Chicagostock Trading

Chicagostock Trading

This Week's Meltdown Eerily Similar to Last Week's

Last week, we took a close look at the intraday SP500 action and shared the view through vol windows. (Click to view). This week, we couldn't help but notice a very similar pattern. Take a look below at the chart comparison between last week vs this week, without Friday completed (tomorrow).  

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Chicagostock Trader's Program

New traders can still take advantage of the $100 discount off the monthly trading subscription. If you have been on the fence before now is the time to take advantage of risking 6 ES points ($299) for opportunity to join our group, trade together, and learn in the process. Discount is locked in and can cancel anytime. Traders gain access to our AIM trading room where analysis and live trade signals are conducted in the ES, GC, CL futures contracts.  Traders receive a daily futures report on the emini SP500 with daily pivots, and day/swing trade recommendations on various commodities. If you follow us on Twitter or Facebook and like the color you have seen, you will love the subscription trading together.

 

Here is an example of a trade posted in the nightly email and how it is managed intraday:

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This Week's Meltdown in Vol Windows

Trading is a game of price discovery. Like poker, you don't want to be on the wrong side when the bluff is called, or the music stops. The market is all about calling bluffs. Before doing that, it also has to set as many traps and catch people on the wrong side in order to gain enough fuel for the opposite direction. Traders caught wrong are the fuel that move the market by having to cover their shorts or sell their longs. The market trades price and reaction to those price levels create the boundaries for buyers and sellers to defend. Below are this week's 10minute intraday charts of the Emini SP500 futures.

Solid horizontal lines = Vol windows

Dash horizontal lines = intraday pivots

MONDAY:

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The market came back after the weekend, having seen Friday break an 11 week winning streak.  The market started Monday's cash open where it left off from Friday however was met with immediate selling that broke below Friday's 1968 lows to shake out longs and lure in shorts as lower vol window breached to establish bearish bias.  New lows down to 196075 made before turning around to recover above lower vol window and run into the cash open. As sellers defended the open, the market pulled in to retest the lower vol window only to see sellers unable to continue below, keeping shorts trapped and giving way for a squeeze into the close to reverse the intraday bear bias.

 

TUESDAY:

Monday's short squeeze reversal spilled into Tuesday with a cash open at 1977. The "turn around" Tuesday attempt was rejected as the market failed the test of the upper vol window that coincided with 1980 as the level the previous Friday opened below.  This retest led to rejection below the intraday low and into the lower vol window to retest 1968 support from Monday. First test sees bounce back into the opening range only to fail to attract buyers, seeing push back to the lows. Second time around buyers were unable to hold, giving way for a close below the lower vol widnow to squeeze longs.

 

WEDNESDAY:

Wednesday saw the market open 10 handles from Tuesday's close right into Tuesday's cash open. This was rejected with highs of 1974 before turning lower to breach the lower vol widnow and establish a bearish intraday bias.  New lows were made down to 195650 before rounding a bottom and seeing a short squeezed fueled by FOMC statement.  The squeeze was again rejected at the cash open with close below the lower vol window.  

 

THURSDAY:

 Wednesday's FOMC statement caught longs trapped as the market settled at 196550, only to open Thursday 14 lower at 1951.  Longs were caught off guard and forced to liquidate, seeing the lower vol window breached to establish a bearish intraday bias.  July lows of 194250, reversing the market from new highs into new lows going into the close of the month. The failure to recover 1940 led to margin selling and expansion of the lower vol window into the close.

 

FRIDAY:

Friday saw Thursday's weak settlement spill into the overnight session with the market falling into 191050.  The cash market opened above 1920 to see a squeeze through the Globex highs fail to hold as the upper vol window and pivots kept a lid on prices.  The rejection was followed by a move below the cash open and breach of the lower vol window at 1915 to establish a bearish intraday bias. New shorts were lured in below this level to see the overnight lows of 191050 taken out by one tick at 191025 before exhausting.  This failure to move lower led to sideways consolidation before turning back above 1915 to trap shorts and use as fuel for squeeze. The squeeze led to retesting the cash open only to see buyers unable to move past sellers defending the bounce and intraday bear bias.  With buyers failing to pick up and continue squeeze, sellers too back control to drop back 10 into 1916 before settling at 1918.  Going forward, longs are now vulnerable to a open below 1915 to target 1910 for another shakeout.  Shorts are squeezed on a move through 1926.

 

 

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Short term Emini Sp500 trade signals

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Top of the screen is a short term chart based on short term signals. First signal was a short @ 198250 with a 4 handle stop. Next signal was @ 198350 with a 3 handle stop. 198350 short saw first target @ 198050 (1x risk), then stops moved to breakeven which was kicked out on the bounce to 198350 late afternoon.  198250 short saw first target @ 197850 (1x risk), stops lowered to entry and the runners were covered this morning @ 197350.

Bottom of screen shows longer term setups based on daily/hourly charts. First signal short @ 1982 with a 5 handle stop. Target 1 taken out @ 1977 (1x risk), target 2 covered this morning @ 197300. One left with a break even stop and a 1952 target.

 

Here's how it looked yesterday just after the close  http://stks.co/f0qsu

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SP500 6 Month Vol Windows & Pivots

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The second half of the year kicked off this month with the SP500 seeing a spillover effect from the 1st half’s close in June with the market printing a new high of 1978 during the July 4th holiday.  The first half of the year began with the market liquidating to breach its lower 6 month vol window at 1797 to establish a bearish bias, enough to lure in shorts, making new lows on the year down to 1732.  The breach of the vol window was used as a bear trap as the market put in a V bottom with lows of 1732 and squeezed through its 6 month reversal window of 1847 after establishing the bearish bias below 1797.  By holding above 1847, the market reversed its 6 month bearish bias for the 1st half of the year, and forced shorts to have to cover as the 6 month pivots turned into support and the market stabilized above 1800.  Going into the close of the 1st half any shorts that were left were forced to through in the towel which led the market to squeeze out of its 3 month range and breakout through 1900 and into 1978.  With the 2nd half of the year beginning, the SP has traded in a very narrow range, within 1978- 1945.  This has established a new set of volatility windows and 6 month pivots for the 2nd half of the year.  The upper vol window coincides just below the psychological 2000 level which if breached, can establish a bullish bias to lure in longs and attempt to complete a 100% fib extension from 2013 low of 1553 and this year’s low of 1732, up to 2025.  The lower vol window coincides with the late June lows of 1936, just before breaking above 1956 and setting new highs.  Failure to hold the lower vol window shows the breakout above 1955 as a failure and gives room to retest next low down to 1917, followed by old resistance at 1900 in search of new support.  The 6 month pivot for July-December is extremely tight due to the opening range’s indecision, giving way to break out of this range and for volatility to expand. 

 

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