A few thoughts....

October has been a pretty tough month. Initial success gave way to some confidence-sapping trades. Fortunately, I have been able to muster some good trades and restore a degree of confidence. More about this in another post....

For now, I'd like to focus on an interesting strategy I came across in an old issue of Traders Magazine. Called "Flash Formation Fractals" this is a very geometric kind of a pattern, something that I feel rather comfortable with. By using an initial swing high or swing low and a retracement point, it is able to project a target and a reversal zone. More often than not, it proves to be eerily accurate. Using this technique, FTSE looks set to lose about 290 points or so from the current level of 6291. Yes, I am looking at an initial downside target of 6007! Here's a screenshot of the setup and the target level.

FTSE 28th Sep 2007

Friday's action was a bit of a volatility thing. There was a good move both up and down and I had some decent trades.

Outlook for 1st Oct 2007: There is a clear long uptrending channel. But having exceeded the upper line on the 19th Sep, the index has kind of been moving in a somewhat confused way with the occasional day or two of good moves. However, in the last day or so, the index seems to have taken a definite turn to the bearish side as evidenced by the smaller channel visible from the 27th. I would expect the index to try and visit the lower lineof the longer channel - which means a possible drop of about 110 points or so.

However, disagreeing with my bearish stance is the lone Pattern Trapper signal - a High Breakout. It is possible the index MAY try to move up first, hit the upper line of the inner blue channel and then resume its descent.

Addendum: Spotted another possibility on the chart (see the one right on top) - this is a bullish scenario. A new bullish channel (green) has developed - if price continues to move along this channel, we have a move upto 6530! Not in a single day, I guess. Obviously, the index could swing either way on Monday. Should be pretty exciting!

FTSE 25th Sep 2007

Was expecting the market to go down today and it certainly obliged.  Had some good shorts and actually a couple of anti-trend longs too!

Outlook for 26th Sep 2007:  For this exercise, I have switched to Pitchforks.  As is evident, FTSE is in a definite downtrend.  The yellow pitchfork seems to suggest there should be more downside to follow as we have not yet hit the median line.  Possible target should be in the vicinity of 6300.  Should it go below the median line we could be looking at something as low as 6100 or so.  Obviously the target won't be hit in a matter of a single day and is likely to be drawn out over a three day period or so.

Supporting the bearish outlook is the fact that on the EOD chart, FTSE has closed below its three-day balance point.  But it can't be all bearish, can it?  You guessed right.  The lone Pattern Trapper signal for tomorrow suggests a High Breakout.  And since I am short and Sod's Law works best when I take a position, chances are the index will actually rise!  Good luck to me tomorrow!

FTSE 20th Sep 2007

Today was an extraordinarily boring day on the markets (not to mention the whipsaws).

Outlook for 21st Sep 2007   My pressure indicator has shown selling pressure as being higher than buying pressure as of close yesterday.  Will this translate into a down day today?  Time will tell.  The intraday chart appears to suggest possible downside too.  Also looks like PT signals are not particularly helpful other than indicating that we've seen a NR7 and Inside Day as of yesterday.  So the move should be big today, one way or the other.

FTSE 14th Sep 2007

As the problem with Northern Rock continues, FTSE continues to bleed.  From today's action it is clear a new downward channel at a rather sharpish angle has been established.  Unless the market picks up (thanks to the strong assurances given by the Chancellor over the safety of deposits with Northern Rock), further downside is probably on the cards.

PT Signals for tomorrow do seem to suggest upside.  Except for one signal, the majority are bullish.

(1) Low Range Close
(2) 2 Day ROC Buy
(3) Momentum Pinball Buy
(4) High Breakout Setup

Astonishingly, the Range Projection technique worked quite well and the low of the day exceeded the projected low by about 3-4 points.  Here are  the projection/actual:

Projected High: 6,326.59      Projected Low: 6,171.79
Actual High     : 6,289.29            Actual Low: 6,168.00
                            (-37.29)                                  (3.79)

And for tomorrow the projected range is:

Possible High: 6,236.04 (53.25 points)
Possible Low : 6,114.75 (68.04 points)

And finally, a look at the EOD chart for FTSE:

FTSE 13th Sep 2007

I was rooting for longs on the FTSE for today.  I certainly wasn't disappointed!  FTSE closed up by 57 points.  Despite several interruptions today (doubling-up as a driver!) managed to catch some good trades.  

As is evidenced by the intraday chart, there is nice upward channel running on the FTSE.  A technique which I cannot reveal here indicates there is further rise to come on the FTSE.  I would not be surprised to see the index hit 6425 tomorrow.  Odd as it may sound in the current economic situation but the markets are rallying!  Never, never argue with the market!

The EOD chart on FTSE also shows a clearly upward channel and points to even higher targets.

Outlook for 14th Sep 2007  There should definitely be some continuation of the rise.   Range projection technique suggests a rise of about 52 points (6416) which does tie-up with another technique and the intraday channel itself.  PT Approach fires only one signal for tomorrow - a Low Breakout.   Should be very interesting tomomrrow!

FTSE 12th Sep 2007

Was expecting a decent bit of downside for 12th Sep. Turns out there WAS some downside, but not a lot. FTSE went on to gain 25 points by the close. Some good trades, though had one bomb.

Outlook for 13th Sep 2007:  If I go by good ol' 3PS, we've had the upper two ribbons turn green, indicating bullishness.  Supporting the case for bullishness is the fact that FTSE closed above its 3-day balance point yesterday.  Channel on EOD chart shows there is an upside target to be reached, perhaps in the vicinity of 6510 or so.  It will make sense to look essentially for longs today.  The only sour note is t struck by the PT signals:

(1) Narrow Range Day 4
(2) Narrow Range Day 7
(3) 2 Day ROC Sell
(4) Low Breakout Setup

As ever, I will wait for the market to show its hand before trading.

FTSE 11th Sep 2007

As expected yesterday, FTSE put on a rise today.  The extent of the rise did take me by surprise.  Strangely, did not trade too well today.  Had only one decent long which I closed rather prematurely.  Most other trades bombed.  Of course the fault is mine - I allowed too many distractions to come in the way - gardener, school trips, shave, shower, lunch, etc... :-)

What continues to amaze and impress me is how channels, properly used can be wonderful for profitable trading.  Day after day, I see these channels play out their magic.  If anything stops me from exploiting these channels to the hilt, it is myself.

Outlook for 12th Sep 2007:  The fact that FTSE has hit the upper line of the channel suggests that a reversal is likely tomorrow.  Supporting that view is my interpretation of Pattern Trapper signals, namely:

(1) High 90-10 Continuation AND Reversal Signal
(2) Momentum Pinball Sell
(3) Low Breakout Setup

Also supporting the case for shorts is the Repeating Angles technique.  See screengrab below:



Adding another nail in the coffin, Reversal Magic is pointing to a reversal today. As yesterday was up, today (12th Sep) should be down. The case for shorts is looking seriously good.  But as ever, safest to wait for the market to show its hand before initiating a trade.

FTSE 10th Sep 2007

Got off to a good start by shorting the FTSE.  Made three other trades with two of them going wrong.  Account slightly down for the day.  

Outlook for Tuesday, 11th Sep 2007   Redrawing the channel lines suggests FTSE should rise initially.  In fact, early this morning Finspreads were already quoting Cash FTSE up by 50 points or so (6173-79) from yesterday's close of 6134.  Begs the question - why not take a trade towards EOD when price hits one of the channel extremes?  Since we have the strongest evidence that FTSE will most certainly rise, my play this morning is going to be - long on a decent pullback, while looking for evidence of a channel forming on the 5-min chart.
 

Friday's action was pretty exciting.  At first, FTSE rose.  Dropped from 9.10 am onwards and stopped at about 10.20 am.  Went on to rise a bit after that and then - wham!  Dropped like a brick and kept dropping well into the close with a loss of 122 points.

What was interesting for me was the way the price action was contained within a channel.   In hindsight, it is very clear that the second touch of the upper line of the yellow channel should have alerted me to a very profitable shorting opportunity.  And having drawn this upper line, the lower line would have been easy to draw by cloning the upper line and placing it at the low made on Thursday.  As can be seen, Friday saw price moving down to honour the angle of the lower channel line!  What a trade it would have been!

But how did I actually do?  I actually closed the day with a net gain of 36 points.

Outlook for Monday, 10th Sep 2007  Given the plethora of bad news on the US economy and closer home (UK), one would expect a continuation of the downside action.  That would not be unusual.  But then again, don't we time and again see the markets behave contrary to our expectations?  Which is why I tend to think that come Monday morning, there is a good chance that we will see a bounce.  The current channel on the FTSE certainly seems to suggest that.  But should the market choose to do otherwise, I am not one to argue with it and will short the market at the first safe opporunity.