Index Futures: A Day in the Life

Please accept my apologies for the lack of posts to the blog. There are work-related things going on in the background that require my attention for the next week or two.
Here is a much-edited transcript from The Trading Clinic that might be of interest to intraday traders. It was a classic “it is written” sort of day, filled with traps for emotional and “breakout” traders.

[08:58:29 ET] frankie just when everyone thinks the script is written…the markets throw out a curve ball…and we have payroll contraction
[08:59:50 ET] frankie many of the interviews i heard last night went like this….looking for a weak job # tomorrow …and we’ll get a strong rally tomorrow because the fed will be forced to cut rates
[09:00:16 ET] Carlos Yes, that’s why bonds are up.
[09:00:33 ET] frankie yes….thats why i am long bonds
[09:28:15 ET] Teresa_Lo I was late in getting up…so there is some panic this morning going on?
[09:28:41 ET] Teresa_Lo Non-farm plunged or something?
[09:28:59 ET] Suburban_Trader Sept. 7 (Bloomberg) — The U.S. economy unexpectedly lost jobs in August for the first time in four years, increasing speculation that the Federal Reserve will have to reduce interest rates to counter an economic slowdown.
[09:29:21 ET] Teresa_Lo I like the part where they say “unexpectedly”
[09:34:15 ET] Teresa_Lo Trading in Europe is really so civilized.
[09:34:37 ET] Marquess what do you mean?
[09:34:40 ET] Teresa_Lo The U.S. bond market would open at 2:20PM local time.
[09:35:02 ET] Teresa_Lo I’ve only been back in Vancouver since the second week of July and I’m nearly dead from the hours.
[09:35:06 ET] Teresa_Lo OK, here is the first bar.
[09:35:30 ET] Teresa_Lo BUY STOP at ES 146375
[09:35:37 ET] Teresa_Lo in case it can bounce (for a bar)
[09:40:31 ET] Teresa_Lo ES 62.75 is the new buy stop.
[09:41:09 ET] Teresa_Lo I love it how David “EBITDA” Faber is now David “People can’t get a mortgage” Faber.
[09:41:34 ET] Teresa_Lo He actually says that “Things seem to be getting worse.”
[09:41:43 ET] Carlos Most likely.
[09:42:01 ET] Teresa_Lo Maybe we move from the “subtle warning” phase…
[09:43:45 ET] Teresa_Lo ES 146000 Initial stop
[09:43:49 ET] Teresa_Lo I just want one little scalp here.
[09:44:23 ET] Teresa_Lo ES 6375 is Target 1
[09:44:38 ET] Teresa_Lo We have it
[09:44:41 ET] Teresa_Lo so once we have the target
[09:44:53 ET] Teresa_Lo we either take out money or move the stop to break even
[09:45:08 ET] Teresa_Lo it’s up to you here ’cause I have no idea how many people are waiting to lean on the sell button above
[09:45:13 ET] Teresa_Lo I have what I want.
[09:45:42 ET] Teresa_Lo A little blast of volume from those covering stops and we are good.
[09:47:15 ET] Teresa_Lo So this bounce is probably going to find some sellers…but I personally hate selling after a big gap down like that.
[09:47:30 ET] Teresa_Lo the usual tendency is for it to form a tighter pattern.
[09:48:39 ET] Teresa_Lo There is one up bar here on the 5M ES
[09:48:50 ET] Teresa_Lo so if you want to do a smaller size quick scalp…do it just like in the book.
[09:48:56 ET] Teresa_Lo Emphasis on SMALLER SIZE
[09:49:47 ET] Teresa_Lo The downside target is just really small.
[09:50:01 ET] Teresa_Lo Here is the snapshot of the first trade completed.

[09:50:11 ET] Teresa_Lo And now, we’ll see what happens on this bear flag.

[09:56:34 ET] Teresa_Lo We obviously have the 20EMA5 and 15 overhead, but if the Grail sellers come out at the EMAs, I really don’t expect it to be able to hit their downside target in one swing or anything like that.
[09:57:06 ET] Teresa_Lo It usually puts in a higher low and then morphs into a two-swing flag.
[09:59:22 ET] Teresa_Lo 5M ES, NQ and ER2 still “bear flag”
[11:31:25 ET] Teresa_Lo So…we are not seeing much range on the downside anymore
[11:31:25 ET] Suburban_Trader Interesting points thanks
[11:31:30 ET] Teresa_Lo small bars with a lot of overlap
[11:31:37 ET] Teresa_Lo so perhaps time for a bounce here
[11:31:43 ET] Teresa_Lo I will be back in an hour, OK?
[12:35:57 ET] Teresa_Lo I’m back. So that was a nice bounce, unfolding pretty well as expected.

[12:37:54 ET] frankie teresa do you trade these opening gaps like today with the trend at the open?
[12:38:24 ET] Teresa_Lo No
[12:38:30 ET] Teresa_Lo lol
[12:38:36 ET] Teresa_Lo because on a gap down like this
[12:39:28 ET] Teresa_Lo the normal reaction is to say, “Geez, I missed the boat, so I have to get in there and sell too.” And that is usually not the way to make money. But later in the day, when all looks “stabilized”, we can look for the U-turn, just when they think it’s “safe” again.
[12:40:02 ET] frankie the uturn back down in our case?
[12:40:05 ET] frankie today
[12:40:10 ET] Teresa_Lo Right…
[12:40:17 ET] Teresa_Lo quite often you have this grinding back up
[12:40:34 ET] Teresa_Lo when it takes out some important high where they all buy and then the dreaded U-turn comes.
[12:41:25 ET] frankie we may be approacing those levels soon
[12:44:40 ET] Teresa_Lo Yeah, just listen to CNBC. They will tell you when they are feeling better and then watch for U-Turn.
[12:45:19 ET] Suburban_Trader Too bad you can’t chart the intraday CNBC emotions you make a fortune lol
[12:45:41 ET] Teresa_Lo Hey, that’s what we get paid the big $$ for.
[01:38:23 ET] Teresa_Lo So Frankie…
[01:39:13 ET] Teresa_Lo the de rigueur stop run (at the morning high) is done.
[01:40:08 ET] frankie yes…looks that way
[01:40:33 ET] Teresa_Lo Now it’s time to say some Hail Marys .. their (the buyers’) stops at the LOD (low of day), right?

[01:41:14 ET] frankie how do you time your entries in here?
[01:41:33 ET] Teresa_Lo I don’t. I can’t really do these (slow drip torture) that well.
[01:41:41 ET] Teresa_Lo It’s a 45M bear flag
[01:41:48 ET] Teresa_Lo and I’ll turn it over to the system at 2PM
[01:44:40 ET] frankie what time period does the system trade for you intraday?
[01:44:53 ET] Teresa_Lo 2500 ticks
[01:45:10 ET] Teresa_Lo any bigger time frame will do, actually
[02:52:53 ET] Teresa_Lo Oh, oh
[02:52:57 ET] Teresa_Lo we are almost there!
[02:53:00 ET] Teresa_Lo come to us baby
[02:53:25 ET] Teresa_Lo Now, see how they always say futures trading is so hard
[02:53:33 ET] Teresa_Lo what is so hard about the analysis part? Really?
[02:53:51 ET] Teresa_Lo I got to drive B to school when it was at the morning low and said there should be a bounce
[02:53:57 ET] Teresa_Lo the bounce happens and then it was time for the U-turn
[02:54:08 ET] Teresa_Lo and now, the test and maybe stop raid
[02:54:19 ET] Teresa_Lo there are only so many combos, like Chinese food
[02:55:16 ET] Ben_Lee Well T, you have years of experience looking at the patterns, I bet they are imprinted in your consciousness.
[02:56:15 ET] Teresa_Lo Maybe it would be easier for people if they stop looking at the indicators and look at the bars.
[02:56:20 ET] Teresa_Lo That’s my opinion.
[02:56:30 ET] Teresa_Lo And think about what other people are doing and where they will be trapped.
[02:56:46 ET] Teresa_Lo We’re basically bloodhounds, tracking the escapees.
[02:56:56 ET] Teresa_Lo There we go. We have target.
[02:57:30 ET] Ben_Lee True, agree. It takes a while to make that shift though, from a move-chasing prey to the patient trapper.
[03:00:35 ET] Teresa_Lo Just for the record, you can see the spike of volume as the last resort (“It’s a Breakout!”) sellers get in the way.