With the Fed raising rates by .25% this past Thursday I have received many questions about this supposed bear market that the US. First let’s look at the S&P500 emini futures.
A bear market occurs when the market stays below a 20% move from the swing highs.
On this daily chart, we can see the high was 2100. If we take off 20% from the high the price the market would have to stay below is 420 points lower around 1680.
A bear market will occur when we are below the 20% drop in the market from its high.
Presently, the buyers are still in control to the blue zone where sellers will have to be in control to keep direction moving us towards the Next blue zone around 1700.
The market is in a consolidated range. We are in a 200 point range where price is looking for a commitment to either move higher or lower. Our present pattern is buyers are in control so we would be a buyer of dips, until price breaks below 1960 where sellers are in control for the short term.
If you look at a 20% decrease in the price of gold from 1900, then price below 1500 will be in a bear market.
Price has been below $1500 since April 2013. We don’t know when it will change direction and become bullish, but as US debt increases many of the “Gold Bugs” believe it is bottoming.
Technically, gold looks like it still has a little bit more to go and could break the psychological $1000 an ounce soon.
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We started the week thinking the S&P500 emini futures could be heading to new highs, even though the news was nothing exceptional which normally means a rally, sellers moved in and took control of the direction.
Sellers took price to through the 200 MA just as we were getting the Bullish Cross of the 50 Moving average and the 200 Moving Average.
Support has come in as the previous swing lows just above 2000 (the psychological support)
1998 to 2004 is first support, next support coming in at 1980
Then Previous point of control at 1960 for direction and possibility of moving to 1938.
Where will be the major supports for a major sell off? First we would look for 1860 then a double bottom at 1820 confirming the previous swing low on major seller price action. These are the targets for a sell off.
|Dec 16||2:00 PM||FOMC Rate Decision|
Stay away from the news on this, you are going to hear them crying over which way to go and how it could effect this or that and give us some of the biggest margin calls in history and the collapse of the bond market.
Trading the News is for the il-informed trader. Never speculate.
Stay away, wait until it has direction and then join in. Don’t try and guess the markets. Wait until you see the direction of the market.
Normally when everyone is crying doom and they bring out the doomsayers you haven’t seen in years, I would search for the contrarian positions. It seems like everyone is thinking “this could be bad”.
I am watching for consolidation on both Monday and Tuesday with a possible move down to the next support level.
Being a buyer of dips could be expensive here as there could be quite a bit of volatility.
Remember, you don’t have to trade. You can wait for a market condition you are more familiar with or you have experience trading in with proper risk management.
It is the end of the year, do a little self reflection, write in a journal, project where the markets could be going. Go over you system and see what works, needs some work and what could be thrown out. The key is mastering the education you have and leveraging it a risk management system that protects your capital.
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With the world in a slightly precarious position with Russia and the US squaring off for Dog fights over Syria and Turkey, Europe invaded by refugees, and China in the US playing Chicken over an island with an air strip you would think that gold would be skyrocketing like all the closet crazy economists have been saying (for 3 years). But gold is not playing. Gold is not playing by the rules which everyone is expecting. In fact gold has just showed us the the Key resistance of $1200 is not where it is going and that there will be a squeeze and stop run to a lower support.
Today we started with just over a 2% sell off and have slowed as we moved into the Japanese open where the BOJ Bank of Japan has announced it will not be easing for this quarter. Boo hoo, the US has to get another patsy for stock buying and currency devaluation.
Needless to say, it does look like we could be consolidating in a $150 range that could be quite profitable if you can buy on the dips and sell into the resistance. Gold trading is very risky and you can have a lot of exposure defendant on your leverage and how you manage your risk. It is best you have a Gold Trading Plan.
$1132 is a major decision point for Gold. We can consolidate in this range or if sellers step in, we could see a move back to the psychological $1100 and possibly a move to previous swing lows around 1077,
Watch for slow periods, most traders get caught in a dull market. This is where we can see agressive buyers move in and blow out any short sellers. If we do break below $1077 then watch for a move for a full extension that could test to the $1000 area. I don’t see anything pushing the market this far. But be forewarned, when gold price action slows down, it is normally to break to new levels. The last two and half weeks have been slow. We are just approaching the resistance on this bearish trend so watch your risk.
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The US Dollar index has a Death Cross (see previous article), this could be a turning point for the dollar or it could be a brief period of consolidation then a continuation to new highs. Presently, price is at 94.90 area and has been moving down breaking a supporting trend line. If the dollar index price closes below this area then we can look for a continuation to the next support at 94.255, the previous swing low, which could be support. If sellers pick up volume we could see price test to 92.60.
The volume on the Dollar Index DX 12-15 is decreasing with a slight bump up on the daily as sellers moved in breaking the supporting trend line. Take note that from the move down on August 21 we have large capitulation volume sell off. this topped 140,000 contracts. average volume this past week has been 26,704 contracts and has been under the weekly average drawing it down.
Sell side to support through October, will be selling the rallies and shorting in to any continuations if meets risk criteria. November, watching for a buy side opportunity after some sort of downside support or capitulation revealing the Market Makers levels. November is typically a strong month for the dollar index, although last year we saw mostly consolidation.
China is also back from vacation and it looks like they will continue their own Quantitative easing program. Their best interest seems to devalue the Yuan. More on this later.
Outliers to watch for: Ukraine has been quiet as the US has been played out of our unseating of Syrian Assad. This could be a hot point as many international player have brought planes, boats and missiles to the game. Europe, could see more unrest as immigrants fleeing the previously mentioned situation are thrown into the winter months and no place to live. Demonstrations could be on the social menu both for better living situations, and those opposed to the refugee numbers moving in. There are to many financial outliers to list as derivatives, ETF’s, credit swaps, and other financial products are soaring.
Next week, more on the catastrophe hedge, Gold.
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The death cross is used in technical trading and occurs when the 50 moving average crosses the 200 moving average on a daily chart. This can some times show a reversal of the general trend. The implication of the Death Cross is that we are switching from a long term bull market to the beginning of the bear market Sometimes it can also show a correction for a further continuation of the major trend as we saw in 2011. Presently we are in the middle of this pattern and haven’t seen the break in either direction. In this chart it could mean that we are in a start of a Bear Market.
We’re focusing on a daily chart for the S&P 500. Price action on the S&P 500 is in a consolidating range from 2020 to 1830. There is an 80 point range which buyers and Sellers have been pulling price around. Price under the 50 MA has been very volatile.
In early September we experienced the “Death Cross” Where the 50 moving average has crossed the 200 moving average.
This happened four years ago, August 2011, where we had a similar pattern of a selloff with a consolidated range where buyers and Sellers were fighting for direction and then after 4 tests down on the daily charts we passed through the 200 Moving average and then continued in The bullish direction of the market. Once price broke through the 50 moving average and the buyers were in control price tested back to the point of control where support was found and then we continued back through the 200 moving average and on to new highs.
The Death Cross can be a reversal pattern or a continuation pattern. Joel Wissing
The Death Cross typically means the 50MA has crossed below the 200MA signifying the emergence of the bear market. This is where we will see a dominant selling of rallies until Market makers have flushed out the investors. This will give Market Makers a new base to trade from as they start to accumulate at the lower price levels.
Watch for support and volume at the approach of the support and resistance levels.
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• Trading plan
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The markets mirror many natural conditions and environments. This past week we have seen the first group of three class 4 hurricanes in the pacific in recorded history occurring at the same time.
Global Class 4 market conditions.
There is just so much financial fraud you can inject in the system before the storm washes it away.
Financial Fraud is happening in the world wide markets.
The VIX in the US has hit new highs. Much like 2008. There is a global meltdown. This makes the 2008 crisis look like a light mist compared to the storm on the horizon.
It will be lead by:
The reality is interest rates are so artificially low that the ponzi scheme they have played for 10 years all the money rushing in went to the emerging markets causing collapse.
Markets like Canada (soon to be in a recession, property bubble in commodity’s regions and currency collapse), Brazil (currency at 37 year lows), Australia (property bubble and dollar about to collapse), they are going to suffer as their currencies continue to loose in the international marketplace and inflation. Commodities are the only market which expose the financial Con imposed by market manipulation and the Fed’s artificial rates. The Bloomberg commodity index is below the 2008 Financial crash levels with our markets still holding at only a slightly corrected price.
Money forcing rental rates up in London, New York, Vancouver and San Francisco are actually flight money from the international rich moving(escaping) to safe havens. The worlds weathy are moving into these safe havens to protect their money and the lives. There are more Russian billionaires in London and New York than in Russia. Property prices in these cities do not reflect a robust economy, the reflect the growing gap from rich to poor and that middle class incomes will displaced from these cities as the prices go higher.
You have probably seen the presstitutes releasing articles like this:
Libya, Syria, Afghanistan, Iraq and the poorest countries like Yemen are bombed out and refugees are flooding out probably not to return. The press is calling it migration, the truth is that these people are refugees from a war torn environment that can not support the inhabitants. Europe should be sending the US a bill for the refugees fleeing from our corporate sponsored war in the middle east and Asia minor. This will be a tragedy for Europe as we see the poor rushing into countries that can not employ them. These refugees will more than likely never return to their home countries. Millions will be fleeing.
This could signal the start to the end of what we have known Europe to be. Get ready for the borders to close, restrictions to travel to occur and an ever increasing unemployment rate as millions from Asia minor, and Africa pour into an unprepared and unorganized EU political base. Watch as gradually each country will declare that they solely determine the number of refugees allowed in and then Germany have to pay for them.
Rental affordability has steadily worsened in most cities across the US. Median rental rates are now over 30% of renters income. The quantitative easing and suppressed interests rate has made it so that companies like Blackstone and Berkshire Hathaway can own and control countless billions of US rental properties.Huge private equity groups are buying single family homes and apartments across all the top tier housing markets in the US. Even ghetto rental rates have increased. Warren Buffet also swooped in and bought properties at 10% of market value now to charge the highest rental rates in US history. 30 % of midtown Manhattan is occupied less than three months of the year. Los Angeles renters now devote 49% of their income on rent. This is the norm? We have a global deflationary class where their real income is decreasing, real wages are decreasing and their rents are increasing and the fed induced mis-allocation of capital which created a glut in supply which you can see in the Baltic dry index (which has collapsed). The price to send goods from China (the worlds manufacturer) to Europe and US (the consumers) are at the lowest rates since early 2000’s. This reflects part of the global slowdown.
The normalization of interest rates that the FED mentions is not enough to balance the risk in the markets and the amount of leverage that plutocrats use for hard assets stolen from the middle class.
Social and Geo political storm is on the rise. The world economy is in a recession and the refugees headed into Europe from the middle east and Africa will create the next biggest unemployment and social storm to hit their markets. A complete market collapse in Europe could occur as the social and financial implications of the Central Banks destabilizes and creates more inequities between the rich and the middle class which is the new poor.
Low interest rates, market manipulation and destruction of the middle class will create the financial storm that will prevail this next few years.
China is not the point of this world correction or the reason the world is going into a recession. China has acted as the catalyst for world supply and demand this past 12 years being a major supplier of cash to purchaser of US treasuries, and a large part of demand for international commodities consumption. The Bank of China is interceding in their market place and going by the play book that the US has used many times before. Although jailing journalists for using inflationary speech is a new way to control the market. This is actually not effecting the international market place as much as the devaluing of their currency and the probability that the next steps are going to be devaluing their currency more through some sort of quantitative easing and no longer purchasing US treasuries. We could even see an increase in Treasury note sales by China which in effect could be reversing the US’s own quantitative easing. So blaming the Chinese for an international recession is not even close to reality as the US, Europe and other countries have had a full out currency war this past few years and injecting money in to markets through artificially low interest rates so corporations buy their own stock back..
The Fed has lost its way, interests rates used to be valued to the amount of risk, and the present rates do not reflect risk.
What is your planB?
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The supporting trend line showing the weekly bullish trend on the S&P500 emini futures has been broken. Price has moved below the 50 Moving Average and broken the previous summer consolidated support zone above the 50MA.
The previous Swing Low of 1790.25 and major support above 1849.25 are the lines in the sand to watch. Greece’s turmoil was quickly absorbed into the markets. China’s fall was not and has had some push back into the US and European markets. Buyers are looking to keep this above 1900 as a psychological support. If we hold above there, we could see a consolidated zone retracing the previous weeks volatile range of 160 points with a move down that was off a gap to an extreme low and then buyers bringing price back up.
This weeks price action is contained with in the previous candlesticks high and low. Giving us no real direction for a continuation this next week. We will be watching for price to either break below 1900 or above 2000. We could see these price levels are visited and rejected over the next few weeks. On the weekly chart we don’t see either a bottom for support or a capitulation of price at the lows. Most of the volume last week was buyers bringing the market back up from the large Gap down. So did we find the new bottom? It looks like we have support in where the previous swing low is, we shall see as we wind up this third quarter.
Support is coming in at 1900, psychological support, 1834 the previous swing low last week, 1791.75 which is the previous swing low where we broke below the 50MA and then moved back up, and finally 1685.50 where we have support on a test down February 2014 and where we could test the 200 moving average.
The weekly chart is an easy way to catch the direction of the market. It shows you the price action without all the noise and makes the major support and resistance from trend lines and previous price action very easy to follow. Using these previous swing highs and lows, you can then transfer them to a shorter time frame for targets and risk management.
Trading is high risk and care should be taken, if you are not familiar with the market it is best not to trade it at all. Using a trading plan can be part of your risk management. Always trade with a stop, and never risk what you can’t afford to loose.
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Looking for this to retrace to 2100 and then consolidate and move up, or for sellers to take control and move past the support at 2070 and break through to 2050 area close to the 50 moving average. There is some support at this level, around 2070 and we could see a 10 point move up before it reverses and breaks support to return to the 50 moving average.
The consolidation zone from 2050 to 2118 area has been tested on many occasions and the floor has not been determined yet. There has been no real capitulation buying or selling.
We had a higher range for the week with the range moving from last week 35 point range to this past weeks 56 point range. In this type of chop though we must be careful for turn arounds when we get these engulfing patterns because most have only established support and resistance.
Always manage your risk first, and never take a trade you can’t afford.
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The US markets had a partial correction with a few break away gaps which can become longer term targets for the next move down by sellers. The first gap we can see filled today bringing the market down to within a few points of the previous open gap.
The Opening gap on the S&P500 emini futures was 8 points, we opened with buyers in control, and with in the first hours of trading we closed the Gap. The Gap looks like it acted as resistance where the sellers moved in and then moved the market to the previous lows on the open.
There is still another open gap just below at 2001.50 .
This is another daily chart showing open gaps for the previous months trading action.
The open Gaps below the 200 Moving average are a good target for a major sell off. We bounced on the 200MA and retraced to the previous swing highs. The market might need a pullback to break through this resistance as sellers have moved in on many occasions at these price levels.
The 50MA is the next down side target at 2094.75. You can see that volume has picked up a little bit on the sell off and then volume drops as we put in a bit of price failure under 2108 as buyers moved in.
As we are in earnings this next week we could watch for some volatility. The market really moved with exuberance from the supported lows on the 200MA, it looks like we are watching for some other event to sideline this move up. Be careful trading the highs and always manage your risk first.
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