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 May 22,
2005 Commentary (weekend edition)-
Today I'm
going to discuss a few business matters, and then we'll get to some charts.
It's getting to be about that time of year when I need to take a break, or risk
collapse from total exhaustion. I pretty much work from the minute I get up
until the minute I go to bed, seven days a week. I'm not complaining, only
stating what I do. I never used to take any yearly breaks ('vacations') at all,
but in the last few years I've learned that I couldn't go on like that.
I'm about
ready to get some R&R, so in a few weeks I'm going to get away from the
computer and go have a different kind of fun. Take some walks, hang out with my
better half (she still doesn't believe me), and just generally not be near the
computer. Those that follow me closely know why I am bringing this up in
here.
I can't do this 'halfway', so I will not be writing the free
commentary when I'm gone, looking at or answering e-mails, or shipping books.
If I try to do this partially I would get sucked right back in, and then I
don't get my needed break. I will write a commentary for next weekend, and then
I'll decide on the fly if I am going to write one towards the end of the
following week, or leave it at next weekend's commentary. I will update the
readers as far as that in the next commentary.
Books sales have been very good
lately, and I want to mention that if you have been thinking about buying the
books (and I know of at least a few people that are 'getting ready'), please do
so in the next week, because much after that and I will not be able ship them
until after I return. In fact, I won't even know you've made an order. If you
send me an e-mail asking me why I haven't shipped or even answered back in the
two weeks you've been trying, I won't even see it until I 'return'.
I will post this on the books page, as I usually do, but not
until I go on my break. If you want to do your studying before I return, please
order shortly so I will have time to get those shipped out to you. Any other
questions or communications that you have, too, please try to take care of
those in the next week or so.
As I have said the past two years when I go
'on break', even if I am right here five feet from my computer it will not be
turned on, and I will not even know until I 'get back' that there are e-mails
in the 'in box'. I really need to stay away for this period of time, so I can
come back fresh and creative. I will post this to the What's New section when the time
comes.
Let's move on to some charts. I am going to lift something from the
members' section for
today's post. It is a little bit 'wild', but look over the charts and the lines
carefully and you should be able to see very clearly why I use the things that
I do.
"Today I want to point out something that was setting up yesterday.
Let me start with the S&P at Monday's close. Don't get startled when you
first see this.
At first this looks like a mishmash
of lines, but it is just two key sets with reaction lines, both obvious and
unadjusted. One goes back to mid-April. Remember the sets that were being used
over and over? These are the same sets. The ES ends the day right at a very
noticeable intersection of lines. I also noticed something obvious there,
too.
The 1.128 external retracement from
the last run down fell right there, too. Now, the main idea is that I am
suspecting we are in an uptrend right now, perhaps forming that ABCD I
discussed. I look for clues and price action to tell me things are as I expect
them to be if this premise is true. I also find potential trades as I do this,
but I get clues, and that's critical. Clues from a given timeframe 'trickle
down' as 'context' for lower timeframe setups. Read that again, as it is very
important in what I do.
So what jumps out at me from this framework? And what
would be an 'ideal' price action structure for that?
I put an obvious offset line on the
chart. I will be looking in the area of that line, and the offset. If the
uptrend is to continue I would expect a reaction there. If not, surely at the
lower upsloping line just below. Maybe a reaction on the one line, up to the
next downsloping line (the same line we are at right here), and then down to
the line again, or the area where the lines come together. This is getting
pretty far ahead, and I just do this one setup at a time, but it doesn't hurt
to sketch out some scenarios, either.
Let's see what happened from here.
The ES gaps down, runs up, and
rolls right over. I have my ideal scenario, an ABCD forming right at the area I
want to watch. The interesting thing was that this was a pretty clear setup for
a CD leg run as it rolled over at the C point of the potential pattern. I have
a setup to play the downside even on a gap day, and a bigger setup forming. As
an aside, look at the overnight data and see how a play right off the lines was
possible for me if the liquidity was there.
Let's see
what happened from here.
The ES goes right to the line with
a beautiful ABCD pattern, and runs right up to the line I thought it might. It
does this with an ABCD pattern, and then rolls right over. Since I put this
chart together it formed an ABCD off the run down, and is now ramping up. I
can't recall seeing so many small ABCD's on the lower timeframes as I have
today. It's just one after another. And where did this last ABCD reverse? Right
at a division line. And where is it as I write this right now? Right back at
the line you see the last reversal off on this chart.
I am watching
all this to guide me on what may be happening with my higher timeframe layout.
I also use this for intraday trades. I use the bias and 'context' from the
higher timeframes to guide what trade setups I like for the intraday, and what
I learn 'down here' helps me understand the higher 'context' and shape my
premises.
Can you see how it all fits together to form a coherent picture (at
least coherent to me)? That's a big part of what I am trying to convey. When I
say 'price action' I mean all of this, and more. When I say I am trying to read
the price action I am attempting to form premises and look for action that is
consistent with those premises. I feel this is a critical aspect of my
trading."
The next commentary will be next weekend's edition, posted by
Sunday May 29, 2005.
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