Friday, November 25, 2005
Issue Contents:
| 10:01 | Daily Plan and notes on market direction |
Remember – markets close early today – NYSE, AMEX and Nasdaq close at 1pm ET as do stock index futures on the CME. Most futures products on most exchanges close at 1 or 1:15pm today. Fewer market participants means reduce or eliminate trading unless a truly exceptional opportunity walks buy.
Futures Plan
Key levels:
- trade a range breakout LONG above 10967 on the first pull back following the breakout
- stalk opportunistic counter-trend (in the big picture) SHORT if price fails to hold the range lows near 10925, on the first retracement (bounce) following the break out lower. Aggressive traders only
Broad Market Picture
Major Market Indexes – Daily
There’s nothing wrong with this picture except that the rally has been very directional now for most of the past month, and as a consequence, history tells us to expect a profit taking pull-back at any time. The levels of the recent breakout are the first key targets, however in a strong market we should not be surprised to see price pull back much less than the first primary target.
Unfortunately “any time” might not be for another four weeks – there is ample precedent for a daily grind upwards through the end of the year.
What we’ll have to do is take each day on its own; be prepared to take some or all profits depending on the perceived weakness, but also be ready to quickly re-establish positions should the prevailing trend (up) reassert itself following a profit taking pull-back. It can be very hard for some to buy high – but while the trend is strong that’s exactly what we should be doing.
I’m a big believer in scaling out of good winning positions – unless there’s a clear top, such as we saw earlier this year, I divide positions up into chunks and allow a series of tighter and looser trailing profit stops to take me out. This helps avoid bailing a strong position completely on the first sign of weakness, only to see the trend reassert itself shortly thereafter.