Week of October 9
Does the war in the Middle East change the bullish thesis?
Recap of last week:
Incredibly tough week to trade last week, and we ended up finishing with one of the best weeks of the entire year. Although we closed up “only” 0.71% this week, the week was very lucrative if you were positioned with a long bias. We officially gapped down 4 out of 5 days this week. And we also closed higher on 4 out of 5 days. This is important market generated information. Typically it tends to be the opposite, with most of the gains coming in the overnight session and flat to slightly down during RTH. Any divergence from the mean is something you need to note. This is particularly key information and led to my Friday play call.
We lean on volume to determine if a move is “real” or “fake” and it is especially encouraging to see the majority of selling done in low volume, and most of the buying happening during the NY session with high volume. Institutions and major funds who are managing billions, don’t and can’t transact during the midnight and twilight hours like us retail traders can. We can put on 10 lots of ES and call that significant size, no funds are going to try and long 10,000 lots of ES at 1AM. There just simply isnt enough liquidity.
The week frankly wasn’t looking good up until Friday, seemed like it was going to be death by paper cuts and theta checks, until Friday. I sent out a warning Friday pre market, predicting a likely scenario and what to do if said scenario came to fruition. My “lucky guess” turned out to be exactly what happened down to the letter.
I told you im 4250 bid. We took a measly 7.75 drawdown MAE, and 108.50 points MFE. I even told you when to take profit, at EOD. Again I dont consider my service a trading alert service, but I like to give out a couple trades per week as a nice gesture! And if you take my trades every week with just 500 bucks or so, the subscription pays for itself many times over. Feel free to look through my archive if you have any doubts, its all a part of historical record.
Anyways, just goes to show you the power of process and persistence. As I always say, I am super happy with 1 of 3 scenarios. Small loss, small win or big win. Big loss, unacceptable. This week it was primarily small wins and small losses. Until Friday, we had such a disgusting winner it wiped out all the losses many, many times over. When is the last time you hit a 100 pt long on ES? Thats alot of money and a big accomplishment.
By the way, I want to reiterate, the most important takeaway from my substack is my market thesis and general bias. I give certain trades, just to give something specific. But you should always tailor the trades to your style. So although I said long ES @ 4250, if you are a 0DTE guy, then use 0DTE. If you are a diagonal call spread guy, use those. If you trade NQ, trade NQ. These assets and derivatives are all correlated in the end.
Next move for markets?