April 22, 2012
By Scott Pluchau
http://scottpluschau.blogspot.com
Sorry if I have been pounding away at the Nasdaq 100 primarily lately,
but I have barely even looked at another contract the past week. I have
a passion for the precious metals, but there is not much going on there
in the big picture, and the last thing in the world I want to do is
"force" trades or the analysis. I believe the trading opportunities
will continue this week in the Nasdaq 100, and it may be another week of
relentless Nasdaq 100 coverage. But the important thing is the
principles of my methodology remain the same for all futures contracts.
Things may not turn out the way I expect as well, but in the meantime, I am focused on correctly identifying the current phase of development the market is in, and then identifying favorable trade locations from a perspective or "probabilities" and "reward to risk", utilizing proper position sizing/money management. Keep in mind the greatest trading system in the world is probably useless in the hands of a trader who lacks "discipline", "consistency", and "objectivity".
Before I touch on this week's Commitments of Traders Report, the details of my interpretation of the COT report can be found in the tab at the top of the blog.
The market breadth and volume in the Nasdaq 100 was not bullish in the latter stages of this recent ascent, but it was also the net bearish position that the commercial traders were building upon that had me eager to trade on the short side once a reliable reversal pattern developed. The commercial traders are historically "trend enders". I have discussed on the blog how frustrating it was to wave goodbye to each new daily high without being in a trade to the long side at all, but I also strongly believe in my rules. And there are no rules for "Gambling". NOT speculating IS speculating. This has nothing to do with a psychological disorder known as "Loss Aversion". Loss aversion is devastating for traders. More on psychology another time.
There are many posts on the blog about the Nasdaq 100 that include COT coverage, market breadth, the "Double Top" reversal pattern on the daily chart, and intraday pricing patterns in the smaller degree timeframes. Patience is still warranted, as we are still above minor support on the daily timeframe, but the intermediate term trend is down in my view.
This week's consolidated legacy COT report in the Nasdaq 100 shows a decrease in the open interest of 1,172 contracts with the commercial traders increasing their NET short position by 3,985 contracts. Each contract in the consolidated report is 100 X the Index. Assuming the index at 2,674 (closing price for the week), and if my math is correct that is an increase of their NET short position of $1,065,589,000. Should we small traders soak up a billion dollars in supply? After you is what I say. The commercial traders are hedgers and they are transferring the risk, but they won't be transferring it to me. I am all about accepting risk, but I want to accept the risk the commercial traders don't want. And that risk is pointing down in price action for the Nasdaq 100.
The total NET short position of the commercial traders as of the cutoff for this report is $7,230,496,000.
Until the intermediate term trend changes to the upside, I am either going to short, or I will do nothing. Should the intermediate term trend change to the upside, I may be back on the sidelines looking for opportunities elsewhere. Sure money can be made trading to the long side in the Nasdaq 100, but using my methodology, those trades will have "negative expectancy", which means even the trades I make money on, in reality, I am actually losing money. Over time it is a clear path to ruin.
This weekend's chart includes the weekly timeframe on the right hand side. Major support is a long way away, and that "High Volume Node" might become a tractor beam should the Nasdaq 100 continue to slide.
I couldn't even tell you what Apple is trading for, and I do not look at the chart of Apple ever, but they are reporting earnings this week I believe. Equity traders believe it is wise to keep an eye on the S&P mini futures, but these days it seems like the traders in Nasdaq 100 mini futures are keeping an eye on Apple. Perhaps there is something the commercial traders know that we don't?
I may touch on the "Traders in Financial Futures" COT report later, as it is quite interesting in the Nasdaq 100 as well.
(Click on chart to expand)
twitter/ScottPluschau
Consulting? ScottPluschau@gmail.com
Members Scott's blog are appreciated
Source: http://scottpluschau.blogspot.com/2012/04/weekend-update-nasdaq-100_22.html
By Scott Pluchau
http://scottpluschau.blogspot.com
Things may not turn out the way I expect as well, but in the meantime, I am focused on correctly identifying the current phase of development the market is in, and then identifying favorable trade locations from a perspective or "probabilities" and "reward to risk", utilizing proper position sizing/money management. Keep in mind the greatest trading system in the world is probably useless in the hands of a trader who lacks "discipline", "consistency", and "objectivity".
Before I touch on this week's Commitments of Traders Report, the details of my interpretation of the COT report can be found in the tab at the top of the blog.
The market breadth and volume in the Nasdaq 100 was not bullish in the latter stages of this recent ascent, but it was also the net bearish position that the commercial traders were building upon that had me eager to trade on the short side once a reliable reversal pattern developed. The commercial traders are historically "trend enders". I have discussed on the blog how frustrating it was to wave goodbye to each new daily high without being in a trade to the long side at all, but I also strongly believe in my rules. And there are no rules for "Gambling". NOT speculating IS speculating. This has nothing to do with a psychological disorder known as "Loss Aversion". Loss aversion is devastating for traders. More on psychology another time.
There are many posts on the blog about the Nasdaq 100 that include COT coverage, market breadth, the "Double Top" reversal pattern on the daily chart, and intraday pricing patterns in the smaller degree timeframes. Patience is still warranted, as we are still above minor support on the daily timeframe, but the intermediate term trend is down in my view.
This week's consolidated legacy COT report in the Nasdaq 100 shows a decrease in the open interest of 1,172 contracts with the commercial traders increasing their NET short position by 3,985 contracts. Each contract in the consolidated report is 100 X the Index. Assuming the index at 2,674 (closing price for the week), and if my math is correct that is an increase of their NET short position of $1,065,589,000. Should we small traders soak up a billion dollars in supply? After you is what I say. The commercial traders are hedgers and they are transferring the risk, but they won't be transferring it to me. I am all about accepting risk, but I want to accept the risk the commercial traders don't want. And that risk is pointing down in price action for the Nasdaq 100.
The total NET short position of the commercial traders as of the cutoff for this report is $7,230,496,000.
Until the intermediate term trend changes to the upside, I am either going to short, or I will do nothing. Should the intermediate term trend change to the upside, I may be back on the sidelines looking for opportunities elsewhere. Sure money can be made trading to the long side in the Nasdaq 100, but using my methodology, those trades will have "negative expectancy", which means even the trades I make money on, in reality, I am actually losing money. Over time it is a clear path to ruin.
This weekend's chart includes the weekly timeframe on the right hand side. Major support is a long way away, and that "High Volume Node" might become a tractor beam should the Nasdaq 100 continue to slide.
I couldn't even tell you what Apple is trading for, and I do not look at the chart of Apple ever, but they are reporting earnings this week I believe. Equity traders believe it is wise to keep an eye on the S&P mini futures, but these days it seems like the traders in Nasdaq 100 mini futures are keeping an eye on Apple. Perhaps there is something the commercial traders know that we don't?
I may touch on the "Traders in Financial Futures" COT report later, as it is quite interesting in the Nasdaq 100 as well.
(Click on chart to expand)
twitter/ScottPluschau
Consulting? ScottPluschau@gmail.com
Members Scott's blog are appreciated
Source: http://scottpluschau.blogspot.com/2012/04/weekend-update-nasdaq-100_22.html
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