Monday, October 17, 2011

Updated Game Plan

Our resistance short spot was taken out in the overnight session. Our $SPY 123.5 short roughly corresponded to ES_F 1230-1233 zone which we wanted to short last night :

The most frustrating part about futures is that some of the best spots are triggered in the middle of the night. Perfect reversal at our 1230-1233 resistance short zone — we loved that spot and contemplated putting in offers at 1230/1233 with stop at 1235 in case it triggered during the night but alas didn’t, and were left with a gorgeous chart that justified our call but no trade.

Note that ES_F fulfilled the SPY trade we were looking for — 100SMA/daily resistance test and roll. This makes the SPY resistance short more complicated and we’ve lost interest in the trade due to it being a second test– but let’s cross that bridge later.

Trend-day down today — and bulls got lots of little cuts trying to buy the dip. Our rule of not going contra-trend on first day of sell-off has saved us countless dollars over the years. The first day of a sell-off often is a trend-day — and going mean-reversion on a trend-day is often a frustrating and losing experience. Stick to the direction of the EMA on trend-days, which meant today shorting the rallies back to the descending EMA.

Bulls were shot down on every touch to the EMA except for the last one, which in turn reversed against underside of S2/15 min-20EMA. Typical trend-day action which kills reversion to mean traders.
We have a lot of decent longs now that are getting ready if/when market regains strength; and $SPY 117-117.5 will possibly offer decent opportunity as a day-trade long.   In between those two scenarios, howeve, we will be mostly chilling.