Today proved to be another volatile day. Ben Bernanke came out and announced that deeper rate cuts will most likely be needed as the economy is slowing(story). This initially drove markets higher only to sell off, then rally again. Tonight Merrill Lynch announced they will take down $15 billion mortgage write down which is double the initial estimate (story). Overall this is bad news, and I think this is just the beginning.

Today provided some good trading setups if you took your profits fast enough. You have to adapt everyday and take the opportunities the market gives you. That’s the lesson I’m learning every day, that not one day is the same but the opportunities are still there. You have to keep a clear head and move swiftly from one trade to the next.

Let’s start with the YM. Between July and October the YM fell from an all time high around 14,200 all the way down to 12,800 – back up to 14,400 then down to where we finished today around 12,800. What does this mean? It means we have a double top formation and the support line has broken. Conventional wisdom would tell us that our next target would be around 11,600. I don’t necessarily think it will hit that target, but with the recent volatility I could see it happening over the next year. Remember it won’t be a straight decline to that level. Bear markets are tough to trade because you will get huge sell offs followed by huge rallies. Of course this double top could fail, but until that happens I will continue to use the 13,000 area as resistance.

Similar story for the Naz, the long wick on the spinning top tells me there’s a fight between the bulls and the bears. In order for me to have confidence to go long on the NQ I would want to see more demand with stronger conviction. That doesn’t mean I don’t think we will test 2,000 again, I think that’s entirely possible. But my target of 1850 still stands.

Today CL broke the $95 support level along with a trend line. My next target for CL is around $90. I think we will fall back to $90 and possibly even $85 before rallying past $100.

I hope everyone has a great Friday and good trading. If you have any questions feel free to send me an email or leave a comment. Thanks for reading.

Overall the market was choppy today; but there was still plenty of money to be made. Screen time is essential with trading. Today was the day that screen time paid off, along with the ability to control your emotions and not expect anything from the market. You had to take your trades and let them work, if they turned out to be a profit or loss was irrelevant, as long as you were following your plan and following sound money management rules.

I want to start off with the NQ as I believe it is the most interesting setup right now. Yesterday the critical 2,000 support level was broken; which is obviously very bearish. I pointed out my next target would be 1950. That target was hit today and turned out to be near the LOD (low of the day). After 1950 was hit price rallied and formed a nice hammer. Normally I would jump at the opportunity to take a hammer on support, but there are a few reasons why I will NOT be taking this trade. The first one is the risk reward. Remember the support at 2,000? Well, due to a change of polarity 2,000 is now resistance, so the close around 1979 means our long position would only have roughly 21pts to work with. The potential risk would be our stop below the bottom of the wick, which is under 1950. I am not willing to risk over 30pts to profit 20, which is not a good risk reward ratio for me. There are several ways to take this trade and none of them are right or wrong, but that is how I would take it according to my plan – which also means that’s why I won’t be taking this trade.

Next up is the YM, I don’t really know what this candle is called but it shows buyers were present around 12,600. Interestingly enough 12,600 is the low from the 400pt decline on February 27, 2007. I find it crazy to believe that we are already trading back at those levels, but we are and buyers were definitely present. Looking ahead tomorrow I see 12,800 as a potential level to short as that is now new resistance. I think we might touch that tomorrow and could see another bounce in the 12,500 – 12,600 range before going lower.

Last but not least, CL. There are two inverted hammers in a row on the $95 support line, along with a wedge forming. The wicks on the hammers tell me that price has tried to move higher twice but lacked any conviction so the breakouts failed. I will wait for some form of confirmation before making any trades.

Hope this helps, if you have any questions feel free to e-mail me.

I haven’t updated this blog in a while and I figured I would give it another shot. There will be a few slight changes but nothing major. First off I will only analyze the markets I actively trade, the YM (e-mini dow), ES (e-mini S&P 500), NQ (e-mini Nasdaq), and CL (Crude Light). I will occasionally talk about the USD since that has a lot of news surrounding it. But for the most part I will only focus on the YM, ES, NQ, and CL. If you have any questions or would like to contact me, my e-mail is james.lengyel@gmail.com

First I want to talk about the YM. On Friday we tested the mid August lows and closed somewhat near that low which is bearish, the small wick on the candle indicates there are buyers in the area. The MACD finally rolled over and that adds to my bearish argument. Although going short right on a support level isn’t attractive in the risk/reward category I would look to go short if we broke those lows and my swing target would 12,500.

The NQ has been setting up a box play for nearly two months now and finally broke out of the support. I wouldn’t be surprised to see a retracement back up to 2,000 then a selloff down to my target of 1,950.

The ES hit support made in November, but I don’t like this setup compared to the YM and NQ so I will stay away from this market for now.

Crude light has been generating a lot of news this last week since the first trade hit $100.00 a barrel. This would have been great news for the bulls had it not immediately sold off. CL finished the week with a spinning top against the $100 which is actually bearish. I don’t like the idea of shorting CL in this market but I definitely wouldn’t buy until a close above $100. The daily chart shows a possible evening star against $100, but it’s missing the gap up into the doji. Nonetheless it’s still a doji against resistance which indicates a tug-of-war between the bulls and bear; the doji was confirmed Friday with a selloff. I think we might see sideways trading for a few days or a small retracement then another push into $100.

Hope you all have a great weekend and good trading. Feel free to contact me with any questions.