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June 4, 2009

Trade Right

Thursday's action set up a wonderful chance for me to exemplify how being right is so much different than trading right. My blueprint for the day was to see the SPX trade up in the high 930s or so and then post the second down leg of a correction to back-test a breakout. The initial step worked out fine, and I found myself selling ES at 938 early this morning. Soon after the open, the market was diving, and I was salivating for a 23-handle profit. Unfortunately, a couple of high-volume bars right after 10:00 forced me out.

one minute index chart

After the 12:15 exit, I didn't see another setup juicy enough to draw me in. The end result was that the market did little in the way of what I was anticipating, but careful analysis and astute capital preservation rules handed me 11 short handles on an up day. The purpose here is not to toot my own horn. In the long run, I'm a bad day trader. Things just worked out today, and I wanted to point out how being wrong doesn't necessarily mean losing money. By the way, there were seven whipsaws in the last 30 minutes of trading! Someone was getting the shake down, and if you can figure out who it was (bull or bear), tomorrow will be a very profitable day for you.

Back to our analysis... the odds of playing out our a-b-c correction dropped considerably today (which should make dowoper8tr quite happy) mostly because of the time element. The b-wave... which consolidates the a-wave... should not last longer, time-wise. Both waves are sitting right on a day in length, so for our a-b-c to complete, we pretty much need to see the market gap lower on tomorrow's open. Even then, the correction is not as neatly set up as yesterday because a 23-handle extension from the current top of the b-wave targets SPX 920, missing our expectation for a back-test of the consolidation breakout. Of course, the c-wave could extend further, but before we start speculating to the nth degree, let's see how the market opens.

The dollar pretty much gave us nothing today, so we just wait things out.

us dollar chart

Until yesterday's low is violated on a closing basis, I will continue to operate under the assumption we will back-test the T1 consolidation between 82-83.

Anyone lose their position in silver yesterday?

silver prices

For the record, anyone who picked up the hedge I suggested gave up 0.11% on the dollar position while picking up 3.5% on silver. Hmmmm.

We can round things off with the usual suspects:

oil price chart

natural gas prices

copper prices

If you stand back and look at that copper chart, it appears ready to enter a parabolic move. If so, a spike to the $3.10 pivot would be in play. I don't think that's going to happen unless the dollar fails here.


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