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Commodity Futures Day Trading The Sandp 500 And E-mini - Observations - Part 2
By Thomas Cathey
Not all conventional commodity trading folklore is correct. Some is and some isn't. Much is anecdotal. Most of it is designed to make you feel comfortable in a trade. Feeling "comfortable" is the fastest way to the poorhouse in commodity trading. We are paid to provide liquidity and take on risk. Read on to see if you adhere to this basic and important market law.


More SandP 500 and E-Mini Futures Contract Observations: PART 2

"The one minute e-mini futures chart will sometimes magically touch or spike the outer band channel."

When you set up a pair of moving upper and lower price bands to contain e-mini price action, set them so the price breaks out of the band only on climax tops or bottoms. It's amazing how well this signal works. It appears that when an e-mini climax takes place, all the cycles are in synchronization and burn themselves out at the same time. This united power spikes out of the normal band boundaries. Since most of the cycles are rolling over after the climax, this backing off can be quick for a few bars and leaves the spike area isolated like an island top.

Next, the e-mini futures market may erode slowly down like a normal bull correction, fooling the majority. This is a situation when a quiet decline is NOT bullish, but bearish. Know the difference. Price may anemically try for the top again, but usually fails. This is where the real decline starts. As usual, selling the first and exact high is a mistake. Wait for the secondary try while you are looking at other indications of failure.

This is one of the few times the e-mini futures market is kind. It actually rewards you for getting in later than the traders who have the nerve to sell the first panic high. But if you are a big gun, the first panic gives you the liquidity needed to put on a big line. The contract volume at these spikes can sometimes be tremendous.