Today the stock index futures are on the Sell Short day of the Taylor Trading Technique cycle. A TTT Sell Short day tells us to look for an initial rally to fail; we then look to go short when the market starts moving lower.
I chose to watch the eMini S&P for this setup because it was flirting with the previous contract high of 2014.50. At the same time, all the stock index futures are in a daily uptrend so we would want to be careful with shorts. As I said in the morning Swing Trader’s Insight watch list, Friday’s high of 2016.75 was the primary reference price for the TTT Sell Short day; we could watch the 2014.50 level if the market was unable to reach Friday’s high.
The 8:30 AM open was 2013.75; it then traded sideways until the pop after the 9 AM ISM report. ISM came in stronger than expected, and it rallied to a new session high of 2017.00.
This rally was the “high violation” signal for a TTT Sell Short day. The move above the previous session high of 2016.75 was our “heads up” to look for a short sale and we got short on the subsequent move back below the previous day high.
The initial stop loss for the short would be above the session high, which in this case could be extremely tight. Breaking below the day session low of 2011.00 extended the selloff to 2008.00 but the inability to take out the overnight low (2007.00) could be a signal to take profits. I was inclined to do so as the daily trend was up and the other indices (eMini NASDAQ and Russell futures) weren’t confirming the selloff. If you did cover shorts you might look to reshort if the daily low was taken out; if you stayed short you should have stops at no worse than break even.
Essential Guide for Futures Swing Trading
In this guide, experienced trader and broker Scott Hoffman explains the trading methods he uses to analyze and trade the futures markets and to publish his trade advisory, Swing Trader’s Insight.
STOP ORDERS DO NOT NECESSARILY LIMIT YOUR LOSS TO THE STOP PRICE BECAUSE STOP ORDERS, IF THE PRICE IS HIT, BECOME MARKET ORDERS AND, DEPENDING ON MARKET CONDITIONS, THE ACTUAL FILL PRICE CAN BE DIFFERENT FROM THE STOP PRICE. IF A MARKET REACHED ITS DAILY PRICE FLUCTUATION LIMIT, A "LIMIT MOVE", IT MAY BE IMPOSSIBLE TO EXECUTE A STOP LOSS ORDER.
The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. References to over-the-counter (“OTC”) products or swaps are made on behalf of StoneX Markets LLC (“SXM”), a member of the National Futures Association (“NFA”) and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI does business as Daniels Trading/Top Third/Futures Online. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser. References to securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to exchange-traded futures and options are made on behalf of the FCM Division of SFI.
Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.