- The MKT has just produced a big positive technical signal. On the SELL side DP BREAKOUT strategies are a low probability but valid. Risk little and go for a lot. If the MKT is going to turn sour, it should be quick and relentless. Avoid UP FADE strategies as the MKT has just produced a major buy signal and fresh gains are expected. UP REVERSAL strategies as well are not recommended, as any resistance level violation that cannot be held is more likely a squeeze for the longs, which can quickly turn positive.
- On the BUY side BREAKOUT, FADE and REVERSAL are recommended as the MKT is aggressively bid and all buy signals are valid opportunity. If stopped out at or near the low tic of a reaction and the MKT is not following through to the downside, leverage up using the squeeze low as a stop, expecting a quick reaction back above your original entry. De-leverage unless you have confluence with other indicators or like MKTs.
Today's PRICE MAP Performance for SP
- Defining the technical state of the market along with which TACTICS work best in that state is an essential element of trading, and one that we will be taking a deeper look at in the coming weeks. Knowing what the market is expected to do is very important; however, knowing what the market should NOT do is of equal significance. Today's action in the S&P 500 highlights how to use our optimal HEDGE tactics after the market has produced a "tell". In a BULL TREND market state, our expectation is for the market to make higher highs and higher lows throughout the day, maintaining POSITIVE STRUCTURE. A break in this structure could signal that more of a DIGESTIVE market action is to be anticipated. As highlighted by the red circles, the market broke + structure just before 9 am CT when it produced a LOWER move LOW. This was our "tell" on the market. As the S&P 500 rallied back up to the UP, it gave us a very brief "headfake" above out RESISTANCE level at the UP, before reversing back inside our CRITICAL RANGE. After a break in the positive structure, this SELL UP REVERSAL strategy serves as a valid HEDGE opportunity. As the day progressed, this trade proved to be profitable as the market sold off to the DIR around 10:30 where profits could have been realized on our HEDGE trade.
