Tuesday 8th October – ES_F Review

Morning Traders,

Really tough day on the ES yesterday with the market appearing bullish running into the late afternoon, but sold off in the last couple of hours, closing below the open at 2937.50. On the daily candlestick chart we’ve printed a candle that probed into the upper balance area (2946-3025) but importantly rejected out of it, and closed inside the July/August balance area. What we’re seeing here in the bigger picture is a failure to get higher, to the downside, we’ve also seen a failure to get lower. This market is incredibly difficult to trade at the moment, due to the uncertainty about the China deal, impeachment, looming recession etc. One of the things we have seen is the 50-day moving average coming into play more and more. In the chart attached below, you can see the 200 day MA in green and the 50 day MA in white, and you can see that previously it was support and now it is resistance.

If we look at the last few days, we’ve moved roughly 100 handles in 2 days so it’s incredibly difficult to trade. We have a gap to the downside which we’re slated to open close to, but we’re also gapping down roughly 18 handles – gap rules will apply (which have been inconsistent to say the least recently due to the volatility). Overnight our inventory is mostly short, we also, significantly, stopped to the tick of the T+2 close.

In the context of the bigger picture, we’ll look to use the 50 day moving average to present trades to the short side, and we’ll use profile and the internals to give some pinpoint entries. I’ve come in today with a massive short bias, which, as always I need to check myself. Inventory is very short compared to where we closed last night, so we’ll look for A & B periods to correct inventory. During the globex period, it’s really easy to move this market around, but the S&P 500 is closed and all the associated stocks aren’t trading. So we use A & B period to allow this inventory to unwind, and see if this flush down is real or not. I believe the best trading opportunities will come later in the day, provided we’ve no natural sellers (people selling from a long position).

T+2 today refers to Friday’s range, so we’ll use the highs, lows, close and 1/2 back for potential entries and exits. What this means is that, we had some strong buying on Friday, and now you have to think are these lower prices going to represent a buying or a selling opportunity for trades that settled on Friday. Given how difficult this market has been to trade, it’s ok, particularly if you’re a new trader, to sit on your hands and do nothing, because even the pro’s are finding it tough!

Good luck, and happy trading!