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

[bthomas]

Fundamentals Remain Positive for the Bonds

F2 Comments: Another day of buying in the financials. The fundamentals, technicals and outlook for such all remain positive. This is a strong bull market. That said, tomorrow might finally see some profit taking from longs who don’t want to ride their contracts through the weekend. Dec futures expire tomorrow and Jan options next week. A short squeeze could explain some of this buying too. By the close the analysis favored higher prices tomorrow. We want to buy early weakness and see if 141-28/142-00 can be taken out. If this area is rejected, can play form the short side on expectations of EOW profit taking. First buy zone is 140-29/141-01. Back up buy is 14021 OB.

 

[bthomas]

Lower Prices Slightly Favored for Monday

F2 Comments: Friday’s market paused. The late buying on Thursday was most likely from institutions exiting their shorts in front of Friday’s December contract expiration. Friday’s market failed to take out Thursday’s highs leading to consolidation and light long liquidation throughout the session. The close was neutral. The market activity analysis slightly favors lower prices on Monday without news. No formal economic announcements scheduled for Monday either. The market’s direction is probably tied to the direction of the ES. Can trade the session from either side. Best trade set up I see will be failure to extend the range of the OVN session higher. This would set up a sell to retest support, IMO. If support at 139-28/140-00 then holds, would look to trade form the long side. First sell zone is 141-11/15. Back up sell is 141-20/24. Cover and/or reverse, if 139-28/140-00 holds.

 

[bthomas]

Holiday Trading - Probably a Range

F2 Comments: The Holidays almost always dampens activity and it did today. It was a trading range affair, period. Sellers above 141-12 and a buyer below 140-08. The close was mid-range too. What do I see for tomorrow? Another trading range day w/the 5Y auction bringing in some extra volatility. Some news too: Chain Deflator is expected at -4.2%; GDP at -.5%; Existing Home Sales at 493K; New Home Sales at 420K and Michigan Sentiment at 58.6. Want to sell early strength, especially above 141-08. And can be a buyer below 140-08. Expect the 5 Y auction to push prices from one side of the estimated range to the other.

 

[bthomas]

Holiday Market Opportunities

Die hard traders found opportunities on Friday, December 26th, the day after Christmas.

Volume is relative, so even though there were only 17,000 contracts traded all day, about the same volume you'd expect to see in the overnight session, opportunities still exist. On the 8:56 bar price traded down to 140.305 but volume traded at the ask was increasing relative to the 8:53 bar.

Taking a conservative approach and waiting for the 8:59 bar to form would have been a good play. With ask volume increasing and the bar closing on it's high, taking a long entry was worth a try. In this case, there were 8 tradeable ticks, or some part thereof, to be had.

At 10:14, the widest bar of the day formed while making a new daily high. At that moment you don't know if price will trade higher, but two bars later and ask volume drying up, its a reasonable assumption that consolidation or a reversal is at hand. 4 1/2 ticks were available if you took the trade out the bottom of the 10:20 bar.

Holiday markets can be slow, but opportunities still exist.

 

[bthomas]

Trading Slow Markets

When the market is slow, as it usually is between Christmas and New Years, opportunities still exist. You just have to wait for them to develop.

There is a tendency to want to do something just to get a little action, but, as Archie Bunker said, stifle yourself.

The attached chart should be reasonably self explanatory.

 

[bthomas]

Comments for Tuesday 1/6

No chart at this time, but the comments are relevant.

F2 Comments: The third day of heavy selling. Came into today’s session wanting to be a seller and that turned out to be the trade after a rally of a point from the OVN session’s low. Talk about volatility. The OVN high was retested and held and it was a seller’s market until 132-115 was touched. The close was weak. The market activity analysis favors lower prices without news. Tomorrow’s news: Factory orders is expected at -2.6%; and ISM Serves at 37.0. If as forecast, it will be supportive for Bonds. Want to sell early strength and see if 132-00/08 can be taken out. If it holds, we will look to the long side of the market. First sell band is 133-07/11. 2nd sell zone is 133-19/27. Cover, and/or reverse, if 132-00/08 holds.

 

[bthomas]

Market Rallies During TIP's Auction

F2 Comments: The market did sell as per the analysis hitting 131-235 before buyers entered the market. Today’s TIP auction and a 10 point move off the highs would have encouraged some buying. The market rallied to 133-255 during the TIP’s auction before closing at 132-21. The structure was a “b”, which favors selling early strength at least once tomorrow. If support then holds, then Thursday’s and Friday’s news forecasted supportive news should hold the market in a range and/or bring in buyers. No news to drive tomorrow’s trading. The ES’s direction is likely to be the market’s focus. Want to sell 2 zones and see if 132-12/20 can be taken out. If support holds, will look to the long side of the market. First sell zone is 133-03/07. Back up sell zone is 133-19/23. Cover and/or reverse, if 132-12/20 holds as support.

 

[bthomas]

10 Year Note Auction Today

F2 Comments: The market traded in the predicted range. There were sellers above 133-00 and buyers below 132-00. Took awhile to get to 132-00. Tomorrow’s news and Friday’s news should hold the market in a range early in the session. If not for tomorrow’s Note auction, I would expect the market to stay in a range. This auction could take us out of the current range. Jobless claims is expected at 550K. Can sell above 132-27 and buy below 132-12. Best sell should be 133-03 OB. Best buy should be 132-01 OB.

 

[bthomas]

Buying Weakness Still Favored

F2 Comments: As per the analysis Friday’s market did trade higher. Short covering, call protection give the 10 point move from the recent highs and a very good 10 Y auction all combined to at least make large players cover their shorts. The news was also better than forecast confirming a weakening economy for the longer term bond buyers. The late selling was probably long liquidation before the weekend. A bird in hand remains more attractive than two in the bush for a great many traders. By the close the analysis once again favored buying weakness to retest resistance at 133-20/134-00. If this area does hold on Monday, then I think support will be revisited. No news to drive Monday’s trading. The focus should be the direction of the ES. It finished weak. Want to buy early weakness and see if 133-20/134-00 can be taken out. First buy zone is 132-20/133-01. Back up buy is 132-21/25. Exit and/or reverse, if 132-20/134-00 is then rejected.

 

[bthomas]

Limited News on Tuesday - Focus on ES

F2 Comments: The analysis/idea was to find a place to get long. 132-085 was in our #3 support level. That level brought in buyers and they were present into the day’s close at 134-265. The analysis favors higher prices. We want to buy early weakness, especially below 134-17, and see if 135-00 can be taken out. If 135-00 does hold, OK to get short and see if 134-08/12 can be taken out. Tomorrow’s news is limited: Trade Deficit is expected at -51.0. The focus is likely to be the ES’s direction.