[TheNegotiator]

Trading the E-mini futures intraday doesn't require any particular strength or lack thereof in the stock market as a whole. The only thing in my mind is I need to be aware of longer term correction type activity which can happen pretty aggressively. But monitoring each day closely means we as intraday traders, tend to pick up on the way the markets are behaving at certain areas of importance.

I would argue that bar the infamous "flash crash" of 6th May 2010 and what followed, we have not had any sustained move down in value which I personally consider to be a proper correction and not consolidation(even wide consolidation). Over the last 6-12 months I have noticed that when we reach extremities of consolidation, when all the eco data and macro geopolitical news are looking terrible, there is a buyer flying in the face of it all. The selling is there, but there always seems to be strong buying. It is fairly clear if you look at the ES RTH chart I have attached to the post. Sometimes the selling is weakening and strong buying appears, as typified by a strong move down followed by a strong move up. Sometimes it has been a tight consolidation band toward the lower portion of a rotation down(often associated with continuations not reversals) where strong selling and strong buying seem to be present. Take a look on a longer term chart to see if you can identify these areas yourself.

Monitoring it intraday it just feels like this strong force comes in when these areas are reached. The market gets there when it is weak and selling continues, until this strong buying appears on numerous occasions but at different levels.

Now many might argue that this is just something you should expect in an up trend. But shouldn't we also expect correction in a strong and healthy market? There was some commentary I heard on the Fed and the belief about the Nasdaq I believe leading the US out of several recessions. There is this notion that if the markets as a whole can be artificially supported then the economy as a whole should follow. So first of all, could the observed behaviour be anything to do with this idea? I personally have some doubts about how something like this could realistically be implemented, but no doubts that big Ben would try something like it if he could. The second point is that whether this is some great force in the market or just buyers because the Fed is trying to inflate US debt away, is the manner in which the stock markets are scaling towards the heady heights of 2007 structurally sustainable? Personally, I think not. I do believe that at some point we could easily see a considerably higher stock market given the potential inflation picture, but I also think at some point unless the current market is allowed to naturally correct we could well see a large move to the downside. Perhaps then, when the wheat has been separated from the chaff so to speak and there are truly good opportunities for companies, the economy can start to grow and become more healthy once more.

What do you think?