Posted By: Ilan Levy-Mayer Vice President, Cannon Trading Futures Blog
For 2014 I would like to wish all of you discipline and patience in your trading!
Are we done? Was this the correction everyone was afraid of and that’s it?
Only the future can tell but interesting to look at the daily chart below of the mini SP 500. We bounced OVER 100 points from the lows!!! But I still need to see if we can break above the 1946 level marked on the chart….
Another interesting point is that this rally is on much lower volume than the sell off, but then again this has been the story in the “minor corrections” we had during the last several years.
Not sure if this one is any different and we are heading back to test new highs…my “emotions/gut” says this one has a bigger chance of being a more serious correction than the ones we have seen before but my “trading brain” says that statistically odds are in favor of resumption in the rally…
To be honest none of the above matter, the game has been and still is” What is the FED doing? will they allow QE 3 to linger longer? is Europe going to start it’s own QE? This is what will really dictate the direction of stock indices.
In between, I think that most of the readers of this blog are day traders by nature.
I think the main challenge these past few weeks been to try and recognize early enough the type of trading day ahead and we have seen the three major ones these past few weeks:
1. The most common day are two sided trading action with swings up and down – this type of trading day is most suitable for using support and resistance levels along with overbought/oversold indicators. We have seen some very “violent examples of this type of trading day these past 2 weeks.
2. Strong trending days, mostly one directional – this type of trading day is the least common, many times will happen on Mondays and maybe 3-5 times a month at most – this type of trading day is most suitable for using ADX, MACD crossovers and pretty much looking for pullbacks to jump on the trend. Today was definitely one of these day!!
3. Slow and/or choppy trading days – this type of trading day is best suited for taking small profits from the market by looking at volume spikes, using stochastics as possible entry signals and usually wait for a pullback before jumping in. We have not seen many of these in the last few weeks….
- A good question I’ve been asked is how can one asses what type of trading day we will have while the market is still trading….I have been doing some work in finding the answers and will be happy to hear feedback via email but here are some initial observations:
- Was the overnight session a wide, two sided trading range? If the answer is yes, good chances for similar trading day during the primary session (primary session is when the cash/stock market is open)
- Mondays have the highest chance for trending days
- The behavior of the first hour of trading can also suggests the type of action for the rest of the day.
- If the first 30 minutes of the trading day have good volume, better chances for type 1 or type 2 trading days.
- Low volume during the first 30 minutes can suggest a choppy (type 3 trading day)
GOOD TRADING !
Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time. Past performance is not indicative to future results.
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Futures Trading Levels
|Contract Dec. 2014||SP500||Nasdaq100||Dow Jones||Mini Russell||Dollar Index|
|Contract||December Gold||Dec.Silver||Dec. Crude Oil||Dec. Bonds||Dec. Euro|
|Resistance 3||1264.2||17.96||84.99||144 20/32||1.2932|
|Resistance 2||1259.9||17.81||84.13||144 6/32||1.2888|
|Resistance 1||1254.3||17.66||83.30||143 10/32||1.2805|
|Support 2||1240.1||17.21||80.75||141 18/32||1.2634|
|Support 3||1234.5||17.06||79.92||140 22/32||1.2551|
|Contract||Dec Corn||Dec. Wheat||Nov. Beans||Dec. SoyMeal||Dec. bean Oil|
|WedOct 22||Tentative||EUR||German 30-y Bond Auction||2.25|1.1|
|USD||Core CPI m/m||0.2%||0.0%|
|10:30am||USD||Crude Oil Inventories||2.8M||8.9M|
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 here in 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.