Tuesday, October 23, 2012

Tuesday evening

SPX Daily
The bears pushed into the 1400-1410 zone today on SPX. S&P futures traded the second highest volume day of the December contract... and I'm starting to get very curious what the COT report will show on commercial positions when it comes out this Friday. The report  will include today's and last Friday's action, which were both big volume days. Today was also the highest daily volume traded so far in the Naz & Dow futures.

With the Rydex Bull & Bear Flow indicators getting closer to looking ripe for buying, we might have a recipe for this 1400 SPX area to hold for a decent rally. Daily chart indicators on S&P futures could use a flat to down day tomorrow in order to be in a ripe for buying setup. Short term Sentimentrader indicators are mixed, and are actually getting closer to looking ripe for selling again. Since we gapped lower this morning, the rally attempts (mostly in the Naz) "used up" some more of the ripe for buying setup from last Friday.

I'm not putting on any overnight or swing shorts until this 1400-1410 SPX action plays out a bit. Naz futures have held the Sunday night lows of 2657ish so far, and that's another reason I'm not very bearish here. I don't have any swing longs on either though, it seems like there's plenty of risk on those too.

Rydex data

Sentimentrader.com Rydex Bull Flow

Sentimentrader.com Rydex Bear Flow
Seems like a good time to check in on the latest Rydex data. This is more of an intermediate term indicator, but you can see we are getting closer to a buy signal on both. Rydex traders have been pulling money out of bullish funds and putting them into bearish funds. These indicators are updated daily, so they're showing data as of the close yesterday.

Targets


To target, or not to target, that is the question.  An argument can be made that it is better to let a trade run until it does something “wrong”, as opposed to getting out at a specified target.  On the other hand, a stock will often reverse when it hits an obvious target, so it might be good to get out there.

It really is a question of style.  Targets can be used in several ways :

In the initial risk / reward calculation
As a spot to take part of a position off
As a spot to take all of a position off
As a gauge to see how well a trade is working

Some areas which make good targets :

Prior support / resistance (overlapping bars or price pivots)
Floor trader pivots
VWAP
Widely watched moving averages

I tend to be all-in / all-out, so I set a limit order at my target point.  If the trade looks like it will blow through there, I might increase the target.  If the trade is acting poorly, I might reduce the target.  But that’s just my style, your mileage may vary.