Travel Time (Updated)

Travel Time (Updated)

I need a couple of days of travel time, and the next few days are as good as it gets. It would be best if you did not day-trade on Wednesday through Friday. Tomorrow (Wednesday), we are on the Fed announcement watch. The board starts meeting today. Nobody anticipates any change from the Fed, but that may be the problem as market participants may be looking for inflation vigilance. In any event, it is not advisable to day trade on a Fed announcement day.

Additionally, Friday is quadruple witching day. No, this is not a day to honor Hillary Clinton. It is a day when stock index futures, stock index options, stock options, and single stock futures expire simultaneously. The cross-currents, having little to do with market direction, are nearly impossible to anticipate or trade.

You could try some day-trading on Thursday, but being sandwiched between the two salient non-trading days – day-trading on Thursday is not advisable either – just less risky than Wednesday or Friday. Traders and market-makers often start hedging on Thursdays as they prepare for expiration Friday.

As a housekeeping item, this will be my last commentary until next week, given this week’s less than desirable day-trading circumstances. Our portfolio remains 50% S&P 500 and 50% Nasdaq 100, and we have been rewarded handsomely for picking up the 20-week cycle trough, especially on the NASDAQ 100. I will send out a commentary if the macro picture changes or we achieve price targets. In the meantime, I have some commentary I have been writing on various subjects that I will publish sporadically through the weekend. Monday morning will be the next focused commentary.

Today’s Plan for Day Trading

The S&P 500 notched a new all-time high in a spike in the last five minutes of yesterday’s regular session. The overnight high is a new all-time high and should be carried forward as insecure until it is confirmed or exceeded in the regular trading session. At this writing, the S&P 500 (and NASDAQ 100) are slated to gap (true gap) open. Yesterday’s settlement ended on a spike, but yesterday’s volume and time points of control failed to migrate higher, a slight negative.

As to where the markets are positioned just before the New York open, both spike and gap rules are in play this morning, with early indications being bullish and trading above the spike. Given any conflict, I will be favoring spike rules. The NASDAQ 100 is just now coming alive, as I had been expecting. 

Respecting our core trading vehicle, the S&P 500 index futures, the spike’s base at 3948 is important today as it is also the prior all-time-high. Buyers should be present there as the market retests the breakout level. Keep that market-generated information in mind should that level come into play.

Regardless of price action, where value develops will continue to be important, as will the relative strength on the NASDAQ 100. Good day trading is often like keeping a lot of balls in the air at once. We absorb the price exploration data, watch sensitivity at the key levels, make our decision, and execute. We set our stop just in case we are wrong.

When I  am executing perfectly, following every rule I know (whether in micro-day-trading or macro strategy), the market likely will disappoint me in at least four out of every 10 trades. Keep this in mind, as it is in the realm of statistical probabilities and in no way a reflection of your character or skill as a trader. It is how you handle and manage each circumstance that defines your success and drives your ultimate returns.

A.F. Thornton

AF Thornton

Website: https://tradingarchimedes.com

A.F. "Arthur" Thornton is an expert in logic, risk/reward quantification, market fractals, pattern recognition and asset class behavioral analysis with 34 years devoted to developing algorithmic and quantitative trading systems. In addition to trading his own capital, Mr. Thornton designs custom algorithmic and quantitative trading systems for a small and exclusive group of exceptionally qualified traders.

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