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THE T-BOND DAY TRADING REPORT
Spotting Opportunity in the Treasury Bond Futures Market
Report for Tuesday, March 16, released 6:30AM CT
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Support, Resistance, and System Signals
USM9
R3 122 25/32
R2 122 15/32
R1 122 5/32
DP 121 20/32
S1 121 10/32
S2 120 25/32
S3 120 15/32
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
Yesterday was, once again, a good lesson in the importance of
remaining flexible and relying on price behavior as the ultimate
determining factor. We've discussed this topic not too long ago, but I
think it bears repeating for those who may have missed it.
Many beginners, in their unending search for the one and only ultimate
indicator, tend to look at these types of signals as some sort of
magic key in which to decipher the market's next direction. On the
other hand, I tend to look at them as forces applying "pressure" to
the market's direction. The "pressure" being applied to yesterday's
market by the 2 Day ROC Sell signal was downward in direction. The
fact that the market was NOT able to surmount enough energy to remain
under the DP, even with the increased pressure from the 2 Day ROC Sell
signal, was reason enough to suspect the market might trend in the
other direction.
Once price broke through the DP, any bearish thoughts should have been
in question. That upmove was turned back by a resistance zone drawn
from last Thursday's high at 121-14. The subsequent bounce off the
support zone defined by the DP and the 30 min. EMA was a very clean
two-bar reversal. A long entry somewhere around 121-10 would be about
the best you could hope for, maybe 121-09, with a stop two ticks under
the 121-06 pivot low at 121-04. At that point we had Thursday's high
of 121-14, yesterday's high of 121-17, and the 3/5 high of 121-20 as a
potential targets. That's not a particularly good risk/reward ratio,
but the NR4 Signal and the Connor's volatility readings mentioned in
yesterday's report had us looking for a breakout of either yesterday's
high or low. At this point, price behavior had started looking bullish
by bouncing off the DP, so a breakout of Monday's 121-17 high seemed
the most likely outcome. Mind you, we still had a tight stop in place
in case we were wrong.
Price proceeded to attack and then bounce off yesterday's 121-17 high.
The less aggressive would have found that reason enough to exit, and
that's OK. Even a scratch trade is OK as far as I'm concerned. But the
more aggressive had every reason to hang on, with stop in place, in
expectation that the NR4 breakout potential might be fulfilled. It was
a long, nail-biting kind of wait, but one with rich rewards. The
market soon rocketed skyward, finally finding resistance near the
121-27 resistance level defined by R2, leaving us with roughly 17
ticks in profit. Not a bad day!
Here's a little item of interest that you can do with what you will.
Linda Raschke uses 5 and 10 day average readings of Trin to gauge
potential equities market activity for the next day. Trin is
mathe-matically expressed as
(Adv.Issues/Dec.Issues)/(Adv.Volume/Dec.Volume)
According to Ms. Raschke, a 10 day average reading of Trin less than
.80 is a pretty good lock that the next day is going to be down.
Yesterday's 10 day average of Trin came in at .79 I've long ago given
up in trying to determine correlation between equities and bonds for
day trading purposes, but I do know that significant moves in either
can sometimes go hand in hand. Do with it what you will.
For today's trading, there are no System Signals fired. Both the
Double Stoch and the 7 period %K on our 200 minute chart (attached)
are very overextended. Our cycle indicators are telling us that we're
due for a drop. In strongly trending markets I tend to ignore these,
but this is no strongly trending market. This is a drifter.
The second attached chart for today contains another look at Connors'
volatility measures. Yesterday's pop had no effect. Their still
drifting lower, so I don't think the fireworks are over yet.
We have a few minor report releases at 7:30 AM CT and some bigger ones
at 8:15 AM CT. The most important one will probably be Industrial
Production at 8:15, but I think the market is going to be in trigger
mode here, so it might be best to avoid holding a position during both
times. Overnight activity has a high of 121-28 and a low of 121-21 (as
of 6:30 AM CT).
I am entering the day with no particular bias, although the cycle
indicators still have me expecting a drop in here. Price has yet to
break out of any significant longer term overhead resistance levels,
so yesterday's upmove hasn't established any definitive trend yet.
The market is still primed for a significant breakout move, so, once
again . . . stay focused!
Identify support and resistance levels and watch price action closely
around those levels.
Bob Hunt
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