Wednesday, January 25, 2012

The MouES Bit Too Hard - Covered ES @ $1322.50

I have a certain tolerance for pain when trading and when it is reached I get out of the position and move on. Today the MouES (E-mini S&P 500 Index Futures ES) bit me repeatedly - until it reached my tolerance level. Then I covered my two sold futures contracts with a buy at $1322.50. 

I had a number of very excellent trades earlier in the month and decided to define my tolerance level such that it would not allow those trades to go entirely for naught. So, if this should be my final trade of January (unlikely) I will conclude with a very modest 3% gain in my account value for the month of January 2012.

Here is the daily chart of ES as of a short while ago.

Click on the chart to ENLARGE

Yesterday I spent a few hours studying the S&P 500 price movement since the March 2009 low. The takeaway for me is the similarity of this rally with the fall 2010 rally. In that case, rather than the daily cycle bottoming on Day 35-40, it bottomed on Day 59 - clearly stretched in response to QE2. 

But we don't have QE3 to account for current price action. Or, do we? 

Is the FED printing money to 'loan' to the European Central Bank (ECB) at 0% and we don't know about it? Maybe Saudi Arabia is selling oil to China for Chinese currency - rather than US Dollar currency? Maybe there is huge liquidation of accounts in Europe that is being first converted into US Dollars (which would be US Dollar bullish) but then invested in our or other stock markets (which would be US Dollar bearish)? Or something else having to do with credit default swaps (CDS) between the US and Europe?

Or maybe I am just being paranoid and the overdue daily cycle for the S&P 500 is just a little late arriving this time. At this moment that explanation seems (to me) about as likely as Santa Claus visiting my chimney on December 25 or 26 and saying he forgot what day it was, but I guess it is possible. 

In any event, the TSI is now sky high, price is at the very top of the 3 week price channel and the downtrend line from 2007 is still overhead. The FED meeting is over and I would think that the ES will go into a profit-taking correction soon. 


  1. John - I really enjoy your posts!
    While I've been following the TSI, I confess I could not see today's big move coming (Certainly the FED announcement would affect things somewhat, but I just didn't figure on the degree: dollar quickly tanking, etc.) Did I focus too much on TSI and lose sight of the "news"?

    I was in DUST and managed to get out w/ a little profit, but gave back quite a chunk. Here's my question: In an earlier post, you presented the idea of a Gold dropping a bit further, and then buying into he next gold Bull cycle. Do you think we are there now? Or was this move solely news driven?

    Thanks again for your outstanding posts!
    - jimmy

  2. Hi Jimmy - no, you did not do anything wrong. The stock market is sometimes very
    difficult to figure out as there is a significant degree of information that is
    not public knowledge - forces that are trying to part the little guy from his money.

    Anyway, I think this gold break out may be a very big deal. I intend to play it as such
    until it proves otherwise. As for gold making lows below Dec.28, I personally doubt it.
    The historic caution flag, however, which is the 2008 D-wave, that did something like we are
    doing now and then it turned viciously lower. I'll give it some more study now that we
    have a new development and see what I can figure out.

  3. Your TSI trading record has not relected the $2400 loss on this trade.

  4. So true San Jose. And my loss was more like $2,800. Well, I do not have any of my futures trades on my TSI Trading record.
    Not the wins and not the losses. My little scorecard is just the stock and ETF trades.

  5. hello sir,
    pls can u give ur view on gold were will it head.

  6. My view on gold is that is going to now head much much higher.

  7. Hey John, just wanted to see if you had seen or traded the 3x long or bear etf s for silver. These rascails make a great way to day trade using the 1 and 2 minute charts as well as 5and 10 these work great for scalping also, I know you like new ideas and challanges so thought I would throw them your way, the bear symbol is (dslv and the bull is uslv, I have had much fun with these...they are movers!!.... monty

  8. Hi Monty - no, I was not aware of dslv and uslv - but I am now and will put them on my radar screen Thanks!