HERE IS ONE JUST IN CASE
It is Friday and we have seasonal up biases for today in the stock indexes after recent declines, so I doubt we are going to see downside action today. However, in case we do, here is one trade above I am looking to enter, Crude Oil. I have orders to short below yesterday's low today. I doubt we will travel down there unless we get a stock decline. However, in the event we do I have orders sitting down here for an entry. It seems like a dumb comment even making that type of remark, but that is the world we are living in right now. US stocks are driving almost every single market in the world. When they go down, many other things decline, when they rise most other boats get lifted with the tide. This relationship has diminished in recent weeks from what it has been, but the influence is still there if you watch intraday price action. Also keep in mind seasonals are biases not absolutes. It is always nice to have them backing a trade but at times markets go opposite of them so they are just a tool.
This market correlation is not and never has been a reason to take a trade. It never will be. What it is useful for is keeping a handle on your risk. I have talked about this in here many times, so you can go back and read old posts for more on that. This market is setup via the COT data to decline on a weekly basis, and we have a type of right shoulder pattern here, so that is the basic logic behind this trade. There is always more to them than that, but that is the core reason. We all enter trades using different tools, so I will leave that up to everyone on their own.
Here is the update on the Soybean short I showed the other day I entered.
You can see where I entered, and I do have a trailing stop not displayed. I also have the general target area for this trade on the chart. Obviously we are not in danger of going there today, and most of the time trades do not hit targets anyway. However, you need to have some plan of where you are getting out when you get into a trade, so that is my plan here. I will trail a stop and exit in the target area if we get there and I have not been picked off before that time, which I probably will be. You can see with my COT Synthetic we are in the buy zone now, and the last 3 times we got there we rallied, so a rally should be coming here. You may ask "if that is the case why are you short?"
That would be a good logical question. My answer is simply that the indicator is a setup to look for an entry pattern, it is not an entry pattern. In the meantime the price trend is down, so if it reverses to up while I have a buy signal in my indicator, I will reverse to long. I know some people get confused at times with Larry Williams videos about market setups. You have to understand that a weekly COT setup is a larger frame time view of things based on fundamentals. We have had bearish setups in currencies via that route for long periods of time over the last two years. However, we never got very many short term sell patterns. You have to enter trades on daily charts, and at times they will not line up with the fundamental setups on weekly charts. Do not get confused on this. Just because there is a weekly COT bearish setup, that does not mean you cannot go long on a daily chart pattern, you can and should.
These setups can be dead wrong and we have seen that time and time again with the COT data the last 2 years. It is why I pay far less attention to it. I do watch it and am aware of what it is saying, but if that was all you studied and traded off, you would have been wiped out the last 2 years. I think in general it has jumped the shark. There are still uses for it as I have explained, but do not get blinded by it.
I am not expecting much to happen today unless the PPT decides they want to run this up. I doubt we will see much downside action today. I think most likely flat to higher in stocks and not alot of action elsewhere.
Have a nice weekend.