YM, ES and DJIA Analysis

[james_gsx]

Hey guys, heres my version of the current YM situation

We did have a long signal to buy a few days ago that has yielded great results if you took the trade

One thing I would like to bring to mind is our close at resistance. I am looking for a close above this level so I can bring a bullish attitude into next week. Overall I believe the market will continue to head lower, but I will go with the flow and do what the chart tells me to do.

Brownsfan I have a few questions for you. The Euro, USD, and YM all posted similar patterns before today. I have seen these patterns in books before but I forget their name and what they resemble and the psychology behind it. I will post the USD and Euro charts in here as well as start a new currency thread since I think that will be very important factor heading into the end of the year.

[Vercingetorix]

	Quote:	Vercingetorix
	I think we're going to get another wave down to shake any early longs out and suck some new shorts in. The weak volume rally is what is telling me that this recent move up is not the real thing. We'll form either a head and shoulders or double bottom and then rally to new highs. I'm of the persuasion that this is a correction and not the start of a bear market. The reason is simply the amount pessimism is too great for this to be a bear market. Bear markets don't happen when everyone expects one. Also the price action during this correction looks bullish from a vsa perspective so I would say that the pros are buying this correction like they did the last one in march.

Not to blow smoke up my own arse here, but once again vsa proves of great use.

[james_gsx]

Vercingetorix, how did you use VSA to come to the conclusion this whole thing looks bullish? I really don't know a lot about VSA so maybe I should go look into it.

[brownsfan019]

verc - thanks for sharing! I'm sure James will take a look into it further if he has not already. As for me, I am content with my candles as they appear to do well, esp on the daily as evidenced in this thread in real-time.

[james_gsx]

Everything still looks bullish short term. I would be slightly concerned about a possible spinning top on the YM but I wouldn't exit our trade yet. I would on the other hand move up my stop and go running around the neighborhood naked with our near 700+ pt trade. (why the hell am I day trading if we could do this??)

We hit some resistance today, but I think that's perfectly normal and I wouldn't be too surprised to see some profit taking the next two days. I will just have to wait and see what candles are produced and what the weekly chart ends up looking like.

Brownsfan, if what I'm seeing on the ES isn't a possible inverted hammer, then let me know what it's called

[brownsfan019]

Here's my take on the YM:




What I see is that our initial long is still rockin and rollin, so that's good.

We now have an inverted hammer / shooting star, aka bearish type candle, near a possible support/old resistance zone. This is a tad concerning. The options at this point are:
1) Exit our long at the market tomorrow.
2) Exit our long IF this bearish candle confirms.
3) Exit our long AND initiate a short position IF the candle confirms.

For the candle to 'confirm', I would be looking for price to go below the low of today's candle, which is approx 13,830. Therefore, a sell stop could be placed at 13,829 or lower to either close the long trade or close the long trade and go short.

Based on the candles, I would consider that short; HOWEVER, there is a possible support zone around 13,750. So this could be a quick pop type trade - if the short fills, I would watch closely to see if that level could be broken. If that 13,750 level can break, I would feel good about the short.

[brownsfan019]

Today was an interesting day. I was curious to see if that YM short filled.

If you traded during the day, you know it moved up a little and then down. It moved a little heavier down towards the end of the day, so I was curious to see if our resting sell stop would have been triggered.

Here's the chart:



I posted the closing numbers on today's trading to verify that our resting sell stop was not filled today. The low of today was 837 and our sell stop is 829 - 8 pts away. So based on our chart, #1 long is still working in some capacity - whether it's a full boat of contracts or a trimmed down amount.

Based on today's numbers, we could take a short based on the red spinning top type candle with a sell stop @ 836 or lower, so our sell stop level has been raised based on today's candle. You could also leave the sell stop based on the other order as well, which would be a more conservative play. Again, keep in mind that there's a support level highlighted in yellow on the chart. The conservative play would be to wait for that level to be broken before taking a short. I like a little risk, so I'm ok with this current possible short knowing that it could stop out or provide a small gain (in context of some of our others here). If we get filled short, I would just be looking to see a close below that level to feel better about the trade.

What I'll be watching to see is how much action takes place when that low is taken out. We are taking a short based on candle patterns. Others may simply place a sell stop based on the low of the candle. That's fine with us b/c the more momentum, the better.

Here's an example of taking a trade knowing that there is s/r level close by and you watch to see how it develops:




So what we have here is two possible reasons to go long at #1 and #2. Hopefully it's easy to see the nice setups there - a hammer at each, both at the 50 SMA. Now, when taking these longs though, you have to see some possible resistance just above (yellow line). As you can see, when that level was to be tested, it just busted through and said see ya. That's what I would be watching on this possible short - we know there's a possible support level close by that could cause us to go long again rather quickly, but we'll take that short and be conscious of this level.

[james_gsx]

I wish I was home right now to post charts. But it looks like a H&S pattern could be forming on the YM. I would definitely wait until next week though before trying to go short in this market.

[brownsfan019]

We'll see how today goes James. Thus far in pre-market the YM is up, so no fill on our short (yet). There's not much on tap today for econ news and it's quadruple witching, so we'll see how the futures react today.

[james_gsx]

Tomorrow we have Consumer Confidence and Existing Home Sales data coming out at 10 am ET. As far as the charts go, I think the time to go short may be now. We have an inverted hammer on the YM and consolidation around resistance which is bearish to me. I still think we can get at least a 50% retracement of the big real body created when the Feds cut rates.

Same goes with the ES. But There is a doji with highs at resistance, we are also seeing lower lows, which is bearish too.