As I got up periodically during the night to make sure I did not miss the down moves that happened on my tick chart trades, the overall thought I had was OOPS! What happened to yesterday's gang buster trend day? You can see by the red bars I actually got sell signals right on the last few closing bars yesterday, and down we went overnight. As I stated recently in here, I think it is important that these levels in the neighborhood of the 200 day average hold in the Bernanke's. This overnight debacle in the Euro has bled into the Bernanke futures as you can see above on the 5000 tick ES chart.
I don't know if this is just backing and filling or something more yet. In general intra day price action does not mean all that much, but it might in this instance. If we were going to fire up out of this base we needed to do it now, so this decline better stop about here in my view. I referenced the statistics that say we had a very high probability of over 80% that we would close with a two period RSI reading over 70, which we did yesterday. By the rules of buying into declines and selling on strength one should have been out on the close yesterday. This is why as a short term trader I am just not completely comfortable with that approach. You buy blindly into a steep decline like this adding as it gets bigger. Then you exit the whole trade on just one up close like that. I just don't like the risk reward in these types of things even though the win percentage is over 80% doing it. In any event, had you done that you made a little bit perhaps depending on where you first entered the position. You may have made some money on some portion of the trade and lost on other portions as you averaged in going down. Not for me I just like to point out different ways of doing things to people.
This is the Euro meltdown overnight shown on a daily chart. I have no idea what caused that you Yahoo or Google finance mavens can look it up. It does not matter to me what caused it, I don't trade off stories so knowing them is of no value. We certainly have a powder keg financially in Europe with all that is going on over there. This currency could collapse at any time it seems to me. I think overall you need to be looking for sells here and buys in the Dollar Index now. How you get into the trades is up to you. I am not in either of those positions yet.
Here is the daily chart of the Bernanke 500 at press time.
I still think on a daily basis for short term trading, this is closer to a buy than a sell, but I have no potential trades here today. You can see what is the significant low that needs to hold over to the left. If we zoom by that turn out the lights, this party is over. Until then I am looking to see if a buy sets up down here, but am doing shorts on intra day trading if they show up like on the first chart at the top where the red bars are.
The soft commodities tend to go their own way and are much less prone to this across the board move skit that we see in most other markets. Cocoa is setting up a buy in my view, so I am watching this market closely right now for an entry pattern. There was not one for today, but if we close down there could be one for tomorrow.
I heard one of the funniest quotes about Barry last night that is worth sharing. "Maybe he should play golf 3 or 4 days a week and work less, everything he does is a disaster?" After I stopped laughing I thought to myself that I have actually tried that during bad trading periods. What happened was I went to the golf club, hit is sideways, shot a bad score, then got more pissed off! Net net that did not work for me, and it did not help my trading either. Barry already seems to play alot and it obviously is not helping him in his main job, so I am not sure with both of us having not had success following that advice, that it is any good.
It is a good idea to walk away at times if your trading is not going well, just don't play golf it is more frustrating than trading. Pick something easy like shooting free throws against Shaq.