THE PATTERN TRAPPER

Link to Today's Futures Page

Pattern Trapper On-Line Course

Home

For further information about The Pattern Trapper
complete and submit the Request Form or call 952-892-5550.

T-Bond Commentary for Tuesday, December 19, 2000

US T-Bonds  Mar  USH1

Pattern Signals - an automated pattern identification process which
identifies today's most likely market scenario based on recent price behavior.

90-10 Low Continuation: Morning follow through
on yesterday's weak close is likely. Look for shorts.

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 - commonly used by floor professionals to determine
relative value based on prior day price activity. Shifts in market psychology often occur near these levels.

R2  105-18     R1  105-04     DP  104-27     S1  104-13     S2  104-04

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.

	Normal	Extended
High	105-01	105-09
Low	104-10	104-01

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

TODAY'S T-BOND COMMENTARY

We have two Pattern Signals fired for today's trading in the T-Bonds, the first of which 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.

The second Pattern Signal fired for today's trading is the Momentum Pinball Buy. The Momentum Pinball Buy and Sell Signals originate from the book "Street Smarts" by Larry Connors and Linda Raschke. They 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 of our Cycle Indicators moved lower with yesterday's activity. Normally we would consider this kind of action as having marked a short term cyclical top. However, I wouldn't want to lend this call much credibility until the indicators have had a chance to stabilize. We've gone through an extended period of abnormal short term cyclical behavior. It is not until the indicators can show us that short term cyclical activity has returned to more typical patterns that we can confidently use them in determining directional bias.

The only economic report on today's agenda is Trade Balance at 7:30CT.

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. If the move to that level can occur on Momentum Confirmation, there should be even more downside in the making.

High ADX readings and the 90-10 Low Continuation signal are enough to have us looking for shorts in today's early trading. The ideal setup would entail corrective action towards one of the resistance levels directly above yesterday's closing price, the most significant being that of the 104-27 Daily Pivot level. If price were able to reach this zone as higher timeframe 20EMAs were coming down to meet it from above, we'd have an extra reason to get short. A price reversal pattern and/or Oscillator Divergence can trigger us into the position with the 90-10 Low Continuation signal telling us to expect yesterday's low to be exceeded.

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.

Link to Today's Futures Page

Pattern Trapper On-Line Course

Home