Mid-Day Update - 7/21/21 | Archimedes Methodologies

First, let me highlight that internals have been reasonably strong today, and that gave me the confidence to go with some breakouts. Since breakouts fail 40% of the time, knowing your internals and whether they support the direction you are headed is important.

There was a breakout trade right from the open based on yesterday’s trading range. Double the range, and you have the measured move – which is right where we first stalled today.

Then we based for a while, almost leading me to believe that we would balance the rest of the day, but we did get another breakout from that range, and that breakout is retesting as I write this (another point to add to a position if desired). This breakout is also a breakout from the 30-minute opening range, which projects a much higher figure. Frankly, when the 30-minute opening range is that wide, I don’t usually expect it to double except on exceptionally strong days like yesterday (or weak as the case may be).

You can take long positions at the bottom of the range, but here you had two chances to buy at the 21-period line before the second breakout. I would not work (be short) the top of the range when our market internals are this strong. It would be best if you only were looking for longs on days like today. The range measured move still sits above us, as does the 30-min opening range projection.

There is a problem, however. As you will see above, we may have an ending diagonal (wedge) forming on the higher time frame 2-hour chart. It is pointing to the breakdown level from our last balancing area a week ago. There is a downtrend line there as well. The market may need a rest before it can make further progress. Perhaps it will form a right shoulder dip on a reversal pattern to go higher.

By this time of day, I am typically done trading and will come back around 2 pm EST to see if there will be an afternoon drive trade. Otherwise, the tempo here has slowed to a crawl, and there is nothing that interests me.

Many studies of traders find that most of them give back everything they made in the morning by overtrading the rest of the day. In part, this is due to the choppy nature of the New York and Chicago lunchtime and all that follows. Also, there likely is a degree of screen fatigue at work.

You see how detailed my notes can be as I go on through the morning. And you only see part of it. There is no way I can maintain that level of concentration for more than a few hours.

Money is continuing to rotate back to value and cyclicals. After two days, I am not sure this is still short-covering. So we may have another tradable bottom, or we may be in the process of defining a new, summer trading range.

Stay Tuned,

A.F. Thornton

Mid-Day Update – 7/21/21

Mid-Day Update – 7/21/21

AF Thornton

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Mid-Day Update – 7/21/21

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