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After some brief pause at 2830 - 2850 area, it has broken down again triggering a full market liquidation
My core position are partially stopped out at loss but not completely. I have decided to hold a portion of my ES position to see how low it could go. In the meantime, I would take short setups in another account to offset more downside.
Basically it is quite a trigger situation, but definitely a testing ground for your mentality and skill.
Due to the scale of the move yesterday, many risk management clause are triggered in hedge funds, mutual funds. The risk manager would force, at least, a partial liquidation of their stock portfolios at NY open, hence we should be able to see a risk manager induced capitulation sell-off sometime today. The slump in the overnight session is more likely a reaction to the dive in the Chinese market.
The London session is a tricky one to trade, as there is very little technical levels we could work with. The only advice I could have is to follow the ES when trading the DAX.
Can you help answer these questions from other members on NexusFi?
Was not able to trade for Friday and Monday due to the burden from kids.
Maybe that is better for my psyche as I was demoralized and shell shock last Thursday by the equity market crash on Wednesday. Now I am recovering myself from the trauma.
1. Let us start our analysis from the dollar index. After two failed attempt to take out the 96.10 level, it has formed a 50 pips wide distribution range at the high and broke down from it last Wednesday.
Now my base case is that Dollar index has topped out at 96.10 and is in the process of rotating lower. The double bottom weak structure at 94.95 is a price magnet. The minimal target is the 70.5 retracement of the last up swing. And the ultimately, it should be able to take out the low of the last up swing.
2. Euro is a mirror reflection of the bias in Dollar. The poor high at 11660 lacks excess, which is very likely to be retested.
3. Pound chart is still a mess because it is too much driven by the political headlines. But it seems that the big picture trend is to the upside
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1. Some back and forth in the dollar index and it is breaking to the down side now.
2. ES was rejected from 2720 on last Thursday, hence the base case has been that the down auction is over and it is in the process of accumulation building energy for the mark up phase. The first major level to break is 2780, followed by 2800.
If ES is able to close above 2780, then the bullish break out of the three day balance is on a firm ground.
1. Yesterday the dollar index has indeed tested below the double bottom weak structure we have mentioned in our yesterday's morning prep. However, that break didn't spark the momentum for a down side continuation, instead, it has created a big look-below-and-fail pattern that is essentially called an end to the down auction with an excess. Now we are going to work with a bullish directional bias on the Dollar index that we are going to hunt for long setups instead of short setups.
2. Euro is a mirror reflection of the dollar, hence we are going to hunt for the short setups in it. The 11650 would be the level I would be interested to take my shorts. This is also the area of concentrated stop loss orders that the market maker would like to do business in.
Today i have come into the market with the correct directional bias in the Euro that they would roll over to the down side. However, I was not be able to profit from this move because my entry is way off.
The correct way of drawing the fib should be like this. Because the spike is a stop run, drawing fib from the high of that spike could not yield a useful entry. Instead, the proper way of drawing the fib should be from the high made after the stop run. If I use the fib from the spike high, then it would suggest the euro to trade through the two day volume area and then turn around to the down side. Is that too high a bar for Euro to cross if it were to go down eventually?
This trade has exposed me to the many faults in my thinking. Basically i am too timid and too much seeking a comfort that I am asking the market to give me an impossibly good entry. Trading is not about perfection, but the right risk reward trade-off. Step out of your comfort zone and take trades in the direction of higher time frame premise!
1. The narrative in the Dollar has been quite blurry lately. However, after several days of chop, the intended directional bias has become clear.
Dollar has tested the 61.8 fib of the upswing from the FOMC rate decision, hence it is likely to be on the path of breaking out the topping formation at 96.10. Given the size of the 96.10 top formation, it is unlikely to break it in one go, especially after expending quite some energy yesterday already. The most likely path is for it to pullback or consolidate to restore energy for another push higher.
Hence I would like to see it pulling back toward 96.50 area for consolidation. That is where I would like to load my longs.
2. Euro is testing last week's VPOC. I would not be surprised if it is able to find some support and bounce from that level. The game plan today is to short around 11570 level.
The European equity has hit some speed bump that the FESX has stalled at 3265 area where there are plenty of trapped longs praying for getting out at break even. These trapped long inventories would have to be digested before it can go higher, which means it would take a bit more time to consolidate before a full bull phase.
We can't rule out the possibility of a retest of the last week low, idealistically, making a higher low above 3180.
early this morning dax has already taken out y low, not so the FESX50.
I would expect FESX50 will soon do so as well (?) and this would resume EU downtrend
The support of 11680 is holding for now.
If that were to give away, the 650 is the last line in the sand for the bulls.
The price formation is flat correction with some bearish tilt.
we are waiting for the NY open for direction.
