Mr. Trader « Value of Perfect Information

Name: Mr. Trader

Bio: A full-time student of the market, I find myself captivated by financial markets so that I end up devoting almost all spare time (and often more) to trading and learning from battle-tested and credible analysts with experience that far surpasses my own (e.g. Robert Prechter, Todd Harrison, Jim Quinn, Nadeem Walayat, Jeremy Grantham & many more) as I gradually construct a foundation of my own analytical and trading experience. I am currently doing my best to become proficient in utilizing market mechanics, charting, technical analysis, sentiment cycles, trading psychology, risk management, disciplined rather than emotional decision-making and EW theory so that my trades end up on the side of the smart money . Like Mortie, trading is currently my avocation, one which I intend to incrementally transform into something more serious as I meet developmental goals.

Posts by Mr. Trader:

Mr. Trader’s Newsletter 17

Written by Mr. Trader
January 25th, 2010 at 1:17 am

A quick review of my previous analysis:

Regarding the ES/SPX I said: “This week I believe it is more probable to see a weekly red candle again, with Friday closing below Tuesday’s opening price. I will gain confidence in this bearish outlook if the ES can take out 1127.5 by Wednesday. Downside targets would be roughly 1107, then 1099 and 1085. Two lower probability scenarios IMO include another week of sideways action, bouncing between the high ‘20s and the high 40’s. And least probable IMO is a green weekly close, I would imagine within the 1145-1160 zone if the ES can take out 1146 by Wednesday or if 1027.5 is not taken out by the middle of the week, then I would entertain the possibility that a triangular consolidation pattern may be setting up a run to roughly 1160. “

Tuesday ES tried fake us out as it rose to almost take out the previous high, but failed to take out said high. By Wednesday, ES had take out 1127.5 to the downside and by Friday the ES had made a weekly low of 1086.25 – stopping along the way to that low at 1108.5 – very close to my 1107 level, then at 1101 – very close to 1099, and finally at 1086.25 which was very close to my expected 1085 level.

This week I would expect the ES to touch the low 1060s, I believe there is an open gap at 1061.75 or so. If the ES can close this gap early in the week, say Monday or Tuesday, then I would expect some sort of upward retracement to relive the very ST oversold condition. I would expect any upward price movement to not move above the 1125-1130 zone. A drop through 1060, into the 1040s would suggest weakness IMO and would be fairly bearish for the intermediate term IMO.

Note: I will be traveling for business during the next two weeks and will not have internet access. I will put out my next newsletter three weeks from today.

Fig. 1 VIX Megaphone appears to be in-play

Good luck trading.

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Mr. Trader’s Newsletter 16

Written by Mr. Trader
January 19th, 2010 at 2:13 am

A quick review of my previous analysis, done two weeks ago as I was traveling without an internet connection last week:

Regarding the ES/SPX I said: “Looks like the outlook concerning a high at the beginning of the week was correct, but the ES never made it below the 1109-1108 zone – this suggests strength. In fact, it looks like the ES may be tracing out a bullish continuation pattern with a very nicely defined channel (see Fig. 1). This week I would expect the ES to take out last week’s high if it can make it above the top of the channel at roughly 1122-1123 as of now – this is a dynamic upside target – and a bullish confirmation if ES can make it above 1125.25. Upside targets would be 1135-1150 with the possibility of some climactic parabolic action. If the ES fails to take out the top trendline of the declining channel, I would expect a trip to the bottom trendline of the channel in the 1109-1107 zone. On the downside I’m looking for 1109, 1102, 1098(gap-fill), 1094 and 1085 as a possible bearish extension target. I would gain confidence in the bearish outlook only if the top trendline is not seriously violated and the ES visits the lower trendline within the first two days of the week – otherwise, I’m expecting more upward price movement.”

The Monday following this analysis validated the bullish outlook and the ES moved up all week, making a weekly high at roughly 1140, within the upside target zone of 1135-1150. Last week the market moved sideways, but closed lower on Friday than where it opened on Monday – this was consistent with the expectation I conveyed to Ben before leaving for my trip, and I believe he may have conveyed this in the comments section.

This week I believe it is more probable to see a weekly red candle again, with Friday closing below Tuesday’s opening price. I will gain confidence in this bearish outlook if the ES can take out 1127.5 by Wednesday. Downside targets would be roughly 1107, then 1099 and 1085. Two lower probability scenarios IMO include another week of sideways action, bouncing between the high ‘20s and the high 40’s. And least probable IMO is a green weekly close, I would imagine within the 1145-1160 zone if the ES can take out 1146 by Wednesday or if 1027.5 is not taken out by the middle of the week, then I would entertain the possibility that a triangular consolidation pattern may be setting up a run to roughly 1160.

Good luck trading.

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Mr. Trader’s Newsletter 15

Written by Mr. Trader
January 4th, 2010 at 9:15 am

A quick review of last week’s guidance

Last week I said: “Looks like the euro/usd began the upward retracement I had mentioned, and still has some ways to go on the upside. The low of the week was roughly 1.422 and below this level is where my ST upside bias would be invalidated. “

The euro/usd held above the low and the upward retracement I have been contemplating appears to still be in the processes of correcting the drop from 1.515 to 1.422. I would look for a high this week that surpasses last week’s high at roughly 1.444 – I’m thinking 1.451 to 1.46 before a downward resumption.

Regarding the SPX I said: “ES stayed strong early in the week and never made it below 1088.5. The high of the week was just short of the 1125 level. This week, I would think it’s more probable that the ES makes at least an ST top at the beginning of the week and finishes the week below where it started it. On the upside, I am still looking for the 1125-1140 range to contain any upward price movement. On the downside I’m looking for 1109, 1102, 1098(gap-fill), 1094 and 1085 as a possible bearish extension target. I will gain confidence in this outlook if the ES can close below 1109-1108 by the middle of the week.”

Looks like the outlook concerning a high at the beginning of the week was correct, but the ES never made it below the 1109-1108 zone – this suggests strength. In fact, it looks like the ES may be tracing out a bullish continuation pattern with a very nicely defined channel (see Fig. 1). This week I would expect the ES to take out last week’s high if it can make it above the top of the channel at roughly 1122-1123 as of now – this is a dynamic upside target – and a bullish confirmation if ES can make it above 1125.25. upside targets would be 1135-1150 with the possibility of some climactic parabolic action. If the ES fails to take out the top trendline of the declining channel, I would expect a trip to the bottom trendline of the channel in the 1109-1107 zone. On the downside I’m looking for 1109, 1102, 1098(gap-fill), 1094 and 1085 as a possible bearish extension target. I would gain confidence in the bearish outlook only if the top trendline is not seriously violated and the ES visits the lower trendline within the first two days of the week – otherwise, I’m expecting more upward price movement.

Fig. 1 – ES

Good luck trading.

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Mr. Trader’s Newsletter 14

Written by Mr. Trader
December 28th, 2009 at 2:05 am

A quick review of last week’s guidance

Last week I said: “The eur/usd ended another week near the low of the week, I would expect it to make a probe to the upside to touch the area between the 20 and 50 EMA’s, before resuming a downward price trajectory. This week I would be surprised to see the eur/usd make it substantially below 1.414 “

Looks like the eur/usd began the upward retracement I had mentioned, and still has some ways to go on the upside. The low of the week was roughly 1.422 and below this level is where my ST upside bias would be invalidated.

Regarding the SPX I said: “Considering the sharp drop in the eur/usd I would expect the market to move downward this week – I will look for the market to confirm this understanding if it can take out 1088.5 by the middle of the week. If 1088.5 is taken out by the middle of the week, I would look for 1080, then 1072 and then 1062. If ES cannot take out 1088.5 by the middle of the week, I would look for a rally to the aforementioned 1125-1140 range.”

ES stayed strong early in the week and never made it below 1088.5. The high of the week was just short of the 1125 level. This week, I would think it’s more probable that the ES makes at least an ST top at the beginning of the week and finishes the week below where it started it. On the upside, I am still looking for the 1125-1140 range to contain any upward price movement. On the downside I’m looking for 1109, 1102, 1098(gap-fill), 1094 and 1085 as a possible bearish extension target. I will gain confidence in this outlook if the ES can close below 1109-1108 by the middle of the week.

Fig. 1 – ES

Good luck trading.

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Mr. Trader’s Newsletter 13

Written by Mr. Trader
December 21st, 2009 at 3:07 am

A quick review of last week’s guidance

Last week I said: “The currency pair ended the week well under it’s 50 EMA, and the 20 and 50 EMA’s ended the week at the same level, suggesting a bearish crossover is very likely unless the currency pair makes a swift move upward above the 50 EMA – I would expect at least an upward test of the 50 EMA before a resumption of a move below last week’s low. Looking for the move up to reach anywhere from 1.482 to 1.49, and would reconsider ST bearish outlook if the pair can close above 1.5. “

The eur/usd ended another week near the low of the week, I would expect it to make an probe to the upside to touch the area between the 20 and 50 EMA’s, before resuming a downward price trajectory. This week I would be surprised to see the eur/usd make it substantially below 1.414,

Regarding the SPX I said: “ES ended the week pretty much where it started it – such resilience suggests strength and this week ill be looking for the March contract to take out the previous high at 114.25, at which point I would look for the weekly high to fall within the previously mentioned range of 1125-1140. This bullish scenario remains my primary outlook so long as the ES can stay above the 1104 level early in the week. A downside target remains in the 1060-1070 range if the ES can close below roughly 1096 early in the week.”

By Tuesday, ESH0 dropped below 1104 but not below 1096, complying with neither anticipated scenario. Considering the sharp drop in the eur/usd I would expect the market to move downward this week – I will look for the market to confirm this understanding if it can take out 1088.5 by the middle of the week. If 1088.5 is taken out by the middle of the week, I would look for 1080, then 1072 and then 1062. If ES cannot take out 1088.5 by the middle of the week, I would look for a rally to the aforementioned 1125-1140 range.

Fig. 1 – US Dollar Index

Fig. 2 – SSEC

Good luck trading.

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Mr. Trader’s Newsletter 12

Written by Mr. Trader
December 14th, 2009 at 1:03 am

Mr. Trader’s Newsletter 12

A quick review of last week’s guidance

Last week I said: “The currency pair closed at the low of the week, however not below the low of last week so the weakness could be short-lived – on the other hand, assuming the pair maintains is highly correlated movement with the major indices such as the SPX, a move down at least to 1.476 would not surprise me during the following week. I’m inclined to assign a higher probability to a break below 1.48 rather than a break above 1.52.”

The currency pair ended the week well under it’s 50 EMA, and the 20 and 50 EMA’s ended the week at the same level, suggesting a bearish crossover is very likely unless the currency pair makes a swift move upward above the 50 EMA – I would expect at least an upward test of the 50 EMA before a resumption of a move below last week’s low. Looking for the move up to reach anywhere from 1.482 to 1.49, and would reconsider ST bearish outlook if the pair can close above 1.5.

Regarding the SPX I said: “The coming week, I’m inclined to favor a probe down as my primary scenario. Ill be looking for the ES to get below 1095, sometime Monday-Tuesday as a clue that the market is in agreement with my primary scenario. I would look for a low for the week to lie roughly in the 1060-1070 range. Alternatively, if the ES is able to close above 1119 early in the week, I would expect a high of the week to fall within the range of 1025-1140.”

ES made it to the low 1080s on Tuesday, and touched 1080.5 on Wed., but that’s as low as it went, never making it to the mid 60s as I had anticipated.

ES ended the week pretty much where it started it – such resilience suggests strength and this week ill be looking for the March contract to take out the previous high at 114.25, at which point I would look for the weekly high to fall within the previously mentioned range of 1125-1140. This bullish scenario remains my primary outlook so long as the ES can stay above the 1104 level early in the week. A downside target remains in the 1060-1070 range if the ES can close below roughly 1096 early in the week.

Fig. 1 – EUR/USD

Good luck trading.

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Mr. Trader’s Newsletter 11

Written by Mr. Trader
December 7th, 2009 at 12:50 am

A quick review of last week’s guidance

Last week I said: “The currency pair closed above 1.50 for only 1 day and sold off hard for the next two days. This makes me cautious about expecting higher prices although so long as it stays above the 50ema, now at 1.485, I would expect higher prices for this pair. A close below 1.482 would confirm at least a short-term top has been put in place.”

The currency pair closed at the low of the week, however not below the low of last week so the weakness could be short-lived – on the other hand, assuming the pair maintains is highly correlated movement with the major indices such as the SPX, a move down at least to 1.476 would not surprise me during the following week. I’m inclined to assign a higher probability to a break below 1.48 rather than a break above 1.52.

Regarding the SPX I said: “… I’m thinking that if the ES can make it above 1098 and then 1100 (Monday-Tuesday), it’s very likely to make a new high for the year. I would think upside targets in the range of 1020-1030-1035 could be in the cards by the EOW. Conversely, if ES takes out 1088 then roughly 1082.5 at the beginning of the week, I would expect it to travel below last weeks low of 1067, first target would be 1060-1061 and then the low 50s if that level doesn’t hold.”

ES stayed above 1092.5 Monday and overtook 1100 on Tuesday, making a new yearly high on Wednesday, Thursday, and Friday. The high made was 1119, 1 point away from my high target range.

The coming week, I’m inclined to favor a probe down as my primary scenario. Ill be looking for the ES to get below 1095, sometime Monday-Tuesday as a clue that the market is in agreement with my primary scenario. I would look for a low for the week to lie roughly in the 1060-1070 range. Alternatively, if the ES is able to close above 1119 early in the week, I would expect a high of the week to fall within the range of 1025-1140.

Some mixed signals: Dow Transports closed the week very strong, all other major indices closed in the middle of the range, and the US Dollar closed the week near its weekly high.

One chart is attached with commentary:

Fig. 1 – SPX VPCI system chart with long term VWAPS

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Mr. Trader’s Newsletter 10

Written by Mr. Trader
November 30th, 2009 at 12:01 am

A quick review of last week’s guidance

Last week I said: “The euro/usd pair continued to consolidate in a range all of last week and has yet to break out to one side or another – looking for a close below 1.48 or above 1.5 for further clues.”

The currency pair closed above 1.50 for only 1 day and sold off hard for the next two days. This makes me cautious about expecting higher prices although so long as it stays above the 50ema, now at 1.485, I would expect higher prices for this pair. A close below 1.482 would confirm at least a short-term top has been put in place.

Regarding the SPX I said: “For the next week it appears likely that a head and shoulders pattern could be forming – see Fig. 1 for a chart I generated and posted on the subscriber’s site on Friday of last week. So long as ES stays above 1083.5 Sunday-Monday, I’m looking for upside targets of 1098.5 and then possibly 1102.5 to 1105 with a max target of 1108 before I expect the ES to make another drop below 1083.5, possibly towards the end of the week if not sometime the week after – that downside target is tentatively in the 1050-1066-1072 range and ill be able to generate something more precise if/when the ES confirms my current analysis.”

The ES took out my max projected retracement of 1108 and made it just 3 points higher to 1111, consolidated sideways, and took a swan dive to 1067 before recovering to the 1090s in Friday’s session. All in all, this was very close to what I had projected, and even my downside targets of 1050-1066-1072 ended up being capturing the low at 1067, just 1 point off my mid-target at 1066.

This week I’m thinking that if the ES can make it above 1098 and then 1100 (Monday-Tuesday), it’s very likely to make a new high for the year. I would think upside targets in the range of 1020-1030-1035 could be in the cards by the EOW. Conversely, if ES takes out 1088 then roughly 1082.5 at the beginning of the week, I would expect it to travel below last weeks low of 1067, first target would be 1060-1061 and then the low 50s if that level doesn’t hold.

A few charts are attached with commentary:

Fig. 1 – SPX VPCI system chart with long term VWAPS

Fig. 2 – DOW (INDU) VPCI system chart with long term VWAPS and LT ellipse

Good luck trading.

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Mr. Trader’s Newsletter 9

Written by Mr. Trader
November 22nd, 2009 at 10:07 pm

A quick review of last week’s guidance

Last week I said: “It appears noteworthy that the euro/usd has not made a new high to confirm the SPX’s new high. I think it’s worthwhile to monitor this currency pair for clues as to what to expect from the SPX.”

The euro/usd pair continued to consolidate in a range all of last week and has yet to break out to one side or another – looking for a close below 1.48 or above 1.5 for further clues.

Regarding the SPX I said: “The current technical picture for the ES (SPX futures contract – quotes for those without futures accounts: http://pfgbest.com/traders_tools/quotes.asp?page=chart&sym=SPZ9 ) remains overall bullish. So long as the ES doesn’t take out the lows from Thursday and Friday of last week, ES 1082.5 roughly, then I’m expecting the ES to head to 1104 as a first stop, and then to test the 1110-1120 range. If ES does make it to said upper range, I would then expect a correction down to the 1080s, but that would be a lot of action for the next week.”

This outlook ended up being very accurate – as the ES stayed above 1082.5, made a run to 1102, paused, shot up to 1112, consolidated in the 1100-1110 range and then dropped to a low of 1083.5 at the end of the week – if only my foresight could be this good every week.

For the next week it appears likely that a head and shoulders pattern could be forming – see Fig. 1 for a chart I generated and posted on the subscriber’s site on Friday of last week. So long as ES stays above 1083.5 Sunday-Monday, I’m looking for upside targets of 1098.5 and then possibly 1102.5 to 1105 with a max target of 1108 before I expect the ES to make another drop below 1083.5, possibly towards the end of the week if not sometime the week after – that downside target is tentatively in the 1050-1066-1072 range and ill be able to generate something more precise if/when the ES confirms my current analysis.

Regarding a possible turn date I said: “Lastly, don’t forget that this Tuesday could likely live up to its name of turnaround-Tuesday. But I would not try to pinpoint Tuesday as ‘the day’ and would use a 1 day buffer before/after Tuesday, 11/17/09 so I looking at Mon-Wed as a temporal ‘top window’ – may not be THE TOP, and may end up being just A TOP, or maybe nothing of significance whatsoever – just something to keep in the back of your mind.”

The SPX topped Monday and was trading about 30 points below the Monday peak on Friday. So this projection appears to have been accurate. At this time, it appears unwarranted to assume that the Monday peak was THE TOP and ill be trading under the assumption that it was just A TOP. I would reconsider this if the ES were to make a low below the most recent swing low at roughly ES 1026. A future possible turn date appears to be at the end of Dec, right before Christmas

A few charts are attached with commentary:

Fig. 1 – ES hourly

Fig. 2 – VIX Expanding wedge

Fig. 3 – SPX VPCI system chart with long term VWAPS

Fig. 4 – DOW (INDU) VPCI system chart with long term VWAPS and LT ellipse

Good luck trading.

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Mr. Trader’s Newsletter 8

Written by Mr. Trader
November 15th, 2009 at 11:06 pm

Changing up the delivery this week:

A quick review of last week’s guidance – in a nutshell, I was wrong in expecting lower equity prices and a higher dollar, I think the surge to a new high in the SPX and a new low in the US Dollar took many people by surprise.

It appears noteworthy that the euro/usd has not made a new high to confirm the SPX’s new high. I think it’s worthwhile to monitor this currency pair for clues as to what to expect from the SPX – I have a chart of this pair in Fig. 1.

Regarding the SPX I said: “so long as the SPX continues to close below it I’m expecting the SPX to head lower in the intermediate term with a “next-stop” target close to 950 – but it should take several weeks to get there, again, so long as we don’t close (2%) above the multi-month trendline that was recently broken. As I’ve been discussion on the premium site, I’m looking for the ES to touch the 1074-1085 range before heading lower”

I was expecting the SPX to trade into the 1074-1085 range as a “normal” retracement of the move down, and it looks like on 11/9/09 the SPX closed roughly 2% above the trendline – thereby invalidating my expectation of lower SPX prices.

The current technical picture for the ES (SPX futures contract – quotes for those without futures accounts: http://pfgbest.com/traders_tools/quotes.asp?page=chart&sym=SPZ9 ) remains overall bullish. So long as the ES doesn’t take out the lows from Thursday and Friday of last week, ES 1082.5 roughly, then I’m expecting the ES to head to 1104 as a first stop, and then to test the 1110-1120 range. If ES does make it to said upper range, I would then expect a correction down to the 1080s, but that would be a lot of action for the next week.

If the ES can drop below 1082.5, then I’m looking for downside targets of 1078, 1072 and 1067-1063 range, but I’m not expecting a much lower quote by the EOW.

A list of major indexes not confirming the DOW / SPX new high set last week – this list is non-exhaustive:

BKX
NASDAQ COMPOSITE
DOW TRANSPORTS
DOW WILSHIRE 5000
EURO/USD
RUSSEL 2000
BONDS (LQD & JNK)

Lastly, don’t forget that this Tuesday could likely live up to its name of turnaround-Tuesday. But I would not try to pinpoint Tuesday as ‘the day’ and would use a 1 day buffer before/after Tuesday, 11/17/09 so I looking at Mon-Wed as a temporal ‘top window’ – may not be THE TOP, and may end up being just A TOP, or maybe nothing of significance whatsoever – just something to keep in the back of your mind.

Several charts are attached with commentary:

Fig. 1 – euro/usd