Last week found me away from the markets on Monday and Wednesday to manage personal tasks that could not be avoided. Fortunately, Monday wasn’t much to miss. Unfortunately, Wednesday was hands down the best / most price movement all week.
By the time everything was (mostly) aligned for program trading education to begin, Thursday was upon us. The Thursday session before each non-farm payroll Friday is usually low volume and therefore choppy. That was mostly the case for stocks, with ES chopping inside a boxed range until nearly midday before it made the lone directional push before once more settling into a narrow chop zone all afternoon.
CL made a strong directional push in its usual explosive fashion. Actually, there is no such thing as “deliberate” price movement in CL any more. It is either rolling sideways in a range or blowing up/down thru the price ladder so fast you can’t visually keep up with the change. Those 40 to 80+ tick explosive rips which constitute pretty much all directional movement now.
That is neither good or bad, and it is certainly not a personal complaint. Just acknowledging the facts. The way price movement is now, and you either adjust & adapt to that or you fail to succeed.
In my personal case I was selling into breaks and/or pullbacks of key levels and adjusting stops to breakeven as usual. Nothing different or out of the ordinary there. And usually I will get stopped out a time or two, then manage to hold a stop or two for positive results in the end. That’s not how it worked out on Thursday… every short trade taken into the expected decline was stop-chopped before price continued on in favorable direction.
At some point during Friday’s session I mentioned in the live room that knowing which direction to trade and knowing where to get in each trade is simple. Simple and easy. That part of trading is tied up, nailed down and ironclad for us. The only challenge left in trading and by that I do mean THE ONLY challenge at all is continual navigation of illiquid-market chop.
We are seldom on the wrong side of any price move and when that rare occurrence happens we quickly swap ends and work the correct direction from there. And we know darn well right where all the pivotal S/R zones are to enter with market’s proverbial winds filling our sails. It’s only the constant, unending chop that quite frankly keeps all short-term traders on their toes in every financial market
Friday’s pit sessions after non-farm payroll reaction were split. Stocks ramped straight up and instantly at that from the 8:30am est release of report. Crude oil didn’t react much at all. Once the pit sessions began, CL was on the move while all stock markets pinned dead-flat in sideways, no-range fashion all day long.
We have all seen this same phenom literally dozens if not hundred-plus times now in the past few years of QE domain. Particularly true on Friday sessions. Stocks will gap-up at the open and either hang sideways without giving one inch either way, or they’ll chop-pop a bit higher to keep squeezing shorts.
Either way it paints the headline news in bullish fashion which of course is the only thing that actually matters to those who have money & influence to actually move stock markets. Knowing this fundamental behavior keeps you from endlessly fighting dead-chop sessions where nothing at all is going to happen for 6.75 markets hours of pit-session entirely.
Friday’s CL session was one directional surge lower, followed by an eventual spike-surge right back up to the open range zone again. This is common behavior we’ve seen often lately, matter of fact this same general 5min chart is a deja vue moment from very similar tapes in recent past sessions before. Whatever causes price movement to explode one way is totally unwound and erased as price goes right back the opposite direction with equal or greater velocity.
But that’s all ancillary to the general result of profit or loss. I made some very slight adjustments to the constant back-chop which resulted in gains booked. The result going forward will be fewer CL trades turned, fewer chopped stops, bigger profit-size wins.
Unfortunately, ES offered very little and contributed nothing thru the past two sessions. Fortunately, this congestive coiling will undoubtedly result in a substantial unwind soon. As in this week ahead.
For the first two days or program trading the educational account pretty much tread water. Modest gains in CL offset modest loss in ES coupled with transaction costs. Most of the time was either spent sitting idle while ES/CL price congested in narrow sideways range, with a few brief interludes of outright vertical explosions thru the CL tape. Not much opportunity for profitable trades in those two sessions overall.
No major news events scheduled for the U.S. sessions, several econ reports that can gyrate tapes for a little while. Monthly options expiry Thu & Fri along with CL entering its monthly rollover process then, to be completed early next week. After that there are two full calendar weeks left this month cleared of expiry-rollover-fed influences. I expect that stretch to offer potential for above-average to excellent price action for trading.
Time will tell.
For more daily updates from Austin, visit his blog at Coiled Markets.