E-Mini Day Trading

January 2011

January 2011 was a great month for trading the ES…Plenty of volatility to start the new year, coupled with price action that moved very much in sync with key big picture levels. This was not the first month of very good trading, nor will it be the last…

I have been listing real time big picture analysis 3x a day in this blog, for 3 months running now, while illustrating the best trading opportunities that unfold according to developing price action. 

E=MC2 volume II provides the same running analysis for an entire month, including real time trading examples with account statement verification to show how a trader can put this information to use in actual trading.

While no two traders will ever trade the E=MC2 approach exactly the same, I hope this information proves to be valuable for those who study it.

My goal has always been to set the trader on a path to view trading in a logical and consistent manner day after day so one can develop the confidence to make trading decisions on their own.

The E=MC2 trading approach is designed to be big picture first, trading signals second, and the goal of this blog has been to show how these two areas come together in a consistent and logical way each and every trading day.

I have gone to great lengths to explain how the big picture guides all trading decisions, and I am surprised when others consider this just a “moving average approach,” or miss the concept of integrating the  big picture altogether.

I want to make clear if you decide to trading using the E=MC2 approach, you will need to (1) Identify support/resistance levels on a running basis (2) Understand expectations of how price moves inside and outside of support/resistance levels (3) Understand how the trading session always begins with a first move/first retrace relative to support/resistance that formulates a trading bias for the day (4) Understand how this trading bias continues, or changes as the session goes on.

Finally, all of this is placed into a context of:  (1) Normal trading conditions (2) Trend day trading conditions  (3) Chop trading conditions.

I explain all of this in the material with many examples.  I have shown how this information unfolds in real time in both books and in this blog for verification purposes, and study purposes.

I have found big picture context to be very important in my own trading.  

I have done my best to explain how big picture context translates into trading decisions, and at the very least I hope the E=MC2 material gives traders some unique “food for thought” as they consider formulating their own trading plans.

Performing a similar big picture exercise each day, and then going back at the end of each day to review how the trade signals presented in the material tie in with the best trades opportunities that set up according to unfolding big picture structure should help any trader develop a unique trading plan utilizing E=MC2 material, with the final goal of realizing the daily, weekly, and monthly trading goals that are presented in the material.

MON – 1-31-2011 – (DAY SESSION PART 2)

SUMMARY – With 1280-1270 as a framework today, the market probed below 1270 overnight, came back strongly into 1280-1270 consolidation which signaled a move to 1280 that developed as part of an up bias that continued into day session part 1structure.  

Price moved above 1280 to 1284, providing several long trade opportunities as the bias remained up until a small C2 buy loss developed at noon, followed by a new swing low combined with the mechanical  trend turning down @13:30 for a short trade for small gains, as price moved below 1280 as the potential start of a down move back to the bottom of 1280-1270.

However, a new intra-day downtrend never materialized  (no further sell trades set up) as price rallied strongly above 1280 with strong upside volume @14:00, and this signaled an up bias in the form of chop between 1284-1280 which had you looking to the long side for the last hour of trading as long as 1280 support held.

MON – 01-31-2011 – (DAY SESSION PART 1)

GAP/FIRST MOVE/FIRST RETRACE – After day session part 1 trend is up until 1274 is taken out, a failure occurs on an attempt to move above 1280 , or  a new swing low develops if price moves above 1280 which will take time to develop.

MON – 01-31-2011 (OVERNIGHT-OPEN)

MACRO – The ES broke out of the 1200-1050 bracket, reached the upper 1295 area target and finally fell sharply on Friday to create what looks like an upper big picture bracket point

If the market can create a new daily swing low pattern (not there yet), 1220 is pullback to swing target.

This week we monitor for a continuation of the reversal week lower that appeared to set up last week.

OVERNIGHT/OPEN – After a large directional day on Friday, expectation is for a pause day and a new short term consolidation area to form. 

Overnight price moved sharply lower (below 1270) which brought in strong buying that eventually has taken price up to short term resistance near 1280, or back into the chop range that formed near the end of Friday.

Start the session expecting 1280-1270 chop, and see how first move/first retrace structure falls into this expected scenario.

FRI – 1-28-2011 – (DAY SESSION PART 2)

SUMMARY – As mentioned in the opening comments, a break of 1298-1290 chop was expected to be powerful, and today the market dropped almost 30 points from the opening high as a powerful breakout/trend day down developed.

After day session part 1 ended expectations were for 1280 as long as 1290 held, and there were many E=MC2 sell opportunities to profit as price worked down to 1280.

With classic trend day conditions in force, a perfect pullback to the 1280 resistance area at 11:45 coincided with the classic type of trend day entry (when the mechanical trend looks like it is changing direction during a deep pullback). The safest sell entry was on a swing low, pivot pullback around noon (1277.00) for an expected move to new intra-day lows (1272.50).

From here price rallied and set up a trading range between 1280-1272  with a trend day down bias as long as 1280 held.

As 1280 resistance area held , this created nice price/volume/pivot sell opportunities starting @14:00 for an expected move to the low end of the range.

A lot of sell trade opportunities today after (1) Major resistance breakout failure above 1298 (2) An opposite consolidation area breakout  below 1290(3) Developing trend day conditions with a big picture 1280 target first, followed by a big picture 1270 target once 1280 broke.

FRI – 01-28-2011 – (DAY SESSION PART 1)

GAP/FIRST MOVE/FIRST RETRACE – Watching first move/first retrace at a major key resistance area it was clear by 9:00 that an upside rejection was unfolding when price  made a first move of the day higher above 1298 and then  dramatically reversed below the intra-day lows at 1296 during the first retrace move lower.

This set up a nice sell opportunity at 9:15 (1293.25) for an expected move to the 1298-1290 consolidation lows.

The subsequent C1 sell @9:29 was riskier because price has reached key support, but with volume confirmation strongly in place (off the charts negative), this trade offered  ,more gains if you decided to take it with strong downside momentum in place.

Structure is down back inside 1290-1280 with 1285 first support, so as long as 1290 area holds on a pullback stay with downside to 1280, and only consider longs if a new swing high develops later that coincides with price moving back into the 1298-1290  consolidation area which will take time to develop.

FRI – 01-28-2011 (OVERNIGHT-OPEN)

MACRO – The ES broke out of the 1200-1050 bracket, reached the upper 1295 area target and is searching for a new bracket high to form that looks like will develop somewhere above 1295.

Strong responsive buying comes in at each successive consolidation low  (1280, 1290) so anticipation is for a push above the 1298 highs where we will look for acceptance/rejection.

OVERNIGHT/OPEN – Overnight price moved from the bottom to the top of the current 1298-1290 range which has been in place for three days now…The longer this  range lasts the stronger the breakout will be.

Trading has been tricky inside this range (expected),and the only thing to do at the open is to continue to treat this as a trading range and trade cautiously  while holding a bigger picture up bias view, and see if first move, first retrace structure of day session part 1 points to any type of rejection to move higher.

THURS – 1-27-2011 – (DAY SESSION PART 2)

SUMMARY – After day session part 1you know: (1) You are up against major 1296 resistance (2) Inside 1296-1290 chop (3) With 1294 intra-day support.

Also, you know daily price action is consolidating and threatening to break out higher until 1290 area is taken out.

With this big picture context in mind a C2 long up against 1296 resistance @10:00 is considered very aggressive and would have led to a small loss.

Then once 1294 broke @10:09 expectations were for price to move to the lower end of 1296-1290 and there were several opportunities to enter short for gains as price moved down to the 1290 area.

If you had 1296-1290 big picture chop in mind (spread out chart for last two days), an aggressive C1-C price/volume countertrend buy developed just before 11:00 for an expected move to the 1296 area.  If you missed this buy trade (due to holding with an intra-day trend down bias as price moved below 1294), there was another opportunity to enter a chop trade long for small gains near 11:30 when 1294 was take out to the upside and chop was confirmed.

Price moved back up to 1296 resistance by noon which signaled caution for immediate new long trades and price proceeded to stall and move sideways for the next 2 1/2 hours.

In terms of structure, since 1296 seemed to rejected early as price moved all the way back down to 1290, a price move all the way back up to 1296 with a long pause likely represented a pause before a breakout higher as long as 1294 held. 

I realize this is advanced thinking, but if the market was really rejecting 1296 earlier in the day, it never would have moved all the way back up to the 1296 area again.  The pause at 1296 is logical based on very big resistance area.

Therefore, the trade options after price reached 1296 was either to (1) Stop trading altogether until an official breakout  (2) Enter long and hold inside a very narrow range above 1294 expecting an eventual breakout higher  to test the highs of the day (advanced trade concept, but logical..)

The market eventually attempted a breakout higher at the end of the trading session to provide gains if you were very patient in line with developing market structure expectations.

THURS – 01-27-2011 – (DAY SESSION PART 1)

GAP/FIRST MOVE/FIRST RETRACE – Price opened inside chop from yesterday with no gap, and after testing the lower end of chop, price volume/pivot buys set up early @8:31, 8:39 (1293.00) for gains as price made an expected test of the 1296 area highs.

Price penetrated key 1296 area key resistance and reversed sharply (no mechanical  C1 buy momentum here) and the key to unfolding structure during the first retrace lower would be whether  or not 1293 support would hold to keep bias up.

Price held in the 1294 area and C2 buy setups developed at @9:16 (aggressive before pivot/volume confirmation), 9:26 (after volume/pivot  confirmation) for gains when price moved up to test the highs of the day.

After day session part one, price is still in a very tricky major resistance area.

The bias is up as long as 1294 holds, and it looks like price wants to break out higher but you never know.  Without C1 momentum monitor 5 minute price action to look for trade opportunities

If 1294 breaks the bias turns down,  and then we monitor 1295-1290 chop  to see if this downside reversal can follow through lower of not.

THURS – 01-27-2011 (OVERNIGHT-OPEN)

MACRO – The ES broke out of the 1200-1050 bracket, reached the upper 1295 area target and is searching for a new bracket high to form. Twice the market tested 1290-1280 consolidation lows and strong responsive buying came in, which points to price consolidating between 1290-1280 to make a push above 1295 attempt where we will look for acceptance/rejection

OVERNIGHT/OPEN – Overnight price continued inside 1295-1290 chop that formed yesterday as price tries to break above 1295.

With price at key 1295 resistance and in currently chop, this leads to a host of trading possibilities.

Trading starts cautious in chop conditions. A breakout up will continue a trend. A breakout down can be a significant start to a bigger picture decline. Also, a move higher, followed by rejection back below 1295 can also be significant, especially if the low end of 1295-1290 is taken out.

Unfolding first move/first retrace structure day session one structure will be the first clue to what is developing today if price remains inside 1295-1290 chop near the open.