Swing Trader’s Insight was on the correct side of a number of markets today. There were signals for Taylor Trading Sell Short days for the stock index futures and the Euro, Taylor Trading Buy days for the Yen and gold. Days like today are a good example of the psychology of markets and how the Taylor Trading method allows you to anticipate where market turns are likely to occur.
Looking at the daily chart of the eMini S&P (below), Monday, Tuesday and Wednesday were doji bars, which resulted in Thursday’s upside breakout to the recent highs. This rally was likely to suck in weak and / or late longs, leaving the market vulnerable to a downside reversal in the following session if it ran out of traders willing to buy at increasingly higher prices.
Today’s Sell Short day signal was in anticipation of the trend reversal that was likely to occur IF the market rolled over and began to sell off. By the Taylor Trading roadmap, we would look for the market to stall around the previous day high, turn down and then trend lower for the balance of the session, ending with a close toward the bottom of the daily range.
I thought I’d also cover the eMini analysis from this morning’s Swing Trader’s Insight morning comment:
Sept. eMini S&P Futures: It was on a Taylor Trading Sell Short day signal; what to do now? On the upside, regaining the overnight recovery high (2043.50) could start a rally while a break of the last overnight low (2016.00) could lead to another leg down. Either trade would have a wide margin of error today.
In the same way the Taylor Trading method looks to identify where market turns are likely to catch weak hands, we were looking for a similar setup this morning. Specifically, 2043.50 was the high trade made after the session low. Thus, a move above this high would like spur more short covering, as traders who sold lower would increasingly feel pressure to buy back their losing short positions.
That’s what we saw after the 8:30 AM open. A rally ensued, moving above the 2043.50 high about five minutes after the open. 2059.25 was the midpoint of last night’s selloff; the market’s inability to clear this level was a signal to take profits.