Thursday, August 2, 2012

ES - 2 August, 2012 closing re-cap

Pre-ECB ramp-up to the extreme 78.6% fib retracement of entire previous movement = Tuesday high @1383.

Disappointment at Draghi's announcement starts the sell-off.

TH opening ramp-up to 50% fib retracement (h.10:25), drawn from anchor point ECB high (validated by the 78.6% = Tuesday high).

Low of the day at -23.6% standard fib retracement of same previous 50% fib retracement =  -50%fde opening gyration (TH 60m OR) = RSI/price positive divergence.

Notable (see two charts above): when, at the ramp-up opening, the ES had reached the 38.2% fib retracement of the larger possible high-to-low, the $DJI had not yet. When the $DJI reached its 38.2% fib retracement (h.10:25), ES was @50% fib retracement of the smaller proportion and that was then enough to continue lower (i.e. $DJI proportion is leading).

Realized P&L was €1,890.

I end the day flat.

ES - 2 August, 2012 pre-ECB set-up

In keeping with the larger short bias portrayed in the Week-end review (23-27 July, 2012), I would initiate short positions, should the market reach the following levels:
 - 1384.75; and
 - 1386.5.

The shorts would be invalidated upon the Dow Jones Industrial Average ($DJI) breaching and staying above 13128.64 (Monday top), during cash trading hours.

On the flip side, I would split a long entry between 1363-1364, for a 3-5pts target.

Wednesday, August 1, 2012

ES - 1 August, 2012 closing re-cap

The reaction to the FED announcement brought the market to the bottom of a descending channel (anchored to TH high/low) = -23.6%fde.

Realized P&L was €700.
I end the day flat.

Tuesday, July 31, 2012

ES - 31 July, 2012 closing re-cap

My reading of today's action is that the market needed to test a supporting proportion out of the 
Friday/Monday comfort zone, in order to maintain a bullish bias into FED (Wednesday)/ECB (Thursday).

The support was found at a -23.6% virtual 38.2 standard fib retracement coinciding with a -50%fde.

Notable is the fact that the break that led to this support happened swiftly just at the cash close.

Realized P&L was €493.

I carry 2 ES long@1372.5 overnight.

Monday, July 30, 2012

ES - 30 July, 2012 closing re-cap

My reading of today's action starts from the cash chart of the $DJI, piercing: a) the -50%fde; and b) the upper boundary of the large descending channel.
Intra-day trading proportions, to match the larger/stronger cash multi-day resistance proportions, were developed (see chart above).

In particular, the fact that twice a -23.6%fde acted as support (at Globex and TH time), the TH one being as a reversal of a preceding TH proportion and the fact that all happens on a Monday, portrays a bullish bias, at least into FED and ECB by Wednesday/Thursday or even Friday with the Non-Farm Employment Change.

Realized P&L was €872.

Due to the day bullish bias, I carry 1 ES long@1381.5 overnight.

Update 1: Just before the EU opening, my conservative profit target (-100%fde of intra-day gyration @1385.5), on the 1ES long was reached, for a 4pts profit.

Sunday, July 29, 2012

Week-end review (23-27 July, 2012)

The activity statement for the past week is shown below

Starting the week (and the blog), with a €100k initial capital, the realized performance was €6,483.53 or a 6.43% time-weighted rate of return. 


The stated intent of my blog is to keep track of my trades and my performance, I therefore, via this blog, did not mean to be consistently conveying a comprehensive view of the markets.

Having said that, each trader has his own view of the wider movements of the markets and although I have learned that to be able to trade I do not have to be too fixed on egoistic ideas of where the market should go next, there might be times/junctures when stating a bias might be more appropriate.

This, in my view, might be one of those few instances.

Long and medium term view

My long term view of the market is visually represented by the above monthly, log-scale chart of the Dow Jones Industrial Average ($DJI).

I think it is self explanatory, but few clarifications might help.

 - The fib fans have been anchored to the 1982 low and to the 2007 all-time high.
 - 1982 is relevant because: a) it was the year of a global third world debt crisis (see the following documentary, to appreciate the similarities with the crisis we live in our time: Prisoners of Debt: Inside the Global Banking Crisis); b) it was a time when global central banks, the governments and the IMF decided it was preferable to inflate their way out of the crisis, rather then face it (the effect of this is visible on a monthly, non-log scale chart of the same $DJI dating back to 1900,... notice how 1982 is the year when the exponential global-liquidity-driven growth starts).

Reverting to the $DJI monthly log-scale chart (see a close-up below), notice also how 2009 found support at the lower fib fan, indicating the 1982 growth trajectory was not broken.

Finally, notice how, since the 2009 low, the market rode the middle fib fan on its way up, again corroborating the view that the 1982 growth trajectory was in place.

and now? ...

2012 saw a warning sign, a RSI/price negative divergence appearing at the upper boundary of a large descending channel, formed with anchor points the lows of 2002 and 2009 and the all-time high of 2007 (see chart above).

This, in my opinion, is enough to warrant further investigation into what proportions might be unfolding.

The market might be on his way up, still riding its 1982 growth trajectory, measured by the fib fans, or it might have developed a counter proportions (the large descending channel).

My current view is that the market has stalled at a very important juncture.

It is too early to say if the prevailing long-term bullish proportion (the 1982 fib fan) has run its course, but what I think it is possible to say is that, even maintaining this bullish stance, there is room for the large descending channel to prevail, at least temporarily (weeks or months).

To help me gauge the next movements of the market, I will use the fib matrix on the weekly $DJI chart above.

A break and staying above the 1st May, 2012 top @13338.66, would signal the bullish stance wins.
A failure to break above 13338.66 and a start of a decline (in the next few days/weeks), might see the market test the 11706 area.
Should this support (11706) fail, my medium/long-term bias might switch to bearish and the main proportions affecting the market, might switch from the up-trending fib fans to the down-trending channel.
Should the 11706 support hold, the bullish stance will have to be tested again, at the top of the red channel.

Trading the short-term

In my opinion, trading can and should be conducted identifying intra-day anchor points and their emanating set-ups, without the need to elaborate too much on medium to long term direction/forces/proportions.

In this week-end review, however, following the dissertation above, I would venture in showing the above tradable hourly $DJI chart.

The -50% fib diagonal extension @13123, reached on Friday at the close, is sufficient, in my experience, to say that an ABC correction might have run its course.

If this were the case, a potential wave 2 would have completed and a wave 3 down could unfold, to at least the 11706 area (as stated above).

This wave 2 set-up might extend higher, in the next days, but a break and staying above the 13338.66 level would invalidate it.

For as how much this potentially bearish set-up is intriguing (at least for a trader), we have to keep in mind that next week both the FED and the ECB are scheduled to release official statements and we all have understood that they will try everything to counter the deflationary forces that the bearish proportions explained here imply.

For this reason, as traders, extra caution is warranted.

Post Scriptum

Have you also had the impression that this week rant by mr Draghi (Enter the Draghi, ... the first part of the video on mr Draghi is fun), was a bit over-done and emotional and resembled the rant by former Greek finance minister Giorgos Papakonstantinou warning short sellers that they will be crushed? When I saw mr. Draghi, I thought that, if Central Bank policy communication becomes open reprimand, this might signal a weakness and not a strength on their part. Let me know what you think...

Friday, July 27, 2012

ES - 27 July, 2012 closing re-cap

Today I could trade 2 interesting short set-ups.

The first, @1362.25, was discussed in the previous post.

The second, @1384.25, had its roots in the anchor points dating back to 19/06 and 25/06 (see chart above).

Realized P&L was €1,025.

I end the day and the week flat.

ES - 27 July, 2012 EU Globex session

1362.25, as per previous post (see ES - 26 July, 2012 closing re-cap and chart above), was the exact level for a short (top was 1362.25 at 2:45EDT, 8:45CET).

Thursday, July 26, 2012

ES - 26 July, 2012 closing re-cap

My reading of today's action is in the chart above. The market started today the leg-up that I was expecting and by the action and the proportions that unfolded, it looks like a wave 3 thrust, of what degree I do not speculate.

Based on extension projections of 3 different proportions (see chart), I see a short @1362.25, for a conservative 2-3pts profit target.

Realized P&L was €3,956.

I end the day flat.

ES - 26 July, 2012 pre-opening set-up

My take on what just happened following ECB's Mario Draghi bullish comments.

The market had reached the support given by a previous top @1327.75, coinciding also with a corrective pattern measured by the 100% fib extension of an abc drawn with the pivot points of yesterday's reaction top @1339, subsequent low @1330.5 and Globex high @1336.5 (see chart).

That abc was enough of a correction when the market-moving news from the ECB came in.

I have just downloaded my long position @1343.5, in order to play the 8:30 news and US cash opening freely.

Update 1. it looks like I left a lot on the table exiting @1343.5. Even though my bias remained bullish, I thought I could be better off playing the gyrations of news and US cash opening, but I might have to conclude that I have underestimated the reaction of traders to Central Banks, which I have witnessed in the past, and the thrust of a potential wave 3, according to the count that I was following (and that is visible on the chart).

Update 2: Draghi's comments were released at 12:22CET, while the ES touched the low@1327.75 at 11:06CET, a full 1h and 15min before the supposedly market-moving news. This is reinforcing my opinion that the market had already done a correction sufficient to resume the up-trend.

Wednesday, July 25, 2012

ES - 25 July, 2012 closing re-cap

My reading of today's action is in the chart above. The market might be accumulating, to fuel the next leg up. This accumulation could also see the EU Globex session low re-test @1325.25, which coincides with a 78.6% retracement.

Realized P&L was €914.

I am carrying a 6ES long position overnight and would add 2long@1325.25, keeping the stop below 1319.75.

ES - 25 July, 2012 pre-opening set-up

The long 1@1321 set-up was front-run by 1tick (see my 23 July, 2012 post), as the low was established in Globex @1321.25.

I am now long 2, avg price 1328 and have a long bias for the day, if the 1319.75 previous low is not breached.

I see the potential for this move to reach and trespass the previous high@1376, as in a ascending diagonal triangle, with overlapping waves.

Short-term, for intra-day trading, I see that the matrix of fib levels emanating from the two pivot points currently validated (1321.25, current low and 1339.25, low on FED testimony day), gives 1343.5 as relevant resistance. If reached, I plan to take profit on both my 2 longs there and revert to intra-day scalping until that level is cleared, to resume the long bias, or until a new set-up is evident.

Tuesday, July 24, 2012

ES - 24 July, 2012

Yesterday I set up my IB account with a paper €100k starting balance (minimum required to trade margin securities).

Today was the first day of trading it.

During the day, I did not post any trades because:
 - In the first half of the day, the market did not reach my hourly set-up. At this stage, my trading was pure scalping through the mood and the very short-term proportions at pre-lunch gyrations;
 - Then, the market caught me by surprise, breaking before lunch to the downside, through various supports. I took a few counter-trend long trades along the way, with modest draw-downs, that I was able to average, based on my projections of potential extensions.

Average entry size was 5 e-mini contracts.

Realized P&L was €2,009.

I am carrying a 1ES long position overnight, because the early-week corrections have lately allowed a subsequent rise for the rest of the week.

Monday, July 23, 2012

ES - 23 July, 2012

Open positions: none

Next possible trades (subject to confirmation as market approaches):
Long: 1 @1330.5
Long: 1 @1321
Short: tbd


Dear reader/trader,

I am starting this blog to keep track of my trades and my performance, prompted by the last 12 months results on my real-money futures account (108.4%, Sharpe ratio 2.69) and by a friend's encouragement.

Trades (entry, target, stop, size and timing, when possible), will range from intra-day (mainly), to weekly and will be posted with a chart.

Expect some fine-tuning over the next few days/weeks, as I will need to ride the blogger learning curve.