The action today was pretty much along the lines of what you would expect after such a sharply higher day that we had on Tuesday. It remained 50/50 which way the market would break going into the last 1/2 hour, but we were tipped off not only by the triangle on the 5 minute chart, but also by the breaking of the trading range of the day to the downside. I have attached the 5 minute chart as well as the 5 minute chart to illustrate my points of today.
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The probability model for tomorrow is calling for a resumption of the rally tomorrow.
As a matter of fact it is calling for a flat to higher open, with the open being the low for the day
so we very well could be in for another good upside day. I don't really expect anything as powerful as the rally on Tuesday, but there is strong probability of a good rally day.
We will know withing the first hour as to what type of day to expect, either trending or consolidation. As I had written in the intra-day postings today, the fading of the gap in the first hour of trading gave us a strong clue that today was going to be a consolidation day. This put us in the position to sell rallies and buy weakness and it was very profitable. On a consolidation day it is also very important to watch far a break out of the trading zone for a potential mini trend to jump aboard. We got that in the last half hour of trading as the days lows were taken out and further weakness set in.
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The probability model continues to signal that we should buy weakness and that a potential intermediate term low has been put in place. However, I continue to see very little evidence that this is the ultimate low for any type of strong assault to the upside. While I was glad to see the fairly strong put buying during yesterdays strong rally, the put/call ratio went back to its recent trend of being way to complacent about current levels of the market and this is NOT a healthy sign on the intermediate term front.
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Until we see more evidence either way, we will continue to follow the advice of the probability model and buy weakness.
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I will be posting more day trading modules to show some very simple strategies to use during the day to not only scalp the S&P, but also to find strong moves of 10 points or more with a short amount of trade holding time.
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