Morning Update: 12/27/2011

Hello Traders:

12:50 AM…

Good morning! As always, I try to preface each update with our intent as a trading site and an educational resource; Screen Trading Futures main focus and/or goal is to make you money! Discussing macro economic issues are important and can be lots of fun at times. However, because most of us are short term traders, with a finite amount of capital we feel it is futile to discuss such issues in any depth. Therefore on this site, any engagement on economic issues ( i.e. GDP, unemployment, politics, policy change,  etc.) will be limited in nature. We focus on which markets are trading in ranges (balance areas) and this affords us an opportunity to predefine our risk and do what we love to do: make a trade!

As traders return from the holiday volume should increase and the market’s direction should become clear. The ES on Friday came within 4 handles of my intraday target of 1264 (read morning update 12/23/2011), and after which, backed off of resistance and bounced off of support while consolidating for the remainder of the session. YM, NQ, TF all hit highs and exhibited the same kind of action although the NQ did close on its high. Trading the week preceding a holiday can be very tricky, as the follow through on most trades just isn’t going to be there.  However, if you were disciplined enough to catch this move at support  a few weeks ago (as we did), this proved to be a potent spot to lighten up and take some profits.

This week typically has three scenarios that can play out. First.. we grind even higher squeezing shorts and establishing new highs 1271, 1284.  Second.. we may consolidate in a balance area for the rest of week and see a move towards the beginning of the new year. Finally… we may reverse hard, as most securities are at  balance extremes with a downside ES target of 1218.25, 1195 respectively. A break of 1195 on volume 1143 is likely. A break of 1284 on volume 1330 likely.

This week’s watch list has many candidates in balance areas  and should prove to be good swing trades. Insofar as day trades, there are several candidates today that I feel offer the best risk to reward.  When scanning hourly and range charts tonight there is one thing very clear: a move in one direction is immanent.  Most commodities are set up at one balance extreme or the other and all we need is volume or a lack there of.

Please check the watch list for your support and resistance levels as well as market conditions. Follow me on twitter for trade alerts, trade lessons, and market updates. Thanks!

Trade Well,

Olof Thomas

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