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.
  1. 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.
  2. 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.
  3. 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.

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