31 January 2006
Yesterday, Monday 30 January 2006, was a classic range trade day. The best trades of the day were early. A short based purely on the important price projection number of 112 21 should have been taken between 112 19 to 112 22 in the few minutes after the report. A long should have been taken after prices hit 112 10 and did not go further. The safest
place to take the long was 112 15. I got out of my trade at 112 19 due to my nervousness with taking a long trade when the market had just made a new low. In retrospect, 112 21 was
probably a given, however, due to the reasons I posted yesterday, I still stand behind my decision to close out. The next and final trade for the day was the cycle high I called at
0850 CST. Prices spiked to 112 25. You could have gone short as late as 112 22 and still made a quick and easy 4 ticks.
A few points to keep in mind:
Yesterday was a fairly narrow range trade day. While it is possible to have a range trade day for a second, a third and so on, day in a row, you have to be realistic and realize that
every time we have a fairly narrow range, look out for a large move coming soon.
The price projection numbers have held for Friday, and Monday. I have nothing to add for today in terms of new price projection numbers. To me this is indicative of the market being tightly wound up like a spring, ready to break forth. I usually have to make new calculations daily basis. I haven't made a calculation for three days in a row.
Price activity is showing that the following levels are important:
112 26
112 21 + or - 2 ticks
112 12 + or - 2 ticks
For the third time in a row, here are my price projection numbers that I calculated after the market close on Thursday:
113 10
113 01
112 30
112 21
112 07
The outliers remain the same as well.
Once again, it looks like you will be better off shorting the market at one of the key price projections. Keep in mind that the price projections only work if you are carefully watching price activity, volume and time and sales. You need to know that things are
petering out. That is the part that I know how to do. Call it intuition, call it a feel for the pulse of the market, call it what you will. Whatever it is, I have it and I don't think it is possible to convey exactly what "it" is here in this forum. I would stay out of short trades that begin to kiss the double 00's on the high side, i.e. 113 00, for reasons previously mentioned. On the other side of the coin, the more days that we stay in a narrow range, if we approach 112 00, look out below! I would say that my outlier low targets will easily be met, if we break through 112 00.
Finally, going back to the idea of a range trade day and its relation to a possible big move in the following day or days. Think of it as pent up frustration. Think of the frustration that you feel, knowing that the market will go down (or up), and then watching as it simply traded in a narrow range. Now project that frustration on the collective minds of all the market participants. When the dam breaks, watch out below (or above)!
With the above analogy in mind, if in fact the break is to the downside, and prices trade decisively below 112 07, you have a shot to make a quick 7 ticks with a target of 111 30.
