Hi gqguy2003,
I too monitor the Emini ES futures since its birth, traded it exclusively for many years before traversing to Emini ER2...
Yet, I will always continue to monitor the SPX.X, SPY and ES as if I can drop ER2 in a heart beat to put on a trade in ES.
Further, the S&P 500 is a key component of my intermarket analysis.
What moves the markets???
News, geopolitical events, FED events, economic events and other key markets (ex. oil, gold et cetera) are the
main reasons why the markets does what it does because they heavily influence trade decisions among the big boys and retail traders that trade the S&P 500.
This is a
fact and every trading day may have a different reason or several of the above reasons for any particular swing point.
I mainly approach my own trading via the above because of my background associated with the above and it has been consistently profitable.
So where does Technical Analysis comes into play in my own trading???
TA is very
useful for entry/exit signals in the above picture of what really moves the markets.
Thus, we should already know what's going on in the market prior to the use of TA especially since they are strongly connected.
The moment big boy movers or retail traders looks at their chart to say this is a good place to make a trade decision...
They are using technical analysis and such does not need to involve any indicators.
Further, every losing trader that I've met that uses TA
do not have a strong understanding of what really moves the market or they think its unimportant.
However, this can be an issue of semantics and that in itself can create debates about this...
TA all by itself does not move the markets!!!
Why???
TA is the tool used by many like you and I.
It can help to explain to others why the market did what it did especially if other traders have a strong interest in Technical Analysis.
Yet, to properly keep it all in context...the explanation should involve TA with the real reason the markets did what it did.
For example, one of my favorite TA tool is Japanese Candlestick Analysis to help with my primary trading tool involving intermarket analysis.
When I see a Bullish White Hammer pattern...
I don't see it as a prediction tool to tell me that the market will go up.
For me, I should already know what the market is going to do after interpreting (news, geopolitical events, FED events et cetera) for the day or at that moment.
If I think the market is bullish but don't know exactly when to open a Long position...
That's where the help of TA comes into play.
More importantly, when that Bullish White Hammer pattern appears or the appearance of any other type of bullish price action...
It confirms my already existing
bullish perception (not prediction) of the market.
Simply, understanding the markets should always precede Technical Analysis and not the other way around.
That reason alone is why many can't understand why some traders using TA are consistently profitable because profitable traders (those that have endure for many years and longer) have a strong understanding of what really moves the markets.
The debates occur because backtesters or doubters of TA approach their testing of TA from the view point of TA all by itself instead of from the perspective of consistent profitable traders...
Understanding the market prior to using TA as a trading tool for entry/exit signals.
With all that said, let me try to answer your question although it was directed at someone else.
And if you think that the news really is the answer and that technical analysis doesn't move the market anywhere as you say, please tell us specifically what bit of news came out on 8/16 prior to 12:02 pm cst that caused the SP 500 futures to stop the sell off? Yes I would really like to know how it is that news explains all the intraday moves? And the intraday moves is all I am concerned with. I focus only on the 500 futures not on any individual stocks.
I got wind of
rumors on August 16th Thursday that the FED will take it one step further (beyond injecting money into the markets)...
To help bring some confidence in the financial sector after all the disturbing credit issues et cetera that started coming to surface around mid July.
Since mid July (if you've being paying attention to what moves the markets)...
It's been very bearish and disturbing of what has been occurring in the financial sector.
Heaven for many traders that use trading methods that do well in high volatility market conditions.
Yet, scary for many investors or those working in the credit industry and industries related to it.
Next, as mentioned, I started hearing about a
rumor involving the FED getting a little more involved to stabilize things early morning August 16th Thursday.
That doesn't make me bullish but it does tell me I need to be alert and careful in my Short positions.
On August 16th Thurs around 12noon est, market still looking bearish especially in its reaction to the 12noon est Philly FED survey (FED event).
Market pushes down hard then volatility suddenly contracts (TA analysis) and the market reacts by attempting a counter-thrust upwards just prior to 1230pm est.
Volatility expands again but the market doesn't follow upwards.
Instead it drops again until it gets slowed by contracting volatility around 1245pm est.
Guess what, there's that rumor again about the FED getting involved.
I'm starting to think the following:
* Price decline in reaction to the Philly FED survey has problems with the contracting volatility.
* Other key markets reacting the same (intermarket analysis)
* Rumors of FED pending involvement
I"m now changing my perception of the market along with reducing my position size on Short positions to better manage the risk exposure.
Then around 1245pm est I start seeing a few White Hammer Lines in key markets besides the S&P 500 (intermarket analysis).
I talk to a fellow trader that trades big in Gold and Oil...he too hears the rumor about FED and begins reducing his position size on Short positions.
Next, I see a few news alerts that a few major financial lenders have borrowed billions from bank to fund loans to prevent a collapse
I'm now convinced the FED will get involved especially with the rumors of such an involvment circulating in the markets down to us retail traders.
Markets then contracts again along with some Hammer Lines showing up in the s/r zone of the prior Hammer Lines.
I'm now looking for any bullish price action because my perception (understanding of the market) has changed from bearish to bullish.
That's when I saw a few bullish white hammer patterns in key markets and did my first Long positions (back to back) with the first Long position around 1:03pm est and the second Long position around 1:11pm est in ER2 to correlate with my new perception of the markets.
Nice price movement upwards and there's a retracement back to the s/r zone of that bullish 1:00pm - 1:15pm est price action.
What happens next???
There's one heck of a rally upwards that becomes the talk of the town among traders and the financial TV networks.
We all know what the FED did the next trading day around 0815am est after that
scary feeling slowly returned in the overnight price action.
Was it
all Technical Analysis or was it an understanding of the markets prior to TA along with managing the risk exposure of that understanding.
I say the latter (to answer your question aimed at someone else) and it didn't need to occur exactly at 1202pm cst (1:02pm est)...
It was an accumulation of events and its
OK to use TA to help explain those events but its
flawed to say its the reason why the swing point occured.
An analogy, the market is like a book and TA is discussed in the last few chapters.
To ignore everything else and only read the chapters about Technical Analysis may be ok for awhile but eventually it will catch up to you along with not allowing you to fully understand the book.
Mark
(a.k.a.
NihabaAshi) Japanese Candlestick term
