Today the EMini S&P futures were on the Sell Short day of the Taylor Trading Technique (TTT) cycle. This gave a good short sale opportunity if we used the standard TTT entry; looking at holiday and overnight trade gave us even better entries.
Friday was the second day of a market rally, giving the TTT Sell Short signal for today. This was corroborated by ROC (bottom panel of the daily chart) which continued to show a sell signal. The standard Taylor Trading setup would be to look for a failed rally above the previous day high (our reference price), shorting the market when it dropped back below the Friday high of 2790.00.
Yesterday’s holiday and last night’s trade gave the market additional trading time. Although I don’t usually trade during these hours (I don’t watch the markets closely enough during these sessions), this activity can create additional market structure to use for trading.
For the EMini S&P this gave us two additional levels – the 2797.00 high made during Monday’s holiday session and 2803.50, the high made in this morning’s premarket trade. As with the Friday high, we could use these overnight highs as reference prices for a TTT Sell Short day move (failed rally short sale setup).
The 8:30 AM open was 2800.75 and the market proceeded to rally to a new session high of 2808.50. This was the signal portion of a TTT Sell Short day – a push above our reference price(s), a final fake out move that gets weak shorts to cover and late bulls who buy near the top.
The market subsequently sold off, the 9:15 AM move below the overnight high was our first sell signal (We don’t look to execute trades unless the market does what we anticipate- in this case, dropping back below reference price level(s). Regardless of the trade signal, we only act when a market does what we anticipate.)
The market trended lower over the morning, with the Friday high of 2790.00 serving as support until it was decisively broken around 12:45 PM; this prompted a rapid drop to the 2769.25 session low around 1:45 PM. Bargain hunters came in and it has since rallied to the low 2780s, trading sideways for the balance of the session.
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