Charts I’m Watching: Sep 5, 2012

I’m not really a scalper.  Our swing/directional calls have been pretty successful and are a lot less stressful and time consuming.  But, we’ve had day after frustrating day of watching breakouts and breakdowns fizzle before they could even get started, leaving us with subpar performance for August (+5.4% versus our average of +12.2%.) 

Today marked the 21st day in a row where we traded within 5 points of the fan lines from 2007.  Complaining hasn’t seemed to help, so I decided to scalp this schizophrenic market and try to pick up a few points per day — at least until the Central Planning Sweepstakes winners are announced and things return to normal (hopefully by the 13th.)  

It’s good for an old dog like me to get the blood flowing by getting reacquainted with some old tricks.  But, buy and hold types might prefer to brush up on their golf game.  We’ve averaged 12 trades/month since the new site opened in March.  In the past two days alone we’ve traded 9 times.  Thankfully, it’s been volatile enough to pick up 2.3% in the process.



Emini’s are taking on a descending triangle look, and approaching the .618 time point where there should be either a breakout or breakdown.

It’s worth playing along on the downside at the opening to see if there’s another trip to the lower bound at 1395.  A stop at the upper bound (1406) should provide protection.  I’ll take a short position on SPX when it opens.

UPDATE:  9:50 AM

Strange opening, with SPX up while ES was down.  Opened a small short position at 1406, stops at 1408.50.  Lower bound on triangle for SPX is 1396ish.

If the 15-min RSI rebounds at a TL coming up, I’ll switch sides and play the upside.

UPDATE:  10:00 AM

Switching sides here at 1402, with very tight stop at 1401.

I still like the idea of a Butterfly Pattern getting going here.  I’ll post a chart in a moment.

UPDATE:  10:10 AM

If/as we approach the upper bound, we’ll have to be wary of a reversal that could start a Gartley in the other direction.  The BC leg was roughly .618 of the AB leg.

So far, we’ve retraced .786 of the BC leg.  The upper bound is roughly at 1408.50 — which also happens to be the upper Fan Line from 2007.

More in a few.

UPDATE:  10:20 AM

The 5-min RSI has provided a nice road map this morning.  Just broke out of its little corrective channel — but that rising purple line is one of our major channel lines.  Make or break time for this little rally.

If we hit the upper bound, I’ll likely take profits and wait for a breakout to get back in.  Otherwise, cash sounds fine.

UPDATE:  10:30 AM

Taking profits here at 1408.55, will stay in cash unless break 1409.55 or little channel up breaks down.

UPDATE:  10:45 AM

Channel broke down, but RSI picture isn’t so clear.  Will stay in cash for now.

More in a few.

UPDATE:  10:50 AM

5 min RSI broke back through support.  Will we get a tag on the lower RSI channel line again?  It’s the same line for the 15 min, too.  The lower Fan Line is just below at 1404.80.

If that doesn’t hold, there’s also a TL at 1403 (white) that might correlate with the RSI channel lower bound.  If that doesn’t hold, there’s always a yellow channel line at 1399 and the descending triangle lower bound at 1396.50.

It just now occurs to me that the frequency with which SPX traverses between the upper and lower fan lines (currently at 1408.42 and 1404.80) has provided some tasty trade opportunities.  In the past 20 days, it’s ventured into the gap 30 times, 22 of which traveled to the other side and 8 of which failed.

Given the 4 point gap and using reasonable stops, that would have translated into a nice little trading system:  22 x 4 = 88, 8 x -2 = -16, net = 72 pts. Probably not useful going forward, as we should break out of this tight range once the Central Bank Sweepstakes winners are announced.  But, for now, the an lines are definitely exerting a lot of influence.

UPDATE:  11:15 AM

Speak of the devil.  Just had a little reversal at the lower fan line.  I’ll play the odds and go long if we break above 1404.80 — stop at 1402.80.

UPDATE:  11:20

Changed my mind — don’t like the RSI pattern.  Will wait for a better setup.  Looks like more downside to me.

More in a few.

UPDATE:  11:40 AM

So much for ignoring the trend!  RSI broke up through its FL and SPX appears headed for the 1408.40 side of the gap (also the triangle upper bound.)  As before, if it breaks convincingly through 1409.55, I’ll consider it a breakout of the triangle and tag along on the upside.  If not, happy here in cash after making lunch money for the day — or might take another run at a reversal.

UPDATE:  1:30 PM

SPX approaching that white TL (1405-ish) again.  If it breaks through, should be a good short.   Chart in a minute.

UPDATE:  1:55 PM

Yikes!  That was a break through.  If 1401.25 broken, immediate target is 1400.  I’ve added some channels (yellow, dashed) that seem to be working pretty well in the short run.  We just bounced off 1401.38, will likely back test the presumed channel line in red — also a yellow channel line.  This is really bouncing around, I’ll set a loose stop at 1405 — as we might go back and back test the broken TL (white.)


UPDATE:  2:35 PM

I’ll give it another point or so to see if it’s stopped by the TL back test.

UPDATE:  3:44 PM

Going ahead and closing out the short here at 1403 for a whopping 2 point gain.  We’ll probably get a bounce off the RSI TL, and I like the idea of being in cash again overnight.


Charts I’m Watching: Sep 5, 2012 — 6 Comments

  1. PW–I’m looking to short at the top of the channel again around SPY $141.35ish for that downside.  Already rode that scalping train once today, and will try to do it again.  Of course, breakout above 141.47 = stop out.

      • PW–using EW, I’m counting this triangle as a 4th wave, looking for the 8 point breakout to the upside at this point.  Anecdotal evidence, but at 12:11 I put in an order for a decent amount of SSO at $58.47.  It sat there for a couple of minutes before getting filled as NOBODY was selling the SSO with a .47x.48 bidxask.  Absolutely no volume…and this is why I think it will break out to the upside…the market maker wasn’t willing to part with the shares–or doesn’t have them.  The HFT “volume” machines that are supposed to create market liquidity sure didn’t jump in to fill that order.  Kinda funny from my perspective.  Now of course, this thing is going to tank to 1266 in 3 minutes (HAHA), but thought I’d share.

        If that count is right, we are in the ‘e’ wave of the triangle and it should break out in the same direction it entered (up).  We’ll see if they just painted the perfect triangle to screw with people, or if it will really work.  GLTA.

  2. I’m confused you were trading the ES….you posted a short @1406 it never got that high?

    • Sorry, should have been more clear on that.  This morning was a little hectic.  I watch the ES before the market open to get an idea what to expect, translate the actual trading to SPX.  I know many readers don’t trade futures, so usually post trades in terms of SPX only.