The 3-2-1 Approach: A Simplified Method for Trading Any Market

Contract Rollover in the Bond Today

Today the contract rolls from Dec to Mar. Expect a range bound day w/sellers above 128-08 and buyers below 127-12. If normal post Thanksgiving dynamics prevail, it should be a very quiet day. Trading stops at 1215 CST today in all markets. The indexes should be on hold awaiting Black Friday retail sales input. Retailers are offering more discounts this year than normal. Want to trade the market form both side. Structure favors higher prices w/help from the indexes. The normal spread between the expiring and new contract is 30/32 32nds. The Dec/Mar spread is currently trading at 30/32nds. First sell band is 127-27/31. Preferred sell band is 128-03/07. First buy zone is 127-17/21. Preferred buy zone is 127-09/13.
 
Examine Multiple Factors Before Making a Trading Decision

The attached chart shows a set-up that occurred right after the opening on Monday December 1st.

The Bond market had just pulled back 20 ticks after rising 50 ticks overnight. Here are a couple of factors that should have been apparent to you before entering a trade.

1. The 8:19 bar is real skinny and compressed, indicating a lack or selling interest.

2. The mode (the level at which the highest volume occurred) is increasing on every bar that has tested the new low.

3. Volume traded at the ask is increasing.

4. The 8:20 and 8:24 bars have deceleration squares and diamonds, again shwing the the selling interest is drying up.

5. Finally, the 8:24 closes on its high.

The proper entry is at the close of the 8:24 bar. The market then rose 19 ticks. Taken together, these factors can help you make an informed trading decision.
 

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Market Makes New Highs

F2 Comments: The OVN session, first half of day session and post lunch session all traded higher. The market closed strong and is pointed higher. If the buying doesn’t get started early in the session, I would expect a consolidation day w/sellers above 130-24 and buyers below 129-20. Time will tell. No major news scheduled tomorrow morning. Auto and truck sales is tomorrow’s news. If the ES is sideways to lower, want to buy early weakness and see if 131-00/13 can be taken out. If resistance holds, will look to the short side of the market. First buy zone is 133-05/09. Back up buy is 129-29 OB.

F2PM12-01.jpg
 
ADP Employment on Wednesday

F2 Comments: The market paused and set back looking for support after yesterday’s strong buying. Longer term buyers entered the market at 129-16/24 and the Bond was steadily higher thereafter and did close strong. The Bond is pointed higher tomorrow w/some help from the ES and news. Some news tomorrow. ADP Private Employment Index is forecast at -173K. If the ES is sideways to lower, want to buy early weakness in the ZB and see if 131-16/20 can be taken out. If resistance holds, will move to the short side of the market.

F2PM12-02.jpg
 
Jobless Claims on Thursday

F2 Comments: The market was bought again today. The long term buyer supported the ZB yesterday at 129-16/20. Today’s long term buying supported the ZB at 130-12/16. As long as the news remains supportive the ZB should be sideways to higher. Today’s activity supports buying early weakness tomorrow. Tomorrow’s news: Jobless Claims is expected at -525K and Factory Orders at -2.7%. First buy zone is 131-21/25. Back up buy is 131-13/17. Market must take out 132-12 to stay w/your longs.

F2PM12-03.jpg
 
Stay Patient During the Chop

This morning, the Bond market was trading in a narrow range until 9:47am. At that time there was a big push down with no follow through.

You don't really know if this is volume exhaustion until you see if there is continuation. If price trades out the top of the bar, exhaustion is likely and the trade is a buy (see attached chart).
 

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NFP - Most Important News of the Month

F2 Comments. The market traded higher again today and extended its range late in the session. The market is strong and is pointed higher w/some help from the news. This is likely to remain true until the economy bottoms out. Tomorrow is employment news day, the biggest news day each month. NFP is forecast to be down 300/325K and Employment at 6.8%. If as forecast, it will be supportive. If you had to trade in front of the news, you would be long. We will play the news on the first setback of after the announcement. If the range is not extended, we will exit the trade and look for long liquidation before the day session close in the Bond.

F2PM12-04.jpg
 
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