A few of you who read our blog (hi, guys!) have finally reaped the rewards, and we're glad. Friday's events were not that hard to predict (or were they?), make a plan, and act on. Recall our post (and this, too) : it struck us how quickly the only open gap below closed during those quiet dinner hours two days ago? We watched it live and noted: it happened so fast, on light volume, no apparent reason, it seemed as if the market just wanted to get rid of the 'obligation' to hit the previous day's close, so it can turn to other business (i.e. open gaps above).
And today it did. See this:
ES 2016 01 29 - the day of the 50 point rally
So what does this tell us?
1. What we needed to know is on our 13R chart. If you scalp (e.g. with a system like ours), do so with the trend, on the pullback, after you've understood the action. If you have the necessary account size, you can increase your chances of success even more (as Adam Grimes points out in his excellent book, p. 7), by staying completely out of the noise but still below the really large players. In any case, find your sweet-spot. Try ours.
2. Read the chart and understand what's happening. Charts speak volumes, and our job is to listen, understand and trust our analyses. See the 34R below as Friday's crescendo unfolds.
ES 2016 01 29 34R
3. Make no mistake: explanations in the media, the Japanese central bank, the oil, the moon or the stars, or whatever they come up with (always in hindsight), is 'for entertainment purposes only'. When the news is matters. What the news is does not. The truth will be on the charts.
4. A few good indicators (e.g. those we use) can help. A select few. Pick them, stick to them, do not change them. Once you've decided on them, keep your charts steady.
5. Imagine you're a big player on that chart: what would you do to make money? (Remember: the market is an auction.) When you do have an answer, you have to find the best spot to enter, and have the guts to act. When you don't (which is, in our case, often), then stay out.
Happy chart reading, and mindful trading to all!