[category Commentary}

The chart shown in Figure 1 is the E-mini plotted at 20,000 ticks per bar and covering from January7, 2014 to the present. This period has been pretty good for short term trading – the daily movement in price has been from 40 ticks to more than 80 ticks during this period.

Figure 1 E-Mini 20,000 ticks per bar – January 22, 2014.

My general take on this market is that it is proceeding with caution. Note the lower highs and the lower lows of the last few days. That indicates to me that the gains have been taken with great effort and the market remains nervous and ready to spike in either direction with the slightest motivation. Or perhaps we will see a spike in both directions, such as the one we saw which we saw just recently on January 13 and 14.

My trading method is technical and short term so our trading decisions are based on factors that generally ignore what we have been discussing – at least at the trade decision making moment. We generally do not care which ways the market moves as long as it is not moving against our current position.

However, we cannot deny that markets such as the current one cause us to have a bias towards our direction of trading. We continue to think that this market is going to have some big moves to the down side – perhaps followed by a reversal and a move back upward. We have learned long ago that the market will move in the direction it desires at the moment – whether we agree with its logic or not. Actually that is why we eventually moved to short term trading. But we have not ever forgotten that the market oscillates – and those movements vary from time to time based on the psychology of the market. It we could have a market our way all the time we would opt for the type of market shown in the above chart – on either side of the January 13-14 spikes.

For the short term trader, we are far better off with those regular oscillations of 40 to 80 ticks. It may make the market a bit more boring, but the spikes can be expensive if you get caught on the wrong side – particularly with those to the down side.

 

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