Friday, November 19, 2010

Emini Futures / Trading The American Dream


from the trading desk of CFRN...

Will the Bulls Power through $1225.00? China raised rates by 50 basis points, unexpected by traders (25 was expected) typically negative for commodities. China slows growth by tightening and this pressures commodity prices. Euro Zone news that potentially the debt crisis for Ireland and Ireland’s banks may have some resolution, lifted the Euro FX and helped the case of the Indices as well. Help from the IMF should potentially keep Ireland’s banks from insolvency. The E-Mini S&P 500 seems range- bound until we can get some direction from the global economies that may influence the US Markets. The Euro FX may find some stability temporarily, but we still look ahead to other potential insolvency problems with other Euro Zone countries. 

The bulls attempt to run the market up, but just seem to pause at those technical resistance levels. Today $1200.00 was the top of the E-Mini S&P 500, while the low of the day was $1187.50. The E-Mini S&P 500 double bottomed around 9 AM this morning enticing the bulls back in for short-term temporary moves. It was a case of move-up and consolidate. Toward the close, we double topped at $1200.00. The CFRN Weekly Trading Zone of $1198.00 - $1199.00 held. 

Next week, we go into the “Thanksgiving Holiday” with some abbreviated sessions and reports shuffled around. Monday, we do not see any major US Economic Reports scheduled.

The trend remains down, but we could see more of a bounce or consolidation on Monday! This market would possibly get much more momentum if it could break through $1225.00, but will the bulls have the power and conviction to do so? The bears waiting for potential selling set-ups really need this market to break $1170.00 to get any confidence behind them. We may just consolidate for awhile. Back in the day, I would look for pre holiday exhilaration to create more of a move. With the uncertainty in the Euro Zone and the direction of China along with our own stimulus challenges, traders may be skittish to take a real position. $1195.00 appears to be a point of control or comfort zone for the market. Should we breach the $1225.00 zone, our CFRN Weekly Trade Zone gives us $1231.00 - $1232.00. If we stay capped, our CFRN Weekly Trade Zones are $1215.00 - $1216.00, $1205.00, $1206.00. We may find the CFRN Weekly Trade Zone $1199.00 - $1198.00, $1187.00 - $1188.00 and $1181.00 - $1182.00. In This type of retracement, we may find ourselves back at CFRN’s Weekly Trade Zone $1163.00 - $1164.00 or further. A consolidation or pennant in this area is more expected.

Leslie Burton
Senior Market Strategist
CFRN Columnist

Nothing in the world can take the place of persistence. Talent will not; nothing is more common than unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and determination alone are omnipotent. The slogan 'Press On' has solved and always will solve the problems of the human race. - Calvin Coolidge

A Week In The Zones 
Our Traders received these before the market opened last Monday...

S&P 500 Emini Futures / ES
 So can you...

Pattern of the Day - TRENDLINE BREAK (a.k.a.) "TRADER VIC" 
Often, not always, price will break a trendline and move away several ticks or pips. Then, it comes back to test the backside of that trendline. That’s where you enter the trade.

If the trendline break coincides with your other favorite indicators such as:

  • Our Weekly Trading Zones
  • Our CFMA1
  • Our Cycle Indicator
  • Our DMT
  • Previous Support Or Resistance
then set an entry order for price to take you in when it comes back to test that level. That way you enter the trade at an optimum level with less risk. 

See how price broke the trendline, then came back to test the backside? If you look carefully at the chart and run your eyes left, you will see that the trendline bounce also coincides with a previous support/resistance level. If you did some Fibonacci calculations you would also find that same point matches with 50 and 62% retracement levels. With that convergence of factors, the trendline backside test makes a good entry point!

Trading the American Dream
An American investment banker was at the pier of a small coastal Greek village when a small boat with just one fisherman docked. Inside the small boat were several large yellow fin tuna.

The American complimented the Greek on the quality of his fish and asked, "How long does it take to catch them?" The Greek replied: "Only a little while."

The American then asked why didn't he stay out longer and catch more fish? The Greek said he had enough to support his family's immediate needs. The American then asked, "But what do you do with the rest of your time?"

The Greek fisherman said, "I sleep late, fish a little, play with my children, take siesta with my wife, Maria, stroll into the village each evening where I sip wine and play cards with my friends, I have a full and busy life."

The American scoffed, "I am a Harvard MBA and could help you. You should spend more time fishing and with the proceeds, buy a bigger boat with the proceeds from the bigger boat you could buy several boats, eventually you would have a fleet of fishing boats.

Instead of selling your catch to a middleman you would sell directly to the processor, eventually opening your own cannery. You would control the product, processing and distribution.

You would need to leave this small coastal fishing village and move to Athens, then London and eventually New York where you will run your expanding enterprise."

The Greek fisherman asked, "But, how long will this all take?" To which the American replied, "15-25 years."

"But what then?" The American laughed and said that's the best part. "When the time is right you would announce an IPO and sell your company stock to the public and become very rich, you would make millions."

"Millions ... Then what?" The American said, "Then you would retire. Move to a small coastal fishing village where you would sleep late, fish a little, play with your kids, take siesta with your wife, stroll to the village in the evenings where you could sip wine and play cards with your friends."

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