Last night, I noted some changes in behavior in the stock market as represented by the S&P e-Mini futures. I said that I would be looking for downside trading the next day (today) and that the key level to watch was yesterday’s high. You can read that post by clicking here.
Today’s Trades
We can see that yesterday’s 1405 high was indeed the key level. Being unable to hold that high set the stage for sellers to press the advantage they have been developing over the past few days.
If you didn’t stay up late (or get up super early) to short yesterday’s high it was no worry. We got plenty of action in the US session. Soon after the US session opened, we had a classic trade setup to the short side at A. All that we require in a sound trade setup was in place for this trade. Another lovely short occurred at B. This was all set up by the last few day’s price action and the inability to hold yesterday’s high. Isn’t it nice to know how to trade when coming into the trading day?
Spring
Drawing the proper lines along with other signs, we can see that the market was showing indications of strength as it fell lower in the morning session. A long trade in the form of a spring became available at C. This spring had the necessary elements that we look for in taking a spring in a falling market.
The spring didn’t take off and rally strongly to the upside as so many do. Thus, this spring told us in advance that it initiated a corrective rally only; it was not a setup that would bring us to new highs on the day. We therefore take profits as the structure tells us and look for another short opportunity. We didn’t have to wait too long, as we get an up thrust at D.
It was good trading with numerous points as we picked off almost every turn. Not all days are like this, but then, they don’t have to be when we can read the market by its own actions and mindfully trade what the market offers us.
Tomorrow
Weakness was dominate today. Buyers couldn’t put much more than a corrective rally together today. I will be looking for some additional downside follow-through tomorrow.
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