Big day tomorrow with the FOMC announcement. Hopefully everyone is out of their positions unless they feel very strong about them. FOMC days bring a lot of volatility that is rather difficult to trade, and really could go either way.

On the YM price budged against resistance yesterday and formed a spinning top, that was confirmed today with a bearish candle. There is a wedge forming as well, and it looks like tomorrow we will get the breakout. The question really is to what side will this breakout occur. On both the YM and ES we have a very similar chart pattern, and something that really sticks out is the volume. Volume has been stronger on down trends compared to the small uptrends, which tells me there is more downward pressure in the market. But nonetheless, I still want confirmation before making any bold moves.

CL, one of my favorite trades right now finally got the pullback I have been waiting for. I really could not have asked for a better pullback, right into support. Once I get a bullish candle I will look to enter into this position and ride oil up to $100.

Let’s take a look at Gold. This chat shows some overnight price action hence the hammer on the 8 EMA. I usually delete this since it can add a little bit of confusion to my analysis but I left this one on here for a reason. If we got a close tomorrow with this candle I would look to go long. The reason is very simple, the 8 EMA is our support line and a hammer on support is a very bullish signal. I don’t want to go out hunting for hammers, but I think this could be a good play if we get a close like this tomorrow.

Now onto the stocks, I closed out the MER position like I said I would, then I got a sudden change of heart and got out of everything. GS closed with an inverted hammer on support, and considering the FOMC announcement tomorrow I didn’t want to take on that risk. If you take a look at the squeeze indicator (at the bottom) the trade could really go either way.

Other than that, I will just hurry up and wait for tomorrows announcement and that should give us some direction. Good luck.

Traders have to allow themselves to be very flexible with their views on various markets. Yesterday I was bullish going into this week; I liked the chart patterns of GS, MER, and LEH. That proved to be profitable as they all jumped at least 2%, LEH jumped 4%. Even when you make big gains and you let the market pay you a handsome sum, you still have to stand guard and look at every aspect – especially during a week like this when the Federal Reserve makes their announcement regarding interest rates.

I’m going to start with the ES and YM, both confirmed my bullish stance and technically there isn’t a reason to exit this position. I am cautious though, both the ES and YM nudged against resistance and both have declining volume. It would be too easy to say everyone is waiting for the Fed to make its announcement, which brings me to my next point…

Take a look at the Euro and USD, they are both showing patterns that would suggest that the potential Fed rate cut is already priced in, or that the Fed may not cut at all. The USD developed an inverted hammer last week, normally I would say no big deal we could use a pullback anyways – but this isn’t a normal week. The Euro shows us a hanging man after a long uptrend, the hammer is also accompanied by strong volume which shows bearish signals. Why would the Euro show weakness and the USD show potential strength if the Fed were to cut rates more than expected?  Plus, the YM and the ES lack of volume and resistance has me cautious so tomorrow I will see what the market tells me and adjust my trades accordingly.

CL continues to show strength, I expect a pullback soon since price looks a little extended from the 8 EMA. I won’t lie, I love this rally. People really shouldn’t complain about gas prices, is it really that difficult to figure out if you bought crude every dollar CL gains that would pay for more than two full tanks of gas? Come on people, let CL pay for itself!

Now to the stocks, what a great day for the financial sector! MER gave us a dragonfly doji last week and that was followed through by a nice 2% gain today and a close above the 8 EMA.LEH formed a bullish piercing pattern and followed through with a 4% gain today. GS gave the strongest bullish signal last week and followed through with a 3% gain today and new 52 week highs.

Now here is where we tie everything together, it’s quite simple. Since I am overly cautious with the USD and index markets I don’t want to have my head out on the chopping block going into the FOMC announcement. Not managing these trades would be like standing on a train track, hearing the train coming, and not turning around to see if you’re about to get splattered across the tracks. So to prevent that from happening, this is what I will do.

• Rank the three stocks from my least favorite to my favorite, and sell the least favorite.
o GS – Favorite because of the bullish engulfing pattern and 52 week highs. I also like the cup with handle.
o LEH – The bullish piercing pattern is simply a stronger pattern than a doji after a downtrend.
o MER – The dragonfly doji works, but it’s not as strong as a doji after an uptrend.
• Keep GS the way it is, unless I have a reason to adjust my position tomorrow I won’t touch it.
• Add insurance to LEH, I would buy a protective put – so a December $55 put. This protects my position if the stock falls, and I’d only be risking a limited amount if the price jumps.
• Exit my MER position completely.

That’s pretty much it for tonight, good luck trading tomorrow.

I write this blog looking at the new beautiful BMW E92 M3  (you can click on that link for a picture of the car) due out next spring to the US, and listening to Kanye West’s – Good Life. Basically it’s making me feel good about life right now I know that all this hard work will eventually pay off.

I am pretty bullish going into this week. In this blog I will include both futures and stocks, since I believe that a good trader is capable of using more than one market to his advantage – one being equities as well as futures. Too be quite honest, the YM and the ES won’t always allow for good setups, so it’s crucial to look at more than one market.

Last week on the ES there were two hammers with strong volume that stuck out, on Friday the confirmation came. Fridays candle was very bullish because the close was near the high, which tells me the bulls were in control up to the closing bell. The ES also closed above the 8 and 21 EMA which is also bullish for me. There is overhead resistance around 1550 which has me a little concerned, but I would not look for a short setup, I would be looking for any long setup that appears and take advantage.

The weekly chart is also bullish, if you remember from last week the weekly chart can help guide the daily chart. Two weeks ago there was a spinning top after a strong uptrend, followed by a steep decline in the markets. This last week we finished with a piercing pattern which is bullish, so I would be looking for setups to the long side.

The YM is very similar to the ES with the piercing pattern, so I won’t be talking about this setup a whole lot since it’s basically the same thing. Go long.

The NQ (nasdaq) has me excited at these levels – the daily closed above the trading range on a bullish candle. What is the down side? There is not a lot of volume, but that doesn’t concern me when you look at the weekly level. The weekly candle shows a very bullish engulfing pattern. Yes, it barely wraps around the previous candle but it still shows the bulls are in control right now, and with the recent close above the trading range I would be looking for any signal to go long.

I missed my entry to go long on Silver (SI) above $14, but it happens. There was a strong close above $14 on a very bullish candle and my next target is roughly $14.90 as that is the next resistance level.

Gold hit my target at the 127% Fib line but I don’t see any reason to sell with the latest candle. For an entry, I would definitely wait for some kind of a pullback.

CL – wow what a rally! On the weekly chart there is a cup with handle that took around a year to form, and is still in the process of breaking out to its potential target of $100. There isn’t anything on the charts that would send a bearish signal. The daily chart broke out above its highs with a strong bullish candle and strong volume. Overall, crude is a very good market to be in right now. If you can’t get the CL contracts, try an ETF and pick up a few options.

Now onto the stocks, I first want to take a look at the financial markets. GS has a bullish confirmation candle and a close above the recent resistance. With the FED week coming up, I find that to be extremely bullish. MER has a dragonfly doji after a downtrend and extremely high volume, again very bullish for me. Last but not least, LEH has a piercing pattern after a bearish week. But like GS and MER, strong volume and a close above resistance.

If you guys have any questions, feel free to send me an e-mail. Thanks for checking it out.

Sorry I haven’t been posting, I’ve been rather busy lately. I’m not going to focus on the markets in this post, I wanted to focus on something I have noticed about myself, and others. Let’s start with a blog I came across today – this guy is 32 years old and wants to become a millionaire before he is 36. He is willing to risk almost everything in order to get there, and for what? To make a million bucks!

That’s why so many people don’t make it in this industry. They come up to the plate dreaming of the home run, instead of looking for the base hit. After going through his blog and taking a look at his insanely high-risk trades I found out he lost at least 15% of his account value on one trade. I quickly asked him if he ever set up any targets or stop losses when he enters his trade. His response? “No, I never set up targets or stops. People say I should, I’ve lost 15% of my account to my RIMM trade but I stuck to my guns ” As if that’s suppose to be humorous, does this guy understand that I could use his blog and trade the exact opposite and make my year?

He is a prime example of the newbie trader who comes in, thinks he’s king of the hill then gets blown up. Afterwards, they get serious about trading and jump back in, but succeed. Then there are the vast majority, who shy away from the markets for the rest of their lives and believe it all to be luck. I hope this guy succeeds, I would hate to see someone lose all that money due to his own ignorance. But unfortunately with his attitude and lack of capital management, the odds are stacked incredibly high against him. You also have to ask yourself, with all these newbies coming in looking for a quick buck how much longer before the bear market comes along and wipes them out?

Now onto my dilemma. I consider myself very knowledgeable about the markets, I understand how they work and I feel that I understand the psychology behind trading very well. But when it comes to live trading, I freeze. I don’t freeze to pull the trigger – I can pull the trigger just fine. I can read the charts in real time, so what happens? Well simply put, I’m a perfectionist. If a trade doesn’t go the way it should, I beat myself up because it didn’t turn out exactly how I wanted. This is a very negative thing that I do to myself, and I believe it’s the biggest thing holding me back. If I were to go trade in a room full of traders, I honestly think I would come out at the very top. Maybe not number one, but very close. Why? Because I’m very competitive, and my competitive edge would kick in, and the perfectionist side of me would swing over to winning – not each individual setup. So why is it that when I’m at home trading, I can’t get this competitive edge? That’s a question I have to ponder and attempt to tackle, I think over coming this road block will set me on a solid path to success.. or at least until I find the next road block

I love trading, you find out more about yourself trading than you ever have in your entire life. Screw therapy, just start trading!

Oh and about the markets.

The YM has a hammer, or hanging man however you want to look at it. It could be a hanging man since the last two days have been bullish. It could be a hammer since the overall trend is down. The point you want to look at though is the close is at the 100 SMA – so this is a trade setting up. But I won’t be taking this trade, the risk/reward is too big for my account to handle so I will have to pass and wait for the next setup.

The ES has a dragonfly doji – which makes no sense because those are suppose to come as hammers and the market has moved up. But again, the risk/reward ratio is too big for my account to handle. I am not willing to lose $1500 per contract for less than $1500 if it works out. If this setup fits in your plan and capital management plan, then take it – if it doesn’t, be patient.

I like CL here, I think we will test recent highs and breakout. I want a bullish candle at the resistance with confirmation, then I will be buying. Since we are at a fresh high there is the possibility of going into a trading range before breaking out. I don’t want to get stuck in that range, so I will wait for the breakout and confirmation.

Hope it helps, good trading.

Friday was a pretty nasty day for the markets. A 400pt drop isn’t really a huge deal anymore; even those with short-term memory can recall a few 300 pt drops in recent months. Friday was a good day to show the importance of stops, and more important how emotionally disciplined you need to be if you want to trade.

Let’s take a look at the YM, if we plug in the simple Fibonacci retracement lines it’s pretty clear support was found right on the 61.80%. Rewind a month and you’ll notice this same area was a resistance line, coincidence that a math formula picked the same place for support that was once resistance? You tell me.

The next big leg of support of the YM is the 200 SMA which would be difficult to penetrate. If we hit that level and get a bullish candle I would most likely go long. The TRIN finished at 3.15 Friday which can signal a lot of emotion in the market, so there could be a quick rally come Monday morning.

Now for the weekly chart, we had a pretty clear spinning top and then the obvious confirmation. Right now I would be sitting aside waiting for a signal to enter either short or long into this market. I won’t go short yet because I would feel like I’m chasing the market, and that’s something I don’t want to do.

The ES shows much of the same, support in the same area. Again, I might look for a small early morning rally due to the TRIN but I won’t enter anything until I get the right signal. Sticking to the trading plan is extremely crucial in a situation like this.

Let’s take a look at gold. Gold had a very solid week yet again, and is well on its way to a target of $785. Price is getting a little far ahead of the 8 EMA so I wouldn’t be surprised to see a pullback soon, one that I would obviously be buying. With the current sub-prime mess and the carry trade, gold is a pretty solid trade.

Last but not least, crude light (CL). CL found support on the 8 EMA which could turn out to be a good buying opportunity. I’d like to see how tomorrow turns out.

Well yesterday I took a long position on the ES from the spinning bottom and support on the 21 EMA. I was long, and I was wrong. Unfortunately in trading that happens, you have to view trading as a business in order for it to pay like a business. As most of you know, sometimes when you make a business decision you are wrong. Well in trading, I made a business decision and I was wrong. There are a few things that I could do after cutting my losses, I could evaluate why I was wrong and make sure I don’t do it again and that’s always something good to do. I could also get aggressive and try to make my money back, unfortunately that’s what most people do and it’s called emotion. Emotion is the single word that destroys most portfolios, and you can see it in the charts. So instead of locking down and chasing the market, let’s take a look at where it’s at now and if any setups are occurring. Losses happen; you deal with it and move on. Think back to the Boston Red Sox vs. New York Yankees a few years ago – I know it’s painful for some. In the ALCS the Yankees were up 3 games to 0, Boston won 4 straight and went onto the World Series. How did they get there? They didn’t look at each game as a do or die situation; they played it one game at a time and forgot about the last one. You have to do the same in trading, you expect to lose since it is part of the job, but don’t focus on it and keep your head clear for the next trade.

With that let’s take a look at the ES and where it’s at now. You can see the last 3 days price action has been constrained between the 8 and 21 EMA which tells me the bulls and bears are fighting for territory. Volume was big on the spinning bottom and somewhat light today – again that tells me there is a lot of indecision right now. I’m sure there are hundreds of setups to trade this market, but none of them are mine and none of them fit my personality. So what do I do? I will hurry up and wait for a setup, most likely a breakout to the short or long side. If we close below the 21 EMA we have some wiggle room before the next leg of support. If we breakout, we have immediate overhead resistance. This could prove to be a solid trading range, but the best setup would be a breakout to the long side above the resistance and I would feel very comfortable taking that.

Let’s move on to the YM, this is where looking at various markets can become crucial. On the YM we have an open and a close below the 21 EMA which is bearish. But the overall trend is still going up, so we could grind along that trend line until a breakout to the short side occurs. The other possibility is we trade back in forth between 14,200 and that lower trend line and are forced into a breakout – with the constant barrage of mixed economic news that wouldn’t be surprising. Hopefully when the breakout does occur, we will be ahead of the move by reading the various candlestick patterns.

The NQ has been pretty strong lately, but it’s still trading in a consolidation range. Looking at this chart today the NQ gapped up and closed higher than yesterday, and it almost looks like an evening star could form. This basically means that the market is in a position to go down, or trade sideways for a while longer. Even if we get confirmation tomorrow, I won’t take any trades just yet – I’d rather sit tight for a breakout.

Last night I said I expected a pullback in CL (Crude Light). I still expect to see this pullback, but it obviously didn’t happen today. We obviously have found new support, and it looks like a lot of people unloaded some of their positions in yesterday’s doji. You also have to look at the psychological aspect of CL reaching the $90 barrier, unlike AAPL no one gets excited when new highs are reached – which makes it more difficult for CL to keep going up unaffected. I still believe $100 oil is very possible by summertime of next year, but not without some pullbacks. The next target for CL is $96.57 which is a huge gain from its current position. I love the bullish run on CL and I will wait for a pullback before entering a bid to go long.

The USD (US Dollar) continues to drift lower and become more of an embarrassment for the US Economy. But who cares, we are here to make money and that’s where gold comes into play. Gold is moving very well along the 8 EMA to its next target of $785 and then $800. I believe new all time highs for gold are very possible; thanks to the unraveling of the gold carry trade. Look it up on Google, it’s very interesting. I would love to post details about it, but I simply don’t have the time right now but in short, the price of gold goes up really fast

If the USD is going to keep falling, why not make some money off of it? The USD was in a tight range for a few weeks and just falls to its last bit of support, which I fully expect to break down and continue lower. Once we break through these lows my target will be $76.38 (again, I got that from the Fibonacci line). Tomorrow night I will post a weekly and monthly chart of the USD – the monthly is quite amazing to see how strong the dollar became, then how fast it fell apart.

Well while the USD is falling you can make money several ways if you feel unpatriotic about shorting the USD. You can buy some Canadian currency, gold, or even better the Euro. The Euro chart looks basically the same as the USD chart, except it’s going up. We have a very strong bullish candle running into resistance, and I think it has the momentum to break through and carry to new highs.

That’s it for tonight; tomorrow should bring some important information and add another candle to the weekly charts. If you have any questions or comments just send me an e-mail, have a great Friday and good trading.

Alright with the intro out of the way, let’s get to some trading. Let’s first look at the ES – e-mini S&P 500 (the easiest way to explain it is think of the S&P 500 as a stock on crack, thats the ES) Each tick in the ES is .25 points, and is equivalent to $12.50. The first few days I post charts I will clarify as much as possible since I know a lot of you who read this may be completely new to seeing these charts. To those of you who know all of this, I apologize it’s just temporary.

Currently we have what I call a spinning bottom (there are a ton of names for these candles, the names are irrelevant want the candle means is what is important). As you can see the ES dropped the previous two days down to the blue line which is the 21EMA (exponential moving average). The candle is green which means the market finished higher for the day, the simple way to read this is the body (the colored part) is green so we opened at the bottom of the green body. Sometime during the day the market sold off pretty hard and pierced through the 21 EMA, then buying pressure came in and forced the market considerbly higher up to the red line (8EMA) then the rally fizzled off for a small gain for the day. So you might say who cares? Obviously theres still a lot of selling pressure because the market couldn’t sustain it’s rally and it sold off pretty hard.

Well, this where the beauty of market pyschology comes into play. Since we have a long wick that pushes up to the 8EMA it shows that the bulls started to gain control and that buying pressure is now stronger than before. Simple supply and demand, the sellers are now finding more buyers than before – people are willing to buy at this price.

You will see where I put two green solid lines, that shows previous resistance now being support – hence why people are willing to buy at this level.

Now lets look at the weekly chart. I personally love the weekly chart because it cancels out a lot of the “noise” we get on the daily charts. On the weekly you’ll see where I outlined a spinning top candle against the 100% Fibonacci line. This means that at the resistance (previous high) there was mixed market sentiment, and a sell signal was triggered. That worked and you obviously see we are down for the week. We hit support at the 8EMA on the weekly chart, which was also pretty close to old resistance.

So using candlestick analysis I would consider going long for tomorrow based off the daily chart.

Now for the ever so popular YM – aka e-mini Dow. Each tick is 1pt, and that is $5 per tick. The YM is mostly a haven for newbie traders to day trade since there is less capital at risk. The “big boys” trade the ES. I prefer the ES because my setups tend to work better with that market.

Alright on the YM daily chart we have another spinning bottom, this time the market closed lower but that is still okay. What I particularly like about this setup is the close right on the 21 EMA. We have two even closes in a day showing support, this could also be called a tweezer bottom. The overall trend is bullish and I don’t like to fight the trend, another reason why I like the long side of this setup. I won’t post a weekly chart right now, since it looks pretty similar to the ES.

The NQ is next aka e-mini Nasdaq. Each tick is .25, and each tick is worth $5 (I believe). I really don’t trade the NQ very often, but I do like to follow it since sometimes it can be a “leading” indicator.

Overall there is a bullish trend that I wouldn’t want to fight. What is concerning though is the strong resistance over the last few days. I would wait to make any trades based off a close above or below one of those trend lines. A close like that would show either the bulls or bears are in charge.

Crude oil is the big discussion these days, after hitting record highs it truly affects everyones pocket book. Well, right now I think crude is going down and heres why. Over the last few weeks I have been announcing a target based off of Fibonacci numbers of $86.54 – well we just hit that number and broke through that line. Now we have a pretty clear doji at the top of that trend, so I would put a tight stop on my long position and re-enter after a quick pullback. A lot of people have the same target as I did, so they will unload part of their position and take profit off the table hence why I believe there will be a pullback. I will post a weekly chart at the end of the week.

That’s it for today. Tomorrow I will post more markets and we will see how how the YM and ES turn out. Again if you have any questions or comments, just send me an e-mail. Have a great day and good trading.

Technical Analysis of my Futures Trading

This blog will primarily consist of technical analysis of various commodities such as; e-mini futures, gold, crude oil, and silver. From time to time I will add a chart of a popular stock, a popular stock would be Apple (AAPL), Crox (CROX), or a popular oil company receiving a lot of attention.

There are many indicators and art forms to technical analysis and since everyone has a different personality, they see things different in the marketplace. I prefer to use candlestick analysis, basically I look at the bar of the trading day/week/month and determine the current market psychology. Market psychology is very crucial for a few very simple reasons – price is determined by supply and demand and nothing else. Different candlesticks show different emotions in the market, for example a doji in a bullish trend would tell me that market sentiment is shifting and bears are starting to take control. That alone won’t always make me go short, but I would strongly consider exiting my long position.

Now for a brief history about myself and my trading career.  I started watching the stock market when I was 14, I quickly learned about fundamentals and stared picking various stocks out of the business section in the newspaper. I really didn’t know what I was doing, but I liked it and that’s all that mattered. Soon after I realized the internet was more about Yahoo! and e-mail, I found a few websites where I could hold a virtual portfolio. This was great because I could buy and sell my stocks and see how much money I could make if it was real money. I pushed myself to learn even more, and dragged my friends into the mess by setting up competitions and making it a point to win.

When I was 17 I entered into the e-commerce business plan event for DECA. I wrote a business plan centered around a stock market education website- still though I was ignorant and had no clue that I didn’t really know what I was doing. A quick glimpse of foreshadowing occured when I met with a account executive in Denver, he told me that the difference between real money and virtual trading is quite different. Since I didn’t believe him and I was confused I went to a close mentor, and he told me the same thing. Since I was young and thought I knew all, I blew them both off and continued on my quest to master the markets.

Early 2007 (I was 19) I got my first shot at trading with real money. I quickly figured out I really had no idea what I was doing – the markets weren’t the same, my indicators weren’t working, I didn’t see things the same way. You know what it really was? It’s a simple one word explanation: emotion.  I had no idea this was affecting me until my mother pointed it out to me several times. I decided I just didn’t know enough, I quickly pushed myself to 13 hour days studying various technical analysis charts and ultimately went on a search for the holy grail. I never found it, but I found a book that changed the way I looked at the markets. It was called Mastering the Trade by John Carter, the attitude of the book and the new look at market psychology changed the way I looked at markets. I realized I had to find a style that fit my personality, and that I shouldn’t make thing’s so complex. I found that futures my personality very well because they were so technically based, and the pyschology behind the price movement posed as an intellectual challenged I craved for.

Within a month I went from a chart with at least 4 indicators, to one that used price alone. Everything became simple, and thats when I found candlestick trading. I always used candlestick charts because they were easier on my eyes, but then I realized the pyschological meaning behind each candle. I could see the fight between the bulls and the bears, and I loved it.

Here I am, 8 months from when I bought my first stock. Things have changed extremely fast, and I’m lucky to be where I am.  I found that day-trading doesn’t work with my personality and I’m sure it has a lot to do with how my brain sees things differently in real-time compared to after the fact. But since at this moment I haven’t figured out how to conquer that problem, I will focus on swing trading. In this blog I will post various commodity markets, primarily the ones I listed at the beginning. If they come across as complex, don’t worry I try to explain it as easily as possible. Feel free to e-mail me and ask me questions or leave me comments.

I am not a licensed professional and I am not offering advice. I am simply sharing with everyone my current viewpoint on these various markets.