Great Trading This Week But Listen To Rob’s Cautions And Tips In This Video

Welcome back gang. I hope everyone is having a great kick off to their weekend. As we conclude last week’s market action. It has been a great week, it’s been a great 2014, and its just going to get better and better. Mark those words. It is going to be a year with a lot of active trading and a lot of opportunities here. We are doing so many more trades in the Live Trading Room on a daily basis. Great stuff and so much more to come!

As we take a look now at the stock index futures the plan for Monday is to step back and take a wait and see. If anyone tells you any different they are really putting you into potentially a dangerous spot. Right now we have two things going on. Obviously, overseas with the Ukraine/Russia situation is a big thing this weekend. We don’t even know what these markets are going to look like come Monday morning. They could be completely different. The other thing that is taking place here that is very important to note is what happened with the RUSSELL today. You see the RUSSELL held up in what we refer to as the kill zone. That is where we have the falling speed lines and rising support underneath. All things being equal, you have declining market energy settling in there. What is happening here is that you are trapped between a rock and a hard place and it gets whipsawed back and forth. At the same time, take a look at the other three instruments. Something is way out of whack there. You have the S&P, DOW, and the NASDAQ considerably down. In fact, we spent our time this morning in the Live Trading Room shorting the NASDAQ because it was performing the best overall. This is counter to what we normally do from the perspective of trying to follow the one against the three. The RUSSELL was acting very peculiar. It wasn’t moving much up or moving down net. We kind of almost neutralized and compartmentalized the RUSSELL today. We acknowledged that we were in that kill zone and said that the plan for today would be to see if we could get these markets, which early on in the morning had started to bounce off their lows, (on my screen at 2:50) to settle back down and start to roll back towards the low of the day that they could be some great short opportunities. That is exactly what the market offered up this afternoon. Great short opportunities in the stock index futures. Hopefully you guys really enjoyed that.

As we look to Monday we’ve got three of them that are down considerably. We have the RUSSEL that is still holding in there. You can bet Monday morning that I’m going to be paying close attention to what happens in the RUSSELL in relation to the other three. We need to wait and see what happens with the news this weekend. This is basically the same thing as if we were trading in front of a news report. You wait for it to come out and reassess the situation there.

Contract Rollover And Staying Where The Volume Is

One other thing that I want to share with you this evening that is a little bit different (on my screen at 3:46). If you trade GOLD or CRUDE OIL or even the stock index futures they roll over every three months. GOLD and CRUDE OIL roll over much more frequently than that so you can get use from this any time. This is how I roll over. It is very much different than what your broker will tell you. Just keep that in mind. Your brokers actually tend to force you into the new front month contract as rollover is taking place but, from my perspective, that is a very dangerous place to be. Especially if you are trading any real size. What you’ll notice here, this is Thursday morning’s open (on my screen at 4:32) when rollover was set to begin. You will notice that while your brokers force you over, in most cases, to the new contract (what you see on the left side is the March contract and the other is the June contract) there tends to be more volume in the previous contract.

As we look at the US open yesterday morning just look at the start difference in volume between the two. You have 22,725 trading into the open on the March contract and only 5,800 on the other. That is approximately a 4 to 1 ratio. Let’s move into later in the morning. Here we are at 11:00AM (on my screen at 5:16) and the market is getting a little bit thinner at that time. Let’s take a look right there at 11:00AM. At that time we see 13,000 still trading the March contract and only 5,800 contracts one the other. Over a 2 to 1 ratio still. Don’t you want to be where the volume is? That is something that I want to challenge and remind all of you about. We want to be where the volume is. What I am doing is that I’m putting up the existing month and the new front month and I’m waiting till the five minute bars roll over in volume to the new contract. You see here ( on my screen at 5:56) even at this point yesterday this big down bar was 64,000 in the March and only 26,000 in the June contract.

Of course, finally in to the overnight session, it went ahead and started to switch over there to the new contract. That wasn’t until late into the evening. That is why Friday morning I’m usually trading the new front month. So, when your broker forces you over consider, if it makes sense to you, to go back to the previous month because don’t you want to be where the volume is? Just because your broker wants to make sure that you don’t forget to roll over you may want to be where the volume is to avoid as much slippage as possible as well as poor fills.

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