Technically the MKT is in NEUTRAL TRANSITION and difficult trading conditions are expected. The MKT has produced an aggressive sell signal which should weigh on the MKT today if the signal is valid. If the integrity of the prior session's low remains intact a return to a sideways trend less trade is likely. Roll with any new weakness and leverage up if good risk parameters present themselves. The potential to get in at the beginning of a new move lower is real.
The 1349.6 Inflection Pivot holds the key to today's action. Below here the negative signal remains in play targeting 1307.3 and 1276.2 on any negative turn of events. A rise above 1349.6 is a sign of strength that has the contract flirtng with a play for higher move highs targeting 1375.6 and 1406.4.
On the SELL side be more aggressive after the previous session low is taken out. Not that this is a pre-condition but should be noted as a confirmation of weakness. BREAKOUT strategies should just "go" so keep risk parameters tight. FADE into any positive reaction off an unsuccessful downside BREAKOUT after a resistance level is confirmed. Use a REVERSAL strategy to leverage up back under the original failure point. If the integrity of the previous session low remains intact, avoid REVERSAL strategies as expectations are that the "negative" signal is going to follow through it should do so straight away and any break in the negative momentum is a positive signal that the MKT is going to return to its neutral posture. FADE strategies are recommended early in the session or near the end. The negative signal will either play out from the get go or will weigh on the MKT in the latter stages of the trading session.
On the BUY side REVERSAL strategies can be executed off of major support levels at or near the previous session low point. Avoid this strategy on lower levels as any new weakness has the potential to be the beginning of a move. If the integrity of the previous session low remains intact FADE strategies can be accepted at or near this inflection point on the initial test with tight profit target objectives. If the MKT has already had a reaction off this support area avoid this strategy. Use BREAKOUT strategies as a signal to FADE a negative pull-back after a confirm break in the negative momentum. Only take this trade if the previous session low point remains intact. Otherwise this will be a SELL REVERSAL opportunity.
Note: This is a dangerous emotional trading environment. You should expect the MKT reactions to go a little further that you expect in either direction so anticipate this in your position and risk management.
JS
* ENTRY STRATEGY - 5min web video explaining FADE, BREAKOUT and REVERSAL strategies http://www.jsservices.com/education/sbt/CME_EntryStrategies5min.wmv .
To learn more about JS Services Strategy Based Trading approach please contact me at info@jsservices.com . You can also visit http://www.jsservices.com/ and sign up for a Complimentary FREE Trial.
