I did not trade much yesterday – I spent the day playing Battlefield 3 keeping an eye on the market.
Yesterdays market action was a classic buy the rumour sell the news, or so it seemed. The V shaped pattern formed after a pre-market run up on news: “German Bundestag passes EFSF motion with large majority” – the market ralled in the European session but got sold off violently in the American session. It then found support near the previous days low to get rallied on rumours of Chinese assistance in Euro bailout (later discredited).
I had a short pre market which I cut far too soon. I did not re-enter until much much later on a pullback to vwap from beneath. It was lunch time and I feared market maker head-fakery so I cut it at breakeven to watch it drop 5 minutes later. I left it at that and watched the rest of the day play out. I am succeeding in knocking overtrading on the head, a major milestone for me. I am looking for one good trade a day for now.
I added some commentary on what I saw:
On Tuesday I noted: “delta is positive but price way below the open – the opposite of a short squeeze is a leandown” – I found it on undergroundtrader.com
On the macro view: I asked Benko if he thought the balance would breach 1250, he said he felt his theory from big picture 10/20 was still valid. Having this idea in advance does not guarantee anything but at least it assists in knowing there is some rationale to a move.
Theoretically: as far as support and resistance goes, the more confluence at an area the stronger the support and resistance. Approaching the June lows from the downside – could the range be 20’s – 60’s for a period? – average daily range has been > 20 points of late.
As ES is between R2 and R3 I went to find what I read about pivots before:
The result: there have been 2,026 trading days since the inception of the euro as of October 12, 2006.
The actual low has been lower than S1 892 times, or 44% of the time
The actual high has been higher than R1 853 times, or 42% of the time
The actual low has been lower than S2 342 times, or 17% of the time
The actual high has been higher than R2 354 times, or 17% of the time
The actual low has been lower than S3 63 times, or 3% of the time
The actual high has been higher than R3 52 times, or 3% of the time
Not quite a normal distribution – is a short above 1284.25 a 33/1 shot?