Well, tonight’s the first night of a series of reports culminating in the Non-Farm on Friday. Today I want to examine what I’d look for if I were seeking to trade the ES. The fact is I am not: I am not convinced that the volatility is at a level that suits my comfort level. But if I were seeking to trade, here would be my thought processes:
- The 18-day (monthly trend) has confirmed a change in trend by completing a Whole Point Count, a Line Change Count and accepting below the Maximum Extension (see Nature of Trends). the 12-M may or may not confirm the 12-m change in trend. We’ll know come January 31st.
- I’d be looking for a zone to go short; that zone (see S&P I to V) is 1382 to 1386 basis cash. The stop would be above 1410.
- I’d be looking to enter the trade off the FOMC report.
- If the FED cut rates by 0.25 or less, I’d expect the market to sell off without reaching my zone. In that case, I’d give the sell a miss for now. If the market did rally, I’d still stand aside on the basis that a cut of 0.25 ought to have provoked a sell-off but didn’t.
- If the FED cuts rates by 0.50, I’d expect either a knee jerk rally or a rally that lasts till the close of today. In any event, the rally would have to reach my target zone. Once there I’d look for a sell setup and entry based on Market Profile and Market Delta Volume. This is my ideal sell scenario.
- If the FED cuts rates by 0.75, I’d give up the sell idea for tonight and reassess the picture tomorrow.
There you have it, a clear-cut picture. Unfortunately the current True Ranges would result in stops way outside my comfort zone. I am looking to trade elsewhere.
Refer this blog post to a friend or colleague…
