StrayDog's Weekly Analyses and a bit of trading RANT - April 26, 2020

Sideways movement in last week, volatility went down again. VIX closed at 35.93 last week, so still high, but going down. Now we are going into Earnings wise - most important week, since all remaining FAANG stocks will report, and ten out of 30 of DAX Component companies. Due to Labour day on Friday, May 1st - this is the shortened trading week for European markets.


Scheduled data releases and Earnings reports for the next week:

Besides Earnings reports, we have US Advance GDP q/q and FOMC Statement with Press Conference on Wednesday, and ECB Monetary Policy Statement with Press Conference on Thursday.


So, a lot of important news and earnings reports, with traders trying to Making sense of a stock market just 16% off its high while a pandemic costs 26 million jobs.


Question is - Is ANYTHING DIFFERENT THEN LAST WEEK? Check last week blog here.

And I must say - NO. Nothing is changed. We are still in the range, in the balance, which means markets are preparing a bigger move. The week in front of us is FULL with POTENTIAL CATALYSTS.


Check this tweet from Jim Dalton, about market being in balance.

Since nothing much is changed, lets see just the major charts.


Chart #1 - Weekly and Daily SPX


On Weekly chart we can observe market is now in prior area of Support, which now COULD act as Resistance. On Daily chart we can observe the PA around DMA50 and halfback of the down move from ATH, AND that Friday close is ABOVE both.


SPX trades in the range, waiting for the catalyst for a decisive break. NDX is still in the upsloping trading channel, above the 61.8 of the down move from ATH and leading the US markets. RUT is still below 38.2 of the down move. Nothing new there.


Chart #2 - DAX Daily


DAX trading for 12 days in the range #4. Waiting for the catalyst - SAME like SPX. Nothing changed there either. Targets for breakout OR breakdown from this range remains the same, marked on the chart. Step by step.


FOR BOTH MARKETS:

>> BALANCE LEADS TO EXCESS, AND EXCESS LEADS TO BALANCE. Bigger move is preparing. Until a proper catalyst, balance can continue.


Inexperienced traders would want a forecast, and experienced ones will make scenarios and adjust to those, being once again the thing that everybody who wants quick gains hates the most: "nimble and flexible".


As Chris Ciovacco said in his Weekly video Rest Of Year Likely To Feature Big Moves In Stocks, there are FOUR scenarios:

Screenshot taken from the video

THE TRADING RANT PART


Great quote from that video mentioned above, and one of my favorite trading quotes, comes from Michael Carr: "Don't worry about what the markets are going to do, worry about what you are going to do in response to the market".


So, what are YOU going to do? Are you going to trade your ego, OR the chart that is in front of you? Are you going to hold positions without stops and watch how market is going against you? OR, you are going to follow the plan, to execute the best you can, to place your stop BEHIND the invalidation point and being OK with taking a loss, knowing that next good trade is around the corner? Trusting the long term expectancy and your edge? Do you have an edge in this markets, a plan, a strategy? Check some of the articles from this site.


I often write about TEMPO and MOMENTUM in my MORNING NOTES - for day trading of German DAX. Here is what Peter Reznichek wrote about Tempo:


In my opinion, as a trader with 16 years of experience - having a plan, having an edge, knowing where you will execute and then DO THAT DECISIVELY as good as you can, sticking to taking trades ONLY on, or near inflection points, will keep you in front of the crowd. Since crowd usually do not have a plan, can't adjust to change, crowd waits too much to get the "confirmation" - a luxury that we the short-term traders rarely have - which leads to trades on bad locations, crowd do not use stops and crowd trade headlines instead of their own plan, not knowing where inflection points are.


RECORD your setups. Having a Setup Gallery is super-duper important folks. Market behaviour is repetitive, and in time, you SHOULD have HUNDREDS of setups, and then to go through them again and again and again and again in your free time, or during the long choppy periods, when you should wait for opportunity and sit on your hands. Study those. That can be a good tool to reinforce conviction to entry on repetitive setups. Work on your edge.


I make a Setup Gallery for each day for Subscribers of DAILY DOSE OF DAX, and post them each Friday for the trading week behind, like this:


Bonus chart - EXAMPLE of a Chart for a Setup Gallery


The instrument can be ANYTHING - from Stock Market indices, Forex, Stocks, Commodities...


Studying and journaling your trades can help you, and having a Setup Gallery as a tool in your trading arsenal can only be a positive thing for you. The level of details, number of comments and graphic presentation of this - as solely a text, or as picture - is up to you. In time, you will know what you can execute with no problem, and what YOU want to see, in order to press that Buy or Sell button.

 

In short term trading it is very important to properly understand context heading into every day, to know from which side wind is blowing - who has the short term control, and which side will be forced to liquidate IF and WHEN market hold above or below a certain level. What is the level of volatility, what can we expect from any particular day, what market already done in premarket session, what possible setups can be available, and so on... the things that we constantly learn in the DAILY DOSE OF DAX.


Cheers, StrayDog