The Taylor Trading Technique (TTT) says that markets run in a three day cycle of Buy day, Sell day and then Sell Short day. Each day has an anticipated move associated with it. Thus, if we know what day of the cycle a market is on we know what market move to anticipate.
Monday was a Taylor Trading Buy day for the eMini S&P futures. It didn’t make the anticipated Buy day move (open near the previous day low followed by a rally to close near the session high) however a TTT Sell day follows a Buy day so that’s what we anticipated today, and what was listed in last night’s Swing Trader’s Insight.
On a Taylor Trading Sell day, the anticipated move is a rally to the previous day high. In Taylor’s model of the market, the Sell day was the session for the “smart money” traders, who bought in the previous session, to sell out of the long positions they accumulated in the previous Buy day.
Taylor believed the market was run by these “smart money” traders, who ran the market up and down to make money off the unsuspecting. Whether or not you believe markets are run in such a fashion, I find the TTT helps to identify and anticipate where losing traders are likely to do the wrong thing at the wrong time, which helps to identify and trade short term extremes in the markets.
So today’s Sell day for the eMini S&P meant we would anticipate a rally, with Monday’s high of 2022.50 as the primary upside objective. Although it took a while to develop, we did get the rally today, eventually reaching Monday’s high after crude oil futures rallied into its 1:30 PM pit close (crude oil was on a Taylor Trading Sell day as well.) Today was also a good example of why you don’t want to be on the wrong side of the market late in the session, as it tends to move in the direction that causes pain to those who least want to see it (like today’s late rally hurt those who sold at lower prices yesterday or this morning).
Looking ahead, Wednesday will be the TTT Sell Short day for the eMinis. On a Sell Short day, we look for the market to stall against the previous day high, turn down and then trend lower over the session. We’ll see what tomorrow brings.
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Essential Guide for Futures Swing Trading
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