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[alex01]

Market Force: Neutral. On a higher open and early run up in prices look for sell off from the early highs. Trade holding above 1081.00 continues to be bullish.

ESU04 S&P500 E-mini Futures
Wednesday, August 18, 2004



Trade Setup Summary for Tuesday, August 17, 2004:
B@1081.75/ S@1081.00 -.75

Recap of Tuesday's Action:
Good Morning and welcome to Wednesday's action.

At least we hope we will get some action as Tuesday turned out to be a frog hopping around in a small 3-4 point range with the "Video Game EMini Traders" coming in and trading the Buy/Sell Program divergences with the huge spike candles up 1-2 points and then opposite candle down the same.

This has become prominent lately when the market goes flat or trades in an indecisive range area. With the modern technology traders can put on 1000 contracts with the click of a mouse and take em off all in 1-2 seconds. That is what you see when these elongated candles come in on one side making you think the market is dropping out of the sky only to see an opposite Buy candle come in with the same spike length drowning out the sell candle you just saw. So in a very similar fashion as a video type game, prices and profits are searched and destroyed in seconds. I expect that game is here to stay as program trading now makes up over 30% of the trades in these electronic markets and makes the jitters even more intense if you are not aware of what is going on and think it is real trading bias. It's Not! Not at all...just video trading games at congestion points played with real money...big money.

We got long at the Hour One low area today near 1081-82.00 and watched for prices to push back up towards the highs to test. There was only a small blip up to 1083.50 before pulling back below the Hour One low as you can see on the chart above.

We patiently waited in line with our TCF2004 system up until 2:00 est and then cut the trade based on the time factor and risk/reward increases. I made the following comment before standing aside for the rest of the day which proved to be the right thing to do.

"We have waited for the 2:00 est time frame with very little upside response to our buying of the Hour One low. The High 5 is bullish and there are underlying factors suggesting higher prices later into the close but the RISK/REWARD premium has shrunk as we crossed over the 2:00 est time frame.

Prices may still rally off of this area but we just had to abandon the trade based on using all well thought out parameters."

Today's Call & Briefing:
Today we are going to be looking for any further rally attempts to get hit with some selling today.

On a higher opening and early rally above 1083.00 we are going to be on our toes to see if we can get short after the first hour.

If we have a mildly bullish High 5 then look to get short a few points above the BreakOut by letting that rally attempt play out some.

At that point if we indeed do get this setup and get short then just look to hold short into the close.

If we get this pullback as expected into the close then traders who are interested can also start LOADING LONGER TERM POSITIONS FOR A RALLY INTO THE END OF THE YEAR. We would suggest 1060.00 as a stop area. This is not an official trade but a good trade idea for what could end up being a back end loaded bullish quarter.

If prices OPEN LOWER below 1083.00 and take off to the downside hitting the Hour One low again then we will need to carefully examine the High 5.

If we get a rally off the Hour One low of 3 pts or so and thenn return to the B/D low we can confidently go short IF the High 5 are strongly bearish.

If the High 5 are Neutral to only mildly bearish at the time of the B/D under such a circumstance then we can look to buy the B/D minus 2 points or a bit more and hold for a counter rally later in the session.

Overall we favor the idea of selling a rally attempt and holding short into the close. However, as intraday traders we have to be prepared for anything and so I offer the alternative approach if we head for the lows first.

Value Area: 1,081.00 - 1,083.80
We would look for this area to hold up the selling if the market is going to stay bullish overall.

We may get a lower move today into the close IF we do not get a substantial rally off the open but we consider that a move into the mid to lower 1070's will be a good long term BUY POSITION to look to hold into the end of the year.

Buy Pivot Target: 1,079.25 - 1,080.25
This may be a support area but we need to see how the opening and first run of prices goes. If we run up and test 1091.00 then this could hold out as support.

A weak opening and slight rally is most likely going to trade through this.

Watch the -4.25 stop/pivot at 1075.00 for support and a potential opportunity to load a longer term position (stop near 1060.00...not an offical trade recommendation)

Sell Pivot Target: 1,087.00 - 1,086.00
Here is where we want to take a hard look at shorting.

Compare this price zone with the Hour One High and if that is the first pivot we approach after the first hour be ready to short up here or perhaps we end up more near 1091.25 (+4.25 stop/pivot)

Above that we stretch to 1094.25 and then goal of 1097.25 mentioned last week.

10 Day "Pit Bull" Moving Average: 1,074.60
We blew through the Pit Bull and the Market has (what I call) "Leveled up". Some of you who are longer term subscribers to the Morning Call remember me talking about this and identifying it's occurance during the beginning of the so-called Iraq War.

We had suggested a bottom was in just a day or so after the bombing of Iraq started and talked about how the market would "Level Up". This is what occured clearly on the first week and then during periods after that where the market just mysteriously leaped higher. It is very difficult to get abourd these moves.

We saw this occur on Monday and again today where the market gaps up open and climbs rapidly off the gap up.

If we hold certain support levels just below 1081.00 (estimated 1075.00) we should see this occuring more as we head into the last quarter.

Pro Trader's Action
We've given two scenarios that are important for today. On each one of them it is going to be important to let the market play out some.

That is the type of day we have in the Day to Day sequencing pattern.

Ideally we will be able to get on the short side from a higher, early move and then be able to monitor support levels using Trailblazer and the High 5.

If this does occur (the higher open and early rally) we will be looking for lower prices going into the close so it will be a patient day.

On the lower side with the lower open and early drop we would be more inclined to scalp from the long side and not take as much risk holding.

Good luck with your trades today and I'll see you in the action.

Mohan