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Trade Setup Summary for Friday, August 1, 2003:
Sell 982.00/ Cover 980.00 or lower +2-4 pts. (Buy Pivot target becomes Sell resistance with a Bear High 5)

Recap of Friday's Action:
Good Morning and Welcome back from the weekend. A very special welcome to all of our new subscribers and visitors that joined us over the weekend.

Well, it appears we are still stuck in the low range doldrums of summer just waiting for some more extended range action. It seems now whenever you get a 20 point range in the S&P500 everyone gets all excited about it. I vividly recall a time when a 20 point range was considered "normal" with many 25-30 point ranges. As S&P500 futures traders we just have to look forward to the market getting more stretched out again someday.

Our Headline Call on Friday for the market to head lower and close in the lower third of the range played out as planned. We got the chance to go short at the "Buy Pivot becomes Sell Resistance" TCF trade setup as the market blew through the --4.25 stop at 978.75. On a reflex bounce back to 982.00 we nailed the short (recall: recent re-tooling subtracts --1 point from the original Buy pivot at 983.00). This trade is shown on the chart above and you can see how with "professional patience" the trade pushed lower later in the day and gave up a slight profit.

Some of you may have cut the trade earlier due to seeing it run lower twice and then keep pushing back to the entry area. Ordinarily we would look to hold the trade to fruition but on Friday's seeing this lower pushing and recovery no one would have blamed you for scratching the trade. We saw once again on Friday the strong resistance come in at 977.00 exactly and this will be an important test/pivot number for today's action. Let's dive right in.

Today's Call & Briefing:
We will be looking for a specific opening to tie in with our Headline Call today. On an early, lower opening and drop in prices this will signal us for what we expect to be an up day today.

Because of the slow action and range on Friday there are not any specific underlying factors other than our Market Force indicators. I could not get a strong indication of a weekly bias which I often like to give on Mondays. It appears we still need to make that stretch lower to fufill the 967.00 number we have been discussing for a few days.

We will be looking for the prices to rise off the lower early move and possibly stage a BreakOut rally off the Hour One high pivot. If our Headline Call idea is correct we will see support most likely come in at the 972-3 area early today instead of the lower 967.00. This price area correlates with our Buy Pivot target --4.25 at 971.00 which we would expect to hold up the early selling. If this same price area matches up with the BreakDown Hour One pivot then we will be in business for a buy signal trade.

Now if they do stretch down below the 971.00 area then we could be in for a similar trade setup as occurred on Friday with the reversal to sell off the Buy Pivot. You can see why it is so important for our subscribers to memorize and mentally rehearse the TCF Trade Setups.

Our Market Force indicators are bullish for today and Monday's are supportive for an up move on a lower opening and early lower move usually. So with the combination of these two factors the lower move/ early drop action should be a bullish setup unless there is some extreme unexpected bad news.

If they open higher and run higher first then we could still look for a BreakOut attempt but the chances of a continued rally throughout the day are not that strong.

TCF TRADE SETUPS TO WATCH FOR TODAY: As stated above we are going to first be looking for the lower opening and early drop action to get in sync with the Headline Call. If that occurs we will be first on the lookout for the BreakDown Hour One pivot to be the first pivot hit between those two. There is a good chance on the way down we would hit the Buy Pivot Target but we do not want to trade at this Buy Pivot today but wait and see how the Hour One Pivots setup up.

If we get a higher opening and early push up then there is a chance of hitting the BreakOut first. It will be very important to see that we are NOT setting up for a BreakOut buy scenario in order to look to go short based on the higher opening signal. If we do get this higher opening action then there is an outside chance that it will set up a further BreakOut buy. All we would need to do is compare the arrangement of the High Five at the time of the BreakOut to determine what to do.

Here is what to look for: If we are getting a FLAT DOW at the time of the B/O (our definition of Flat is if the Dow is up +50 points or less) yet with NAZ leading the market being up +12-15 points or more then we will look for the BreakOut setup to occur. We would also want to see the TRIN lower under .80 or less and VIX ideally down -.50 or more to get long at the BreakOut. If this setup is NOT OCCURING then we will need to determine if we want to sell the BreakOut. On Monday's if we are seeing a BreakOut occurring but the NAZ is holding back being up +10 or less with the Dow soaring ahead of the NAZ being up +80 or more usually we will look to short the B/O and add 2-4 points to that high depending on the rest of the High 5.

Watch for the BreakOut Buy or Sell to correlate with the Sell Pivot Target up there at 984.75-985.75. Busting through the 990.00 stop/pivot target should see em run higher today. This trading area puts us back also face to face with the Pit Bull 10 Day Moving Average which is an important number to watch especially now.

Value Area: 977.50 - 981.50
We have a tight VA range today but we are going to look for prices to hold above the 981.50 area to be bullish today. If we get an expected push below the 977.00 bottom of the VA area and then a rise back up into the zone this should see prices go higher on the lower opening script.

Buy Pivot Target: 975.25 - 976.25
No trade at this pivot today. Please see commentary above.

Sell Pivot Target: 985.75 - 984.75
No trade at this pivot today. Please see commentary above.

10 Day "Pit Bull" Moving Average: 987.10
If our scenario for a bullish type day or at least a rise in prices off the early lows occurs then we will be looking for another CrossOver of the Pit Bull. You can see how with the slow summer trade and many of the large fund managers on vacation there is just this hovering near the Pit Bull and no really decisive moves. It's important from a Market Call academic point of view for the newer subscribers to see how vital this 10 day moving average is for determining market direction or in this case lately "market stuckness". Still this congestion at this price area shows how this Pit Bull serves like a magnet for prices almost holding an equilibrium lately.

Pro Trader's Action
Today is a rather convoluted day on the indicators. We have a fairly vivid directional bias to the upside off of lower openings but not as clear a conviction if they open em up higher.

Still let's prepare to short a BreakOut with the above referenced trading setup. No matter what, it is usually good to let any early rally play out up until 11:30-12:00est before taking a short position. I have noticed this over many years of trading the S&P500 that with Monday's being the strongest day usually if we get any type of up move early to just give it time to "hang up" near the highs before going short.

The week appears to be heading for another slower range period with a bias more towards erosion looking to fufill that 967.00 number. If that gets filled earlier in the week then we will be looking for a stronger upside bias but still nothing substantial.

Good Luck today with your trading and let's see if we can grab 8-10 points on that lower opening and early drop if we get it. All the best, Mohan

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