Chicagostock Trading

Futures, foreign currency and options trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones financial security or lifestyle. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results. Video content hosted by third party.

A few weeks ago, before starting October, crude oil was sitting back at its 2014 lows of 9124, after rallying up to 10768, only to fail the retest of the 2013 summer highs.  This failure, and upside down U turn, led to a small consolidation period as short covering and new buyers materialized to put in a tug of war.  The 2014 reversal of 9124-10768 has a 1644 range.  Taking this range and subtracting it from 9124, this gives downside objective of 7480 to complete the expansion.  This takes place as the market made a technical reversal for the year of 2014 and failed to hold 91, seeing a flush, and expansion of the 2014 range, in the opposite direction. First level of major support is seen at 8090 with sell stops under 7728 to complete 7480 objective. Short term this support level offers an area for shorts to cover and buyers to look to defend, for a move back to retest 84-88 resistance, up to 91.  Failure to hold 7728 gives way to complete 7480 expansion target, which takes out the 2011 7495 low. 

Futures, foreign currency and options trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones financial security or lifestyle. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results. Video content hosted by third party.

Chicagostock Trading.

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Took all day to get that fill, however 7375 provided a level to defend on the short side. Since the risk is 4 points, if the market gives us 4 points in return, we scale out to lock in base hit and reduce exposure. Stops lowered to entry, allowing market to either continue lower to give the "homerun" setup, or move back to exit trade. 

Recall last week, just before the POTUS national address, crude oil fell into new lows for the year by 2 cents at 9122. The next day after the address, oil fell further down into 9043 before turning into a short squeeze as shorts began to cover their positions, sending the market back above into highs of  9344.

On September 10th, we wrote "With the Presidential address tonight highlighting need to attack ISIS, this gives bulls their last hope for a short squeeze/rally."

"Buyers must step in here to reverse through 9400 in order to trap shorts and attempt a short squeeze through 9600 to test next major resistance into 99-102."

In the above daily chart, the market shows the pierce of the 9124 lows on the 11th and the move up to 9367.  Today, the market retested those lows, allowing sellers opportunity to continue as well as buyers an area to defend.  The retest of last week's lows saw sellers fail to push through; showing some exhaustion on their part, as well as seeing buyers defend the retest.  This has thus far led to a squeeze back to the 9300 level allowing aggressive buyers opportunity to scale out. 

Weekly chart shows clearly defined downward channel in CL from the failed retest of the 2013 highs in June of this year.  This week the weekly bar is seen pulling into retest last week's low and finding a bid. Small short covering as the market breached the 2014 lows and an attempt to create a failed break down under the January lows.  Buyers must look to recover and close above last week's high of 9394 to attempt a trap under the level and look to target 9600 for stops and a retest of the broken trend line from last year's lows with room to retest the broken 6 month vol window up to 10080.  Short term resistance met into 9280, squeeze through 9367 confirms Monday's lows as a successful test of last week's low.  New downside support based off Monday's cash session down to 9175 with sell stops below 9117.  Failure to hold the year lows and get through 9400 gives next major support into 8880.

Crude oil made new lows for the year by 2 cents on Wednesday at 9122.  This is the third time the market has tested this level, June 2013, January 2014, and now.  To start this year, the market took out last December's low and turned the breakdown into a failure to go into a short squeeze leading up to 10754.  This was crude's second chance to retest last year's failed highs of 11224 as it tried to break through its weekly pennant to the upside.  The retest rejected with the highs being placed in June and the second half of the year July, beginning the liquidation lower.  The move down has been relentless as the market has been driven down below its weekly pennant and broken its trendline from the 2012 lows.  Short term, buyers must hold this new low by 2 cents at 9122 and look for a move through 93 in attempt for a short squeeze to retest 9400.  Failure to hold 9120 gives room into next major support at 8880. With the Presidential address tonight highlighting need to attack ISIS, this gives bulls their last hope for a short squeeze/rally.  ISIS continues to sell crude at deep discounts on the black market. 

Weekly chart on crude oil shows a clearer picture of the failed retest and reversal below the 2014 lows.  Buyers must step in here to reverse through 9400 in order to trap shorts and attempt a short squeeze through 9600 to test next major resistance into 99-102.  Next major sell stops in the market are below 8590 from April of 2013, which gives room down to major support at 8080 with sell stops below 7728 as the June 2012 lows.  Since the trend line from these lows was taken out, a pullback down to retest these lows at 8100 would offer buyers a strong level to attempt a bounce.  As July goes so does the second half of the year. 

Futures, foreign currency and options trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones financial security or lifestyle. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results. Video content hosted by third party.

Futures, foreign currency and options trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones financial security or lifestyle. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results. Video content hosted by third party.

Futures, foreign currency and options trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones financial security or lifestyle. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results. Video content hosted by third party.

Futures, foreign currency and options trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones financial security or lifestyle. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results. Video content hosted by third party.

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

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:

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.

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

The second half of the year kicked off this month with the SP500 seeing a spillover effect from the 1^st half’s close in June with the market printing a new high of 1978 during the July 4^th 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 1^st 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 1^st 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 2^nd 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 2^nd 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. 

SP500 futures have been in limbo after completing the 1955 target based off the January-February range expansion (1844-1732 = 112, 1844+112=1956).  This level has also coinciding with a major fib extension at 76.4% based off the May 2013 low (1553) to the December 2013 high (1846) and the February 2014 low (1732).

We know this year started off sideways from last years close, which was followed by a massive liquidation from 1844 down to 1732.  This selloff was reversed, with the market recovering above 1844 to squeeze out shorts.  The reversal above 1844 created the plateau to allow new buyers to come in and support prices to attempt and expand the 112 point move down up into 1956.  After 3 months of sideways consolidation and bear traps, the market printed new highs in May at 189850 followed by a low of 1859 that barely held its May low of 185450.  By holding this low, the market managed to reverse and squeeze through 1898, giving way to breaking outside of the 3 month range and expanding up to complete the target as shorts once again were squeezed.  The ECB came out on the 5th of June to cut rates to negative, giving the boost in the SP to hit 1940.  The following day was the Jobs report on the 6th of June which continued the move into highs of 184975. Spilling over into Monday, highs of 195475 were made completing the range expansion and meeting the 76.4% fib, give or take a point.  The futures rollover from June into September saw prices rollover with, falling down into 1917 to test the June lows and hold, before reversing back up as the September contract became the front month and went toward to meet with its 76.4% fib as well. 

Highs of 195975 were made during last Sunday's Globex session that further squeezed shorts after September took out the continuous highs. Since this Globex high, the cash market opened lower only to rally back and retest this high, making a new one by a tick at 1960 before going offered down to 1936.  Over the past 2 trading days the SP has fought to hold above 1940 as it attempts to defend the reversal off the 1917 lows and develop a base to squeeze shorts through 1960.  Buyers at the 1940 level need a move through 1960 to be rewarded based on their risk of defending the 1917 low.  Doing so, gives way to the next major fib level of 100% at 2025.  Failure to hold 1940, gives way down to target the 1917 low made last week.  Failure to hold 1917 confirms the new highs as a failed breakout with buyers that will be forced to liquidate which gives way down to retracing into the May breakout at 1890 to allow buyers to defend.  This would be alot healthier to the market as it would allow buyers a opportunity to buy a dip and use a break of the May lows as their exit, as opposed to forcing buyers to chase above 1960 in which will continue the capitulation of shorts and parabolic squeeze. It is the struggle to accept 1950.

It is important to pay attention to VIX futures here.  After taking out multi year lows and falling below its trend line from the 2013 lows, VIX fell into 1073 early June, before bouncing up to 1289 in an attempt to come back.  This early attempt was rejected and VIX was sold down to make new lows (as the SP made new highs), falling down to 1034 before seeing a push back to highs of 1233 on the 25th of June.  It is interesting to note the take of the Volatility Sonar report from Optionmonster TV that highlights July call sellers in the VIX futures and an absent of what they call the "call stupid buyer" that has been buying premium in VIX not show up on that particular weakness from the 25th.  Jamie Tyrell explains how VIX can turn higher toward the end of the video.  Thursday saw VIX press against highs of 1251, nearing that 1289 June high, before backing away. Shorts in Vol should be concerned as a squeeze through the June highs forces shorts to cover as the June lows setup a failed breakdown, giving way for a move to retest the April range of 16-18.  

This was our projection of VIX just a little over a month ago: http://stks.co/p0M9e

On Tuesday, the SP500 put in whats called an "outside reversal bar". What this means is the market took out its prior high, however failed to hold and reversed to close below the lows.  This comes after seeing last week the contract rollover from June into September, see the market sell off down to 191750 after the June contract reached its 76.4% fib extension and 1955 target with its 1954.75 high.  The market recovered after the rollover lows of 191750 last week and ended the week with the market taking out the continuous 195475 high up to 195675. This allowed the September contract to meet its 76.4% fib. Monday saw a continuation of this squeeze overnight with the Sunday globex trading seeing a squeeze up to 195975 and Monday's cash open lower. Tuesday saw the market retest this globex high, take it out by a tick at 1960.00, and fail to hold, falling down to take out the cash open to reverse the market, falling into major support at 1941.  Going forward, this reversal not only caught longs off guard, but has also left some shorts on the sidelines with Tuesday's retest of Sunday night's short squeeze.  The close below 1950 has turned the level into new resistance with pressure against 1941 based off the 1917 low made last week. The reversal down to 1941 allows buyers a retest of major support to defend and prevent the 1917 lows from failing.  Bulls must now get through 1950 resistance and recover the failed 1960 high to regain momentum.  Failure to hold 1941 support gives way to target last week's 191750 low to squeeze longs and confirm the daily new high as a failed breakout. This would be a front run ahead of next week's NFP report with the downside chase to squeeze longs and lure in shorts below 1917.  Failure to hold 1917 gives way to break the June 191375 low and put in a reversal for the month, giving room down to retest major support within 1890-1880 based off the May breakout. 

The SP500's breakout in May has expanded its January correction from 1844-1732 of 112 points with highs of 195475 missing the marker by 1.25 (1844+112=1956).  This comes after the correction in January setup a bear trap which was followed by a V shaped bottom, squeezing out those shorts. For the months of March through April, the market made peak highs on job reports, however remained below 1900 and held above 1800.  This range tightened in May with the jobs number failing to take out the previous high, putting in a lower low at 1886 on May 2nd.  This lower low for the first in 3 jobs releases lured in shorts as it setup a failed retest and breakout of the April highs at 1892.50.  A correction was attempted following this lower high, only to hold at 1859, holding the May low of 1854.50 and preventing a reversal on the month to confirm the short side. This failure to take out the monthly low caught shorts trapped as the market gapped open on the 21st at 1874 from its prior day close of 1868 and pressed to take out the May 2nd jobs number high of 1886. With this jobs number taken out, the short side was forced to cover, using this as fuel to break through 1900 and take out the 3 month range which gave way to expand the 1844-1732 V bottom up to 1956, as well as meeting the 76.4% fib extension at 1956.  This level completes the short squeeze objective and the range expansion objective, however the pressure remains to the upside as the breakout is in a parabolic period.  The latest leg from 1924 up to 1941 was sparked on high volume with the news of ECB going to negative interest rates. The jobs report gave the last spark into 1950 on Friday and this created a spillover effect, seeing Monday continue the rally into 195475, meeting its objective, before going into profit taking.

Going forward, a daily close below 1945 gives way to back and fill last week's ECB squeeze with lows of 1921 to retest the breakout point and major support down in the 1920s with sell stops below 1913. Failure to hold 1913 gives way to shake out the long side and retrace back to the range highs down to 1900-1890 from the original breakout point in May.  This provides buyers an area to buy on a pullback as opposed to chasing the market on the highs.  The pivot for the rally comes at the May lows as a breach below the May low reverses the upside momentum. Above 195650 sees the 100% fib extension up to 2025.

Futures, foreign currency and options trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones financial security or lifestyle. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results. Video content hosted by third party.

As the NFP rate creeped toward the Fed's 6.5% target, the bond market acted ahead and as it closed 2013 on the lows, it started 2014 on the lows, only to fail in moving lower and squeeze higher during the month of January. This upside reversal caught shorts by surprise as it squeezed the market from 12723 to 13503 to stop against major resistance from October of 2013.  The reversal into this resistance squeezed out the short side, however for the next 3 months the bond market stabilized sideways to consolidate the reversal and in turn develop a base or in technical terms an inverted head/shoulder pattern from February to April. With April's low retesting March lows and holding, this saw a push back to breach the 3 month highs and confirm the inverted h/s pattern. The coiled pattern once again left shorts selling the market trapped and with the breakout above the 3 month high, this gave fuel to expand this inverted h/s target and squeeze out October 2013 highs. This was done in May, confirming the lows of 2014 as a failed breakdown and a reversal in trend. So far since the October highs being taken out, this has led the bond market to further squeeze another 4 handles as late buyers now come in after the confirmation and chase the market up.  Going forward, major resistance is being tested from June of 2013 in the bond market with new buyers chasing prices above last October's highs. A move through 14028 squeezes this resistance level and retraces the bond market 50% from its 2012 high to its 2014 low. A break below 13606 reverses short term upside momentum to shake out longs chasing the market and give way to test downside support at old resistance 134, followed by 129 as major support off the year lows.

The Yen also started the year on the lows and reversed higher during the first month of 2014. This caught the market off guard again, squeezing out the short side with the move from 9486-9926.  Since this January upside squeeze, the Yen, as the bond market, went into a sideways consolidation period as it turned lower, however held above the January lows to keep shorts trapped. The consolidation and coiling led to an inverted head/shoulder pattern just as the bond market, with a squeeze in May to break above the neckline of 9870 and reach its 200day moving average for the first time since November of 2013. In contrast to the bond market, the Yen has had much more difficulty in expanding this range and seeing new buyers chase the market at these levels. For now investors are favoring the hedge of stocks into the bond market. Eventually this should rotate from bonds into yen and gold. Short term, the Yen remains in an uptrend with a target of 10150 to expand its 3 month range. Failure to hold the May low gives way to retest the April lows.