In this morning’s watch list I labeled today a “Z” day in the eMini S&P futures (and the other indices as well). I got the term Z day from Linda Raschke. A Z day is a day that occurs after a big range day. On a Z day we look for consolidation trade as traders digest the previous session’s volatility and movement.
Friday saw a big trading range , as you would expect on the day of the employment report. It actually had the widest trading range of the previous four sessions; it was also an outside day (a lower low and a higher high that the previous session). These two patterns are an indication of increased participation. If that’s not enough, Friday’s volume in the December eMini S&P was 2.93 million contracts – the highest volume since October 30th.
On the day after a big range day we anticipate consolidation and position squaring trade. This consolidation means we look to sell intraday rallies and buy intraday breaks. The natural support and resistance points are our trusty Taylor reference points – the previous session high and low. We anticipate that on a Z day traders will generally be unwilling to push the markets much beyond the previous session’s high and low. If the previous session’s range was sufficiently large, the current session intraday high and low will often work as support and resistance.
Today’s 30 minute chart of the eMini S&P futures shows this concept. The blue vertical line marks the start of today’s session; the overnight high of 1110.75 was made in the first half hour, then retested an hour and a half later before it sold off. Around 8 AM this area was tested again; a good short sale opportunity.
Looking ahead, I’d continue to look at the overnight high as resistance, then the standing resistance at 1112. I’d also view support between 1100 (psychological, round number ) and 1098.75 (the overnight low). Assuming this range holds, I would expect a directional move tomorrow, as the volatility expansion / contraction cycle continues.
Sell rallies, buy breaks
This is a sample of the analysis from my Swing Trader’s Insight advisory service. For information on STI, and to sign up for a free two week trial, visit here.
The information contained here includes information from sources believed to be reliable and accurate, but no guarantee is made as to accuracy, nor do they purport to be complete. Opinions are subject to change without notice. Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.
Copyright © 2009
This feed is for personal, non-commercial use only.
The use of this feed on other websites breaches copyright. If this content is not in your news reader, it makes the page you are viewing an infringement of the copyright. (Digital Fingerprint:
f2ea78dd95959aa32f651cec20a16e23)
