Why Tuesday Was Traded Short And The Plan For Wednesday Ahead Of The SOTU And FOMC

Welcome back, everyone! You’ll recall that our strategy here was pretty straightforward and pretty sound. We saw that the Russell was going to extend to the other markets finally. We talked about skipping rock theory and how the markets over and over were hitting those key areas. Our concern was push down. We talked about how that specifically dealt with the Russell. Sure enough, it did continue to follow through. That also helped us break down below those speed lines on the other stock indices. The Dax was already below. It was real easy to decide which way to trade. If you’ve been following with my videos the last several days, we had a clear cut strategy to be focusing on shorts. From that perspective, going into this morning, we didn’t have support from the last several days back. We bounced off that area at 9:22 a.m. CT. The overnight session hit that area, bounced up, hit that area again and we were expecting a rejection. You’ll see multiple layers of support in this area. Even if you extend it back, you can see areas where this was an important area as well. The focal point was short until we hit into that key support and then it was time to back off. That’s exactly what ended up happening. At that point it was time to back off the shorts down below until we were looking for retracement trades where we had wide-range spikes back to falling resistance and then the market rolled over again. Some of those retracements were ultimately pretty healthy retracements. This morning in the Live Trading Room, I was focusing on retracement trading. That’s where I made my money trading live on the screen in front of people.

I won’t be putting any money into the overnight session. I’m going to let the State of the Union come to pass. I will look for trades tomorrow morning. The buys are going to be short as long as we remain below the speed lines. Nobody can predict what’s going to happen what’s going to happen with a market push down today. Common theory is you get a little bit of a retracement. You usually have a couple lumps as it’s looking to make that deeper move. People were kind of shocked to see today that we could pull back 20% and not even batt an eye. The Dow was 26,000. That was 5200 points. You would have a 20% correction. Who cares. Let it fall. The market walks the stairs up and rides the elevator down. Obviously, investors will have a slightly different opinion but as traders that’s what we thrive on.

From a fresh swing trade perspective, I’m not going to be taking a look at any long until we’re back above the speed lines. Frankly, I’d really prefer day trades to be back above the speed lines for likely maximum effectiveness. Otherwise, my favorite trade would be for the market to open up, push up a little bit and start to sell off and let the computer programs drive this thing straight down.

I have a couple of things I want to watch for tomorrow. Remember, with State of the Union and FOMC, putting the money in in advance is just a gamble with two major events. So, with that being said, I’m going to go with the conventional wisdom to go with conventional shorts to go down below the speedlines and longs back above. Pay attention to the Nasdaq. I shared with you some of my key thoughts like on the Wealth365 site like AAPL. That was dead on. That dropped down several dollars since I put out that video. The Nasdaq will be kind of important to the process and it’s something I’m trading a lot right now. We’ll watch it pretty closely and I’ll give you some updates in tomorrow night’s videos.

We’ll see you in the Live Trading Room tomorrow and in tomorrow night’s videos. Take care!

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