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EMini S&P Trading- Using Premarket Highs and Lows as Reference Prices

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In last night’s Swing Trader’s Insight I labeled the EMini S&P futures as a Taylor Trading Technique Sell short day. As long time readers know, I suggest we trade the stock index futures during the stock market hours (beginning at 8:30 AM CT) and that we can use overnight highs and lows in lieu of the previous day high and low that the TTT normally uses for the reference price.

Wednesday was the Sell day of the TTT cycle, following Tuesday afternoon’s rally. The TTT told us to anticipate a Sell Short day for Thursday- we might see some early upside follow through, but we would look for any rally to fail, and short the market when we saw it turn down.

ESU daily Sept 3

For a TTT Sell Short day we normally we would use the previous session high for our reference price, looking for a rally to fail over that level. However with active overnight markets we often see the previous session high or low exceeded in the overnight session, and we can use theses higher highs and lower lows as reference prices for the day session.

In this case, the EMini S&P futures made a session high of 1968.75 around 7:30 AM. The 8:30 AM open was below this level, and the market rallied off the stock market open. Around 9:25 the initial rally stalled against the overnight high, and then proceeded to rally above it about a half hour later. This rally served to shake out the weak shorts from overnight and early morning; the rally then failed and the market turned lower.

ESU intraday Sept 3

At this point we could look to short when the market dropped back below the overnight high- a “high violation” sale in TTT terms. The initial stop loss would go above today’s session high of 1973.50- if the market resumed its rally and took out the high we would know the market wasn’t doing what we anticipated.

EMinis sold off into the early afternoon, reaching the Thursday high around Noon. In this case the previous day high was a poor choice for a Sell Short day reference price, as the market bounced off it twice before finally taking it out late in the session.