January 15 2010 Overlay and Commentary

It was very interesting creating the morning prep this morning at 7:30 AM USA.

My very first initial feel was a short bias and sell off visualization. However, the price was sitting on inside support and was essentially confirming it.

So I had a short and long bias with a master premise of resistance to support (1128.25). However, my prep rules called for inside support to potentially hold and a possible continued sideways market.

My prep hierarchy performed perfectly. More than I realized because I ended drawing a "line in the sand" and mentioned it in the comments.

That is exactly what is was. I rarely have a "line in the sand" on my prep. Then I mentioned that the price was more likely to sell if it could not move a few points off 1138.50 inside support by the 9:30 AM EST open.

It did move off the area but that put the price mid-range at open.

I did not catch that higher low that came in just after the open. (I hope everybody is following) I was looking for reasons to get long but I had absolutely no desire to get long. Nor did I have an entry which was good.

When the price tested inside support at 9:56 AM EST, I still had no desire to buy it but would not go short either. It was too aggressive for me today. I was anticipating an extension and I hate playing in extension areas until they start to fail.

Then we got the sell off. I felt the conflict in the market bias prior to the open, did not buy the move up nor did I fade the move down. However, I failed to initiate a short and did not have a trade today.

I was not interested in chasing the action down. I pretty much stopped paying much attention around 11:00 AM EST.

Two Important Observations Today

1. If I am going to have a line in the sand, I need to initiate a blind entry once it is violated. My method of producing the prep told me everything today. It is a spectacular way of reading the market.

The blind short was the only way for me to hit the short. I spent plenty of time checking to see if i could have imitated a short mid-range and there was no way.

2. This one is powerful. When the price comes off an inside zone prior to the open and is sitting mid-range, this is a screaming sign the a higher low or lower high is coming in and to watch for a retest extension of the pre-market origination point.

If it was going to move back up to test the opposite end of the zone as is always the basic premise, the price would open at or close to the originating zone.

I was not interested in getting long because the market told me it was not going up to resistance. All the signs were there and I get it. It may be confusing to most but I see it and will trade it next time it happens.

No video commentary tonight.

I encourage everybody to go back and check out this week's videos if you have not seen them. I watch them as well.