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July 22, 2012 / redman59

Setting Up for an Eventful Day – $ES_F

Tonight is definitely a fun one to watch in the /ES. News out of Europe created a huge spike in the /ES as it was hanging around the 1320 level. The /ES rose some but when some of those resistance levels cleared (shown below) further upside was easily achieved..and quickly.

One of things that I constantly keep up when trading is the /ES chart to include the Globex session. I will use the hourly to avoid a congested chart. The first chart shows from last Thursday, when the selling began. Notes are provided on the chart, but below the chart I also want to further explain some notes.

One note is the Naked Point of Control at 1346. These tend to act like a gap in a stock in that they act as magnets and usually get filled at some point and prices may reverse from there. I believe that we have a high probability of this area getting filled tomorrow.

Also you can see a congestion of the Value Area Highs. These also can act as support and resistance levels and carry even further weight when they are congested around the same area, in this case 1327-1330.

Lastly is the relative volume indicator at the bottom. This is provided from the thinkscripter. This study “displays the current bar’s volume as a percentage of the historical average for as much data is available in your chart”. I only use this on the 20 day hourly and look for readings of 200% or higher and see this as a capitulation or stalling point.

The chart below is today’s action and it looked as if an inverse head & shoulders has formed with a target area of 1342, which ended up being the high tonight. Also you can see on the relative volume indicator a closer look at how the market stalled at those points and actually reversed and/or pulled back from those points.

With tonight’s action I have no desire to short the market here. I am respecting the buying that happened at the end of day after what was turning out to be another bad day for longs. I believe putting in a small allocation or just sitting back and monitoring is the best game plan for non-daytraders as I think the intraday volatility is going no where.

Current Account:
Cash @ 90.4%
Long bias @ 4.9%
-AAPL Call Calendar @ 4.9% (disappointed with today’s performance, but holding)
Short bias @ 4.7%
-SPX Bear Call Spread @ 4.7% (full profit if we stay under 1355 by close)

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