Here’s the second Weekend Edition of DAYTRADING by AMBUSH. I already feel like I was never gone. The solid trading for the week helped immensely. Just so you know how this will work frequency wise, here’s the schedule. I will do the Weekend Edition on Friday/Saturday and keep Sunday posting to a minimum.
The daily updates will give you a summary of my trading results and advise you of any changes to the entries or planned management moves. I will do these on Monday, Tuesday, Wednesday and Thursday nights. Thursday’s edition will contain only a summary of the day’s results. I don’t trade on Friday but you’re certainly free to use my numbers and strategies at will. As most of you reading this know I usually trade only during the exchange published regular trading hours of the open outcry session.
Once in a while I may jump a market early or carry a trade past the RTH close. Most all of my trading gets done in the electronic contract but I watch both charts – TRH open outcry and electronic. I still design and setup my trades the night before and do absolutely NO, ZERO, NADA, ZIP analysis during the hours I permit myself to trade.
As I’ve said a thousand times: do NOT do analysis while you are watching price flow. During those hours all you are allowed to do is execute the trades you calmly, quietly and coldly designed last night. You do not setup a new ambush while bullets are flying in the one you set up last night. That’s when you invariably miss something in your game plan and wind up taking one in the head … and the wallet.
I’m not sure when the freebie will cease and we go subscription given the problems Shaggy is having with all her websites. Hopefully ours will be up soon so I can quit imposing on Erich and we’ll get down the road with our own little community. Currently, I’m scheduled to see my Valley Fever doc on 2/5. I’m hopeful it is all gone and I’m done with him. Keep your fingers crossed. I’m very much looking forward to a year of good health and no drama. Wishing the same for all of you.
We all know the Pat’s will be there. I’m hoping the Packers will be too. You gotta’ love Favre!
BONDS
Wow, did things happen fast at the end of the week or what? Tuesday could be a really whacked out day. The talking heads will have a field day and what my settle in the heads of the players and traders … well, who knows. One thing for sure, it will be an interesting if chaotic week. We have an unprecedented outcry for a federal economic stimulus plan that is also supported by FED Chairman Bernanke’s comments despite his warning not to take likely the FED’s concerns about inflation.
We had a couple of very prominent financial “celebrities” mentioning a rate decrease of 100 basis points. I still think 50 is about it. President Bush introduced a stimulus plan this morning that was mostly all about tax cuts, The Dems reacted much as one would expect so Monday should be full of fodder for the talking head cannons. I think the BONDS remain in an upward bias but we must keep in mind the market and the fundamentals have set up the potential for corrections back to 118-16.
One look at the chart has the triple top between 120-08 and –16 jumping out at us. Bonds are either building fuel stores for a move higher or exhausting itself in attempts to move higher that will ultimately lead to a failure. I expect neither the break out higher or the failure to be strong. Corrections lower to the 118-16 level could be violently swift. Moderate rises of a half to full point could likewise be quick.
I will sell any rise above 120-00 that fails and heads back south. I will sell any break below 119-16. I will sell or buy at 119-00 dependent on the whispers. 118-16 is the same deal – sell breaks lower and buy failed retests that head back north. I doubt we’ll see 118-00 soon, probably not this week unless someone says something really off the wall … like 100 BP decreases … idiotic comments.
CURRENCIES
All the focus this week should be on the US Dollar. There is some clear weakness in the Euro and the President 150 billion stimulus package will create some buyers. But the upside is limited at best and will ultimately remain so under the current recessionary cloud that plagues the US economy. Look for everything else to play off the dollar.
Canadian Dollar
The Canadian is feeling pressure from two fronts, sagging commodity prices and ongoing economic fears of a slowing economy. I think we may see some initial rise on the US situation but we’ll quickly return to tough sledding. We could easily see a return to the huge support at 9500.
I think it is highly probable the CD will not rise above 1.000 anytime soon, certainly not this week anyway which is all we care about right now. My problem is I cannot trade anything below 9775 down to 9500 – there is no structure between the 2 to support me … or (lol) resist me. Retests at 1.0000, .9970, .9900, .9880, .9850, .9800, .9775 that fail to hold can be sold. Breakouts above 97.75, .9800, .9850, .9880 and .9900 can be bought. The stops are the next higher 3 or 7 above the sell entry and the next lower 7 or 3 on the buys. The stronger you perceive the R&S line to be the wider you’d consider the stop. Use the next higher or lower number from above as roll points for your stop. The wider they are the more you’ll want to be always aware of the periodic RRR and act accordingly if you see something you don’t like. On the sell of a break below .9775 periodic RRR is our only management salvation all the way down to .9500. Although I do not trade beyond RTH you are free to do so. I miss many great trades squarely off our numbers that are hit by price flow at night and early morning. The numbers and the management don’t know what time it is they just work all the time.
Swiss Franc
As the anxiety lessens some I expect the Swiss will see some longs leaving for a while. This long liquidation will be temporary and I think will push prices down to the last sizable area of support, which is actually a range of support between 8980 and 8970. I’m not at all impressed with the power of the structure above .9100. A retest of .9120/. 9125 that fails is a sell as it passes thru .9120. Likewise .9180 warrants a sell on a failure that turns south. .9080 is a level from which I will buy or sell. The whispers will decide which. .9030/.9020 is a RS Range which means well buy a break out above .9030 and sell a break below .9020. My above mentioned downside target at .8980 is good for a sell or a buy depending on whether support holds and sends it back north or a failure occurs allowing prices to slide south. As always in the currency trades we count from the entry up to the next higher 3 or the 7 above that to place our stop on long or buy trades. The 3 is for the more risk adverse and the 7 for those seeking a lilt extra room. Sell trades we simply reverse the count placing stops at the first lower 7 or for added room the next 7 lower. As is my normal habit I will use all the entry numbers as roll points for the stop as the price flow unfolds.
INDICES
Thursday and Friday both showed us the bears have a firm hand on the market. No one believes the stimulus package, no one believes the FED, and no one believes Congress. The only thing we’ll listen to is the economy. The message there is pretty dismal to say the least. I expect to see more downside particularly if some of the major weekly and monthly numbers don’t hold up as support. As frequently happens in rapidly moving markets we are left at prices without structure to rely upon or base management moves upon.
Mini Russell 2000
On Tuesday of the week past I added 700, 698, 692, 688 and 682 to the numbers from the weekly chart and stated my reasons for breaking the rules. 672, 665 and 648 get added to the party as well. Using Weekly numbers is generally against my rules. I am willing to do some outside the box things in order to retain possible sell opportunities given the extreme weakness present in the market. I’m quite conscious of my prior bad acts and will compensate by tightening my management approach. Here are my numbers for the Russell to kick off the week: 704, 708, 712, 717, 720, 722, 727, 740, 745, 750, 752, 757, 760, 764, 767, 770, 775, 780, 785, 790, 794, 798, 800 and 802. I will not sell anything below 648 and I will not buy anything above 794.
$5 Mini DOW
Although I’m willing to take on numbers from the weekly chart to trade the Russell, I am NOT willing to do so in the DOW. I will not trade the DOW until we build some structure or price flow moves back into ranges already on the chart. The reason I opt not to has to do with RRR. In short; the potential for payoff is so small that to up the risk quotient by going to weekly numbers is prohibitive. Make sure to check the daily updates for news.
GOLD
There’s … as always … a ton of opinion out there on Gold. I look for 2 sided, choppy trade for the next week. AngloGold production was down 55,000 ounces in the 4th quarter; the stimulus package should slow or halt the flight to quality for Gold; the WSJ article shining a bright light on commercial mortgage problems … I can’t point my finger at any fundamental story and say THIS will define the Gold market. It would be near impossible to trade if we didn’t have the $10 Channel Theory to rely upon. Watch your stops and rolls closely. Even more than usual management is the name of the current game in Gold. The 670/680 channel has our attention on Tuesday.
Tom
Ps Those of you who may be new to my work, don’t be shy about emailing any questions you may have. The manuals should be available soon but in the meantime I have no problem answering any inquiry. My direct email is tom@daytradingbyambush.com
Posted January 24, 2008 
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