This week has given us the kind of range and volatility that is very conducive to trading. I don’t yet want to comment extensively on where we might be in the macro trend. It certainly looks like another bottom is in place. I cannot explain it with confidence, but maybe I will give it a shot.
There must have been a meeting in New York on Monday. All the big wigs got together in a cigar-filled room. There wasn’t much time; a few of them were headed for their first trip to space later this week.
The main topic of discussion was the Fed. Everyone had a chance to speak. Finally, they summarized the discussion. “Is Jerry over at the Fed still on board until the next FOMC meeting?” “Yes,” said one of the group. “Who’s turn is it to babysit Biden?” “Jamie, are you on it this week?” “I am warning you; he likes to play a lot of backgammon and cards.” It works out, though; I always tell him he is signing his scorecard, wink, wink.”
“It looks like everything is in place, boys and girls.” “So Buy, Buy, Buy, valuations be damned!” “Delta Virus be damned!” “Inflation be damned!” “Expiring unemployment be damned!” “The crowd has turned negative and fearful.” “This won’t work for us!” “We have to suck them back in so we can unload the rest of our stocks and buy real estate!” “They will all be renters soon!”
“This is the Great Reset, after all, and they won’t own anything anyway.” “We will take their last dollars in this next crash – that should take the fight out of them.” “All we need to do is drop the little worker bees a few crumbs, some video games, and a big-screen TV to keep them happy!”
Zuck, buddy, “This social media has to go – you sure screwed that one up!” “Whose idea was this texting anyway?” “Was that you over at Apple, Tim?” “Didn’t you realize all these ne’er-do- wells would start talking to each other?” “Kamala, how are we coming on that Chinese governing model? The sooner we get that in place, the better.” We are damn sick and tired of that pesky Constitution!”
“You know, If these people give us any trouble, we will sick the FBI and Justice Department on all the insurrectionists.” We run them now, just like we did in Nicaragua.” As for the rest of the Red State insurrectionists and vaccine dodgers, why do you think we call television “programming?” “Someone get a note off to CNN!”
Anyway, I was in Europe, so I must have missed my invitation. But I think that is what happened and why the market continues to go higher. They call it a blow-off until it blows up. Naturally, this could be my FOMO talking. Regardless, today was a good day.
Today’s Trades
My annotated chart for today appears above. I was able to garner 47 points per contract. That is three fabulous trading days in a row. I take them when they come because most days are not so profitable. Making four to six points a day per contract is more normal. And, of course, some days result in losses. So If this looks easy, it isn’t. The chart you see above was built throughout the trading day, not knowing what was coming to the right of the screen. But the market was a bit easier to read than most days today, as it formed a lazy and slightly up-sloped channel.
Every single trade is meticulously noted. DB stands for a double bottom, and DT stands for a double top. There were lots of different ways to work the day. What you see reflected in the trades is my own personal style – there are many other ways to approach day-trading. I am rarely a scalper, and I leave many trades on the table. I am more like a “swing trader” in the five-minute realm. Most days, I only take two to four trades and am done in the first two hours. As a contrary example to my trading style today, one could have bought the opening breakout and held it to the close as long as there was no serious violation of the 21-period line: one trade, a nice profit.
That brings me to the last trade of the day for me. I call it a flush trade. What happens is that the market takes a sudden plunge and blows out all the stops to the left of the chart at the various support levels. Even I got stopped out for a four-point loss per contract on the last trade I took from the 21-period line. Then, after the market makers load up on inventory at the lows, they blow the market right back up to new highs and offload the acquired inventory to all the shorts panicking as the market comes back.
When I did not know about this operation, I use to throw things at my computer screen. But I have been on to these operators for years. Today, they took the market right down to halfback (the 50% retracement of the regular session range), also the point of control (highest volume node) for the day.
I jumped in with both feet near the low, with a reasonable stop below the POC. It had already been a good day, so I figured it was the house’s money. I grabbed an additional 18 points per contract into the close. I would have made more, but I didn’t want to chance the aftermarket or get stuck with overnight margin requirements – so I bailed 30-seconds before the close.
I will have more to say about the macro picture later or first thing in the morning. I need some time to assess. I am still drained, and I spent too much time on the screens today.
But as I always say, you have to make hay when the sun shines.
A.F. Thornton