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Low Volatility Continues & Whipsaw in Play – Oct 8, 2020

MARKET COMMENTARY – Reminder -I am officially on holiday until I return to the mainland on Oct 19 to my office. The whipsaw is in play with tweets being given as the reason that the market is swinging from support to resistance. Remember that we are creatures of causality. We want to know there is a reason for everything. Tonight’s vice presidential debates could also send us into some whipsaw.

There was a bit of a firestorm on twitter between Morad and me discussing the fade off 3420 and traders who look for price level engagement. Morad is a volume flow guy. And its bounce off 3338 for that matter. But my primary commentary was – there are several ways to make money in the markets. We know that the market has price memory and that we visit and revisit with regularity when real trend is absent. This is the current case for October. Do not assume that news makes the market move. Often, it is a case of the tail wagging the dog.

Videos not uploading –

ES_F – intraday volatility continues and that means whipsaw. Pull up a daily chart to see how landlocked we actually are. The candle for Wednesday was an inside candle, however – and that muddies the water quite a bit. Breaching 3420 will create a squeeze and push the sellers out of their positions. The only way a seller is pushed out is by buying the position back to cover and this will move price up. The ES_F was the only index we watch that did not break its high from yesterday. I suspect buyers are timid after being trounced not looking for a turnaround.

NQ_F – intraday volatility remains but a higher high was tested before being rejected. Above the high of Wednesday will push traders into the prior highs of note. Remember what the NQ_F players do – they push beyond the boundaries to find the space to cause the most pain before they reverse. Trade the intraday formations – the trends according to the slope and location of the VWAP.

YM_F – the least rangebound of the trio here is the YM_F as it presses higher but still shy of the last two days highs. Buyers will be bold and attempt a press back into 28390 if we breach and hold 28250 but remember the sellers up there. The tops of all our indices are jagged. Don’t be concerned about leaving with small gains and going back for more. Sometimes the plates at the buffet are dessert sized and trying to take big gains when the market has volatile and jagged edges makes for difficult days. This chart still shows sellers above but the shorter term trend shows as stronger to the upside. Mixed bag for sure.

Remember that strong big money traders have clear direction written into their mental process. We just have to find what they are doing and follow them.

CL_F – Going back to Monday’s post we see how mighty the bounce was off the 37 support as buyers came in full steam. This price action is still holding as Hurricane Delta moves into the Gulf but is still significantly off the coast of the US and of the oil rigs and transport hubs nearby. Even that said, we remain in an important range that holds unbroken for now. Still a mosh pit there.

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GC_F – Also a clear shot down noting that Monday’s post suggested that sellers would be the first to engage and after a whipsaw and jagged topping, we are fading again into the support areas below. The gold bugs are in danger of holding support that is critical for them, else we see that $100 fade to the south. The EU and Lagarde are in the middle of more money printing chatter that should push the dollar back up relative to the Euro and that will bode poorly for gold at this juncture.

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As a reminder, there will be no live webinars until I return. I will be posting a series of small videos after this blog post that should help navigate the terrain ahead.

Recapturing/holding the VWAP with pockets of savage downdrafts is still the likely price flow as the days continue in a choppy fashion. Eyes on the VWAP every day will help you keep the right side of the trade in focus. Until we breach 3417-3420 in the ES_F, this recovery bounce is suspect, but every bounce or fade can move more sharply and more deeply than we expect.

INTRADAY -Keep an eye on the daily resistance and support that we discussed and expect battles at these regions as buyers have a lot to prove to maintain bullish price flow on monthly formations- technical damage is being repaired. BIG time frames will help you position with the wind at your back.

Deep dips remain staging grounds for buyers but some momentum damage has been done- quick strikes to support and back to resistance appear to be the highest probability for success today- dips could certainly get deeper as price action shifts to bearish mode finding to locate deeper support tests.

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NO LIVE TRADING ROOM ACTION UNTIL I RETURN

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This week’s calendar

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Econoday Calendar

********If you feel you need some help understanding how price moves, remember you have the COACH’S CORNER for video reviews.

THINKORSWIM USERS –Chart share links for ES_F , NQ_F , YM_F , CL_F , GC_F – levels here for download to the ThinkorSwim platform

LINK FOR THE TRADING DATA EXCEL WORKBOOK

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TRADING LEVELS

If you find yourself being chopped up, widen your time frame or take time away from your screens. This is a time when less is more.

TRADING VIEW & ACTION PLAN
We remain in a large rangebound formation. Whipsaw grind with tests of both support and resistance is very likely ahead Sellers still have the overall advantage in the short term until the ES_F closes the week over 3420. Buyers are doing their best to force us back to the north by holding higher support and higher lows presenting. For now, any big bounces we see will lead us to more selling pressure above-so trade what’s in front of you and worry about what is ahead when we arrive there.

Intraday LONG trading from support edges like ABOVE the VWAP or tight moving averages will give you the least risk event for engaging – removing your trade at resistance will allow you to participate – understanding that countertrend bounces can be swift and sharp but will likely fail under the broken structure of the market.

Intraday SHORT trading from resistance edges like the old highs or bigger moving averages will give you the least risk event for engaging. Follow the candle trend until candles stop breaking higher.

Here’s a link to the METASTOCK software– you can have your own copy of Metastock to run these tests and setups using Target Rich Trades.

ES_F Dec contract
Target Rich Trades from MetaStock –

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