E-mini Executors: July 2011

Sunday, July 24, 2011

The week ahead 7-25 - 7/29

The bulls continue to have control of this trade. They have almost everything going their way. The Nasdaq made new 52 week highs and closed on their high, this is bullish action. (The Nasdaq is the current leader of this market). The VIX has fallen below all of its major moving averages and looks bearish or range bound in the coming week. Of the 88 companies in the S&P that have reported earnings 75% of them have beaten the street. Plus the market has rallied despite all of the recent bad news about debt fears. It seems as though the market has taken the punch of bad news and swung back knocking it out.

Even though there is a lot of good for the bulls they still have some hurdles to cross. We still have a non-confirmation in the Dow Theory. The Transports and Dow have not made new highs for the year at the same time since May 2nd. Since then we have been seeing distribution not a primary bull trend. (I am still in the camp that we will see a Dow Theory confirmation of a bull trend). We also need to see the S&P cash to trade above the July high at 1356.48. This would be a big boost to the market and from there we could see a test of the 52 week highs rather quickly at 1370.58.

Other hurdles that seem to be on the top of everybodys mind........

DEBT CEILING. DODD/FRANK.

I have been asked several times what I think about these two issues and my answer is this: Politics in the market are a traders worst nightmare (unless you are a trader who bases decisions off of news). When a trader has to react off of news instead of technicals or fundamentals; in my opinion trading becomes gambling. Some traders live for trading off the news, I am not one of them. I do not know what is going to happen on either of these issues. I prefer to let the market action dictate my trading not Washington. I have learned that the market has a short term memory about news and it always comes back to technicals and fundamentals. I am not going to stay up at night wondering what decision Washington is going to make. I trade according to my plan.

Stick with your trading plan and do not worry about what Washington is doing. When Washington finally makes a decision on the Debt Ceiling or Dodd/Frank then the market will tell us how to react to those decisions. I will then be positioning myself according to the action that I see not the decision itself.

For my day to thoughts on the market check out my Morning Brief. Have a great week.

Moving Averages; Black (10 day), Blue (20 day), Green (50 day), Pink (200 day).

Horizontal Lines; Blue (High of the year), Red (Low of the year), Green (Unchanged for the year)

$NQ_F daily chart

$SPX daily chart

$DJI daily chart

$DJT daily chart

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Thursday, July 21, 2011

Q&A July 20th

We are live every 1ET on Wednesday taking your questions here. Send an email or tag your tweet #eminix

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Wednesday, July 20, 2011

Adjusting your execution when following the market leader

Yesterday I talked about identifying the leader in the market and I said that the Nasdaq is the current leader. Today when I got signals from strategy the first thing that I looked at for confirmation was the Nasdaq. I wanted to know where it was trading according to the S&P to help me execute my trade.

A quick way to tell what the Nasdaq is doing compared to the S&P is to put up a chart showing the spread between the two markets. I first type in the (ENQ) Nasdaq symbol minus (-) the (EP) S&P symbol (ENQ-EP). I use a line chart. This helps me quickly identify whether or not the Nasdaq is stronger or weaker than the S&P at that current moment. This helps me a lot with my execution.

In order to be a successful trader you must be able to adapt to the conditions of the market and one of the keys is finding the leader of the market and adjusting your approach to your execution. This is an important tip:

When the leader of the market is breaking and you have a buy signal always remember to buy at and below your prices for better execution of your trades. When the leader is rallying and you get a buy signal remember to buy at and above your prices.

E-mini 5 min. chart

Nasdaq - S&P spread 5 min chart

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Tuesday, July 19, 2011

How to identify the leader of the market.

Like I was saying going into this week; the bullish trend of this market has not yet been broken down. With all of the bad news that we have gotten in the past couple weeks where did we go? We went moderately lower scaring out a couple of longs. No big deal.

In the S&P we traded around the 50 day moving average for several days trying to get some of the bulls to sell their longs and to get the bears thinking that they are right. In the meantime the Nasdaq and Dow were not acting weak but acting strong. They were not breaking as much as the S&P and they were sustaining trade above their 50 day m.a.'s. This told me that this recent sell could be mostly based on news (Italy, Spain, Moody's and S&P possible downgrades of U.S. debt) and did not change the trend of this market.

When you have divergence between the major markets the leader is always the one that is the strongest in the current trend.

Let me make that clearer........if all three of the major markets are trading above their major moving averages (20,50,200) then the market is strong. Right. (or whatever tool you use to determine the primary trend) If one or two of the the three fails to hold any one of their major moving averages that is non confirmation of a change in the primary trend. It takes all three of the major markets to break down below their moving averages to change the primary trend of the market. With the Nasdaq and Dow Industrials remaining strong I have been advising my subscribers that they will lead the S&P higher. That is what you saw today. The tug of war between the S&P and Nasdaq/Dow was won by the leader(s), the Dow and Nasdaq.

To confirm what I am saying......when you see either one or two of the major markets break out one way or the other look to see what the other market(s) are doing. The market loves to follow a leader. The leader is the one that doesn't break its trend as easily as the other correlating markets and stays on whatever the current trend of the market is. The Nasdaq is the current leader (with the Dow as a close second) because they never broke down below their 50 day moving average and they led the rest of the market higher.

I do a Q&A every Wednesday live at 1:00 et. Tag your tweets with #eminix or email me your questions. For my day to day comments check out my morning brief.

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Sunday, July 17, 2011

The week ahead. 7/18 - 7/22

If you read my blog last week you know that I was moderately bullish and this week I am feeling pretty much the same. I admit that it did not work so well last week and I got a little banged up in some of my options positions. Luckily I recovered nicely with my day trading. Last weeks high volatility was driven by worries over Italy and talks about Spain potentially being next in line with debt issues. Moody's and S&P warned that the U.S. could lose their AAA rating (not good news). Lets not forget Bernanke commenting on QE3 or wait did he (the sooner that we get the government out the market the better we will all be). Not to mention it was the first week of earnings. With all of that said the market held on extremely well. The S&P only lost about 27 points for the week. If you told anyone who manages money that with all of the bad news that came out last week that the S&P would only lose about 27 points for the week they would take it.

On to the week ahead......I continue to talk about the bullish action in this market. One thing that I have learned over the years is that even when you get news (good or bad) until the technicals are broken down the market will shrug the news off and continue on its current trend (unless the news is absolutely horrible or unbelievably good). When the news and technicals coincide is when you see extreme moves. If the current trend of this market would have been bearish when all of the news last week hit the wire you can bet the farm the S&P would have been down a lot more than 27 points. This is why I think that last weeks action was good for the bulls. The long term technicals are still holding on. The S&P tested the 50 day m.a. several times and ended closing above it for the week (bullish action). The Nasdaq, Dow Industrials and Dow Transports all are currently trading at or above their 50 day moving averages (bullish action).

Next week I will be watching all of the markets and see if they can hold their 50 day moving averages. If they can sustain trade above them then I expect a moderately positive week for the market but a failure to hold them will then turn me into a seller of this market and I think that we could start to see a little bit of panic selling come in. Keep an eye on the VIX to see if they can stay below 22.00. This could give the bulls some confidence to do some buying but above 22.00 the bears will feel as though they have control of this trade.

I will be watching all of these things closely along with my other indicators throughout the week. If you are interested in reading my day to day thoughts check out my Morning Brief.

Moving Averages; Black (10 day), Blue (20 day), Green (50 day), Pink (200 day).

Horizontal Lines; Blue (High of the year), Red (Low of the year), Green (Unchanged for the year), Turquoise (Unchanged for the month).

$SPX

$DJI

$DJT

$NQ_F

$VIX

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Thursday, July 14, 2011

Q&A from July 13th

We are live every week at 1ET to take your questions. Send an email or tag your tweet with #eminix

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Sunday, July 10, 2011

The week ahead. 7/11 - 7/15

Last week was simply a continuation of the previous weeks rally. I know what everybody is thinking; how could he say that after Friday's unemployment numbers coming out so horrible. They are so bad that no one even wants to talk about them (I sure don't). The reality is what if the market doesn't care right now? What if the market is looking past these numbers like it has been doing with all of the other bad news we have been getting.

Over the weekend I had a conversation with a couple of my friends that are in the financial planning business and they asked me how I could still be bullish with all of this bad news and around a 7.5% percent rally in a couple of weeks. I said to them the best way for me to be a successful trader is to go to the charts for my answers. I told them if I just listened to the news I would always be short and I would probably never leave my house unless it was to start collecting can goods and stocking up on bottle water due to fear that world is ending.

For my answers I go to the charts. That is my church and the charts are what have given me the ability to look past all of the news and chatter to find out what the market is really thinking. As of right now I am sticking with the bullish trend. I still believe that we will see a test of the highs of the year by the end of summer. I say this because of the action that I am seeing in the market. In the past two weeks I have seen some of the most impressive buying that I have seen in long time. After that ISM number on July 1st the market took off and stayed bid. That was amazing bullish action and it felt like institutional buying along with money managers and hedge funds chasing the market. We still have yet to dip back into that initial rally (1324.75 - 1316.75 E-mini futures prices; see charts below). Even with those horrible unemployment numbers on Friday this is bullish action.

It is not all good news for the bulls they still have some work to do. As of right now we have non-confirmation pertaining to the Dow Theory. We have an unbelievably strong Dow Transports making new highs of the year while the Dow Industrials failed to confirm by not making new highs. This is a non-confirmation but this verdict is untold.

The next thorn in the side of the bulls is the MACD. I use the MACD to see the strength of the recent move versus the previous move at these prices. I look for divergence. Right now we have higher highs in the MACD but not higher highs in the market (except for the Dow Transports). This is signalling that we may be nearing a short term top. If the market cannot make new highs with a higher MACD this may give the bears a reason to step back in and try to sell this market.

I will be watching all of these things closely along with my other indicators throughout the week. If you are interested in reading my day to day thoughts check out my Morning Brief.

Moving Averages; Black (10 day), Blue (20 day), Green (50 day), Pink (200 day).

Horizontal Lines; Blue (High of the year), Red (Low of the year), Green (Unchanged for the year

$ES_F

$SPX

$ES_F

$DJI

$DJT

$NQ_F

$VIX

Another thorn in the side of the longs could be the single ticks that we left above on Friday from 1342.75 - 1346.75. If these do not get filled in we could test the low of last weeks range at 1326.50.

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