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Dear Trader,
" Day Trading the SP Futures with Initial S/R and the NYSE Tick "
By Mike Reed
A question that comes up often is "Does the area of support
or resistance that is hit FIRST in the morning have special
significance?"
In most cases, the area of support or resistance that is hit
FIRST in the morning has special significance. In the first
hour of trading, the market's reaction to initial support or
resistance is a good "tell" for the strength of the next
move.
For instance, if the market moves up in the first 20 minutes
of trading, touches the initial resistance zone, and then
turns down, this implies that a good tradable downtrend move
is likely to develop.
How strong that new trend becomes is market-dependent. As
the market falls, its reaction to each new support zone
gives an indication of how weak or strong the new downtrend
is. If the market falls to initial support and breaks down
through it without a stall or a bounce, it will probably
continue down to the next level of support. But, if the
market loses downside momentum near the initial support
zone, the downtrend may well be over.
When price comes into a resistance or support area, the NYSE
TICK is by far the best indicator of what price may do from
this point.
What is the "TICK"? The TICK is simply the difference
between the number of stocks that last traded on an "up-
tick" versus the number of stocks that last traded on a
"down-tick". When the TICK reaches +1000, the market has
reached a short term overbought extreme and when the TICK
reaches -1000, the market has reached a short term oversold
extreme.
When the SP futures make a quick surge to a strong
resistance zone, and then loses momentum at or near the
zone, while concurrently the TICK registers an extreme high
reading (usually over +1000), this sets you up for a high-
probability short entry, with a hard stop just above the
resistance zone.
These counter-trend trades "fade" (meaning to enter a trade
against the trend) the intraday emotional extremes, and may
come at the beginning of a new trend - giving you a chance
to hit a "home run." More often, however, they become scalp
trades that don't last long, sometimes less than a minute.
Either way, they are high probability trades if you time
your entry well.
It takes a lot of practice to time your entries just right
on these trades, and you have to be ready to get out
immediately (before your hard stop is hit) if you sense that
your edge has disappeared. It is difficult to sense when the
edge (probability of success) of a trade is gone *before*
the trade changes from a small gain to a small loss.
Practice will help *if* you know what you're looking for.
Most traders believe you have to wait for your hard stops to
be hit before you can know that a trade's edge is gone. This
may be true for most traders, but it doesn't have to be true
for you.
Mike Reed is author of TradeStalker's RBI Trader's Updates.
Mike has been trading the Market for 24 years. When he got
his start as a trader, Mike was plotting prices on paper
tape as the internet had not yet been "born" as we know it
today. Years of experience have really given him a feel for
the Market action. His support and resistance numbers have
been published on the internet since 1996. He has a wide
readership that includes day traders, floor traders, locals
and hedge fund managers. His nightly support and resistance
zones are specific and incredibly accurate. He offers an
unlimited free trial of his nightly TradeStalker RBI
Trader's Updates. http://www.TradeStalker.com - Copyright
2006 Mike Reed
LEVELS:
| Contract (Dec.. 2006) | SP500 (big & Mini) | Nasdaq100 (big & Mini) | Dow Jones (big & Mini) | Mini Russell |
| Resistance 3 | 1357.53 | 1701.50 | 11861.33 | 748.67 |
| Resistance 2 | 1353.87 | 1692.00 | 11825.67 | 744.33 |
| Resistance 1 | 1350.53 | 1683.00 | 11795.33 | 741.67 |
| Pivot | 1346.87 | 1673.50 | 11759.67 | 737.33 |
| Support 1 | 1343.53 | 1664.50 | 11729.33 | 734.67 |
| Support 2 | 1339.87 | 1655.00 | 11693.67 | 730.33 |
| Support 3 | 1336.53 | 1646.00 | 11663.33 | 727.67 |
| | | | | |
| Contract (Dec. 2006) | Dec. Gold | Euro | Dec. Ten Years | Dec. US Bonds |
| Resistance 3 | 614.2000 | 1.2830 | 109 2/32 | 113 27/32 |
| Resistance 2 | 609.5000 | 1.2803 | 108 28/32 | 113 18/32 |
| Resistance 1 | 606.4000 | 1.2783 | 108 20/32 | 113 5/32 |
| Pivot | 601.7000 | 1.2756 | 108 14/32 | 112 28/32 |
| Support 1 | 598.6000 | 1.2736 | 108 5/32 | 112 15/32 |
| Support 2 | 593.9000 | 1.2709 | 107 31/32 | 112 6/32 |
| Support 3 | 590.8000 | 1.2689 | 107 23/32 | 111 25/32 |
REPORTS (EST): Provided by www.tradethenews.com audio news and interactive research directly from the pits
Thursday, Sep 28th, 2006
Economic
08:30am Initial Jobless Claims (last 318K), Q2 Final GDP Annualized (last 2.9%), GDP Price Index (last 3.3%), Personal Consumption (last 2.6%), Core PCE QoQ (last 2.8%)
10:00am Aug Help Wanted Index (last 32)
10:30am Natural Gas Inventories
01:00pm Treasury's 5-year Note Auction results
Events
Fed's Minehan speaks in Poland on Economic Education at 3:00am. UBS Global Life Sciences conference in NYC through 9/28. Jefferies Shipping conference in NYC through 9/28. Prudential Best Ideas conference in Vermont through 9/29. RBC Capital Markets Consumer conference in Orlando through 9/28. Goldman Sachs Consumer-directed Healthcare conference in NYC. National Mammography Quality Assurance Advisory Committee meets at 10:00am. CME Analyst meeting.
Earnings
Before the Open: AM CRAI FDO. After the Close: ACN CREL ESIO RIMM SMOD TXI TIBX.
Note all time are EST. ANY AND ALL TIMES AND DATES ARE SUBJECT TO CHANGE WITHOUT NOTICE. INFORMATION HAS BEEN TAKEN FROM SOURCES DEEMED TO BE RELIABLE, BUT NO ASSURANCES CAN BE MADE TO THE ACCURACY OF ANY OF THIS INFORMATION.
This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts herein contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgment in trading!
