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SPECIAL NOTE FOR AOL USERS: I'm getting e-mail failure notices from
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prevent the reports from getting though, and, if possible, deactivate.
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T-BOND DAY TRADING FOR THURSDAY, MARCH 11
released 6:30AM CT, 3/11/99
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Support, Resistance, and System Signals
USM9
R3 122 3/32
R2 121 22/32
R1 121 10/32
DP 120 30/32
S1 120 18/32
S2 120 6/32
S3 119 26/32
MONITOR FOR HOLY GRAIL SETUPS! If the 5/15/30/60 or 120 min ADX>30
then look to trade the bounce against that period's 20EMA with the
last intraday swing pivot extreme as the target.
Watch for OOPS! Trade - If O < YL then buy YL on a stop.
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Commentary
The market started off the day yesterday by dropping down towards the
120-25 support level as described in yesterday's report. The price
reversal pattern off the 120-28 pivot was reason to get long, although
I would have preferred it to have dropped a little closer to the DP
before turning.
Unfortunately, it couldn't muster enough energy to break Tuesday's
121-12 high on the initial try. And soon after, the failed third
attempt was reason enough to exit with the accompanying oscillator
divergence as confirmation. The market then drifted back to the same
120-28 pivot level, made a very weak bounce attempt, and quickly
thrust down through the DP. The thrust was held by the 60 and 120 min.
20EMA. Price then began its slow return to the breakout level. I, for
one, was anxiously awaiting a price reversal pattern to get short (as
described in yesterday's report). But none came. So, once again, it
was back to the wait-and-see mode.
Oftentimes, when my immediate expectations are unfulfilled, and I'm
left not quite knowing what to do next, I will start stepping back in
my time-frames to see what's happening in the larger picture. It's
something every conscientious trader should be doing on a regular
basis, but sometimes you get so wrapped up in determining your exact
entry and exit points that you forget.
By stepping back a bit and looking at progressively longer time frames
in the bonds, you can spot a triangle that had formed between Friday's
early morning meteoric rise and Tuesday's low. You would have also
noticed its topside breakout. In addition, at about mid-day yesterday,
you would have been able to spot the in-progress formation of a bull
flag in the then-current price activity. Bull flags typically forecast
a breakout to the topside. An appropriate strategy at that point would
have been to look for a pattern that would trigger you long.
One could have expected a support line to have developed from the
prior 120-19 low. A return to that level would have been an
appropriate place to look for either a price reversal pattern or
oscillator divergence to go long. The subsequent bounce against 120-20
was enough of a price reversal pattern to trigger you long, with a
stop 2 ticks under the prior 120-19 low (120-17 stop). The breakout
did, indeed, occur, and the market thrust through the upper trendline
of the triangle. The resistance level created by the prior day's
121-03 close held things in check, and the subsequent choppy action
was enough reason to exit. All in all, you might have expected an 8-10
tick profit out of the trade.
For tomorrow, we don't have any System Signals triggered. The 200
minute 5 period Double Stoch is in a position where it could be
peaking out, as is the 10 period Double Stoch (attached chart). The
slope of the 7 period %K is still up, but we're nearing the oversold
zone, so caution is warranted. However, the 100 minute 7 period %K
(not shown) has already rolled over, with bearish implications. The
20EMAs for all of our time periods are forming a fairly tight cluster,
with price just barely above. Yesterday was an inside day, implying a
breakout of yesterday's range is in store for today.
We have Initial Claims and Retail Sales being released at 7:30 CT.
Export Prices and Import Prices are released at 9:00 CT. Retail Sales
will probably be the most important number of the day, but I will
avoid holding positions during both release times.
I will be entering the trading day today with no particular bias. The
market will tell us where it wants to go in due course. But, I do
believe that we are nearing a point in time where it wants to roll
over, so I will be paying particular attention to short setups.
In overnight activity, we have a low of 120-21. As of 6:30AM CT, price
has returned to the 120-30 DP. It looks like the bulls and bears could
be battling over this zone very early on.
As is typical of these sort of "neutral bias" days, price action
around the Daily Pivot can give many clues. As mentioned several times
before in this commentary, it is often the case after an inside day,
that a failed attack on the DP indicates a likely move in the opposite
direction.
Identify support and resistance levels and watch price action closely
around those levels.
Bob Hunt
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