2013-01-29

$ES_F : 1486-1496 : Market Recap


Another new high 1503

No short set-up holding once again!


I came in the day bearish as per this trade plan. Markets still appear to be in the grip of the bulls and every short set-up is defeated even before it reaches it confirmation point. After stalling last session, markets had a bearish bias in overnight trading and 1491 area was was tested. Volume was on low side again. VIX spot dropped near 13.1 area. Market opened on bullish bias and headed to gap fill which gave short entry in the anticipated resistance area of 1495-97 eventually making a high of 1498. Subsequent break "almost" confirmed that the short set-up is holding allowing 50% profit to be taken and stops moved to then high of day 1498 as mentioned in this comment. Since short side is still counter trend, taking early profits on 50% of position makes sense.


However the break from 1498 stalled at 1493 and subsequent rally took the line in sand stop at 1498 and made a new high at 1503.50 (so far). This point also establishes the importance of moving stops as soon as trade starts developing. See here for some discussion on this subject.  With about 1hr 45 min to close, market is still trading near 1503-1504 high area which has some resistance. I would expect a small move down towards 1498-1500 before close. In hind sight trading bullish trend today could have been better but well my hind-sight indicator was not working before market open.

Day session range was 11 pt and overall range has been 13 which ties in with VIX.

Once again there is no short set-up in play. AMZN reports after close which I am taking from bearish side with tight stops. Tomorrow is FOMC day: nothing of significance is expected from them at this stage but any indication that they are finding the economy in good health and sign of reduction of punch bowl could hurt the bond and equities market. The session before FOMC is expected to be choppy and low volume. Usually the volatility returns after the FOMC announcement and may be we can get our set-up then.