Tuesday, May 04, 2010

Emini Futures Trading / A Cautionary Tale- Tuesday May 4, 2010


S&P 500 Emini Futures

A Cautionary Tale
Do not allow yourself to be seduced by the often uncanny accuracy of our Weekly Trading Zones. Just as your science teacher cautioned you not to stare directly at a solar eclipse and your Sunday school teacher warned you about looking directly into the eyes of a harlot during happy hour, I feel obligated to remind you that the Weekly Zones are simply a tool, not a strategy unto themselves. You can certainly create a methodology around the Weekly Zones, but you have to decide what will trigger you in, what will trigger you out, and how you will protect yourself in the event the market decides to move the other way. I bring this out because the last two days have simply been too "picture perfect". The Weekly Zones are always "pretty good" (lol) but today was another extraordinary day like yesterday. I've been posting the Weekly Zones since the beginning of the year. Go back and look at the archives. Yes they are reliable and predictable, but she ain't bulletproof. Got it? I don't want you going blind or catching some STD (stupid trading disorder). Amen?

Let's move on... The first trade of the day was a pre-market trade. I don't normally talk about pre-market trades or post-market trades simply because the market tends to oscillate between zones during those hours. The good news is, I think that is beginning to change. We've been hearing about a "Global Market" for years and with the recent blatant stupidity shown by Goldman Suchs, the truth is the "Financial Center of the World" may possibly leave Wall Street and head for Asia. Even if it doesn't, the S&P 500 Futures Market is on its way to becoming a 24/5 trading vehicle. Now the trade I speak of is simply a thing of beauty. Some men love baseball, some love rainbow trout, some even love fast cars that only turn left, but me, I love a Shooting Star/Doji pullback to a Weekly Zone and (I can't believe I'm about to say this) the 21 period EMA on a 10k contract chart. That's my Mona Lisa baby. Here have a peek...

Once the London session opened, 100k contracts could not break up through the 1192/1193 Weekly Zone. Roughly an hour before Wall Street opened, there was one last 10k push (remember each candle represents 10,000 contracts) up to the Weekly Zone. Not only did it fail, but it failed so spectacularly there's even a name for it. In fact, there's at least two names. Some will argue Shooting Star, others will say Doji, and the lunatic fringe will cry Gravestone Doji. Matters not my friend because in this context it means only one thing - Sell The Open Of The Next Candle. Does this type of setup ever fail? Yep! But even when it does it's still worth the price of admission just to see it in action. (seriously)

So if you took that most excellent and obvious trade (I didn't as I was having coffee and snuggling with my wifey of 27 years) the trade target based on the Weekly Zones was 1176/1177. Really? Yep. Go look at Sunday night's post. Did it hit it? Yep, and then it did what it was supposed to do. It became support for a bounce in the other direction.

"So you're saying there was a 16 point drop and a 5 point rally available today based on the Weekly Zones before 9:30am Chicago time?"
"Today is Tuesday, you posted those numbers Sunday night. Right?"
"And then price bounced off your 1166/1167 Weekly Zone 4 times before the close today?"
"How is that possible?"
Like I said earlier...
Do not allow yourself to be seduced by the often uncanny accuracy of the Weekly Trading Zones. Find a mentor and learn how to trade.

Pray Hard & Trade Safe!

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