Monday, March 31, 2008

Market Force: Neutral/Bullish. Watching for turn around to the upside today on an early flat to lower move.

Trade Setup Summary for Friday, March 28, 2008:

* No Hour One Pivot trade set up on Friday.

Recap of Friday's Action:

Good morning and welcome back from the weekend.

On our Directional Forecast for Friday I was looking for the market to move lower early, catch support and make a bounce back towards a Neutral to slightly higher close.

The TRIN was running high for most of the session while the rest of the tape stayed mostly neutral.

When we hit the Hour One low B/D I had recommended taking a short trade and holding short IF the tape was Mega Bearish. Although the TRIN was Mega Bearish, the rest of the tape was not and therefore the rule would have been to stand aside.

As you can see from the chart above, the market tried to catch support on 3 occasions but each time it was a "stairstep" lower which led to an eventual stronger drop into the final hour.

Friday was clearly a "Sneak Down Mega Bearish" move and you've heard me describe these market situations. Friday's was one of the more trickier ones that I've seen in recent memory.

Oddly, there were numerous very important Bullish signals in the mid afternoon that suggested clearly that we could have caught support anytime. However, the market had other plans as they drifted lower and then spiked lower into the final hour.

The action on Friday sets up today's trading plan. More on this below...

Today's Call & Briefing:

Today should be an interesting and pivotal day.

I've got several Key Market Force Indicators turning bullish enough to give the overall rating a Neutral/Bullish inspite of the sell off on Friday.

What we will want to do today is watch the first hour carefully and see if we get a decent pullback to test the 1313 area lows of Friday. If this occurs we could be setting up for a decent bounce if prices can hang lower for a bit and draw in more bears.

If prices push higher first and attempt to rally then we could see more of a "See Saw" type market for today.

TRADE ENVIRONMENT: Expecting both sides of the bias to work equally for trades with focus on buy side today. Watch for support on lower, early drops and reversal to show up session.

HOUR ONE PIVOT ACTION TO TAKE TODAY:

*Buy B/D with Neutral to slightly bearish tape. Mega Bearish tape setup can still enter long but look for 3-4 points below B/D to buy.

*Buy B/O with Mega Bullish tape.

*Sell B/O with bullish tape if there is an early, fast, strong rally into the end of Hour One.

....................

More information on the Hour One Pivots:

Hour One High BreakOut...We want to watch and see if there is a fast, early move higher into the end of Hour One. If this occurs then it will be a "too fast-too soon" reaction the the Market Force Indicators and B/O will be expected to fade (pullback lower off highs).

If the market moves up gradually off of early, lower move then if the tape does turn Mega Bullish at the time of the B/O then we can buy em.

Hour One Low BreakDown...If prices move lower off the open and drift lower towards the lows of Friday (1314 area) then we want to look for support to get long. If prices work the Hour One B/D in the area of 1314 or lower then look to get long.

I am rather expecting the Hour One B/O to get hit first today to create a more "See Saw" type of market.

Value Area: 1,314.50 - 1,331.00

Watching for pullback below the VA to catch support above 1298 and move higher today.

If we get a run up higher first towards 1331 or higher then watch for a more mixed market today with pullback mid session.

Buy Pivot Target: 1,309.75 - 1,310.75

There is a good chance we could run this Buy Pivot target zone today if prices drift lower off the opening.

Watch for support in this area to buy and hold long.

Sell Pivot Target: 1,332.50 - 1,331.50

If we get an early run up to this area it is double resistance with the top of the Value Area along with this Sell Pivot target. Watch for the market to stall and pullback.

10 Day "Pit Bull" Moving Average: 1,321.80

Prices are holding now as I type just below the Pit Bull. Watch for run up higher to pullback and hover around this zone again.

If prices move lower then watch the support zones mentioned above to bring prices back to this Pit Bull area for important market decision.

Pro Trader's Action

After we see how the opening reacts to Friday's lower move we can determine whether we should see a potential upside market today or more of a "See Saw" type day.

Overall it is expected we will see a "mild down day" in the markets after all the fluctuations, but getting long on an early move lower should be a good trade.

If they try and rally "too fast-too soon" early then we will have to fade the highs for a pullback and just see how the tape looks mid AM.

Have a good trading day and I'll see you in the action. Mohan

Economic Calendar

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