Let’s look at how the current state of the market sits in relation to some key levels on the daily time frame, and how that affects our day trading.
This super crucial in looking for potential trading opportunities within the market.
If you don’t understand the bigger picture, it becomes more difficult to accurately assess what you want to trade…
The State Of The Market:
So even though we’re clearly looking at a resurgence to the upside, the DOW isn’t one of those names that I’ve been really anxious to short. The S&P and the NASDAQ are a little easier, and the Russell isn’t valid for shorts.
Something you’ll notice on both the DOW and the Russell, is that we’re looking for the decision on whether or not the October volume weighted average price is being broken. Why’s this matter? Depending on what happens, it would then get me leaning towards shorts intraday more so than long positions.
On the S&P and the NASDAQ it’s far easier to look at the short side in the long side rather than exclusively the long side, which is what I’ve been doing for many many months when day trading across the indices.
When looking at the charts, you can also see that the S&P is really trying to make the decision on whether or not it’s going to establish the price action beyond that one month anchored volume weighted price. The NASDAQ relatively speaking is the weakest — it’s been establishing itself a little more on the charts.
So when considering them all together, you might say, ”Ragh it really doesn’t look like any of the 4 of them have clearly established the movement/resistance at the VWAP.”
And except for the NASDAQ, I completely agree.
What you’ll notice is that the VWAP has a certain gravitational pull. It’s not a hard and fast resistance level. If we’re using the example of a trend line, it’s not as if breaking that level is enough because there’s enough gravitational pull where the market tends to be drawn back to it. It’s magnetic.
A Very Rare Shift:
So right now, I’m open to two-way trading.
This is a very rare shift, and something we haven’t done in many months. If you’re a member of our Futures Room, you can definitely attest to this.
What this means…
I’m okay with looking at the hourly price movement ranges and VScore highs to short, and I’m okay with looking at the VScore and hourly price movement ranges to buy. We’re looking for extremes, and trading it in more of an overbought/oversold type approach.
I don’t expect this to last long, certainly not longer than the election window…
And if we can establish price action clearly back above the VWAP that’s anchored to October 1… terrific, we can go back to preference for the long positions. If we establish more clearly below the VWAP, I’ll have a preference for the short.
But right now, we’re open to essentially BOTH sides of this market.
I don’t like two-way trading as a habit. There’s nothing wrong with it, it’s just that my 30+ years of trading weren’t built on this. I trade most naturally based on having conviction one way or the other in what the path of least resistance may be.
But as you can see, Gang… that doesn’t mean I won’t trade two-way.
A Simple Point:
That also brings up a simple point: if you’re struggling a little bit, it’s because this market is playing exhaustion at the bottom and the top of the range. As a result, it’s a little bit more of a two-way trading approach. To be successful, you’ve got to be flexible and nimble enough to switch gears.
Monday was a great example of this.
Once we started heading lower, we kept heading lower against the path of least resistance (which has by and large been up). So if we have a selloff day within a bullsh directional bias market, those are always going to be difficult trading days for the way I like to look at the market.
So know what it is you’re looking for, and wait for that pitch if you’re ever uncomfortable.