«Intraday Reversals, what do they mean?»
Yesterday was an interesting day in the markets. Shortly after the opening bell around 10ish the markets, specifically the S&P 500 futures, turned lower and didn’t look back all day. If one was to look at the day all by itself it might seem like a normal trading day, however, if one was to look at the totality of the day and the previous days price action and also takes into consideration the economic data that was released as well as the technical picture then it may not seem quite as normal. You see all the things I just described are signs that the market gives us to let us know that things may be changing or just different from what we expect. Let’s take a look at what some of these may mean and why it could explain, at least partially, why the markets were strong one day and maybe less so the next day.
The first sign we have is the CPI number that came out the day before, this number came in at a whopping 8.5% and the markets rocketed higher on that economic data. The bullish uptick could be easily explained as it was not as bad as we thought it might be as it was supposed to be 9.1%. The theory could also be that the markets had already priced in this event altogether. I believe that when inflation is four times the stated target rate that it may have a more bearish effect on the markets but fundamental and sentimental data and news can take time to play out and therefore the push higher is maybe not as shocking.
The second sign that something may not be exactly as it seems comes to us from the charts. The technical picture although being quite bullish the last couple of weeks has some challenges ahead if the bulls are to retain control of the price action. All the major indexes are either in overbought territory or fastly approaching that condition. There is negative divergence on the intraday charts as well. These conditions can be ripe for an intraday reversal and that is exactly what we saw in yesterday’s trade.
There are other sign such as volatility and the role it plays in the markets and a few other technical factors that can help explain why saw an intraday reversal yesterday. These signs regarding an intraday reversal are important because it signal a larger change may be coming and as traders, we always want to be prepared for changing conditions so if you haven’t set up your routine to include looking for signs of an intraday reversal then perhaps it is something to consider, your portfolio will thank you.
Video Of The Day: How to Buy a Long Call With Stop Loss
In this video, Coach Noah discusses how to speculate with stock and options if you think the stock is going to rise. To further mitigate the risk, Coach Noah discusses ways to use a technique called the #stoploss to help minimize the loss if the anticipated price movement does not occur as planned.
Chart of the Day: S&P 500 Futures (/ES)
This is a 30 min chart of the S&P500 futures and it shows the intraday reversal and also shows the divergence at the bottom of the chart from the RSI indicator. These signs can indicator that larger changes could be on the way. Watching these signs can be a game changer in your trading.
Options Theory Blog
Naked Puts, A Delta Perspective
Today’s video shows how you can use the delta of a naked put to determine when you should roll it.
Today’s line up
Traders Lounge 11 AM EST
Join the coaches in this live lounge, ask questions, discuss ideas or just sit back and listen to veteran traders discuss market conditions.
Cash Flow Club Replay
If you missed last night’s webinar with Coach Greg Holmes where he talked about In The Money Covered Call Management or would like to watch it again, check it out here.
Halftime Report 12:30 PM EST
The Halftime Report starts at 12:30 EST and covers what news is driving the market, chart analysis from the movers and shakers of the day, and fun in a way that only Matt and Tim can deliver.
Financial freedom is a journey
Sign up now and gain unfettered access to all of the quality content and powerful Scouting Reports that our Pro Members enjoy for 15-days absolutely free with no strings attached and let us show you what your trading has been missing.
Tackle Trading LLC (“Tackle Trading”) is providing this website and any related materials, including newsletters, blog posts, videos, social media postings and any other communications (collectively, the “Materials”) on an “as-is” basis. This means that although Tackle Trading strives to make the information accurate, thorough and current, neither Tackle Trading nor the author(s) of the Materials or the moderators guarantee or warrant the Materials or accept liability for any damage, loss or expense arising from the use of the Materials, whether based in tort, contract, or otherwise. Tackle Trading is providing the Materials for educational purposes only. We are not providing legal, accounting, or financial advisory services, and this is not a solicitation or recommendation to buy or sell any stocks, options, or other financial instruments or investments. Examples that address specific assets, stocks, options or other financial instrument transactions are for illustrative purposes only and are not intended to represent specific trades or transactions that we have conducted. In fact, for the purpose of illustration, we may use examples that are different from or contrary to transactions we have conducted or positions we hold. Furthermore, this website and any information or training herein are not intended as a solicitation for any future relationship, business or otherwise, between the users and the moderators. No express or implied warranties are being made with respect to these services and products. By using the Materials, each user agrees to indemnify and hold Tackle Trading harmless from all losses, expenses and costs, including reasonable attorneys’ fees, arising out of or resulting from user’s use of the Materials. In no event shall Tackle Trading or the author(s) or moderators be liable for any direct, special, consequential or incidental damages arising out of or related to the Materials. If this limitation on damages is not enforceable in some states, the total amount of Tackle Trading’s liability to the user or others shall not exceed the amount paid by the user for such Materials.
All investing and trading in the securities market involves a high degree of risk. Any decisions to place trades in the financial markets, including trading in stocks, options or other financial instruments, is a personal decision that should only be made after conducting thorough independent research, including a personal risk and financial assessment, and prior consultation with the user’s investment, legal, tax and accounting advisers, to determine whether such trading or investment is appropriate for that user.