Trading Strategy – What Rob Wants You To Know Going Into Tomorrow’s Market

Our Trading Strategy With The $VIX In Mind

First off I want to tackle the $VIX. The thing about the $VIX, and I really want to look back at this to make sure people set their expectations properly. The $VIX has wound up at some pretty low lows here. It’s been here for about 16 months now in a pretty low format the last time it was down that low was back in 2005-2007 then we finally ended up getting the nice crash. The thing is, if history were to repeat itself we could easily go ahead and have several more months here where we’re sitting. When you think about that, there’s 24 months here we have 16 under our belt, we could easily sit here if history were to repeat itself for 6 more months of this low volatility prior to huge volatility expansion and crashing. The reason I point this out is because I’m seeing people take some pretty big bets here early as their trading strategy to try and seize upon a big market crash but as I’ve pointed out, which Is why I want to reaffirm that here, this is 16 months so far but back here this is 24 months of that ultra-low volatility prior to “the end of the world as we knew it’ so to speak with the mortgage crisis and everything. With all that being said, we want to keep that in mind when thinking about our trading strategy. If you’re taking trades with the instant expectation of market roll overs you may be sorely disappointed in your timing. Make sure you can remain wrong longer than the market remains wrong if you know what I mean in a situation like that.

The Euro, Gold, And Stock Index Futures

If you take a look at the Euro, it is something very much on my mind as we are talking about trading strategy. We just briefly dipped below that 1.36 today only to close almost right at it again. We just can’t break that 1.35 80 yet. The 1.35 80 area is what I’m looking to break down below during the European session and/or US session to get really excited about short side trades. For all of you that trade the overnight sessions into the US be on the lookout for that. That’s kind of the key thing I’m looking for. Right now we’re struggling at the 200 day moving average, we broke through it only to rally back to it. Now we’re coming back down but we have gone through that magic 1.36 level and that’s what is so important here. More specifically because of that rule that I have called the 80/20 rule, we’re more specifically trying to get through the 1.35 80.

I just want to update you on Gold as well. I’m looking to see if this is going to become what we call a KOBO, a kick-off blow-off bar. What happens is usually KOBO start off with a big wide range bar then they get several small bars and then they get one more big wide range bar and that’s were all the retail traders jump in and then it will start to reverse back up. Right now we’re just bleeding down, bleeding down, bleeding down since we broke down through my accumulation bar areas here on my rising trend line that I identified for you previously this market just has not looked back. We’ve had the kick-off bar portion, it’s a two phase process. Kick-off and then a blow-off. Well, so we’ve had the kick-off bar now we’ve had several small bars now I want to see that big wide range equal and opposite to the original kick-off bar come down here. That could lead for some great trading. It’s a KOBO and we’re looking to see if that might end up happening here kind of the backend to that trade. Watch for a big drop in Gold there to continue on with this trading strategy.

Finally, as it relates to stock index futures, I just want to point out what’s happening here in the big picture. We’re focusing on a day by day basis because we’ve got two in the two. You’ve got the two that just don’t start going up day after day after day. The S&P and the DOW. And then you’ve got the other two that are seeing some weakness in there and some pausing and not cooking. In fact, I want to show you this weekly chart again because I love showing it. It shows how important these levels are when we are talking about trading strategy for tomorrow. Here we are on the weekly chart, we’ve been here for several weeks, you count them up one, two, three, four, five, six, seven, eight, and now nine. Here we are now, week number nine, we’re back into that channel. We held on for dear life at the speed lines today. As you can imagine going into these the next couple of days my trading strategy is going to be watching the S&P and the DOW start to roll back over, show weakness and the NASDAQ and/or the Russell can accelerate to the downside. Or will the other two rising tides, the S&P and the DOW start to lift us out of this channel, break out above here and we car really look more aggressively at longs.

We’ve got some work to do here though as you can see we’re still in that channel. Last week locked in a distribution bar, this week starting off Monday puts us at an accumulation bar. Again, that bar has all week to close I just want you to see what that looks like on the daily chart that we did. In fact, officially locking an accumulation bar. So you have distribution above, accumulation down below, looking to see which way this thing is going to go ahead and break. The jury is still out on this one and you can tell many people are getting very nervous placing a lot of bets looking at the $VIX now more than ever. I’ve been talking about that since back in January pointing that out to you for various reasons at various times. Well here we are now, a lot of main stream media catching on to the $VIX and a lot of people get nervous in these areas. Until the stock index futures show their ugly head we’re just going to take those small incremental intraday trading opportunities which Is exactly what I’m doing in the Live Trading Room. Outside of that I’m going to be focusing on Gold and of course the Euro.

You guys have a great night, I’ll look forward to seeing you in the Live Trading Room tomorrow morning or in tomorrow night’s videos. Don’t forget that we have a special event tomorrow afternoon sponsored by ICE Futures Exchange and also Trader Kingdom. The link for that is included in your email tonight so go ahead and make sure that you register through that if you’d like to join us tomorrow afternoon. This is the only public even I have scheduled for you guys this week. You guys have a great night, we’ll see you shortly.

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