Homework for Friday 2008.12.05

4. December 2008
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ESZ8 - Tomorrow we will have employment numbers that have no chance of being good.  We were already expecting tomorrow to be a down day and those employment numbers are surely going to help the case.  Hopefully, the overnight action will float up and give us a chance to short it down.

I've been working a lot with the idea of rotation and putting it into an EFS script.  I have a beta of something that looks extremely promising.  This is something that I will have up on the main homepage when it is ready (http://neotoolbox.com).  Thursday's primary pivot level was 865 that rotated beautifully around.  This also reiterates the importance of this 865 level we have seen for weeks.  Based on the squeezing of a trendline, this puts our primary sell level for Friday square on 865.  I imagine tomorrow to be a big down day to finish off the week.  I think a reasonable target is our most recent swing low's close at 815.75.  However, we may easily get lower than that, so the next targets are 795 and 770. 

  • Sell 865 (resistance level we have seen multiple times before (big red line)).  We also see the purple trendline and 34 (weighted) MA (dark blue MA) all coming together right there.  The purple trendline may put our entry level more toward the lower 860's.
    • Target 815.75 (most recent swing-low close on 12/1)
    • Next target levels are 795 (green trendline) and ~770 (bottom of pitchfork)
  • Secondary scenario... Look for opportunities to sell at 856-858 if we can't get up to 865 and all indicators are looking good.

 

 
 
 
Summary - 15:38 - As I was expecting, we didn't have the strength to rally up to 865 before selling off.  Thus, looks like the secondary scenario was the one to take (however, off by 1.25 points).  The target was also spot on.  I was thinking 815.75, we got to 817 (again, 1.25 points off).  Looks like the whole plan just needed to be shifted 1.25 points.  However, the way these markets trade is you have to get in at an area and get out at an area, versus a specific number.  1.25 points is still darn close for an area, especially when you are talking about a ~40 point drop!

We hit that low target very early in the day, which looks like we should've taken it as a BUY area.  If one were to buy at that 815.75 area and have the original sell level as a target (865) it would've been a great day!  Day was flipped for us.  Something I have to keep that in mind in the future if the target comes in very early in the day, look at flipping the plan.  When we hit 865 so late in the day, we did see a pullback off it, but the momentum was so great that there was nothing to stop it.  See chart below.

Another signal that we should've started looking long is when we convincingly broke above the 34vw MA on the 5min, then came back to test that MA and it was all up from there. See chart below.
 

Homework

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