michealday: âNotice at 11am in two minutes 16 points up exactly at the moment when chart is telling you to go short.â
There was a valid short-term sell signal, according to my system, as of the 9:50 CST bar (1234.00). Interestingly, this was generated on the NQ but just missed being triggered on the ES. Accordingly, I would not normally have had a problem with your intention to short but I can give you two reasons why I held off from adding to shorts or trading at all during that time period.
1) News: A false report had begun circulating (9:16) about additional cases of anthrax. A quick sell off and fast market rules apply. Between 9:26 and 9:46 we entered a period of tight consolidation, more apparent in the ES, as uncertainty reined. From there we drifted up on relatively light volume until the previously mentioned 9:50 sell signal.
Had I sold the market at this point I would have been concerned about the consolidation providing a barrier to the downside as juggernaut pointed out. I do not feel, though, that 1226 specifically was a âmajorâ support point, as the degree and extent of S/R can depend on your time frame, as well.
When the news was determined to be bogus we immediately bounced back to the area of trade prior to the story's release. Many times in the past, when this type of situation has occurred, the previous area is filled much in the same fashion as a gap trade. Quick and brutal if you get it wrong.
IMHO, when unconfirmed reports are circulating and the market is in a delicate reactionary mode, it is best to step aside and, in certain instances, close out existing positions.
2) We were in a zone of support that encompassed a fairly wide range in the NQ and a similiar range, although a bit smaller, in the ES. The S/R is based on the TF that I predominately trade off of. As uptik2000 mentioned, I too would have been more inclined to add to a short position if we had broken through the consolidation to new lows. I believe, though, that we would have been in for a grinding trade down through the 10 NQ and 4 ES points below each of their respective lows.
