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

F2 Comments: The market opened higher from weakness in the ES that continued in spite of supportive news. Conversely, when bad news doesn’t break a market, buy it. This is what happened in the financials. The ES sold and the financials rallied to close strong. The market is pointed higher on Monday too.

Monday’s news: Construction Spending is expected at -.4%; ISM Index at 53.0; Pending Home Sales at +.4%.

If the ES is sideways to lower, want to buy early weakness and see if 118-28/00 can be taken out. If not, will exit the trade and look to the short side of the market. Buy zone is 118-13/17. Back up buy is 118-05/09.

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F2 Comments: The market sold as per the analysis and was set to settle lower. Weakness in the ES supported the Note post day session close. Thursday’s action given Friday’s Unemployment numbers could yield another quiet day, especially if the ES continues to sell OVN.

Do have news and the ES’s reaction to this news to get through early in the session. Preliminary Productivity is expected at +6.5%; Initial Claims at -522K; Continuing claims at 5.75 M.

If the ES is sideways to higher, want to sell the Note and see if 117-12/175 can be taken out. If not, will cover. First sell zone is 117-31/118-03 followed by 118-07 OB. Cover, if 117-12/175 then holds.

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F2 Comments: It was an auction day and the market reacted accordingly. At auction the Dealers do run prices up and down to entice buyers into the market.

The market initially sold off of a slightly negative Initial Claims number. Then settled into a narrow range from 118-21 to 118-24+. The market continued to build a distribution that favored lower prices.

The 30Y auction only had 2.26:1 coverage and the Note hit 118-08 off this announcement. The market recovered quickly and made new intraday highs and closed strong. The market is pointed higher tomorrow.

Little in the way of news Friday. Want to buy early weakness and see if 119-01/04 can be taken out. If not, will look to the short side of the market. First buy zone is 118-22/26 followed by 118-18 OB. Exit and/or reverse, if 119-00/04 is then rejected.

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F2 Comments: Friday was a pause day where this week’s auctions are being digested. While the day’s structure slightly favors lower prices, the best trade will likely come out of the 118-28 area as the market starts its next move.

Can sell failure to take out 119-02/04. Can buy failure to break the 118-16/20 area.

Some news to navigate on Monday. The focus is likely to be Retail Sales which is expected at +.9%; ex-Auto at +.4%, Empire Index at 29.0; Business Inventories at -.6%.

Sell failure to take out 119-02/04. Buy failure to break 118-16/20. Will be looking to get on board with a new move from 118-28+/-.

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F2 Comments: Today’s market traded higher off of better than expected early news. The market held those gains too throughout the session and into the close. It is pointed higher on Tuesday. The ES was higher too off the same news. Something usually gives in this situation.

Tomorrow’s news: PPI is expected at =.5%; Core PPI at +.15; Net LT TIC at 35.0B; Capacity Utilization at 70.8; Industrial Production at +.4%.

This news, if as forecast would be negative for the ZN and ZB. Barring the news, I want to buy into early weakness and see if 119-28/00 can be taken out. If not, will look to the short side of the market.

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F2 Comments: Another day of buying in the Note and Bonds. What is driving prices higher this week? Economic issues? A short squeeze into options expiration? The dollar is about to turn around? Lots to think about as we trade into 120-00, an area not visited since early summer.

Some news to get through Wednesday: CPI is expected up .2%; core CPI at +.1%; Housing Starts at 600K; Permits at 580K; and DOE crude inventories.

Want to buy into early weakness and see if 120-00 can be taken out. If not, will look to the short side of the market. Would like to buy 119-13/17, but may have to pay up and buy 119-21’s OB

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F2 Comments: The market was range bound for the session, but as the day progressed it began to take on a lower bias. The close was weak. The market is pointed lower early in tomorrow’s session. Best set up for a short would be from a higher OVN session. The toughest short will come from an OVN session that is lower.

If the market doesn’t break early in the session, I think it will be another range bound day with sellers above 119-24 and a buyer below 119-14. Want to sell early strength and see if 119-08 can be taken out. If not, will cover and begin to look to the long side of the market. Sell 119-15/19. Cover, if 119-04/08 then holds.

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F2 Comments: The market opened soft and did try to break off the early news and OVN weakness. 119-04 held and the market recovered after the news. When bad news doesn’t break a market, some will buy it.

The 2Y auction was the next dynamic to affect the trading. 2y auctions are almost always great auctions and this one was no exception. The market was steadily higher after the 2Y auction and closed strong. Its pointed higher tomorrow too with some help from the news.

Tuesday’s news: GDP is expected at +2.95; Deflator at +.8%; Case Shiller at -9.10%; Consumer Confidence at 47.5; and FHFA at +.3%.

Want to buy early weakness and see if 119-28/00 can be taken out. If not, will exit the trade and look to the short side of the market.

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F2 Comments: The market traded a very tight range Tuesday until the actual 5Y auction was completed. The early news was split. The analysis favored a trading range with a higher bias. The profile doesn’t lie. Just took 5 hours for the up bias to kick in and break the market out of its range.

If the market can hold 119-28 OB tomorrow early in the session, we could be in a longer term break out from the recent range that was capped at 120-00±.

Tons of news tomorrow: Personal Income is expected at +.2%; Personal Spending at +.1%; PCE Prices at +.1%; Core PCE at +.1%; Jobless Claims at -500K; Continuing Claims at 5.56M; Durable Orders at +.5%; ex-Transportation at +.7%; Michigan Sentiment at 67.0; and New Home Sales at 405K. Whew! Almost forgot, DOE crude inventories and 7Y auction.

Want to buy early weakness at 119-29/120-01, if possible. If the market is really strong, it may take 120-05’s to get into the market.
 
F2 Comments: The market traded higher Monday off the opening of the day session and never revisited the early low. The rest of the day the buyers supported prices and new highs were made in the post day session market. The market is pointed higher tomorrow too.

Tuesday’s news: Construction Spending is expected at -.4%; ISM at 54.8; Pending Home Sales at -.5%; and auto and truck sales.

Want to buy early weakness and see if 120-02/065 can be taken out. If not, will look to the short side of the market. Aggressive buy zone is 119-25/29. Preferred buy is 119-25 OB. Exit and/or reverse, if 120-015/065 is rejected.

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