The setups I include on this blog are used in conjunction with the 3/10macd and the criteria I ascribe to it as a way to alert me to an existing condition of price. The key concept to take away from this blog is that I try to anticipate what will happen on the higher time frame by using a faster time frame to trigger the trade setup. I do not trade a "system" I use two indicators to clue me in to price conditions. Please read the Disclaimer located in the sidebar of this site. I can be contacted via email at
I am always open to questions, comments, or suggestions on how to improve this blog.

Friday, May 25, 2012

overnight range

  If you follow any market with active overnight/pre-market trading this is probably elementary to you, but I thought I would highlight the significance for those that may not be aware.  Knowing where the market traded before Regular Trading Hours (RTH) begin is incredibly useful in framing the context of where price is, or where it may want to go (after all, it is an auction process that tests back and forth to gauge interest in higher/lower prices).
  So, before the market opens at 9:30a.m. EST (8:30 CST my time) I frame the highs and lows of the pre-market in the SPY.  These levels are indicated by purple horizontal lines in the charts that follow (where p/m_H refers to pre-market Highs and p/m_L refers to pre-market Lows).  The vertical blue dash line indicates the open of RTH.  In the chart below we can see how closely this compares with the futures globex market on the right (the E-mini S&P in this example):

Along with the p/m_H & p/m_L I like to extend Fibonacci projections off these levels in 50% increments.  So, starting with trade from Monday May 21 here we have the SPY with pre-market included.
Monday was a trend day up, but notice how price behaved at both the p/m_L & p/m_H before breaking out:

Tuesday May 22nd; a test higher (just beyond a 50% projection of the overnight range) and a test lower (nearly to the penny of a 50% projection) before settling back around the previous day's close

Wednesday May 23rd; A narrower overnight range where on the open the p/_H was rejected and price moved swiftly lower to a 100% projection of the overnight range.  Eventually however, price rallied higher, extending to the 100% projection on the upside (notice how it gets caught up on the p/m_L, needing to pull back before it can take off).

Thursday May 24:  A very wide o/n range and being a range-bound market in this instance, price tests both extremes:

Friday May 25; A quiet pre-holiday environment where price based along the p/m_L for most of the afternoon before breaking lower and reversing on the 50% projection.

Anyway, to get an idea of where you're going it helps to know where you've been.

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