Dax40. Tuesday 24 10 2022.
Pre RTH Kick Off Notes
Overnight Range Futs gapped up on the open into the R zone at 925 - 950 (but without the doji spike on CFD´s so I will therefore ignore that.) and we are back down at the 50DMA as I write around 80 points above pcc. The big afterhours move and opening gap up are often faded so watch for inventory correction. Data We have German pmi´s at 8.30 UK time and French at 8.15am where we often get an initial reaction prior to the German data being released. NB: ECB this coming Thursday. Overview This week is likely to be news sensitive following the WSJ article on Friday. Nick Timiraos (the Feds unofficial comms back channel) sparked the rally on Friday with his comments that the Nov FOMC where rates are set to go up by another 75bps could be the time when the Fed starts to consider stepping back and considering the rate path going forward noting that Dec maybe 50bps. We also heard from the Feds Mary Daly on Friday when she said "I think the time is now to start talking about stepping down. The time is now to start planning for stepping down," during a talk at the University of California, Berkeley on Friday. These types of comments are not simply "off the cuff" as we know the Fed likes to ready the markets for what's on its mind and, if this is the case, we could be at a pivotal point with regard to the rate path going forward. Taking some steam out of future restrictive hikes will be welcomed by the markets and could help to stimulate the October rally into November. So be aware of news and comments on this topic as we start the week. Based on what we got on Friday and the failed break down below 3560 behind us in the S&P my general feel is that we test 3800 in the RTH (we already gapped up on the Sunday open to tag this level) and 12950 - 13000 on Dax. If we do test 13k and break above on Dax (which would be a channel break on D1) we have 13100 and 13200 as the next upside zones with a fast area above 200 up to 600. However we can assess the track above once / if we do test and hold 13000. To keep the Dax rally in tact where we have put in 3 green weekly candles for only the second time this year (see above chart) 12600 and 12400 zones to the downside are key D1 HTF areas to hold. If 12400 breaks to the downside it would make it more of a stretch to keep the bullish momentum moving ahead. Todays Trade Plan Given my bullish take on the pa from last week and the overnight gap up I will be looking to buy dips in the first instance. I will be watching for any inventory correction in the RTH as a usual / regular pa event to take a long on the pcc gap close around 12740. Below here the first key H1 downside level to hold is 12660 (S1) which is the Friday news spike pullback which would be another good long opportunity. If we get no bullish reaction at either of these two levels / zones I will re assess although we can dip further to 12550 and still maintain the sequence of H1 HH´s. Levels S1 - 12660 - 12680 S2 - 12570 - 12590 S3 - 12395 - 12415 R1 - 13000 - 13030 R2 - 13090 - 13110 R3 - 13175 - 13200 The US
S&P futures continued to grind higher this morning from 3730 which is key to hold for higher. Any pullback to here would be a 1st test long. Above here we have 3762 and pcc 10 pts lower at 52. The news I mentioned above that the Fed is possibly looking to "step back" from further 75 bps hikes after next weeks FOMC is the driver behind pa last Friday and today. Therefore given the pa so far my preference is to look for dips to buy which I mentioned was my plan for today on Dax and which has played out well in the European session. We have clear levels to work with on S&P which should be used in the same we as we do for Dax. The better opportunities will set up long or short from known levels. Additionally look for pml and pmh scalps particularly pml long scalps as the overnight low as I write has held the 3730 level. RTH Post Session Review
Chart annotated above with all possible entries. We said buy dips in the kick off notes and that's basically what we got for the day. Pity we didnt quite get the pcc gap close as it would have been a 200 + winner. Maybe some of you did catch it and jump in - if you did - great trade! There were still plenty of other opportunities from regular levels and set ups that I´ve posted here nearly everyday. You have to trust the set ups and go with them though. More of the same tomorrow :). Dax40. Tuesday 25 10 2022. Pre RTH Kick Off Notes
Overnight Range Tight overnight range of around 50 pts as I write - no futs gaps and we are trading in close proximity to yesterdays pcc. Note the bulll flag formation and the sequence of HL´s since Friday. Data German Ifo at 9 am UK time, US CB consumer confidence at 3.00pm. Overview Yesterday Dax followed our trade plan i.e. buying dips and tested the 13000 level as I expected. S&P also tagged the 3805 cash level during the RTH session, again the target we had in our scopes also from a buy the dip perspective. Today will be about whether there is any follow through to the upside to propel the rally further and whether we can put in another green day to get 3 consecutive green days which has proven to be a struggle on either index. Dax is already trading above the cash 50DMA and the same 50DMA will be a magnet for the S&P around 3870 if it can continue to push higher. The first target / magnet for Dax will be around 13200 and a test of the descending trend line which has held since January. To get there it also needs a clean break of the ascending TL channel top at 13000. The perceived "step down" in Fed rate hike thinking is the key driver for US markets at the moment after the WSJ article and the Fed´s Daly´s comments last Friday. We have the ECB this Thursday for Dax to deal with prior to next weeks FOMC in the US. Both significant risk events. Moreover we have US mid term elections in the mix as well. While we seem to be building a rally we need to be prepared for anything as it wouldn't take much to derail this relative bullish sentiment. We are still in the throes of a bear market remember so the risk is always to the downside. Todays Trade Plan Now we have tagged 13k on Dax we need to see a clean break above to gather any further upside momentum. Below we have the cash 50DMA at around 12780 and a complex support area (see above additional chart for a closer view of the levels) from 12824 down to 12750 yesterdays RTH low. Any point of this "complex" support can act as a bounce area so I do not have an automatic buy order resting atm as it is too wide to know where stops can be safely placed. I will watch pa in this area before attempting any trade. Further down we have our S1 at 12660 - 680 the pullback low of the run up we got on Friday which is a cleaner support zone and and where I will have a long order sitting should we test. Note we are building a bull flag on the H1 as I write. While I am not a fan of flags we need to be on the look out for breaks to the upside from this TA 101 formation. The clear task for Dax Bulls is to again test and break out over 13000 and hold the cash 50DMA to the downside. A break over and hold sets up a run to our R2 13100 zone where I would expect a pullback. Above here is R3 13200 where we have the descending TL. This should be a tough hurdle to crack for Dax and a good short opportunity. My feel is that it wont push through here at least prior to Thursdays ECB rate announcement and press conference. For today then, it is less clear to me whether we continue in buy the dip mode or whether we change back to sell the rip which has been the better approach all year. Consequently I am open minded and will trade the pa as it unfolds. The bulls need above 13000 but could balance around here waiting for the US session to take a lead from S&P. We have good levels particularly above 13000 which could act as targets and short opportunities and below our complex S zone we have a decent long opportunity at S1. On days like this where I have no strong feeling either way I will trade the levels and patterns as they unfold. Watch for breaks, false breaks and pullback opportunities in general and for double tops and bottoms and usual reference point scalps such as we had yesterday from pml & pmh, and the RTH open level. Levels S1 - 12660 - 12680 S2 - 12570 - 12590 S3 - 12395 - 12415 (key HTF S) NB: as stated watch the complex S zone between 12750 and 12824 R1 - 13000 - 13025 R2 - 13094 - 13113 R3 - 13175 - 13200 (descending HTF TL R) The US
Yesterday we were looking to buy dips for a run up to 3800 which we hit in the RTH before topping out at 3810. The overnight session for the US has been fairly restrained with 3806 holding the highs. For today given the pa on Dax so far we could be looking at a similar RTH pullback to lower levels. If so around 3760 is the first level of S. If it breaks below here, 3730 is in play. The key level to the upside remains 3800 - 3810, yesterday highs, and a clean move above opens up a run to 3825 - 30 which I would expect to hold highs for today. If we get sustained bullish momentum 3860 - 65 is our target at the 50DMA area. As mentioned re Dax in the above notes it is less clear that we are in for a buy the dip day today so I will watch pa and trade the levels from the charts as appropriate. NB: Data has helped push US higher from the open. RTH Post Session Review
There really was only one trade to speak of today and that was long from the lower edge of the complex support zone we had on our charts this morning. After testing the higher S levels in this area and giving no real bounce once we poked through the 12790 level into the H1 wicks from yesterday (no H1 closes below 12790) we started to climb. This trade was no doubt helped not only by the long way it had fallen in relation to the S&P (which was holding much steadier) but also by GM earnings and the Case Schiller data in the US indicating Fed tightening looks to be gradually having an effect on lowering prices (property prices in this case). This bouyed US sentimenet similar to The WSJ article on Friday and once the US opened there was no looking back as the S&P rallied up over yesterdays highs signaling Dax was set to go all the way back to this mornings highs and subsequently yesterdays highs. We did have a couple of regular scalp set ups on the pa prior to this long but this was the trade for today. I hope you all made some decent money on the back of it :). Dax40. Weds 26 10 2022. Pre RTH Kick Off Notes
Overnight Range After the pm ramp up Dax gapped down on the day open which it subsequently filled once the futs opened and has traded in a narrow range between roughly 13020 and 13090. Pcc is 13052 which is where Dax sits as I write. Data No important data scheduled for today other than US new home sales at 15.00 Overview A sharp bounce yesterday after the push down post the Ifo data. All the way down to 12790 and back up and over 13000 to close the RTH session at 13052 after testing our R2 zone at 13100 in the after hours session. Its now about whether 13k holds and whether we can push on to and break above 13200 the years descending TL where we should get a pullback. We printed a 3rd successive green day on the cash index yesterday as we did on the S&P breaking the 2 day cycle which we have seen of late. Whether this is a sign of sustained strength is not clear. We have a number of risk events starting tomorrow with the ECB and next week we have the US FOMC and the mid term elections. While I always like to give you my macro directional "lean", right now I am not sure where we go next. I can see both sides, the bull and bear arguments, and both seem to me to have equal weight. On the one hand we have what seems to be a sentiment shift on the US rate hike trajectory. Recent comments and data prints indicating that tightening may be starting to have the desired effect on slowing the demand side of the US economy and hence assisting in reducing inflationary pressure, have pushed participants to think that the Fed will reduce the hike increments post November. On the other, we are still in a bear market and this is a bear market rally. Moreover we are in earnings season. Google and Microsoft reported last night and both posted a sharp fall post the data. Meta report today and Apple and Amazon tomorrow. When this is the case it is always better as traders to not be swayed by any particular underlying bias and to go with what we see in front of us. We have clear levels and zones to work with and they are the only thing we need along with intraday momentum. Trade the levels and usual patterns and set ups. Todays Trade Plan Yesterdays push back up from the days lows to over 13000 left us with a clean (no structural pauses or pullbacks) H1 candle between 12825 and 12970. I suspect we will trade back into this area to test whether we continue up or not. If so pull a fib from the overnight highs to yesterdays lows and watch the halfback and 61.8% levels. I´ve also placed a level on 12900 around yesterdays overnight range lows which could also act as a target for shorts and a bounce area for longs.
If 13000 holds (and slightly lower down to 12970 ) look for long opps up to our R1 for today at 13110.
Any move to R1 and I will take a 1st test short in the RTH session.
Other than that I will watch, wait for levels and set ups and act accordingly. One thing to bear in mind is that given yesterdays 300 pt V shaped intraday reversal and the ECB tomorrow, volatility is running at a high level right now. Risk management needs to be top of mind as it is easy to get tipped out of a trade with too tight stops or looking for absolute precision. Levels S1 - 12970 - 12985 S2 - 12805 - 12825 S3 - 12745 - 12760 R1 - 13090 - 13113 R2 - 13175 - 13200 R3 - 13360 - 13380 The US apologies - have to leave my desk for a couple of hours so no S&P chart or comment / plan today RTH Post Session Review
Set ups from today as per chart. All regular set ups. While no two days are ever the same - everyday is usually pretty much the same as all the others. You know the set ups - levels (1st test fades, breaks and false breaks); scalps from ref levels ( pmh, pml, open level, gap closes etc) and evolving pa scalps (double tops, shelf and roofs, mini inv H&S etc ). Just got to take them. I am not trying to be facetious, I know when live trading its not easy as nothing does look quite the same until after the event. However, try to think of the outcome and the resulting shape of the chart from the set ups rather than what might not happen and you´ll start to be more confident in taking them. We must have seen hundreds of these set ups everyday and I can guarantee we will see hundreds more. Dax40. Thurs 27 10 2022. Pre RTH Kick Off Notes
Overnight Range Narrow 65 point range as I write after tagging HTF R in the afterhours session. Data ECB rate announcement 13:15 UK with press conference at 13:45. We also have US data at 13:30 of note is Advanced GDP at 13:30. Overview Yesterday we continued to push higher in the US session and Dax and the S&P both put in their 4th consecutive green day - a notable event. Meta reported after hours and dropped around 25% (!) after disappointing numbers. We have Apple and Amazon after hours today. Should they too report below par numbers it would be a stretch for indices to shrug off what looks like a very disappointing tech sector earnings quarter. The key for today is the ECB rate announcement and presser. Stocks are still driving higher on the back of a perceived shift in Fed plans for the future rate path. The BoC yesterday came in with a 50bps rate rise when the expectation was for 75bps. Stocks immediately interpreted this as the first of the CB´s to start to dial back on the basis that this will be followed by the FED post next weeks rise. (Should the Fed only raise by 50bps next week instead of the expected 75bps I can only imagine how far stocks will go :). Whatever the outcome, it does appear that we have changed sentiment somewhat from profoundly bearish due to inflation to less so as it appears hikes are doing the trick. Markets are always forward thinking and a less steep cost of borrowing cycle leading to maybe a cut going forward at some point is having a positive effect at the moment on stock prices. Dialling back to today - we have had only one period this year where Dax has printed 5 green days in a row and S&P none. Today will be a test for buyers in that regard. On both Dax and S&P we are up at good resistance levels. Dax is balancing at its descending TL from Jan of this year and S&P at its 50DMA. Todays Trade Plan Given the "extended" run we have had and that we have the ECB on the wires later it would be usual for Dax to balance at a decent S or R level prior to the data and press conf. It is also normal that we get a great deal of short term volatility on the announcement and during the presser. I am nearly always flat into the release and during the presser and I cant see any reason why today will be any different. In which case its a question of taking the regular set ups as per - you know by now what to look for - see yesterdays or any previous post session review above as a good example of regular set ups - before the data and sit tight until after the event. The short squeeze is still in charge but we are a good R level here in Dax so we cold get a pullback today. However, we go with what we see so although we might logically expect a bit of cooling off up here, if the US continues its rise as it has since last Friday, Dax will find it hard not to follow suit (dependent on what we get from the ECB). The target for this run in Dax is up at 13450 ish and then 13570 so we have room left for more. One point to always have in mind is that prices always (nearly) go much further than you expect! I have no automatic orders set for today and I will trade what prints. Top Tip: If you are finding it hard to take regular set ups, try drawing a circle on your entry like I do in my review charts at the time you take the trade - it could help you sit tight and let it play out or not. The very act of putting something such as a circle or whatever you use to mark up your charts - I use an ellipse as you know - focusses your mind on an expected outcome. It is a mental sleight of hand but I think it might help ! - Try it and let me know. Levels S1 - 13090 - 13110 S2 - 12970 - 12985 S3 - 12805 - 12825 R1 - 13360 - 13380 R2 - 13453 - 13474 R3 - 13523 - 13551 The US
Spx tagged its 50DMA yesterday before pulling back overnight. The ultimate target for this squeeze remains at 3900 - 3910. Given we have had an almost unprecedented 4 green days in succession we could get a cooling off day today. If not 3865 is target 1 then yesterdays high at 3880 on the way to 3900. If it backs off 3800 - 3810 is the 1sts zone of support - if breaks, 3780. 3760 is core support for today which needs to hold for any further push higher. RTH Post Session Review
Limited set ups day. Only really two usual ones - a pullback on data (ECB) and a double top from yesterdays high. Other than that it was a slow day while Dax decides whether it will break the long term daily trend line or start a pullback lower. Probably waiting for a lead from S&P which has been "cooling off" all day so far as mentioed above. Apple and Amazon report after the close so I guess we will get a better feel tomorrow. Not all days are as good as others :) Dax40. Friday 28 10 2022. Pre RTH Kick Off Notes
Overnight Range Gap down on futs - now filled. S&P pulled back on the close last night on further Tech earnings. Looks like we will get a gap down open on Dax as I write. Data German prelim GDP at 9:00 Uk time and the headline for today - US Core PCE at 13:30. We also have UoM at 15:00. Overview Apple and Amazon were the latest of the "Mangman + T" earnings out last night. We have now had MSFT, Meta, Alphabet and the previous 2 - none posted anything to shout home about. Whether US indices can continue to rally when at good R after an extended run (comparatively for this year) and with poor to average earnings/forecasts is the question for today in the US and if they can´t its doubtful Dax will especially as it also is at good R re the yearly TL. We have put in 5 daily green candles on Dax index versus 4 on the S&P index. My lean today is for ranging pa and possible further pullback on Dax. This afternoons US Core PCE print will be watched closely as it is a key indicator in the Feds fight against inflation and Powell has mentioned in the past its importance. In which case we could get a two sided day with Dax possibly ranging in the European session and then dependent (even more than usual) on the US later in the day. The Fed "pivot" is still clearly in traders and investors minds in that post Nov the thought is the Fed will dial back on further 75bps hikes. We will get a better understanding of this at next weeks Fomc. Yesterdays ECB 75bps hike, while restrictive, was slightly discounted by participants as the ECB seemed to be less hawkish on the future path. This pushed the Euro down and helped to keep the Dax buoyant. "Sources" were out after the press conference trying to suggest this is not necessarily the case. As always Central Bankers are fighting a two edged battle - one with inflation, the other with possible demand collapse and recession. They get a lot of stick by many traders but I don't envy their job. Its a tough gig especially in the Euro Zone with fragmentation and widely different issues to deal with across the many member states. Todays Trade Plan
Given the above I am less inclined to buy dips today. I will look to sell any first instance RTH moves up into pcc / R1 and higher to yesterdays high print at 13260. If this "works" and starts to drop I will look to hold into the US data and the US open as we could get a stronger pullback if the PCE doesn't provide any indication that the Feds policy is working.
1st good S zone below current price on Dax is 13060 - 13080 and we could get a 1st test bounce although I am not placing an automatic buy limit- I will gauge what happens and act on the pa. A trip below, down to S2 would be a better 1st test buy.
If the above doesn't work out and we get strong buy side pa and or a drift upwards I will look to buy a break out over R1 on a pullback from above. As I say this is less likely based on my view of today but we must be ready for all events.
As always I will be looking to take scalp entries at the regular ref levels and patterns.
Levels S1 - 13060 - 13080 S2 - 12985 - 13005 S3 - 12805 - 12825 R1 - 13215 - 13235 R2 - 13360 - 13380 R3 - 13450 - 13475 The US My apologies - again - As you know I have just moved house - and there is just so much stuff to sort out!! RTH Post Session Review
So how did we perform versus our plan? I wrote above:
Given the above I am less inclined to buy dips today. I will look to sell any first instance RTH moves up into pcc / R1 and higher to yesterdays high print at 13260. If this "works" and starts to drop I will look to hold into the US data and the US open as we could get a stronger pullback if the PCE doesn't provide any indication that the Feds policy is working. This didnt go to plan as price never got up to R1 until we had the PCE data so any idea on my part that we might test earlier in the session was invalidated.
1st good S zone below current price on Dax is 13060 - 13080 and we could get a 1st test bounce although I am not placing an automatic buy limit - I will gauge what happens and act on the pa. A trip below, down to S2 would be a better 1st test buy. We did test S1 right at the open and later but as mentioned I was watching rather than buying a 1st test. Price was effectively held at this S and we got a decent buy signal if you hadn't already bought, at 10am with a M5 doji. You´ll recall from my book M5 doji´s are something I always look for at good levels and this was as clear as they come with a stop at the bottom of the zone. Buying on the close here at 13080 was a good scalp entry. Scaling out (or closing as a scalp) at the previous HoD at 13125 / 30 was perhaps the safest option given we had the much awaited PCE data upcoming. If anyone held a portion into the data and subsequently let it run then they would have bagged a great runner.
If the above doesn't work out and we get strong buy side pa and or a drift upwards I will look to buy a break out over R1 on a pullback from above. As I say this is less likely based on my view of today but we must be ready for all events. We did get a break over R1 and pcc but rather than a clear pullback price drifted upwards following the US. You could have taken the dip back into the zone once it came back at around 16:00 UK. If not it was more a case of either sitting on hands not wanting to chase price or taking a speculative long in line with pa.
As always I will be looking to take scalp entries at the regular ref levels and patterns. Nothing really set up for such scalps today.
In general it actually turned out to be a buy the dip day as equities are still taking their lead from the possible "Fed pivot" of dialing back on hikes post next weeks expected 75bps rates increase. A good reason to always have alternate scenarios because we never know what will happen. We can look at pa coming into any day, gauge the context and have any idea but we need to always make differing scenarios regardless! more of the same next week :). On The Level: Daily Trade Plans & Set Ups