Thursday, January 23, 2014

Focus moves to China; Day Trading Newsletter 01/23/14; SchoolOfTrade.com



“Most people have no idea of the giant capacity we can immediately command when we focus all of our resources on mastering a single area of our lives.”

Reflections from Today:
·       Chinese PMI news overnight stirs up the markets
·       Chinese PMI showed ‘contraction’ first time in 6 months
·       US News did very little change the overnight momentum
·       Bad news sends equity markets tumbling off highs (-.65% @ 1171.9)
·       Bad news sends Gold higher (+2.25% @ 1264.0)
·       Crude Oil bucks the trend and keeps pushing higher! (+.65% @ 97.35)
·       Crude Oil reminds us that when ‘bad news is still good news’ we are officially trading a BULL MARKET.

Economic News for Tomorrow:

Tomorrow’s economic news calendar is completely empty, which is a rare occasion, and something to think about following today’s big sell-off in equities and jump higher in gold.


We will expect to see a slow day tomorrow, Friday, as traders finish up the week of trading and hit the weekend.

Friday are always going to be ‘early in and early out’ which means we will be looking for trading opportunities early tomorrow morning and finishing trading just after 12pm EST with no afternoon trading.

Day trading plan for Tomorrow:

Crude Oil:

VIP Chart:
Crude Oil is looking very bullish this week and our VIP Chart gives us some important clues for tomorrow’s trading session.

Crude Oil VIP
First, three days in a row of gaps to new highs at the opening-bell tells us the buyers are excited to be buying right now, apparently they see this price below $100 per barrel as a bargain? 

Second, the closing-print today was back in the middle of the range, which suggests that today’s VERY bullish market-sentiment may be coming to an end.

Third, tomorrow’s opening-bell will tell us exactly what the plan of attack will be.  If we open above 97.84 we are bullish again and buying pullbacks.  If we open below 96.81 now we know those buyers took profit and the sellers grabbed control so we will sell short below the 96.81.

We don’t have ANY news tomorrow, and on a Friday that means there will be less volume than on a normal day, so the likelihood of price-action opening in the middle of the range (between 97.84 and 96.81) is very high and we will consider buying the lows at support and selling the highs at resistance tomorrow morning.

Anchor Chart:
Crude Oil Anchor 1
Crude Oil continues to look VERY bullish on this evening’s anchor chart.  We can see a quadruple-threat telling us to be BUYING this evening and going into tomorrow.

First, the long-term-trend is clearly bullish.  As I just mentioned, we had 3 days this week where the opening-print was above the closing-print and NEVER filled that ‘GAP.’

Crude Oil Anchor 2
Second, the short-term trend is also bullish with recent higher-highs and higher-lows in the price-action.  This tells us that even going into the closing-bell today we still have buying opportunities in front of us for this evening.

Third, the ‘cloud’ is green, which means the short term prices are moving higher ahead of the long term prices.  In other words, we are more bullish in the short term.

Fourth, we are above all the key moving-averages on this anchor chart, which will all be acting as key-support this evening and into the weekend.
All of these clues tell us that we can BUY whenever we see a wave-pattern long this evening or tomorrow.

Gold:

VIP Chart:
WOAH look at Gold!  The news from China in the middle of the night on Wednesday night shook the confidence in the US economy and sent gold rocketing higher into Thursday’s trading session.

Gold VIP
Look closely at this VIP chart because there are some hidden clues in the price-action on the chart.

First, the multi-day relationship is very bullish with a huge gap-up overnight that was never filled.

Second, a very wide trading-range tells us that tomorrow (Friday w/out any news) is likely to be much slower and will usually be ‘range-bound’ and inside the range from Thursday.  Nothing is guaranteed, but when the price-action moves in a VERY wide range, we usually see a much narrower range on the following day.

Third, the closing-print gives us a BIG CLUE that this rally higher may be very short-lived.  We only saw ONE news report from China that shook up this market-personality, and it appears that the BIG candlestick wicks and the closing-print in the MIDDLE tells us that these buyers weren't very confident going into the closing-bell because we can easily see the buyers stalled about half way up the range.

All of these clues tell us that tomorrow is likely to be a much narrower trading-range type of day, and the buyers that pushed price higher TODAY most likely took their profit at the closing-bell today and we are very anxious to see if this price-action collapses back down tomorrow, or if this bullishness continues into Friday!

Anchor Chart:
The Anchor chart on gold leaves the window WIDE OPEN for anything to happen this evening and into Friday’s trading session.
Gold Anchor 1

We can see the sideways-trading-range that has developed in the short term on this anchor chart.  The long-term-trend is clearly bullish, but we have seen this many times before; a single news event pushes prices higher, and then there is no real demand for the commodity so the following day it collapses back down on its own weight back to where it began.

Gold Anchor 2
We can’t see any strong trend right now in the short-term on this anchor chart, so the most important thing on Gold is to prepare for all three (3) possible scenarios. 



Price-action can move higher, lower, or sideways so we want to be prepared to capitalize on all directions that are possible for tomorrow.

Mini-Russell:

VIP Chart:

Mini Russell VIP
The Mini-Russell (as well as the other e-mini’s) took it on the chin in Thursday’s trading session after news from China apparently spooked everyone while pushing gold higher by $25.00 and equities falling to weekly lows.

Look very closely at this VIP chart and you can see some big clues for tomorrow’s trading session.

First, multi-day relationship is bearish with lower-lows and lower-highs from 1 day to the next.

Second, we see a “short-covering rally” occurred as we finished the trading session today. 

Third, the closing-print today was just a tick or two ABOVE the prior week highs at 1170.8.

These three (3) clues, along with an intimate knowledge of these markets, tells me that this move lower was likely to be very short-lived.  

The big clue I see is the short-covering rally going into the closing-bell, which tells us that these sellers were NOT confident in their short positions to hold them overnight. 

Look closely and you can also see the closing-print today was above the prior week’s highs, which is a HUGE bullish clue from this chart.  I think these sellers had some fun today and tomorrow we will likely move back higher…but remember…trade what you see on the chart…NOT what I think!

Anchor Chart:
Mini Russell Anchor
The Mini-Russell anchor chart confirms for us that the sellers HAD control, but right now they are about to LOSE control to the buyers once again after a session where the bears had control from the beginning.

Looking at the anchor chart we see 2 sell-zones overhead at 1171.9 and 1177.3 which are both locations where we MAY see selling opportunities this evening and tomorrow.  I am going to be looking at market-personality tomorrow morning to see if these buyers are really taking control, and if they ARE I will skip the sell-side and look for buying opportunities above the 1174.1 and then again above the 1179.2.

If price-action moves LOWER overnight I am looking to buy the zone at 1167.5 and again at 1164.6. 


If price moves below the 1163.6 we can give up on the buyers and resume selling once again like we saw this morning.  I can assume that there are still plenty of bulls in this market for tomorrow, which means I am going to try very hard to get into a price-reversal at these buy-zones below and try to get into the move going back higher (assuming the buyers are there and we can find the entry pattern).

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