Anyways, this isn’t another rant about blind investing or emotional biases.  Instead, I want to take a look at where the market could be heading for next week.  We’ve had significant sell-offs into very strong levels of support.  I think a lot of people are kind of questioning where the market’s going next, so let’s take a look…

Take a look at this 60 minute chart on the S&P 500 e-mini futures contract.  Heading into June, we’re stuck in between two important levels: 1,085 and 1,100.  The area around 1,085 was acting as a strong level of resistance for over a week before gapping up above it yesterday, which turned 1,085 into support.  Yesterday, we also attempted to close the gap down from 5/20 above 1,100.  Notice the red shaded area, which is longer term resistance from the beginning of the month.

Eventually, we’ll break out of this range.  When we do, I’m looking at two key areas.  If we break up above 1,100.  we could run to the next level of resistance around 1,120.  That level is also confirmed with a trendline of resistance coming down from the highs of the year.  If the downside momentum continues, then the next area is around 1,040 – 1,050, which is the low of the year.

There are a lot of people speculating about where this market is headed.  For my type of trading (day trading), it really doesn’t matter.  Unlike when the market was up around 1200, I can see an argument for both sides of the equation.  There has been significant selling from the highs, but we’ve had a strong bounce off of key support areas.  Instead of trying to guess, I’m going to enjoy profiting from other traders’ opinions and let them go gray from worrying about the long term direction of the market.

Have a great long weekend and I’ll see you guys next week!

Chris Dunn

So, after a single negative trading day last week, I’m back strong… This morning I had 4 trades, 3 wins, and 1 loss for a net of +6.25 points. I had an idea about what the market could do today based on some longer term charts.  You can check out my market forecast video on the Emini Academy Blog.  Just to reiterate, I don’t care what happens intra-day on the monthly, daily or 60 minute chart.  But it gives me a good high level overview that can create a nice objective bias.

As I mentioned in our live trading room this morning, you have to learn to think one or two steps ahead of the market.  Basically, look at trading like a chess game.  Here’s what that means to me…

When I’m looking to get in a trade, I want to see the trade hit my target before I even get in the market.  If I can’t see the potential for the trade to work out, then I just sit on my hands.  Doing this gives me really strong conviction in my trade, and the confidence to hold for the target.  And today it gave me the confidence to double or triple my size on 3 trades, two of which were winners.  

A few students asked me how to develop a strong trading psychology and the ability to “think two steps ahead of the market”.  And the simple answer is this: practice, repetition, and burning those damn images into your mind.  You have to be able to close your eyes at any given moment and “define” a winning trade in your own mind’s eye.  I think about this stuff so much that I dream about it… dead serious!  And in some dreams I can actually feel the emotions and physical sensations of what it’s like to be in a trade.

There are no short-cuts…  Only dedicated study to develop your craft.  Anyone who tells you otherwise probably doesn’t trade.  The good news is it doesn’t have to take years to develop.  I’ve seen some traders become consistently profitable in a matter of weeks.  Does that happen for everybody?  Nope.  But it’s possible… And the ones who do very well all go through the same process.

Just another random thought from your e-mini guy…

Chris Dunn

I can only guess as to why it happened… CNBC says there was a mistake made by a Citibank trader, who’s fat finger hit “B” for billion, instead of “M” for million, which assisted in a huge sell-off in Proctor & Gamble’s stock.  Also, there’s been a lot of talk about the financial crisis in Greece and other European countries.  I think all that mess, mixed with emotional selling and stops being hit, sent the market into a frenzy.  

Cramer was live on the air when the Proctor and Gamble sell-off hit.  Historically, I haven’t been a Cramer fan, but I gotta hand it to him.  He made a very timely call live on the air to buy PG at a $49.25 bid, and in less than 3o seconds it was back up to $60.  I’m sure a few quick traders made an easy six figure profit.  Here’s the live Cramer video.

Over the past couple of weeks, I’ve been talking about why we should see a some downside moves in the markets.  As I’ve mentioned on the Emini Academy Blog recap videos, we’ve been in an extremely over-exuberant bullish run since early February of this year.  We’ve seen both retail and institutional investors buying the hell out of the market, which we knew could not be sustained forever.  And as we approached the 61.8% retracement of the bear run from 2008 and 2009, we put in a nice head and shoulders reversal pattern.  We also saw professional traders get net short on the futures markets toward the end of March (another sign that a reversal was coming).  And as the retail investors were buying into resistance, the pros were selling down to support, which made for some nice oscillations and increased volatility.

I think today was a wake up call for people who had a unreasonable bullish bias on the markets.  In only a few short days, we saw the market dip to lows of the year, taking out a lot of stops on the way down.  Who knows what will come out of this craziness?  I’m sure we’ll see some investigations, speculation, and maybe even some regulation… but for the time being, I’m going to stay focused on what I do best and stick to my intra-day trading plan, and let the news anchors stress about where the markets are headed.

Stay profitable, disciplined, and sharp…

Until next time.

- Chris Dunn
E-mini Day Trader & Founder of the Emini Academy

Since Thanksgiving, we’ve seen a little decline int he volume on the ES.  In this video I show how the volume is around 1.5M contracts and how we can adjust our strategies to preserve our capital and continue to pull points out of the market every day.

Feel free to post any comments or questions in this post!

Have a great Christmas…

Check out this video…

BETTER VIEWED IN FULL SCREEN:

09/01/2009 from Chris Dunn on Vimeo.

Today was another “money printing” day in the Emini S&P. We had 4 setups with a 75% win ratio that netted 7.75 points.

I don’t have a lot of time to write in the post (taking the girlfriend out to eat), so I’ll just post the video…

Today we had 4 setups before lunch.  All of them were profitable and averaged about 4 points per win.  Our win/loss ratio has been incredible ever since we added our new “BT Trade” and gave additional criteria for the CT & LO trades.  Most of the guys in the trading room netted at least 4-6 points today.

Quite a few of you rascals have been asking for live trading videos.  I’d love to do them every day, but I’m just too busy trading!  Anyway, here’s a video from my first trade this morning.  It takes about 10 minutes and gives me 4.75 points.  About an hour later, I was able to pick up another 4.5 on a sweet BT Trade.