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 November 24, 2003
Commentary-
Well, I said this thing was going to pop, and
pop it did. First, let's look at the daily bond chart.
The bond came off the grouping on a gap down.
It is still within the sideways congestion, though, so it's unclear to me if a
down move has started. Nonetheless, if I had taken a trade off of the grouping,
nothing has happened yet that would have had me stopped out. I give trades a
bit more breathing room than the tiny fraction the price has traded above the
grouping.
Let's look at the ES, which is a bit more convincing.
The ES has just blasted off on the daily chart. In one
move the ES has taken out the daily highs of the previous five days! There is
no way I can say that isn't strong. But, alas, it is a holiday week, so the
market depth may not have been there. If a trader weren't as 'jumpy' as I am,
he or she could very well still be in a trade from that first bounce off of the
top of the grouping. As I mentioned, this might be one of those trades that I
miss out on because I'm unwilling to give very much back. We'll see. Even if
this thing blasts off to the moon, though, it will have little effect towards
me changing my 'Trading Plan'. I accept that this will happen to me from time
to time.
Let's look at the exciting (read: pathetic) action on a 3-minute ES
chart from today.
The ES gapped open and ran straight
up. Once the buying frenzy ended, it was sleep time until nearly the end of the
day, when a few buy programs bumped it up a little. I highlighted the chart
with three arrows. All three arrows point to spots where I got entry signals on
the 1-minute chart. You would have to have a lot of confidence in the continued
buying, though, to hit those spots after such a gap up. Regardless of whether
your plan would have you trying spots like those or not, the signals were
pretty clear.
As an aside, a thought comes to mind here. I just noticed that I'm
sounding amazed over this 'big' gap up, which amounts to a few measly points.
Remember the days when the S&P moved 90 points, low to high, on a volatile
day? (Recall April 4, 2000, when the range was over 110 points low to high. The
NASDAQ composite moved over 600 points that day!) I guess we've adjusted to
having the VIX under 16 on a daily basis. This isn't 'the old days'
anymore.
I'd like to point out one more thing before we wrap it up. I saw a
very interesting thing on Friday that I wanted to discuss. Let's look at a
3-minute ES chart from Friday.
In my book Kane
Trading on: Trading ABCD Patterns I mention how I frequently see small ABCD
patterns in trading ranges. I see these even on very small timeframes. On
Friday I saw three very distinct ABCD patterns in the endless, boring, sideways
chop that made up the day, and I highlighted them on the chart. All three had
potential entry signals on the 1-minute timeframe, with two of them being quite
good in my opinion. Although I feel it is a tough row to hoe to trade such a
tight range and utilize the 1-minute chart on the ES, if you are a scalper type
and plan to trade these areas regardless, you might look into this and see if
it is of any use to you.
I'm still going to be keeping it light this week, but if
we don't give back the moves of today, and perhaps can keep it going, we may be
starting a trend move here. I expect this could provide some opportunities on
the lower timeframes. If anything stands out, I'll point it out in this
column.
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