Dips continue to be bought relentlessly in this market. Sentiment remains at record highs. Only encouraging things for the bears (if there are such things 9pts off yearly highs after 50+% runup) is that late money is selling, as opposed to late day ramp ups. All that is rather irrelevant in this game of performance chasing momentum and whatever else you want to credit.

Technically, as you can see recent tape has been very much a rollercoaster, which resulted in two ?megaphones?, anyhow, heres a look at expected dip buyer / support levels:

Possible support levels:
998.5 - 50% retracement of today’s 26 point off the lows, also previous support level.
990 - 3 week 50% retracement,which already reacted once, and now also lines up with the trendline of last two lows.
984s - previous spike high, gap fill and also 61% line of 3 week retracement.

On the upside currently rally highs are possible resistance point, which is also 38.2% of the whole bear market and a few trendlines.

Target of 990 retracement play just happens to be 1028, which is almost exactly backtest of ascending trendline on the weekly charts.

In honor of FOMC day, here is a look at interesting trend of FOMC days reversing themselves on most occasions:

(Click the image for full screen view. Chart courtesy of Fari Hamzei (@HamzeiAnalytics) and Scott McCray

While trading just ES, its also important to look at other indeces, today all Dow, Nasdaq and Russel all made a double top (at least for now):
Will be keeping an eye on those indeces for break above recent highs shall we rally, as they will likely lead ES higher also:

As always will keep posting updates on intraday technicals and internals via @esecfutures on Twitter.

Cheers

Vlad

Hey Traders,

yes, bears had the best day in a month today, sentiment is still at highs, overbought etc etc. None of that really matters, what matters are actionable key technical levels.

Support:

- 990 fib confluence s/r level, that held this thign in check today
- 984s fib, s/r level and gap fill
- Below will be looking for gap fill 975, 966 s/r level and absolutely critical 956-957 level

Resistance:

- 999s -1000 s/r level and fib confluence
- 1003 - 50% retracement from highs and also fib confluence (also gap fill)
- 1010 level and then the rally highs are also expected to act as resistance.

—————————

Tomorrow all eyes will be on FOMC at 2:15 pm EST. That should be main market and more so FX mover. There are also some important events out of euro zone overnight, so be sure to keep an eye on your calendars if you trade overnight.

As always will post key intraday levels and internals as more price action develops via blog and my twitter account @esecfutures

Best of luck trading tomorrow and may stops be with us

Vlad

Next key $ES_F support level: http://twitpic.com/di5f1 . ES, YM, NQ, TF now over 102+% ATR $$

$ES_F close to the bottom of channel and fib confluence: http://twitpic.com/di0tt $$

Same old Yen channel still seems intact, with top of the channel laminated with 200ema hourly. Break above that channel and recent 1.06 highs would like be bearish for equities.

Hey Traders,

Here is a quick update of bullish sentiment and NYSE stocks above 200ma. Both of those indicators are at the very least at 3 years highs:

While I will continue to focus on technical levels described in previous updates, I would rather miss the next move up, whatever it might be than chase the tape at this level, unless for intraday scalp

Cheers

Vlad

NEW YORK (Reuters) - A federal judge refused to approve a proposed settlement between the U.S. Securities and Exchange Commission and Bank of America Corp over the payment of bonuses to Merrill Lynch & Co employees, saying he was unable to determine if it was fair to the public.

The largest U.S. bank had agreed on August 3 to pay $33 million to resolve an SEC civil lawsuit accusing it of misleading shareholders by not disclosing it had authorized the payment of up to $5.8 billion of bonuses to Merrill employees. About $3.6 billion was awarded.

But at a hearing on Monday, Judge Jed Rakoff of the federal court in Manhattan said he needed a “much more detailed account of the underlying facts” before signing off. He suggested the settlement might not be “remotely reasonable” if the SEC were right that the bank lied about the bonuses.

“I would be less than candid if I didn’t express my continued misgivings about this settlement at this stage,” Rakoff said. He said the settlement “seems to be lacking in transparency.”

Continue reading full article here: Reuters

Look at this, first they actually cut ridiculous jet spending in half (hopefully in full soon), and now 33Million tip for 6 billion bonuses is not sufficient, good to see.

Hey Traders,

very low volume day today, lowest volume day since Jan 02, 09. Also traded in very tight range, here is % of ATR Summary for major indices:
ESU09    56.9
YMU09    62.7
TFU09    67.3
NQU09    77.8

Absolutely no new  technical developments on this inside day. Bigger time frame levels remain the same, refer to yesterday’s weekend update with daily and weekly charts.

Here is a quick update with immediate support / resistance levels:

Chart is very self explanatory, will keep an eye at highlighted areas as well as the blue channel. Also, keep an eye on 200ema hourl, especially when laminated with one of other s/r levels, it hasn’t been tested in over 3 weeks, thats how strong this move has been!

This week with Euro Zone GDP as well as FOMC meeting all eyes will be on the dollar, here is key channel and resistance levels:

Recent high laminted with 50ema, and top of the channels are two areas which could create a dollar squeeze and be rather bearish for equities.

As always will post key technical and internals updates on the blog and intraday via twitter @esecfutures

Cheers

Vlad

Of Course it would be more convenient to fly to Europe for summer vacation on private jets, so lets just spend $550M of tax dollars on some private jets, there should be plenty for sale now after we made all the CEOs get rid of theirs:

The Pentagon is criticizing the House of Representative’s request to upgrade Congress’ air fleet — and charge the cost to the Defense Department.

“It forces us to take money from things we do need to fund and redirect it for things we don’t need,” Geoff Morrell, a spokesman for Defense Secretary Robert Gates, told the Wall Street Journal. “And in a time of war, we just can’t afford that. The bottom line is, for everything that they appropriate for us above and beyond what we’ve asked for, it will, at some point require us to find money from programs we do need.”

Lawmakers slipped the request into the Pentagon’s proposed budget for 2010, insisting that Congress’ current fleet of executive jets is old and more expensive to operate that newer, more efficient planes. They also say lawmakers use the jets only 14.5 percent of the time, compared to 44 percent usage by military members.

President Barack Obama sent Congress a Pentagon budget of $640.1 billion, which the House adjusted and scaled back to $636.3 billion. During that process, members requested $550 million to purchase eight passenger jets. Obama originally sought only $220 million to buy four planes.

Source: http://www.newsmax.com/insidecover/pentagon_jets_defense/2009/08/08/245565.html

…..

Hey Traders,

SP500 has now rallied over 50% finding itself in a very interesting place, with bullish sentiment at all time record bullishness:

and also right at 38% retracement of the whole bear market which also happened to be the backtest of two previous channels, which have stopped this rally at least on Friday:

Sentiment, bias and overbought conditions aside, besides this retracement and trendlines there really isn’t much in the way of Sp500 retracing 50% of the bear market.

Market momentum continues to drive this higher further squeezing the bears with little to no concern for good OR bad news, earnings, econ data and dollar strength or weakness.

Here are some big picture support levels on ES - SP500e mini futures, that longer term dip buyers are likely to step in at:

Yellow lines also higlight two unfilled gaps that will come into play on any retracement towards higlighted support levels.

On hourly time frame will be watching  / scalping these levels for further clues:

Chart is self explanatory, highlighted areas are expected support levels, purple line is 200ema and blue lines are the channel and the wedge that have been respected numerous times during the last 2 weeks.

As always will keep posting intraday market internals, technicals and charts via my twitter account @esecfutures and on this blog.

Good luck and great trading to all this week

Vlad

Hey Traders,

some incredible currency moves last Friday. Dollar has clearly has been in steep downtrend helping fuel the recent rally.

After breaking down below two yearly lows for the dollar, it managed to close back above that support, with incredible bearish sentiment on the dollar with only ~3% dollar bulls earlier this week, the short dollar trade certainly seems to be overcrowded.

Will be watching this daily downtrend channel for clues:

For dollar bulls to get something going they will need to make higher highs, with recent high laminated with 50ema, above there the top of the channel is expected to act as resitsance.

Euro has also made a huge move on Friday , closing back below the major trendline that euro has been bumping up against for few weeks:

Highlighted areas are expected s/r levels. On the downside will be watching recent low , laminated with 50ema, with two channels/trendline meeting right below. If those are broken MAJOR s/r level at 1.375 is expected to act as support. Upside is currently the path of least resistance, considering broken retracement and resitance lines. THe recent highs are expected to act as resistance. Other than very overcrowded trade and not many left to buy / get squeezed, tehre is really not much in the way of euro to the long side TA wise.

As always will post twitter updates about key technical euro levels on the blog and via Twitter @esecfutures

Feel free to sign up for the mailing list on the right to receive updates about latest posts

Cheers

Vlad

By Jeffrey Kennedy

The following is an excerpt from Jeffrey Kennedy’s Trader’s Classroom Collection. Now through August 17, Elliott Wave International is offering a special 45-page Best Of Trader’s Classroom eBook, free.

———–

I think that, as a general rule, traders fail 95% of the time, regardless of age, race, gender or nationality. The task at hand could be as simple as learning to ride a bike for the first time or as complex as mapping the human genome. Ultimate success in any enterprise requires that we accept failure along the way as a constant companion in our everyday lives.

I didn’t just pull this 95% figure from thin air either. I borrowed it from the work of the late, great Dr. W. Edward Deming, who is the father of Total Quality Management, commonly known as TQM. His story is quite interesting, and it actually has a lot to do with how to trade well.

Dr. Deming graduated with degrees in electrical engineering, mathematics and mathematical physics. Then, he began working with Walter A. Shewhart at Bell Telephone Laboratories, where he began applying statistical methods to industrial production and management. The result of his early work with Shewhart resulted in a seminal book, Statistical Method from the Viewpoint of Quality Control.

Since American industry spurned many of his ideas, Deming went to Japan shortly after World War II to help with early planning for the 1951 Japanese Census. Impressed by Deming’s expertise and his involvement in Japanese society, the Japanese Union of Scientists and Engineers invited him to play a key role in Japan’s reconstruction efforts. Deming’s work is largely responsible for why so many high quality consumer products come from Japan even to this day.

In turn, Japanese society holds Dr. W. Edward Deming in the highest regard. The Prime Minister of Japan recognized him on behalf of Emperor Hirohito in 1960. Even more telling, Deming’s portrait hangs in the lobby at Toyota headquarters to this day, and it’s actually larger than the picture of Toyota’s founder.

So why do people fail? According to Deming, it’s not because people don’t try hard enough or don’t want to succeed. People fail because they use inadequate systems. In other words, when traders fail, it’s primarily because they follow faulty trading systems – or that they follow no system at all.

So what is the right system to follow as a trader? To answer this question, I offer you what the trader who broke the all-time real-money profit record in the 1984 United States Trading Championship offered me. He told me that a successful trader needs five essentials:

1. A Method
You must have a method that is objectively definable. This method should be thought out to the extent that if someone asks how you make decisions to trade, you can quickly and easily explain. Possibly even more important, if the same question is asked again in six months, your answer will be the same. This is not to say that the method cannot be altered or improved; it must, however, be developed as a totality before implementing it.

2. The Discipline to Follow Your Method
‘Discipline to follow the method’ is so widely understood by true professionals that among them it almost sounds like a cliché. Nevertheless, it is such an important cliché that it cannot be ignored. Without discipline, you really have no method in the first place. And this is precisely why many consistently successful traders have military experience – the epitome of discipline.

3. Experience
It takes experience to succeed. Now, some people advocate “paper trading” as a learning tool. Paper trading is useful for testing methodologies, but it has no real value in learning about trading. In fact, it can be detrimental, because it imbues the novice with a false sense of security. “Knowing” that he has successfully paper-traded during the past six months, he believes that the next six months trading with real money will be no different. In fact, nothing could be farther from the truth. Why? Because the markets are not merely an intellectual exercise, they are an emotional one as well. Think about it, just because you are mechanically inclined and like to drive fast doesn’t mean you have the necessary skills to win the Daytona 500.

4. The Mental Fortitude to Accept that Losses Are Part of the Game
The biggest obstacle to successful trading is failing to recognize that losses are part of the game, and, further, that they must be accommodated. The perfect trading system that allows for only gains does not exist. Expecting, or even hoping for, perfection is a guarantee of failure. Trading is akin to batting in baseball. A player hitting .300 is good. A player hitting .400 is great. But even the great player fails to hit 60% of the time! Remember, you don’t have to be perfect to win in the markets. Practically speaking, this is why you also need an objective money management system.

5. The Mental Fortitude to Accept Huge Gains
To win the game, make sure that you understand why you’re in it. The big moves in markets come only once or twice a year. Those are the ones that will pay you for all the work, fear, sweat and aggravation of the previous 11 months or even 11 years. Don’t miss them for reasons other than those required by your objectively defined method. Don’t let yourself unconsciously define your normal range of profit and loss. If you do, when the big trade finally comes along, you will lack the self-esteem to take all it promises. By doing so, you abandon both method and discipline.

So who was the all-time real-money profit record holder who turned in a 444.4% return in a four-month period in 1984? Answer: Robert Prechter … and throughout the contest he stuck to his preferred method of analysis, the Wave Principle.

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