In my experience, quiet markets are much more dangerous than busy markets because time starts messing with your head. You’ve been sitting at your machine for awhile with nothing setting up and bam! you put on a trade just out of boredom. Seems harmless until it goes against you, and you maybe decide to add because it’s slow, and you say to yourself “markets not going anywhere”. haha famous last words!
Next thing you know your sitting on a big position that’s a loser and panic starts to set in. (I’m actually explaining to you what has happened to me so many times that I’m actually getting a bit of anxiety just from writing this)
This morning on Twitter and in our member area I spoke about the divergence going on between Biotech & Energy. Biotech was leading the Nasdaq higher while Energy was the weakest sector in the ES (S&P), keeping the ES at the bottom or middle part of their range.
When we see divergence in sectors, this tends to keep the ES in a range bound scenario until one of the leading divergence markets reverses and works with the other market. The key for us is to watch our Beacon strategy to see if we get alerts at the same time. If we get an alert at the same time, that is confirmation that both the NQ and ES are hitting resistance at the same time. This is the type of trade we will look for because it confirms that they may work together and get away from being divergent.
This morning we were focusing on the ES, YM, and NQ. 2152 in ES, 18,443 in YM, & 4597 in NQ. As I have mentioned many times before in my posts, I use bigger picture support and resistance lines for my bias and short term charts to execute those biases. This morning we had some divergence with the Nasdaq trading the weakest, the Dow trading the strongest, and the ES right in the middle.
Not a surprise to see divergence among the Indices during earnings season. Typically during earnings season traders can get chopped up because of divergences. From years of getting myself chopped up in these types of markets I’ve learned to stay small and watch to see how the other markets react when one of the other markets gets stronger or weaker.
In this pic (left) you will see how Gold was hitting our 60 minute level. On the right 1-minute chart Gold got a new set of Beacon lines near the 60 minute level and Beacon alerted a short signal.
This morning in our member area I talked about focusing on Oil and Gold today over ES because that’s where I saw the opportunities. I’m not just pulling those markets out of a hat, it all comes from morning preparation. I scan about 5-10 markets to see if we are testing bigger picture levels. I then work my way down to shorter term charts to see if the short term charts can help us execute a trade for that day.
This morning in our member area and on Twitter I discussed the importance of three different levels in equities.
- the 2064 level in ES-E-mini S&P
- the 4369 in NQ-Nasdaq
- the 17,629 in YM-Dow.
They were our orange lines on our 60 minute Beacon Indicator. That is our middle level, or better known as our pivot level.
If the bulls failed to hold those areas with hourly closes below them, we were anticipating steep declines the rest of today. That being said, if we held those levels we were looking for a strong rebound in ES, YM, & NQ. When we have a key area on our longer term charts we then look to our shorter term charts and strategy signals for indications to confirm or contradict our longer term bias.
In this mornings brief to our traders my focus was on potential trade scenarios in Crude Oil, Euro, and Yen. The Euro was the one that ended up giving us the strongest signal to trade off of.
As I have mentioned many times in the past, the markets that have the strongest confirmations are the ones that I focus my energy on. Confirmations for us come in forms of moving averages, MACD or Stochastic Divergence, and our number one confirmation is when our short term beacon strategy lines up with our 60 minute beacon levels.
In this mornings brief to our traders I talked about Crude Oil as a market of choice for trading today. The main reason was because of our latest Beacon strategy lines, but also because today was the EIA Data for Crude and that typically creates volatility.
The rest of the major markets were waiting for the Brexit or Remain vote, so this contributed to our focus on Crude Oil.
In our member area and on Twitter I posted the 48.35 area as key support for the bulls to hold. 48.35 is our 60 minute level that we do not trade directly off of. That level is our bias level. We then use our short term strategy to give us a trade setup.