Wednesday, November 26, 2008

Wednesday Notes - A TICK Tutorial

10:15am Going to do some in-depth intraday note taking today to try to maintain a sharper focus throughout the day. Not looking for a home run chip gain day on this pre-holiday trade, but do want an "A" grade on focus by the end of the day.

Got a decent night's sleep and nibbled on Europe's 7:30am ET breakdown via short pullbacks. The U.S. open has been tricky as there have been no clear patterns, and I've been highly reluctant to short for anything other than quick brief resistance scalps given the VIX is downtrending, and have been taking sure, tight clips on any entries thus far to try to get a rhythm going.

10:26am TICK strong so far ... spending more time above zero than below and stronger pushes to the upside. Clean long entries a bit tough, although staying away from shorts has been smart ... so far, that is. ES been clearly rejecting lower prices since early Friday afternoon and I have to respect that. We're also trading completely within Friday's late afternoon range, so all trades are scalps only.

I'd really like just one or two clean shots if the market can get its juices flowing either way today and simply sit out the rest of the time in a highly focused state. Simply put, I want to be highly selective today, and volume could slow to a crawl later heading into the holiday.

10:36am Shaping out to be one of the grind-it-out days. Apparently not many "stuck" traders on either side to fuel a fire one way or the other.

10:44am Imagining I'm sitting at the cash poker game ... fold, fold, fold, fold. Starting to wonder if there's even a face card in the deck. Both 5-min & 15-min ADXs exactly at 12.11 ... gotta be some kind of numerical oddity. Certainly no help there.

Very much a range trade, which is clearly not my strength. Even 1st pullbacks on attempted 1 or 5 min trends are somewhat risky. Of course the longer we coil, the harder the eventual break.

One thing is certain. If I can get the day's chip gain over +$10K, I'm putting a major trailing earnings stop in place for the day. While I don't normally care to focus on the day's #s like that, seems appropriate today for a number of reasons.

10:54am 7-point ES surge out of the flat line. Buying the next TICK pullback.

10:56am Nice, caught 855.25 ... best exit 857.75 and took it out into the climb. Small size.10:58am Ditto 856.00 to 857.75. Will post chart shortly. Micro scalping with small sizes ... not much market depth right now. Path of least resistance up for now but taking high-probability clips. Still inside Tuesday afternoon's range, but 5-min giving it a try. Just doesn't seem like there's enough volume for a strong push though. Europe did something similar after its open, and then imploded after catching long breakout traders on the wrong side.

11:04am ES 5-point plunge ... good reads and decisions. Here are the charts (click to enlarge) of the 1-min ES and 1-min TICK blown up to highlight the micro-scalping. The entry points are the blue circles on both price and TICK. Note the TICK retracements after the price break. 5-min could still extend, but we're still within a larger range and if it does, there should either be another pullback on a higher timeframe or extreme price to scalp short again.

11:11am ES next thrust up approaching top of Tuesday afternoon's range. TICK pullbacks remaining the best entry points so far. 1-min 3LB also long for now. Have to continue to respect the market micro-strength (in this day and age, we'll define "strength" as lack of weakness!) as well as the current range. Still not interested in longer term shorts.

11:18am ES still not able to break its Tuesday PM high of 864.25.

11:21am Until now ... by a single tick. Lower TICK reading on that last surge though ... that might be it.

11:24am TICK reading lower again on this push and stretched from 5-min support ... scalp shorted for 0.75 but expecting a deeper retracement. Will buy any push toward 856 ... the closer to 856 the better.

11:30am ES pulling down ... 4 points off high. Been purposely leaving some meat on the table, as I'm going for prime center cuts only. I'll let the other players at the "table" gamble.

11:49m TICK pullbacks still the prime entries and TICK holding solidly above zero. Doing light scalping & scratching as I get a bit more active. 5-min ADX back over 20. Granting my first national interview in almost four years at noon, so I'll need to step away for about 30 mins ... more on that at a later time. Hopefully, it won't be the kiss of death.

12:55pm Back. Slow grind up, but don't think I'd have entered anyway. Volatility slow grind down. No trader emotional extremes to benefit from and definitely a pre-holiday non-existent pace so far.

1:10pm Trend mode up off open so far ... one of those days where on the surface, pros taking sure profits look foolish as reentries are tough. Such is life.

1:51pm There's an old trader adage ... if you have to squint, pass. I'm squinting. You can't get blood from a stone. Volume dying as expected.

2:00pm zzzzzzzzzzz. Let's see if the 2pm express shows up.

2:17pm Market still rejecting lower price probes. Strength still there.

2:20pm Long 868.25 on TICK pullback after last break up ... should pop.

2:22pm Sweet ... took it out into +1230 TICK toward 871.00. Similar sequence to earlier in day.

2:30pm And again ... 870.00 to 872.00. TICK gets the indicator of the day award, with an assist from the VIX.

2:33pm Nice pop through high of day. Shorts getting squeezed. Might be one more good pullback. Finally some emotion in the charts. (Just takes one group to be hurting, and 'twas the shorts this time.) We have pace!

2:37pm Sitting at 872.50.

2:39pm Took small at 874.00 already out on pop. Want to buy any further thrust down harder. Here kitty, kitty.

Trailing stop on day chip gain now in effect.

2:45pm You're sometimes damned if you do, damned if you don't on waiting for deeper retracement entries. Might still get one more though ... day's not done yet. Will respect the day's trailing stop though and not get caught in any last 30-min whipsaws which has often been the norm.

3:02pm TICK still a horse. In watch mode.

3:11pm VIX still sustaining a 15-min downtrend and now "down" to 55. Almost a 30 point drop in 4 days. Shorts the ones now feeling some pain, although 2008 longs have more than a few legs up on them in that department.

3:27pm No trades but fervently watching.

3:35pm Tried teeny short probe on possible double-top and scratched almost immediately for -0.50. Small size and still respecting the trailing stop.

3:47pm OK, that's a wrap. Stuck a few toes in toward the end, but pretty much watched the close. Locking the gain in at a little over +$10K.

As expected, a very modest P&L day by recent standards and sizing was perhaps too light (will have to watch that if volatility continues to implode), but grading an A for solid focus and market reads, for not looking to short on this pre-holiday strength trade, and for the discipline in respecting the trailing stop during the late trade. Trend days from start to finish are always tough for frequent traders as re-entries can be few and far between, but I'm not going to complain. We'll give this day to the swing longs and investors.

Blog onlookers may want to print today's post and charts as the TICK provided some stellar real-time lessons, and I tried to capture some of them in the charts.

Europe is of course open tomorrow and the U.S. is open for 1/2 day on Friday, but I don't expect to trade much, if at all. I'll post throughout the holiday weekend though and include the November wrap and most likely a video.

In the meantime, I wish you and your families a wonderful Thanksgiving.


traderboy said...

Excellent trade commentary today Don. Thank you for sharing your thoughts so in-depthly. I hope you & your family have a wonderful Thanksgiving holiday as well.

Take care,

Bob said...

Hi Don,

It is very interesting to read your trading commentary. What is your view on the market at this time ? How far do you think this rally will go ? Do we pullback first before we go up ?

Have a happy thanksgiving.


Don Miller said...

Hi Bob.

I honestly have no idea and simply choose to focus on more predictable intraday periods.

Have a great Thanksgiving.


Anonymous said...

Happy Thanksgiving Don!