Shredding the Markets and watching 1693 $ES_F

Today’s Economic News:

image

We hate to give a 0% inflation number the green light, but compared to the last deflationary read we like the German trend a bit better how.  All quiet on the Western front today so we will watch what this slow rising tide action will bring.

Quote of the Day:
Reason often makes mistakes, but conscience never does.
–Josh Billings

Featured Breadth Chart of the Day:

image

Strong trend mode type action.  

 

Comments and Levels for the Front ES (S&P500 – Emini futures) contract:

Short: 1693
Long:  1665

image

It was all upside yesterday and the trend continues. Up, Up and Away!  1684 has broken and we would expect the same today.  New highs are piling in once again (327 yesterday on the NYSE!).   So our downside target should actually be 1665 and we forgot to raise it today on the charts visually, but that is what we are writing down.  Upside, we are looking to extend to 1693 if we can break that 84 again.

I wanted to take a few minutes to talk about the ATR indicator (average true range) that is sitting on the bottom of my charts.  I just put them up the other day to answer a question from a reader and never took them down, but it is interesting to note that we are watching the ATR trading below 3, a random point that I have used in the past to help me judge the waters.   I think of that three as the cut off point between calm trending markets and non-trending markets.  When was the last time we were below three?  Since the time span from the end of April to the highs in May, another amazing trending time. 

The reason I brought the ATR out was because a trader a week or so ago complained about getting stopped out with a 2 point stop.  It was during a time that I didn’t even think the market had moved 2 points.  It did.  It was just a really unfortunate entry.  It happens to all of us.   The problem was, and this is when we  hate those safety nets, the trader was right and the market took off.  That is when it hurts the most, when we find ourselves sitting at the starting gate with a loss and everyone else is “winner winner chicken dinner”.  It hurts.

I have talked to many traders over the years about stops and here is the dirty little secret: the wider the better.  There is not an automated trader out there that doesn’t know that.  There is so much noise in the market that Draghi flapping his lips in Germany can take you out of a good trade at any time.

You have to know about noise.  You have to now about volatility. You have to know about range.  It has to be part of your trade setup and management.  We are in low volatility now.  If you need to make the same amount of money out of this market as you did last week when the 60 minute ATR was above 4, you need to adjust, it is not the same market. When traders say to me “I always use 2 point stops”, I hear “I always use a 9 iron”.  That doesn’t make sense to me.  I suppose it could work if your are adjusting someplace else.  There are plenty of adjusting tricks.  One of my favorite is moving time frames.  If you find you trade well in an ATR of 4, then find a time frame that is giving you that and trade that time frame, then you can keep your stops fixed. Maybe.

Iimage don’t know anything about surfing except that it is best done in the ocean, and preferably a warm one.   I live on the coast of Maine and our water temperature here is just hitting 70 for the first time this year, thanks to an unusually warm summer.  Usually the water is cold.  Between 60 and 70.  It is very different than Florida. That doesn’t stop dudes and dudettes from skinning up and  waxing on.   If you want to know what it is like surfing on our beach you can watch this video.  It ain’t Hawaii 5-0 for sure.  Surfers travel from Canada to hit these waves (what is going on up there? life must be really boring).

Here is the thing about the ocean.  It is different everyday and in different places. Did you know there are different surfboards depending on the conditions?  I have enclosed this handy little chart to help you pick your board.  It has inspired me to make the same chart with ATR on the horizontal and Market conditions, trending  -> chop on the vertical and to put down my strategy in the different quadrants. One of those strategies btw is stay out… you just are not good enough or rich enough to shred this market, watch the pros.

I have my homework cut out for me, if you have an adjusting chart like this, I would love to share it amongst the readers  (I am looking to cheat).

Happy surfing (I will stick to the web kind). 

 

On the MiM:

image

MiM is just showing us that the close was blah… No strong readings in either direction so a bit non-directional moving back an forth across the great divide.  Not even worth talking about the best or worse trading time frames since no one should have been making directional trades based on that.  If you did and you are killing it, let me know.  I know it is disappointing when we don’t get that strong MiM signal, but even having the above information, a do not trade the MiM signal (you of course can use your other tools freely) is invaluable for that closing hour.

Today is Friday.  Fridays are important.  Watch how this trend up week closes.  It will be important for Monday and next week.

 

 

Comments about TLT (Twenty year Bond ETF):  

image

108.75 is the target one more time and a failure there should take us down.  Break out and we are talking about filling the gap at 110.

>>> Follow us @redliontrader<<<<<

 

Breadth Charts in Full :

Zweig Breadth Thrust:

image

Looking good.  In fact so good that the market can go up while the Zweig is going down.


Cumulative Volume Index:

image

Good

 


Number of NYSE issues trading ABOVE their 40 day moving average (40DPI):

image

How is that for a recovery.  20% of stocks above their 40 DMA and now 65%.  Nice.


New Highs / New Lows ratio chart :

image

They are loving the same stocks over and over.  Very nice for the bulls here.


Trenders :

Short Term Trender –  McClellan Summation Index:

image

Bullish:


Long Term Trender –  Cumulative 4-week Highs – Lows (the fat lady):
image

Bullish

Thank you for Reading –
Marlin aka RedlionTrader @redliontrader

 

DISCLAIMER: The information and data in the following report(s) were obtained from sources considered reliable. Opinions, market data, and recommendations are subject to change at any time. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any commodities or securities. RedlionTrader.com, its  officers, directors and its contributors may in the normal course of business, have position(s), which may or may not agree with the opinions expressed in this report. RedlionTrader.com, its officers, and directors are not agents, representatives, or affiliates of the CME Group or any trading entity. Trading Futures, Options, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. Any decision to purchase or sell as a result of the opinions expressed in these report(s) will be the full responsibility of the person(s) authorizing such transaction(s). BE ADVISED TO ALWAYS USE PROTECTIVE STOP LOSSES AND ALLOW FOR SLIPPAGE TO MANAGE YOUR TRADE(S) AS AN INVESTOR COULD LOSE ALL OR MORE THAN THEIR INITIAL INVESTMENT. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.