06-15-14 Trade Plan

This week was just a pullback in the indices and sectors but these small pullbacks really mean nothing to the setups that are continuing to play out.  That kind of price action is good and I am going to keep trading it as long as it lasts.  In the various instruments that are pulling back, there is still larger time frame supporting trends to fall back on and look for the shorter time frame trends to reverse and continue in the direction of the big picture trends.  A great example of that I am watching now is the Russell 2000.  The 65 minute trend is the supporting time frame and in looking for continuation of that trend, I look at the smaller time frame (like 15m) to see if it has the strength to reverse and start a new 15m trend to the upside (which would be the 65m trend continuation).  If it can't reverse and it breaks $115 then so be it, but this is what I am wanting to trade.


The reason I am watching the Russell is because it is giving the clearest signals right now and it has more room to run into new highs.  Risk/reward is more favorable in the big picture.  If the Russell does decide to pull through, that will drive the other indices and drive the market as a whole.  Or maybe the overall market drives the Russell, I don't know but I know the correlations and I'm using the Russell as an anchor setup.  There really isn't much more to say about this so I will take a look at the bond market.

Looks good on the surface right?  Nice daily trend still in tact and holding well so far.  The only problem I have here is that this more powerful part of the uptrend in bonds has been driven on a 130m trend, not a daily.  Right now that 130m trend is trending downward and it has yet to get back above it.  If it can get back above that 130m trend and continue the move higher then I am more than happy to participate in it, but I am not buying here, yet.  Something to look at if you haven't.

Sectors that look the best to me are technology (XLK), energy (XLE), & financials (XLF).  This is only because these are the sectors that are holding up the best.  If the indices continue to the upside maybe different sectors emerge as leaders but for now these are the ones holding up the best and the ones I am watching.  I'll be sure to tweet any changes or updates to this.

I wanted to talk about this ranking system for a second..  This is the most objective way I have ever looked at the markets for swing trading and it falls in line with everything I believe in; trends, multiple time frames, and relative performance.  It takes all three of those extremely important parts of the market (that I have spent a long time studying, which could be why it is so powerful to me) and rolls it into one objective ranking system.  Even better than that, it doesn't cross the line of being too complex or even complex at all.  The simplicity of this is just beautiful to me.  It works for both my shorter term trading and my position trades like bonds.  Maybe this is just part of my learning process or maybe I have struck a new chord of market understanding but I really like what this is doing for me and my execution.  Anyway, that's all I have for this week so as always thanks for reading.

Trade well,
-Michael