Market TAO Fri 10-23-09

SPx will either break above upper resistance lines or remain in this sideways forming channel

....Overnight we saw it all go up Oil,Gold, Asia, Europe ...even the USDollar..

Spy Will Gap up to 109.83 resistance line...

Home sales report due and Bernakie is talking as well.....I always lose money when he talks...

So my plan today is to remain neutral
and see how price responds to these upper resistance lines.

If we gap up and break lines I'll go long and we most likely head to Spx 1120.

If the lines hold... we will most likely spend the rest of day up here fighting it out. I dont anticipate any meaningful sell off today.

The Next 90 Minutes is All I Want to See

I don't want to read about how the banks are fudging the earnings reports. I don't care if AIG can pay back the government. Who gives a Rats A$%% if Bernanke Prints another Brazillion Dollars over the weekend. Conspiracy and market manipulation theories are just a huge distraction and entertaining them is a big waste of time and emotional capital. As a Day Trader, all I want to know is what will happen in the next 6 hours or actually, The First 90 Minutes at the market open and the last 2 hours into the close.

Oh I agree, being aware of the big picture is a good thing to know. Trading the momentum of the open and into the close is less of a fundamental play and more of a Live Pin Ball type of analysis. The Morning action is off Asian and European moves bouncing off Fib's, Support, Resistance, and catalyst such as earnings or critical news release events into or just after the open.

As a Trader, you must isolate your mind from any Emotional Bias. You can't let the long term Time Frame or the parade of talking heads and esoteric columnists cloud the short term trading action of a few hours in a day.
Remember, the time horizons of the these many experts opinions range from 3 months to 3 years. A Day Trader has a much shorter time frame more like 15 min's to 2 Hrs.

If you want to be a happy successful Day Trader, learn to push those long term thoughts to the side and concentrate on what only effects the first 2 hours of the trading day. Long Range opinions of what may happen two weeks or two months or two years from now are most likely all ready priced into the market and not necessarily relevant to the next 90 min trading session.

This is my daily AM Routine

• Day Traders do not hold positions overnight. Having a position will bias the outcome of your analysis and it will be hard to be objective.
• Do your home work and big picture Technical , Fundamental Analysis on the weekend.
• Then do the Small time frame studies the night before.
  Try to identify 3 different what if possibilities for the first 2 hours of trade and how you would handle each one. Include the best entry and exit points along with the best position to place your stop. I usually want to be out of the AM trade about the close of the European session 12:00 EST. And I will not carry a trade over night.
• Then write down all 3 of your plans. Arrange them into order from most likely to least likely.
• Get up early with a fresh mind and scan the business news headlines. Do the Joe Friday bit. "Just the Facts Please." Are they overall Bullish or Bearish?
• Try not to read the opinion articles or listen to Market opinion TV commentary before the open. Rick Santelli and Art Cashin are the only exceptions. Save the rest till after the close.
• Then Look at what Asia and Europe are doing over night.
  Are they in a rally or selling off?
• Then look at the US Dollar.
  From yesterday is it trending up or down?
  For now the US Dollar and Equities are inverse.
  Dollar up / Equities down.
• The price of Oil.
  From yesterday is it trending up or down?
  For now Oil and Equities are trending together.
• Then finally look at the S&P 500 Futures. Traders call it the "ES".
  Based on yesterdays ES and overnight 24 hour range High and Low, how is it trending and trading in relation to the close of the $SPX.
  The ES direction will most times carry over to the equities market open.
  The overall momentum of all these combined will most times determine the direction of the first 90 min's.
• As you work through this Pre Market check list , Weigh the 3 probabilities of your previous night's home work.
• Finally check for key reports or news scheduled to be released like GDP,CPI, Jobs, Earnings, Sentiment, ect.
• When the Bell rings you are ready to put your plan into action.

[tag]The First 90 Minutes,AIG,Bernanke,Fib's, Support, Resistance,Emotional Bias,Time Frame,Day Trader,Technical , Fundamental Analysis,Rick Santelli,Art Cashin,US Dollar,Oil,S&P 500 Futures,ES,$SPX[/tag]

Questions from New Traders

This is one question many new traders have.

There are so many places to look, where do i start and what are the best moving averages and indicators to use?

I am an active trader and I have learned all this the hard way. Many years ago.

Most of the time I don't use any moving averages or indicators on my charts until the last stage of analysis.

I want to form my opinion first then use all the other tools to support or reject my thinking one step at a time.

The most common moving averages are 8, 20 , 50 , 200..........some like to use the 13 ema and 34 sma crossover as a buy sell signal . As far as the Indicators are concerned , the most used and reliable are the Macd , stocastic , and Rsi used together. However, these are not leading indicators and many traders make the mistake of trading solely on their movement.

There is an order of trade that most Professional traders follow .

First ........decide what time frame you will be trading in.......30 min, 1 hr , day ..... the higher time will dictate the overall trend.......ie:.. if you want to trade the 30 mjn chart look at the 1 hr chart to make sure the overall trend is in the same direction. But once you enter the trade don't switch times untill the trade is over. Because if you do ,you will get confused.

1. identify the trend ...up or down.

2. Then look at the volume. Volume is relative. ..... like the gass peddle (volume) on a car.......if the car is going up a hill and you push (increase volume) on the gass what dose the car do? ....it gose up the hill faster.......the same thing happens when the car is going down the hill and you push (increase volume) on the gass ........what dose it do? ... it gose down the hill faster + gravity.) The markets and stock prices do the same thing.


3. Look to the left of your chart for previous price support or resistance zones ( this is where price reversed direction or spent time going sideways) Step 1, 2 and 3 are the most important things to learn in trading. This is also where you develop your decision when price gets to XXX spot , you may act. Here are a series of charts from my sight on support and resistance zones. click here

4. Then start looking at moving averages...........do they look like they may respond to the support/ resistance zones and support your thinking?

5. Last........ look at the indicators ..... This is where new traders really miss up and get into the wrong side of the trade...... do not try to trade both sides of the indicators.
If the trend is up only trade signals from the bottom of the indicators .......if the trend is down only trade signals from the top of the indicators.....most of the time the opposite side will give multiple false signals.....

You can also visit my blog at neboxian.blogspot.com