Sunday Mailbag

Great Morning!

I get a number of solid email / message post questions every week. Makes sense to share some of them and reply en masse for the benefit of all.

One of the steadiest, most popular questions is, “Which emini symbol is best to trade” or “which emini symbol is best for new traders”?

It’s often assumed that ES holds this role by default, simply due to the huge amount of coverage on it versus any other market. My personal reply has been the same for years, and will continue to remain unchanged for years to come: the Nasdaq 100 (NQ) is my suggestion for best overall.

Define “Best”
If we ask ourselves what criteria makes for the best emini symbol to trade, we’d probably have to start with which one makes the smoothest moves away from action points with least amount of false wiggles and spikes.

Now the NQ has its moments of ugliness, just like any financial market without exception. But… when it moves out of consolidation or from reversal points, the NQ tends to make deliberate moves that do not pullback repeatedly into entry/stop areas. It usually breaks away decisively once congestion break = direction reversal is complete.

Last Friday’s opening bell response to the non-farm payroll premarket reaction was straight up from the bell for all emini symbols. The TF (not shown) led with a quick buy-signal flash and drove several points higher straight away. The ES (not show) likewise blasted out of its patterned consolidation and did not look back. Rather rare for the ES, but it happens.

In this specific sequence (like many/most others) the NQ left consolidation patterns with a directional break, then pulled back several times for methodical entry signals offered. That is one of the greatest features NQ has above ES in particular: the tendency to hold higher lows in an uptrend or lower highs in a downtrend offers several entry-point offers.

That trendy price behavior also allows somewhat crisp stop-loss orders to hold without being clipped out on double-top / double-bottom pullbacks, lower-low / higher-high pullback traps that kick out stops on the last gasp before price moves strongly in favor of expected direction.

The ES in particular is nasty like that… by far the most back-fill emini symbol of all. TF has more of that sideways chop tendency now than its predecessor ER2 once did. For whatever reason(s) the NQ trades cleaner with directional bias as it moves from point A to point B and on to point C thru the usual gyrations that price action covers.

Cleanest Setups
I’ve spent quite some time looking back thru NQ charts at specific, defined price pattern sequences and the resolutions from there in large-sample data series. What I see is about what I’d naturally expect: the NQ trades out of patterned setups cleanest of all emini symbols with highest success rates and least amount of sideways noise. Using -4pt or -5pt NQ initial stop while targeting +10pt to +20pt NQ profit objectives offers that type of setup once to several times daily, more often than not.

I’ve said this in video conversations for years now: by far the most feedback I get from successful traders = clients has to do with trading NQ. Again, for whatever reason(s) the NQ traders seem to have highest percentage of long-term success versus other symbols trading. I’ve often stated my opinions of why that is, but the fact remains that is the way unsolicited feedback reaches me over years’ worth of time.

I have a personal affinity for trading ER2 > TF. I like what I see in CL futures very much. I’ve traded S&P 500 indexes in some form or fashion since 1999. But asked to respond without personal bias as to which emini symbol is best to trade overall, I still have to opine the NQ is it.

And I will add that I’m personally intrigued by the potential it offers in our specific pattern sequence method approach. The NQ will also have my attention this week, front & center come Monday.

Best Trading Wishes

Unlearning Untruths

weekend conversation video here

Race-Car Mechanics

[Excerpts From CM-Live HotComm]
09:27:41 {austinp1} no plans for me off the open
09:27:51 {austinp1} read & react to chart-tool setups
09:28:37 {austinp1} stock traders have been locked out of the premarket waggles… they are pent-up to play
09:28:46 {austinp1} probable to be bumpy off the bell
09:29:32 {austinp1} ES 460,000+ contracts premarket already is rather heavy

09:37:42 {austinp1} TF is zipping higher
09:40:01 {austinp1} no pullbacks to fill signals confirmed in ES so far
09:40:38 {austinp1} TF blowing straight up

09:42:39 {d} any ideas what this is?  Didn’t we cross 10% unemployment?
09:42:42 {austinp1} did the fed just cut interest rates?
09:43:53 {austinp1} needless to say, no pullbacks near 58 or 59 for ES longs
09:44:01 {austinp1} watch the short side now, too
09:44:48 {austinp1} no way to mechanically trade the explosive
09:45:22 {austinp1} something happened news wise
09:45:29 {austinp1} no way they go parabolic like this otherwise
09:45:38 {austinp1} something significant happened
09:46:29 {d} gold hit 1100
09:46:41 {austinp1} USD just imploded
09:49:32 {austinp1} if they reverse hard, could take out existing lows
09:49:46 {austinp1} it’s really early for such a power surge to stick… up or down
09:51:00 {austinp1} whatever happens in USD today will be your stock market trend
09:51:13 {austinp1} everything else is out the window

09:58:56 {austinp1} potential trap > break sell pattern
09:59:31 {austinp1} if they tip over, high-odds to retrace the whole thing
09:59:37 {austinp1} could be a wild one
10:01:16 {austinp1} TF is simply going ape-s(omething)
10:07:03 {austinp1} long day ahead
10:07:08 {austinp1} a lot of time left on the clock
10:07:13 {austinp1} patience
10:08:30 {austinp1} short 1065.50 > stop 67.50
10:13:32 {austinp1} long day ahead
10:16:12 {austinp1} time will tell
10:18:06 {M} i think this report actually bodes badly for any big mkt down correction because it should cause the fed to continue to hold rates down the longer unemployment continues to climb
 
10:18:43 {austinp1} well, that’s one side of the equation
10:18:51 {austinp1} USD destruction is the other
10:19:27 {austinp1} the rest of our planet earth holding $$ trillions in debt may not be happy with southward spiral in USD
10:20:13 {austinp1} if they reject further debt loads and force real rates up thru the bond market, say hello to -2,000 pts in the Dow
10:20:58 {M} so no participation (demand) in the bod mkt would forct that correct??
10:21:03 {M} bond
10:21:22 {JL} yes, but the fed right now can go in and buy bonds
10:23:15 {austinp1} what do you think will happen if some unknown global crisis causes flee to USD for safety?
10:23:38 {austinp1} what happens if all the carry-trade players are forced to cover USD shorts on a global event?
10:23:45 {austinp1} Dow -1,000pts
10:23:48 {austinp1} intraday
10:23:53 {austinp1} between the bells
10:24:15 {austinp1} things really are that out of whack, and one-sided on the boat

10:25:04 {austinp1} ES short 1065.50 > stop 1066.50
10:26:39 {austinp1} I expect that entire surge move up to retrace
10:28:18 {austinp1} ES stop at par
10:28:29 {austinp1} par, and parked right there for a ride
10:28:40 {JL} cl has pretty much erased that surge up
10:30:41 {austinp1} bye-bye gone
10:30:48 {austinp1} see ya later, stocks
10:31:06 {austinp1} both symbols at pivots
10:31:12 {austinp1} reflexive pops are possible

10:42:26 {austinp1} stop 61.50 (+4pt)
10:44:04 {austinp1} +4pt locked in, holding for +8pt or greater
10:44:24 {austinp1} next move comes at ES 1157.50 zone
10:44:50 {EC} bounced off it
10:46:54 {austinp1} 61.50 or 57.50
10:46:57 {austinp1} one or the other
10:51:55 {austinp1} both symbols slapping the pivot points
10:52:53 {austinp1} ES +4pts out
10:53:03 {austinp1} ES daily objective met
10:53:28 {austinp1} we tried to hold for more… went +8.0pts to the exact tick and v-slam popped upwards
10:53:41 {austinp1} cannot do anything about that… it’s a violent tape today
10:54:07 {austinp1} had the pullback long entry attempts worked off the bell, would have been +12pts total. One tick higher fill on the short, +8pts total instead of +4pts
10:54:31 {austinp1} but, we caught what was there to be deliberately managed according to what we teach
10:54:47 {austinp1} everything else required some veteran chasing, fading, scaling in, etc
10:55:15 {austinp1} it’s been that kind of morning, similar to last week’s Friday slammer tape
10:55:42 {austinp1} no further trade posts of any kind or symbol today
10:55:50 {austinp1} mission accomplished
10:56:08 {austinp1} will mark charts as patterns emerge, but I’m shut down and done for the weekend

11:12:02 {austinp1} keep in mind what we said yesterday, and premarket today
11:12:16 {austinp1} non-farm fridays have a patterned tendency to wedge into the close
11:12:36 {austinp1} they either make big trend moves, or they make sideways whips that narrow and die
11:12:49 {austinp1} keep that fundamental pattern of behavior in mind today
11:13:07 {austinp1} it is a long-term pattern of behavior…as described in here yesterday
11:13:24 {austinp1} big players square up for the weekend, and out

**

Apologies for lack of posts last night. Spent the evening online live with team members discussing a specific, quasi-mechanical trade entry method for ES specifically. That, and dinner with Holly & friends afterwards ate up my evening (poor pun intended).

Using this specific trade-entry sequence approach, +4pts ES was there with ease each day this week. Actually, almost every day without exception.

Today seemed to be a rare exception at first the way they exploded upwards off the opening bell. Setup sequence for long trades confirmed, but price blew straight up in the air without filling any signals. That type of abnormal market behavior takes elevated skills to handle. In other words, market experience and “feel” is demanded to recognize and react accordingly.

What we’re doing here with ES specifically is working in methodical fashion with a mechanical approach to defining high-odds entry points… the “high-odds” factor is created thru a large sample of setups, of course. Any single instance of trade is 50/50 results. The only way any defined edge is created comes from large-number sequence of events.

Anyways, long-trade signals did not fill due to the unusual blow-off explosion move upwards. But the day was young. We watched the next setup (short) unfold in sequential fashion, took the entry and let it work (fwiw, CL short from 78.75 at the 10am est mark was same trade sequence).

As random chance would have it, ES price moved exactly +8.0 points lower before the subsequent bounce. A tick or two higher entry, a tick or two lower print and net result would have been +8.0 pt ES there. Two ticks lower pullback for the early long setup would have been an easy +8.0 pt ES out into the upside explosion (CL printed below 77.25, same sequence).

But that’s how it goes in trendless, ripsaw tapes. Stay patient, take the cherry setups, lock in acceptable gains asap when offered, try to hold for more when possible.

Setup confirm, enter, manage, exit. Repeat.

That’s trading :>)

A Side Of Mustard?

Great Morning!

Today is the post-fomc session, which is usually stellar to trade. Often makes big directional trend-day moves, which are ideal conditions.

Today is pre-nonfarm payroll day, which is usually terrible to trade. Often makes one – two muted swings in the morning, then volume dries & dies past noon.

That makes today a classic sandwich session: smack-dab between two of the most knee-jerked economic reports known to man. Filling between two buns. Remains to be seen what they’ll dress the sides with here today.

In my case I have no expectations at all. Hunt for +4pts (or better) ES and the day is complete in that symbol. Hunt for the bigger swings in TF, CL and ZS as pattern setups indicate.

Just business as usual, I guess. Believe what we see and react accordingly. Ever heard that old adage before?

Me too :>)

Mechanically Inclined

[Excerpts From CMLive-HotComm]
07:26:39 {austinp1} Great Morning!
07:45:41 {austinp1} …so it can be said that I’ll trade the ES “part-time” with minimal attention and focus given to that symbol…
07:45:58 {austinp1} … and still expect to book +4pts or greater ES more days than not :>)
07:48:25 {austinp1} anyone else who focuses on ES is welcome to use the entire bag of clubs as they see fit
07:48:50 {austinp1} I’ll trade the TF, CL as usual… full array of tools
07:49:00 {austinp1} but for me and ES, it is [blocked] alone

07:59:21 {austinp1} we have a few secondary econ reports scattered thru the morning, then ISM at 10am
07:59:44 {austinp1} but of course nothing will create anything more than temporary ripples in the chart until 2:15pm est

08:45:35 {austinp1} pending “news” slaps are slated until 10am est, when all the world then fixates on this fomc event
08:46:24 {austinp1} expect the usual fomc session pattern: one or two wiggles off the bell, hours of dead-volume drift, afternoon jostling ahead of the release
08:46:37 {austinp1} fundamental upside bias, as shorts cover and price drifts higher
08:47:05 {austinp1} once 2:15pm est and the wild whipsaws clear, final hour has potential for busting some big trend moves
08:48:13 {austinp1} same old fomc story, been here dozens and dozens of times
09:24:55 {austinp1} as noted earlier… looking for one – two possible morning wiggles, then idling back until the afternoon shift
09:25:19 {austinp1} final hour today could get extremely busy… has potential to offer an entire week’s income in less than two hours
09:25:23 {austinp1} potential
09:25:26 {austinp1} key word

14:32:21 {austinp1} short ES 1049.25
14:32:26 {austinp1} stop 50.25

14:34:15 {austinp1} sideways buzz still
14:34:33 {austinp1} long 52.25 > stop 51.25
14:35:44 {austinp1} stop par
14:36:31 {EC} amazing, with all the wild moves there haven’t been any extreme tick moves
14:37:46 {austinp1} all noise, so far
14:39:16 {austinp1} stop 53.25
14:40:42 {austinp1} out +1pt / -1pt ES cumulative
14:40:54 {austinp1} obviously not trying to game every whip turn there
14:48:53 {austinp1} still very early… not quite prime time for directional swings yet

14:57:13 {austinp1} selling ES 1055.00
14:57:24 {austinp1} stop 1057.00
15:01:43 {austinp1} ES stop trailed 1056.00 (-1pt)
15:04:38 {austinp1} this might be the one
15:04:46 {austinp1} still way early
15:06:06 {austinp1} the last ES long from 52.25 > out 53.25 did go to 58.50 highs
15:06:11 {austinp1} sold too soon :<(
15:08:31 {austinp1} so far, it’s been every which way but straight
15:09:03 {austinp1} in the ES long case, it was one tick above +4pts net for the day if out at high
15:09:13 {austinp1} technically, +4pt realized existed
15:09:29 {austinp1} realistically, who the hell could catch it?
15:09:41 {austinp1} difference between hypo and actual :>0
15:11:49 {austinp1} ES stop 1055 par
15:11:59 {austinp1} looks like a stop-gun trap blew off there

15:14:37 {austinp1} ES at 1055 par
15:29:53 {austinp1} ES stop 1054.00 (+1pt)
15:34:00 {austinp1} ES stop 1050.00
15:35:34 {austinp1} out ES 1050 for +5pts ES / +4pts ES cumulative
15:35:49 {austinp1} did it the hard way… thru tons of violent chop
15:36:12 {austinp1} left at least one other +4pts net cumulative trade on the table
15:36:17 {austinp1} but we got it done
15:36:34 {austinp1} same story tomorrow, probably much better weather in the charts

**

It was the usual FOMC session, with a bit more sideways turbulence (until deep into final hour) than normal. The TF was particularly spiky… kept popping and popping and popping relentlessly into upper resistance before chopping and finally dropping into the bell.

Trading a purely mechanical trade-entry method for ES allows me to focus on TF and CL primarily. ES trading is reduced to simple read & respond without bias or emotions involved. And I like that. Very much.

Booking +4pts ES (or more) Monday and Tuesday was quite simple. Today it was a struggle due to the unusual stall > turbulence of an fomc event. We had one long trade that covered +6.25pts from entry to peak afternoon session highs, then a subsequent short trade from 1055.00 that saw session lows more than +13 index points from entry.

After having flipped several trades from premarket to that point in time without making any headway or drawdown, price fluttered at 1049s level with 30min left to go. Markets were at session lows and looking to continue lower. What to do, what to do?

Top Of Class… Best In Show
While the allure of  greater potential gains was, well, alluring… our primary objective with ES is to book +4pts or greater more days than not. Considering this specific approach offers high-odds potential for that just about every day with few exceptions, gotta resist temptation and remain fixed on our objective.

Exactly what we’ve taught in our workshop lessons, exactly what we’ll cover in great detail at Thursday night’s workshop too.

Any trader who can capture +4pts ES ten days out of twenty with the remaining ten washing each other out would easily, handily, certainly find themselves in the top echelon of all ES traders. So we need to keep that fact in mind when facing decisions such as presented to us this late afternoon.

Sure it’d be nice to hold for the big ride. Done that many times before, will certainly do it again. But ES is probably the worst choice for making that a behavioral habit. TF, CL, 6E (or any currency) are much better choices for trading distance. ES (and bonds) are best suited for picking off smaller chunks from high-odds pattern sequences.

Think of it this way: +4pts a day keeps the bill collector at bay. Do that over time, add size accordingly and you’ll make ends meet. Matter of fact, you’ll find financial ends meeting themselves all over the place.

Trade To Win

Review/Preview

weekly video here (35:10 min)

Mood Swings

In case you haven’t noticed, the mood of financial markets has definitely turned 180 degrees. When Wednesday’s word of the federal government pondering ways to end the open-spigot money flow process, everything changed from there.

Gone for now, possibly for awhile is the constant underlying bid as permabulls buy every dip in non-USD related instruments. Here for now, possibly for awhile is actual fear that the Fed will sooner than later pull the reins of free money flow that has crushed the USD into a straight auger downwards.

Volume is back. Volatility is back. Steady to rapid pace of the tape is back. Hopefully here to stay for a long time to come.

But that doesn’t mean trading every day or especially every spot on the chart is rife with high-odds potential. You still have to remain patient, disciplined and self-aware. Me too… and every other trader in the world without exception.

There may be and in many cases will be more opportunities for profit. There will also be many periods of sideways chop and noise. Lots of counter-trend spikes and dips. Lower-low and higher-high traps right before abrupt hard turns the opposite way. Overdone price extremes will snap back for tradable distances, and final-hour moves into the closing bell may be dramatic.

For the first time in a long time, tomorrow’s FOMC news release will be one of uncertainty. The idea that fed posture and language could change here has players jockeying longs and shorts with plenty of fear on both sides. There is a high probability that Wednesday afternoon from 2:45pm est right into the closing bell and possibly all night long. Thursday could see dramatic price movement following fomc and leading into the non-farm payroll revisions report.

We’ll be ready thru all, that’s for sure

Trade To Win

Full Moon Risen

Today is the official full moon-phase for November.  In my career I’ve seen more than a few absolute slammer sessions on the full-moon day… no trend, just wild volatility.

This morning I staged TF sell orders at 564.50 and 563.50 as price pulled back into resistance. Each time price hit that mark exactly, v-turned and plunged away with no fills.

Swing low was 557.80, or three ticks above my staged 557.50 long signal into the 10am econ news. Again, price v-turned away from that entry attempt and soared to 569.30 in straight-up fashion.

News came out, price relaxed off the spike and wedged on both sides of daily pivot point. Four shorts at TF 566 area, four trades stopped. Stood down from further trade attempts at 11:30am est. TF signaled short at 564ish on a high-odds pattern at 12:10 ~ 12:15pm est sequence, then dropped dead to 553.00 lows.

Afterwards, sideways violence stretched into the closing bell.

*

Was short CL from 77.70 early, trailed out at 77.10 ahead of the 10am est news. That +$600 per contract swing was followed by three (3) more +$1,800 per CL contract swings, up and down and up before they flagged into the close.

Can you say “sideways violence”?

ES traded smoothest of all, ES is easiest of all for entry during high volatility because they back & fill most. Threw off cash potential all over the charts, multiple times.

No trend, no directional bias. Just random slam-bam price swings going every which way but loose. If you hit the entry – exit right in any symbol, you were profitable. If you missed any of that by a hair, might as well have missed by a mile.

Wild start to the new month. See how they roll ‘em around tomorrow

Trade To Win

Lower-High Watch

Both the ES and TF are off -70 index points from recent peak highs. The -$3,500 and -$7,000 per contract moves respectively might be customary gap-fill pullbacks to base support before new highs are reached from here. Or this could be the start of something bigger, below.

No one ever knows anything for sure when it comes to financial markets movement. Sure, lots of idiots out there play the prediction game and actually feel like they accomplished something repeatable when random chance makes them right one time. Veterans of the game know too well that surprises and unexpected outcomes are the norm instead of exception when it comes to market movements.

The best anyone can do is measure, weigh and posture positions. Right now we are on lower-high watch. If markets lift and fail, the subsequent failure probably continues the decline way lower than current. Wednesday and Friday last week declines were on much higher volume than Thursday S&P (lone) rally event. Selloffs always happen on heavier volume than rallies, but Thursday’s mark-up move up was especially feeble.

After months of waning volatility, markets are overdue for a period of heightened tape action. But all volatility is not created equal. Sometimes the pace will be strong but price action remains sideways violent in small ranges. Sometimes it will pullback deep into support or resistance repeatedly on the way up or down. Other times it is a smooth, steady ascent or decline.

Regardless, should be more distance and follow-thru on price swings. The markets will give us several opportunities this week to hit some solid gainers. It will also spend many hours in sideways, choppy congestion. Let’s take advantage of the former and avoid the latter.

Following the trade signals as usual. No bias either way, but holding short trades following upside failures with greater expectations for big profit potential. Until the recent highs are breached and/or markets stage higher low pullbacks going up, downside continued has the nod.

Trade To Win

Weekend Review

weekend discussion video here

Best Trading Wishes