30/04/10

Opened short, 455th trade, on tremendous energy sector sell-off in response w/ what, ES breaking above VWAP was hardly imaginable. The position was soon closed, cause:
1) no selling pressure appeared;
2) internals were not in my trade favor - environment was slightly bullish w/ already one $tick above +300 for the first near five minutes of trading versus one $tick below -200, plus $add was at +100 while S&P 500 at near -0.1%;
3) energies (XLE ETF) was continuing to slide sharply, but the market reaction was already reluctant;
4) financials - the weakest sector at the moment - started to recover.


Almost twenty five minutes after the open bell I have opened 456th position in a bet of the market decline. The reasons were:
1) $add posted lower low unlike ES;
2) financials recovery pullback (that was one of the reasons of the previous short exit) was over and already battered sector started to fall sharply;
3) as well as technology sector, on behalf of XLK ETF and of course Nasdaq Composite futures, started to slide.

Four minutes later fixed the trade on the reasons of:
1) no industrial and consumer discretionary sectors - the strongest - sliding or even lower lows;
2) no Russell 2000 futures lower low.

But time have showed, that trade exit reasons were poor and not appropriate.
A) The key point in a moment when the market do slide is to see the weakest sectors movement approval. If weakest sectors do not slide, then the market will stop falling. But in the current pattern weakest sectors, as did the market, were shrinking. So reluctant downside move participation of the strongest sectors was not serious problem for the sellers. And minutes later Russell 2000, industrial and consumer discretionary sectors have postes fresh session lows.

B) As i have pointed out in the 2nd trade reasons, $add was weaker then ES. But that was only half of the story.

Usually, during the session $add possesses one principal position - it is weaker or stronger then ES. Obviously, in one out of three occasions, during the session $add make a change. And if in the first part of a day ii is stronger then the market, in the second it can become weaker then ES (or vice versa). And of course sometimes $add can change its correlation w/ the market three time or even more. But in such cases call that session just range day.

The thing is that on the friday 30th april session $add started the day stronger then ES. But when I opened my 2nd trade it was exact that time when $add reversed its relation w/ the market. That occurrence is very influential to ES in particular. So it was one more issue to stay at the short position.

C) Plus one more, final, point in order to explain why the market continued to slide is Volume Points of Control issue - most commonly traded price during particular past sessions. The thing is that strong triple VPOC level was broken and the next huge support level was 10 ponits below. See detailed analysis about last session VPOC profile here.


Closer to the month finish opened 457th long trade, cause:
1) $add w energies sector (the strongest at the moment) unlike ES have posted higher highs, plus 2) to post interim high was one small step deal to financials (the weakest) and Goldman Sachs stocks also.



But in deed, the only appropriate reason on the long entry was only interim bullish $add. Goldman was at the brink to the higher high but it have failed to soar, cause overall session bearish fundamental factor was at a place - the bank criminal investigation start. The market continued to decline and the loss was soon unavoidably fixed.