Welcome back everyone!
Today's trading session was notably slow, with both upside and downside movements being quite limited. In sessions like this, I tend to hold smaller positions and add to winners as direction begins to pick up. My targets were initially set wide, but upon witnessing a rejection of continuation, I promptly adjusted my expectations.
The bulls attempted to break the highs, but this was countered by strong selling, pushing prices back into today's range. In such scenarios, it's crucial not to oppose the market by trying to predict its movements. Instead, targets should be adjusted closer to the entry point, accepting whatever results come.
A key question is how to identify when this is happening, which is relatively straightforward. As long as the price remains within the session's initial balance range without any strong moves breaking out of this range, a balanced session is likely in play. As mentioned yesterday, while we are trending higher, a lack of continuation in a session suggests that these prices may be maintained.
If you found yourself caught in today's choppy market, it's important to reflect on why this happened. Work on refining your ability to spot such market conditions as early as possible and strive to avoid them in the future. The concept of the Initial Balance and identifying a failed breakout or breakdown is a basic method to detect when a move is showing signs of weakness. Additionally, if you find yourself frequently getting chopped out of trades, consider setting a maximum loss limit for a session. If this limit is reached, stop trading for the day and take notes on how the session progressed. Remember, if a trend day is to prevail, it's often driven by strong news or an early rally or sell-off during the cash session.
Outside of the E-mini and Nasdaq, there were notable movements in Oil and Gold. Oil experienced some downside below the long level, while Gold remained strong above its long level throughout the session, even showing a significant bounce later on.
In the stock market, the daily levels provided clear guidance for today's session, and the swing levels in the “momentum gallery” offered excellent selling opportunities. The Dow, Japanese Yen, Canadian Dollar, Swiss Franc, and 2 & 5 Year Bonds all experienced strong upward movements. This aligns with my expectations and suggests potential for upside squeezes, especially considering the crowded short positions among retail traders, as indicated in the COT report.
Let's now shift our focus to the rest of the plan. The event and earnings side was relatively quiet today, with nothing significant on my radar.
Let’s dive in!