trading range was the narrowest of the last four days. The Inside Day aspect of the signal refers to the fact that the day's range was within the range of the prior day. If the market were thought of as a spring gradually being compressed, these signals represent a likely trigger point for releasing that pressure. There is potential for the market to break out of this range today, and essentially trend in one primary direction. 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. The more conservative 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. On the S&P; Half Day Chart, all of our Cycle Indicators move higher with yesterday's activity. The move higher can be attributed more to Wednesday's surprise Fed interest rate cut rather than anything that can be directly attributed to cyclical positioning. ADX levels on 5, 15, and 60 minute charts are all either very close to or 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. Some important economic numbers will have already been released by the time tomorrow's regular trading session begins. On the roster for tomorrow are Unemployment Rate, Nonfarm Payrolls, Hourly Earnings, and Average Workweek, all released at 7:30CT. Principal market direction will likely be determined before the session even opens. Even though it likely that most of the market's volatility has already been seen in Wednesday's surprise Fed announcement, we should enter the day prepared for the possibility of increased activity. One of the more prudent approaches for entering today's trading is to simply stay out of the way until the dust settles. If opening volatility is extreme, we should wait 15 to 30 minutes before entering a position. By this time, you can usually get your bearings and market entry can then be made with a greater degree of confidence and with less chance of getting whipsawed. One interesting pattern to keep an eye out for early in the day is the Spike & Ledge from the book "Street Smarts". If we get a large opening gap or early spike move as a result of today's numbers, this pattern will trigger us into a trade in the opposite direction of the original thrust. It is identified by, first, an obvious spike, and second, a "ledge" created by the first retracement move away from the spike extreme. A violation of the line created by that ledge is our trigger to enter. The big disadvantage of this trade is the fact that the stop typically needs to be placed just past the swing pivot extreme. This is usually too far for my tastes. There is another trick that comes in handy after a large impulse move. I'm always a little gun-shy about jumping on board in the middle of these types of, typically, fast market conditions. You not only risk large slippage, but such volatile spikes often require very wide stop placement. And I'm ALWAYS on the lookout for ways that I can reduce my risk. However, if you pay close attention to the 5 min. 20 EMA on days like today, sometimes you can come out all right. If, for example, we have a large impulse move upward, rather than using some sort of breakout entry where you have to place your stop past the extreme of the swing pivot, you can, instead, just sit back and wait to see if price eventually returns to the 5 min. 20EMA. If it does so, and a price reversal pattern develops near the EMA and a previously identified support zone, you can go long with your stop just below that zone. You won't catch the hero moves this way, but you can still garner some good profits, AND you reduce your risk considerably. Another important item of note on highly volatile days - the Pivot System S&R; levels posted at the top of this report can quickly become useless if the volatility is extreme. The calculations for these values are based on the prior day's range and close. If a report is released that causes significant market movement, the value of the activity on the prior day, and any calculations resulting from that activity, can be rendered meaningless. Even with the potential increase in volatility caused by the reports, the heart of the matter still boils down to identifying support and resistance levels and watching how price reacts near those levels. In addition, keep a sharp eye out for Spike & Ledge and Holy Grail patterns.
US T-Bond Mar USH1 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ TODAY'S T-BOND COMMENTARY The only Pattern Signal fired for today's trading in the T-Bonds is the 90-10 Hi Continuation & Reversal. The concept behind 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. This reduces the pattern's frequency of occurrence while increasing its probability as a forecasting tool. The 90-10 Hi Continuation & Reversal signal is fired when the day's open is within the bottom 10% of the day's range and the day's close is within the top 10% of the day's range. This signal is telling us to expect continuation of the upmove in the morning, and then a reversal sometime during the day. On the T-Bond Half Day Chart, Cycle Indicators continued their move lower with yesterday's activity. Our indicators continue to exhibit 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. ADX levels on 15, 30, 60, and 120 minute charts are all either very close to or 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. We have some important economic numbers coming out this morning. At 7:30CT we have the Unemployment Rate, Nonfarm Payrolls, Hourly Earnings, and Average Workweek being released. Unemployment Friday can always be a tricky one. Even though it is likely that most of the market's volatility has already been seen in Wednesday's surprise Fed announcement, we should enter the day prepared for the possibility of increased activity. One of the more prudent approaches for entering the day's trading is to simply stay out of the way until the dust settles. If we happen to get sharp price action directly after the report, wait at least 5 to 10 minutes before entering a position. By this time, you can usually get your bearings and market entry can then be made with a greater degree of confidence and with less chance of getting whipsawed. One interesting pattern to look for immediately after the reports come out is the Spike & Ledge from the book "Street Smarts". If we get a spike move as a result of today's numbers, this pattern will trigger us into a trade in the opposite direction of the original thrust (example in the chart to the right). It is identified by, first, an obvious spike, and second, a "ledge" created by the first retracement move away from the spike extreme. A violation of the line created by that ledge is our trigger to enter. The big disadvantage of this trade is the fact that the stop typically needs to be placed just past the swing pivot extreme. This is usually too far for my tastes. There is another trick that comes in handy after a large impulse move. I'm always a little gun-shy about jumping on board in the middle of these types of, typically, fast market conditions. You not only risk large slippage, but such volatile spikes often require very wide stop placement. And I'm ALWAYS on the lookout for ways that I can reduce my risk. However, if you pay close attention to the 5 min. 20 EMA on days like today, sometimes you can come out all right. If, for example, we have a large impulse move upward, rather than using some sort of breakout entry where you have to place your stop past the extreme of the swing pivot, you can, instead, just sit back and wait to see if price eventually returns to the 5 min. 20EMA. If it does so, and a price reversal pattern develops near the EMA and a previously identified support zone, you can go long with your stop just below that zone. You won't catch the hero moves this way, but you can still garner some good profits, AND you reduce your risk considerably. Another important item of note on highly volatile days - the Pivot System S&R; levels posted at the top of this report can quickly become useless if the volatility is extreme. The calculations for these values are based on the prior day's range and close. If a report is released that causes significant market movement, the value of the activity on the prior day, and any calculations resulting from that activity, can be rendered meaningless. Even with the potential increase in volatility caused by the reports, the heart of the matter still boils down to identifying support and resistance levels and watching how price reacts near those levels. In addition, keep a sharp eye out for Spike & Ledge and Holy Grail patterns.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ YESTERDAY'S T-BOND TRADING
Market Commentary Page
For the S&P; 500 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.
NR4 with an Inside Day Signal
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).
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.
R3·1388 R2·1375 R1·1362 DP·1352 S1·1338 S2·1328 S3·1315
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.
90-10 High Continuation & Reversal: Look for morning
follow through on yesterday's strong close and then a likely reversal.
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.
R3·106´07 R2·105´27 R1·105´16 DP·104´25 S1·104´14 S2·103´23 S3·103´12
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.