Wow what a trading day yesterday was. Stockbot’s two tiny updates that I posted yesterday morning were able to capture nearly the entirety of the pop and drop trading session!
As noted in my last update (2/23/18), the upside target zone was captured (just shy of 2800). The market rallied to the former “parabolic rally” support which has now become resistance (thick red line). As was also mentioned, downside risk was much higher than upside risk. I mention this again because managing risk is critical in sessions like these.
This is not to say that the market is done rallying. We just have to take the facts as we know them. The rally appears to have formed a rising wedge which broke to the downside (near-term bearish). Nearest real support is a long way’s down.
With the near-term rally channel broken, bulls will have to work hard to create a support zone in order to launch another attack at the 2800 line. Sustained trade below 2720 would be bearish.
From a momentum perspective, Market DAILY momentum is pointed south if it not recovered by end-of-day. The last time this happened was 1/30 and it was the warning before a severe decline.
Coming into this morning’s session we do see near-term Bullish momentum building (15m and 1h) which are typically good signs. We’ll have to wait until this morning’s open before we know if it’s a fake-out.
The RSI Trend Cycle indicator which I posted a few day’s ago does a decent job at giving downside warning’s at lower intervals (1m/5m/15m) but of course the lower you go, the more volatile it becomes (giving warning’s throughout a bullish run instead of just during key pivots).
I will be away from the market this morning but will be back to post updates probably around noon. Hopefully in the near future I’ll have stage 1 of Stockbot complete and we can have some automatic posting of momentum triggers.
In the meantime, the overall picture as of 0859 is energy, metals, and currencies trading lower while SPX/ES continues to build some bullish momentum this morning. Agriculture continues to lead the market (corn, wheat, soybeans).
SPX mid-term downside target is initially 2650 if bulls lose it here. SPX 2800 remains the price to beat on the upside. Bulls are probably hoping for a day 2/14.
Momentum Trades will be posted when I return home in a few hours.
Update 1240: Stockbot initiated a SELL of SPX/ES at 1215 which has continued, and is gaining strength. This may finally provide a trend change direction to this morning’s chop. With the volatility today, you’ll definitely want to watch your stops.
Note if 2700 doesn’t break decisively in a few bars we may be in for a sharp retrace higher.
Update 1311: For anyone following the last SELL, you’re at least 20pts happier 🙂
I’m taking some profits around this level (presently 2680). I’m still looking for 2650 if prices break lower. At present, momentum is solidly bearish until pulls can prove otherwise (the yardstick grows ever further).
Note that bearish momentum will likely confirm on an hourly basis if prices stay under 2700.
Update 1323: Tread carefully here. If bulls can successfully build a base then the bounce target is 2704. Below 2681 and we may see a waterfall for another 10-20pts short. I’m watching the 1m momentum for signs of snowballing into 5m/15m.
For bears, trading below 2695 keeps the bearish channel alive. For bulls, breaking that and recapturing the dropzone (2700-2704) would be a first target.
I typically close when I see the market meeting resistance. In this case, I took off half risk at 2682.5. Stockbot is still short from 2709.
Update 1333: Added “zone to watch” below:
Update 1350: Took profits on new position at 2677. Stockbot still short from 2709
Sometimes I get asked “how do you know when to close a short?”. My little day-trading trick for that is to monitor the Weiss Wave. I’ve found that when a large bearish Weiss Wave abruptly ends, it’s usually the earliest signal of at least a temporary reversal. Sometimes it’s temporary but more often than not, a momentum signal will trigger shortly afterwards in the opposite direction. It’s not perfect but it tends to help me dodge sudden reversals.
As you can see, it does _not_ tell you how to get back in. As a result, I primarily use this signal for determining when to cut part or half a position during a major day-trading move. Sometimes, if the price lands at a key support, I might cut 90% or all of the position to prevent losses from a strong bounce. It all depends on market behavior shortly afterwards.
Update 1404: As we approach the target from this morning of 2650 you’ll want to become nimble. Sudden reversals from over-bearishness can eat up your profits. Took profits again at the WW pivot as marked above. I’ll be watching for another entry or to close the remainder if price action is pointed higher.
Update 1409: If it’s not already apparent, the decline appears to be accelerating in intensity. If bulls can’t get a decent bounce above 2672, it looks like this drop will intensify shortly.
Update 1411: 1M SELL renewed on ES
Update 1417: I can’t possibly post every 1M (1 minute) pivot so, please trade carefully. 1M SELL above ended at the 2659 level. It’ll probably come back around. 2665 and 2668 are first two key levels for bulls to recapture short-term and 2678 if they want to have a chance at stopping the decline. Decent bullish momentum coming in on this bullish move.
Update 1420: first two bullish targets captured (the easy ones). If you haven’t aready secured some profits, you may find the next bit painful if bulls make a run for the next bullish level.
5/10/15m Bullish Volume broken to the bull side so, this bounce could be larger than the last few. Due to the overall trend being negative, I will favor a bearish interpretation for now. That means, I will enter short again when momentum reverts. I won’t chase long signals until momentum breaks the levels I specified above (particularly 2678).
Update 1430: Stockbot signaled “Early Warning Trend Change” on SPX. At the moment, I’m discounting this until bulls can clear and trade above 2675 (current trend-line area). That being said, with the 1m momentum bullish and continuing (though not gaining much ground) it looks like bulls are building a foundation for a rally.
Update 1440: Chop zone and return to very-near-term bullishness (at the 1 minute level). Still no overall bullishness but bulls have now made enough of a base to make a run at the trend line and break bullish. Careful now if you’re bearish.
Update 1445: If you’re one for gambling this trend line is your best risk/reward zone near-term. Bullish momentum is kicking up but still failing to trade above the resistance zone. Bullish if trading above, bearish if fails.
Major battle going on around the trend-line. I managed to grab a few good trades up and down. Bias overall is still bearish while bias near-term is still bullish. Zone of trading is a 7pts (2665 to 2672). Trade on either side of this range have a great risk reward.
Update 1458: While the longer the bulls battle here, the longer the price has to break the trend sideways, the more they’re building a pennant. Bulls now need to hold above 2669 as the trend channel turns from resistance to support. Momentum and volume are near-term bullish (at this time)
Update 1502: Early warning of pennant breaking for the bears. We’ll see if momentum continues to build. (break down from 2667.50). Still not seeing volume confirm so bulls are holding this decline for the moment.
Looks like it may have been a fakeout (hence the volume wasn’t confirming).
Update 1509: Closed and took a long position at break of wedge on bullish momentum to the north. Close stop in the event that we’re in for more chop like the last few sessions. If not, then this will possibly turn out to be damn near the bottom for the session (assuming bulls can hold)
Update 1517: Wow! Caught that one perfectly. Momentum and volume continue to push this mini-rally higher (20pts on SPX now). Some resistance in the 2680 zone but if bulls can hold above 2680 then we’re headed higher. Watching momentum and price action carefully now.
Update 1520: Ack, this is why I take every other day to trade without posting. I missed the 2680 consolidation zone which I was planning to load up for a further move.
Update 1527: Pivot zone is still in play with bulls unable to break above 2690 and holding 2680. Momentum is near-term bearish and volume mixed. At this point I’m flat until I see some clarity.
Update 1531: Momentum is skewing negative at the moment. In short with a close stop (in the money as I type this.. fast move). Looks like bears are winning the struggle. Next decision point at 2671 ish. which is the former resistance zone.
Update 1541: AS we come to the final 20mins of trading, price has fallen into a declining trend channel and just popped back under the recent bullish support. Bulls will want to catch things before they become two bearish. A mere 3 point rally could invalidate the bearish channel (not hinting at anything for the algos!)
Closed half as I posted that.. as the bulls did in fact make their small rally to very-short-term save themselves at 2669. Will watch for another entry short or to see if bullish momentum returns. **Flat and awaiting entry.
Update 1545- 1m signals bullish. Bulls have a lot to prove to hold this. Let’s see how this shakes out. Potentially a lot of money to be made end-of-day if bulls or bears fail.
Interestingly enough, Stockbot looks on the verge of signalling bullish. 5m trend has been bullish since our 1425 signal. In other words, that dip from 1525 to 1545 looks to have been a W2 of a potential larger bullish rally that is forming.
Once again forming a base at 2680. I’m in a long for a small amount from the initial signal. Looking to add if we can break above resistance from earlier. Will cut and run if we pivot.
Done for the day!
Stockbot Trades: Short from 2709 closed for a gain of 30pts per contract ($1480 per contract)
Manual Day-Trades: 20 trades (in and out) 6 bad and 14 good. A gain of 19pts per contract ($930 per contract) average after subtracting wins and losses. That means Stockbot beat me today but daytrading today was quite a bit of fun!
I typically trade 2-10 contracts when daytrading depending on risk and how long the momentum is running, which allows me to partially exit/etc effectively and provides a nice additional revenue source.
Typically, unless the market is very choppy, Stockbot's longer trades (I only allow it to trade 15m, 1hr, and 1d events) usually work out better than my day-trades.
Incidentally, trading SPY with the same same entries would have netted you 3.36pts (~1.19%) or ~2.41% if short UPRO. Bear derivatives like SPXU also work but their signals are inverse.
My point is, if Futures Trading is too high risk (understandable), or too complex (also understandable from a risk management perspective) then trading SPY/UPRO and other ETFs can allow you to profit from the same moves in a safer way. It is also a great option for when the market is choppy and you don’t feel like having to put a lot of money at risk on large stops.
Going forward I plan on continuing a 1 day on, 1 day off schedule as far as updates.
To help people out, I’m going to be posting some longer-term month, week, day, trades. I might also mix in some of the stocks I trade (nothing exotic, just your typically S&P constituents). I’m teaching my fiance to swing-trade stocks so I’ll be using that as a chance to post the trades.
I hope I was able to help everyone have a profitable day!