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I received an e-mail this morning from a reader who is frustated … he has cut his overnight holds to zero as the market goes through its wild swings. However, he finds that he can't get involved in Day Trading on stocks that he normally trades (GS, AAPL etc…).
I didn't get involved in either of these today due in large part to not trusting a low volume holiday session. I told him I would post how I use Fibonacci grids in teaching my students in playing Continuation Patterns.
First let me go back to my post here. I drew up a simple model where I expected prices to go…Just with this simple model, you could of made a nice 6 figures in the futures market… aside from the whipsaws we had in the triangle formation(which was very irritating to say the least). Notice I had the black line drawn out before prices fell sharply on Oct 27th in which I called bullshit. And although the chart below could still be in the cards, I have a feeling we will break the October Low just from looking at certain charts…… However it is still the only bull case scenario I see from here. But again my hunch from looking at Portugal, France, and etc is that we could break the Oct low, destroying any chance of an inverted H+S formation.
This is going to be quick, but I wanted to get this out there.
Starting at the opening bell this morning, I started covering like a Banshee (do Banshees cover?). My reasons were simple:
+ The drop in the Euro was having less and less of an effect on equities;
+ We had nailed – and I meaned NAILED – my targets on both the NQ and the ES
+ I wanted to lock in a nice profit for this calender month
I came into the day with 72 short positions; you've never seen someone clicking the Cover button so quickly.
I have two longs right now – TBT and FXE – and I don't plan on getting aggressively short again until we can get to the level I'm showing below on the Russell 2000. There's actually a reasonable chance I could relax on this half-day.
The market has pushed into one of the most short-term oversold states that I have seen in quite some time. Almost every ETF I follow is now in a “very oversold” state with RSI (2) readings below 5 and over half below 1 – a rarity indeed.
So, now is the time that I want to be aggressive on the long side, but only for a few trading days. Conditions like the aforementioned almost always work themselves back to mean-reversion and I want to be a participant when the short-term occurs. I already have several trades on in both of my options strategies and plan on adding several more over the next few trading days, that is unless we see an enormous bounce before the opening bell Friday, which I think is highly doubtful.