As we always do on Thursday evenings in Deep Practice, we looked at the S&P e-mini market to see what its likely next move will be. Traders in the Deep Practice group noted that the S&Ps were making a new low after a lower high had been put in. The immediate trend was therefore down.
They also noted that the market was very oversold. We can tell this in a number of ways, but the easiest – and the one shown here – is to draw a trend channel. The trend channel immediately highlights the oversold position of the market.
Finally, traders noted that the trading day just ended (Thursday) had relatively high volume but made little further downside progress on that volume. Hidden buying was entering the market.
From this ‘top-down’ market analysis, they made a game plan for the following day: be a buyer on any intraday test or spring of Thursday’s low, or look to buy if the market holds an intraday higher low. The market decided to spring and several traders reported that they had good trades last Friday. One person said, “There is real value in the work we do in Deep Practice. Having the game plan in advance let me trade with confidence. I saw what the market was doing as it was doing it. It was easy taking the trade. And what a great trade!”
We had nice follow-through today, reflecting the significant oversold condition.
I expect, though that we will start to run into resistance around the 1395 – 1400 area, or perhaps even a little higher (1410) since we are in a holiday week. Thus far the market is pushing off the lows aggressively. Compare this to the last, anemic rally. We will see how this plays out going into the US Thanksgiving holiday on Thursday. Expect lighter volume as we draw closer to the holiday.
Interested in learning more about Deep Practice where we learn how to apply the Wyckoff Method each week? Find out more about the weekly group here: Deep Practice
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