Last night I suspected the EMini S&P had a breakout setup for Wednesday. It wasn’t a clear cut breakout setup so I thought I’d watch the overnight action to see if things were more definitive this morning.
There was, in fact, a large downside breakout move last night as the Chinese announced a list of retaliatory tariffs for US goods in the recent trade spat. This move pushed stocks dramatically lower and left us with a question for today’s session: Would the market continue its breakout selloff, or would buyers step in and start a rally?
This gave us two potential scenarios for today. For the selloff to continue we would need to have sellers be willing to sell at increasingly lower prices. If the selloff ran out of momentum, a rally could have a lot of buying interest if late sellers decided to throw in the towel and cover shorts. Such a rally could create a positive feedback loop; the higher the market went, the more pressure on shorts to cover and new longs to purchase.
The 8:30 AM open was 2572.50, just below the Tuesday low. There was no downside follow through, and the market rallied from the outset. I sent out a recommendation to buy if the market rallied above the last overnight high of 2581.50- I was interested in buying if we had some confirmation of buying pressure.
We had some time for this purchase, as the market spent about 15 minutes trading back and forth over the entry level. It pulled back to retest it and then the rally gained steam as the morning went on. Clearing 2590 (the 200 day SMA) and then the 2600 level boosted the rally as the morning went on. The overnight high of 2612.75 is the next upside target.
Try Swing Trader’s Insight – for 14 Days
Swing Trader’s Insight – Trial - This swing trading resource is designed to help you improve your trading skills and make you aware of trends and new potential opportunities in the commodities markets. Regardless of your current skill level, access to this exclusive swing trading information will enhance your trading experience.
Swing Trader’s Insight – includes access to premium web content.
Swing Trader’s Insight – includes an email newsletter subscription.
Swing Trader’s Insight – trial lasts 14 days.
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.
This material is conveyed as a solicitation for entering into a derivatives transaction.
This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.
Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.
You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.