Posted on March 12th, 2008 at 11:56 AM

A while back I posted, SPY - Moment of Truth which indicated a potential short on the SPY. It's been a few months since that post and we now well into the trade, however there are some warning signs that are appearing letting us know it may be time to take final profits.

Once the trade is entered I switch to Gann to help me determine where potential trade failure levels exist, remember the whole goal of the trade was for the SPY to make new lows down to 124. As a defensive trader I am always looking for key reversal points where the trade may fail. We hit one of those points on March 10 and had a reversal off of the 4X1 Gann Level (Green Level), this is a very common failure point for Wave 5's and must be respected, this is a place where I take some profits and adjust the stop to at least the entry. While I realize the rally was based on news, it still occurred at a key level. Our next big test is if we can pass the 2X1 (Blue Level), if we do the chance for new lows any time soon is very small. In any case these two levels may bracket the market in for a time similar to the pattern we saw in February (the 1X1 [Red Line] and the 2X1).

Posted on March 13th, 2008 at 12:42 PM

     Back in January, we were looking at March Natural Gas as possibly setting up for a large 1-2-3 pattern to the top side. (see: Natural Gas Outlook)  That scenario obviously played itself out fairly well throughout the rest of the March contract.

     Now that we are rolled over into April's contract, we will continue our outlook. The Wave 3 that has come in has pushed up with a vengeance. It kicked off strong once it breached the previous price level of our Wave 1 from Jan 14th. Notice how the market gapped right through the price level once it decided to move beyond Wave 1.

Posted on March 13th, 2008 at 1:04 PM

Crude Oil continues to baffle me! It seems to like using the support of our MOB at the 84 - 86 area (Crude Oil) but has NO RESPECT for any resistance levels in its path these days. It respected the downward 1X1 Gann Angle back in January, but seemed to get a little agitated when it saw the upward 2X1 hanging out with the 1X1. It was at this union of these two angles that we saw crude oil bear its teeth and move to even higher, unexplored territory. (see chart)

All of us like to buy a bargain — the opportunity to get something we want before prices get back to “normal.”  That’s the premise behind the trading approach known as “scale trading.”

Like most methods, scale trading is not a cut-and-dried, easy way to trade. For one thing, you might decide the price is already low and just can’t go any lower. And, then, it goes lower — much lower, as traders in energy, hogs, sugar, copper, soybeans and other markets can attest. Or, it might be that, even though everyone recognizes the price is unusually low, not enough buyers step in, so the market just sits at the low end of its historic range for an extended period of time until buyers give up.

By Sam Seiden, an experienced equities and futures trader, as well as a trading educator*
Posted: March 14, 2008

I have been trading futures for approximately 15 years. When speaking to people about trading and investing today, I find that many still think of futures speculating as high risk Wild West gun slinging, and this could not be further from the truth. The truth is, in many ways, these are the lowest risk markets in the world and really do make the most sense for people looking to get involved in market speculation.