Morning Update: You’ve Got My Attention
If you’ve traded the ES and the indices as a whole for any length of time you’ve heard the phrases “The Markets is Climbing a Wall of Worry”, or “The Most Hated Rally”. This signifies traders are not positioned to take advantage of a rally. Clearly sentiment was more negative than the market had intentions. I have been on the side of expecting lower prices. I’m a huge fan of the rally but only after prices retreated into the 3800’s first. However, I do not want to be a hater of a rally that leaves me behind, or worst, catches me short.
Therefore, I wanted to provide my playbook as to not be caught off guard. All of my counts require some downside retrace of small to large magnitude. If price decides to trade above yesterday’s high...I may close all short calls. My January calls are almost worthless, but the position I opened yesterday will cause me concern because that doesn’t expire till end of February.
In the cash market, this looks much cleaner. I would expect price to get a deep retrace or reconcile as an ABC zig zag down in the 3700’s.
The ES always runs the risk of containing noise due to the lower liquidity of the overnights. Sometimes it will give you signals as to how the cash market will react, sometimes it confuses. I’m undecided as to whether it’s confusing noise, or it’s signaling to me the market intends to go higher and not retrace like my analysis shows.
If ES trades above yesterday’s high. I may close out all short call positions. We have already extended to the 3.618% Fib Area...and I’m not going to give upside price advances much room before I pull the plug on shorting. Keep in mind, these are not outright short positions in the ES. If you’re outright short the ES right now, you’re giving yourself NO ROOM FOR ERROR. Therefore, have stops in place.
I’ll be frank...if the market continues to move higher from here...I’ll hate the rally. Yes, I’ll be one of those traders. But will I allow it to cause losses....NOT ON YOUR LIFE.
Suffice to say, the bulls have my attention now.
Best to all,
Chris
Therefore, I wanted to provide my playbook as to not be caught off guard. All of my counts require some downside retrace of small to large magnitude. If price decides to trade above yesterday’s high...I may close all short calls. My January calls are almost worthless, but the position I opened yesterday will cause me concern because that doesn’t expire till end of February.
In the cash market, this looks much cleaner. I would expect price to get a deep retrace or reconcile as an ABC zig zag down in the 3700’s.
The ES always runs the risk of containing noise due to the lower liquidity of the overnights. Sometimes it will give you signals as to how the cash market will react, sometimes it confuses. I’m undecided as to whether it’s confusing noise, or it’s signaling to me the market intends to go higher and not retrace like my analysis shows.
If ES trades above yesterday’s high. I may close out all short call positions. We have already extended to the 3.618% Fib Area...and I’m not going to give upside price advances much room before I pull the plug on shorting. Keep in mind, these are not outright short positions in the ES. If you’re outright short the ES right now, you’re giving yourself NO ROOM FOR ERROR. Therefore, have stops in place.
I’ll be frank...if the market continues to move higher from here...I’ll hate the rally. Yes, I’ll be one of those traders. But will I allow it to cause losses....NOT ON YOUR LIFE.
Suffice to say, the bulls have my attention now.
Best to all,
Chris
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