Looking To The Dow For Guidance For The Four Indices

Ok gang, welcome back. Rob Hoffman here with you. Listen, this is going to be an abbreviated and a little bit unusual video. We are going to combine the free, premium, and swing trading videos together here in a brief video this evening because, as you know, we just got back from Germany and the World of Traders Event where I was speaking and we will be heading over to Las Vegas to do some speaking.

Let’s go ahead and take a look at a couple of key thoughts from today that I want you to remember from last night’s video and what happened today. As we analyzed the S&P near the open this morning we were noticing that we were having a negative divergence on the daily chart in comparison to my indicators. Well, at the same time though the DOW was maintaining a positive correlation where the indicators were higher and the price was higher. Now, the thing is most of the indices minus the DOW were showing weakness this morning. So the whole key, the whole crux of the matter this morning was if the DOW starts to falter then we can look at more sell-side pressure on the other stock index futures. That was the key. That’s what was necessary here.

The Retail Trader Trap In The RUSSELL

So as we went into the session we were seeing signs where the market was trying to make higher highs in price and trying to go ahead and push up but the indicators were just not showing that the market energy was there. We were getting much lower peaks (on my charts at 1:49) here as you can see. We were also starting to see what we call magenta, blue, magenta factor that usually precedes retracements. So, the stock index futures weren’t really cooperating with each other and we weren’t getting unison there. What ended up happening was finally the DOW ended up becoming somewhat of a leader here (at 2:12) this morning back to the upside in the short term. However, that did not go ahead and tie with some of those weak readings that I was showing you earlier. So, what was happening was things such as the RUSSELL were pushing up but we’ve been getting sell-side signals. Now most of you would say that this looks very bullish. We were getting these (on my charts at 2:36) rising and making higher highs so this looks very bullish to people. Well that’s what really helped seal the deal on the day. What happened was, I pointed out to people that we were actually making what we call the Hoffman Fade here (at 2:49). We were making these short term stretches in price. Usually they’re higher highs to make the fades and here on my charts (at 2:58) it is more of an M-pattern. That is really important because when this started pushing up like this (on my charts at 3:06) this looked very bullish and right here (at 3:11) people started expecting this to go on to new heights. Also on my Triggers, we had a positive divergence on the underlying indications. I said, “Look, I recognize some of the positive indications but I’m telling you this looks like a retail trader trap here.” In fact you can look at some of my actual drawings from the screen at that time this morning right around the ten o’clock hour Central Time. What I was saying to people was that I thought they were going to take this (on my charts at 3:34) up a tick or two. They are going to get it right back above here (at 3:36). It’s going to look really attractive to traders looking for a breakout and then it is going to roll right back down here. What ended up happening right after that was, sure enough, we started to falter there and you’ll notice that we went back to magenta on my indicator there (on my charts at 3:58). So as we follow along with this, look what happened (at 4:01), sure enough that preceded the rollover that started there. Then as we look at this that whole forecasting on the hourly chart that we were looking for started to come through. As we followed that forward, notice what happened, the DOW started to falter as well and that of course brought everything down with it. Once we start having the DOW falter remember that’s what we were looking for. That was a key piece of the puzzle. The DOW just kept getting weaker and weaker and weaker.

So then look what happened to the RUSSELL. That brought everything else down kind of like we were expecting. So in the end, it all started with that little fake move where they trapped the retail trader and then brought it right back down (on my charts at 4:46). So it was really great that we were able to see this before it happened and avoid those false breakouts. That’s something that very important to us.

The Super Strong Dow

As we finish up the day here (at the time of the video) that markets continue to show weakness into the afternoon session. Remember, a key piece to this is that super strong DOW. We are looking for that to go ahead and fail, the more that fails the better off some fantastic shorts will come in some of the weaker stock index futures. Now, another key thing from yesterday was (for all of you that get my nightly premium videos) you’ll notice that we talked about DDD. We talked about how to trail the stop in DDD. This came out of a question from one of our students, Alan, who asked in the Live Trading Room how I managed DDD and how I trailed the stop and what I was thinking about. I gave a long presentation on that in the Live Trading Room yesterday morning and I thought that would be a fantastic swing trading one as well since I felt that is was time to leave the DDD market in the short-term for a host of reasons.

You notice on the video from last night (on my screen at 6:16) what I was basically saying was we were, at that time, parabolic. There was a host of things I said, obviously, throughout the six minute video. Some of the key things though, we were basically parabolic, have lots of room to grow back and a distribution bar here (on my charts at 6:30). Now at the time we talked about this in the middle of the live session we were at about $83 and so I was explaining why I thought that was a good time to get out up here (at 6:40) because the risk of moving from what we call my speed line to 20MA trades was setting up here (a common play that we use in our successful options trading program).

As we go back and take a look at this now you’ll see that what has happened here on an intraday basis that as of the low we hit just a bit ago we’ve given back almost 10% on the day. Currently, right this second, it is at about %7.3. That’s a huge drop! A lot of that could have been avoided if you listened to what we talked about the Live Trading Room yesterday or you acted on it based on comments from last night’s Swing Trading Video. You would have preserved a lot of profit before this thing took quite a blood bath.

For those of you that want to go ahead and join us in this highly successful nightly video newsletter program you’re welcome to go to www.becomeabettertrader.com/now or you can call the office at 847-984-0031 and you can join us. What you can do is instead of paying the normal $147 a month price you can join on a special rate here. You’ll get the monthly Q&A webinar. You’ll get access to the discussion forum with Randy and I. You’ll get my six hour day and swing trading course including my must have ‘Overcoming The Fear Of Pulling The Trigger And Handling Drawdowns’ Course. Really, it’s an incredible package of tool and things to be a part of here along with the amazing commentary each and every day. A huge value for $97/month.

Leave a comment!
Read previous post:
What We’re Looking For Next In Index, Gold And Crude Oil Futures

Welcome back everyone. Rob here with you. First off, before we get into tonight’s information I was to go ahead...