In yesterday’s blog post I wrote about a short sale trade in the EMini S&P (read that here). This was based on the ES being in the Sell Short day of the Taylor Trading Technique (TTT) cycle. Yesterday’s afternoon’s recovery meant I labeled today the Sell day of the cycle. However, unlike the label, the TTT Sell day was an opportunity to go long today, which worked well.
I labeled today a Sell day because the market both sold off and then rallied yesterday. A Sell Short day is usually followed by a TTT Buy day however a Buy day is predicated on the market closing near the bottom of the daily range in the previous (SS Day) session. Tuesday’s relatively high range close meant we would anticipate a Taylor Trading Sell day for Wednesday.
The Sell day of the TTT cycle is really a misnomer of sorts. From the name, you would think a Sell day would be a day to short a market. However, Taylor’s “play” for a Sell day would be to sell out of long positions that were purchased on the previous, Buy day. If I’m looking to trade a market on a Sell day, I’m looking for a resumption of a rally, especially in a bullish market. The strong up trend in the ES and the fact that there was a lot of room from the Tuesday close to the Tuesday morning high made me interested in going long today.
In this morning’s STI comment I wrote that I would be looking for a rally on a move above 2790. The midpoint of yesterday’s selloff was 2789, I rounded this up a bit to use as a pivot point. This is the Fib level I pay attention to – if a market moves above a 50% retracement level then it’s likely to move back to where it started. This jibes with the TTT, with the Sell day objective being a rally to the previous day high.
The 8:30 AM open was below 2790, and it moved back above 2790 just after 10 AM, which triggered our long entry. From here it moved higher over the session, reaching our 2808.50 (Tuesday high) objective just after 2 PM. Today’s high range close gives us a Taylor Trading Sell Short day signal for Thursday, although I’m a bit leery of the short side given the strength of the uptrend.
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