Trading room commentary from some very experienced Dax traders
"Just watching the Globex open and I like this pa ....new WP at 12130. I think that's a target before the next down turn."
"We are not likely to get another big down move today, unless we get a Break Away setup (opens below CBOS). Make a new low and reverse -that's what I am thinking .... we need a retrace, so I am looking for an extreme move and reverse; we have to retrace first after 4 big down days."
But the futures session saw 200pts come off the market & move below CBOS:
"There is a squeeze from hell coming - they are sucking in more shorts."
Fast flush down
Q: On Friday you said it need a fast flush down before the trend could reverse. Could the action at the futures open today have been it? 200 pts? A: Yes but I thought the flush down to 800 was it. Was ready to go guns blazing long - but the failure of CBOS messed up my thought process. Could have gone long when we got back over CBOS, but was too close to open then.
Q: Why does this flush down needed to happen? A: To flush stops and reverse the market - I said this morning they will draw in shorts and whip it round. Yep it was a bear trap. It happens a lot on Mondays. Considering it was below CBOS it's made an amazing recovery
How it works
There are a lot bears trapped (in losing positions) and the market won't let them off. They are forced to take the short off and that creates a buy order, so the fuel for this move comes from the bears getting squeezed. When they are roasted the move will stop. This is a classic bear BBQ ....
It's what do markets have to do: inflict maximum pain to the losing side. The market is all about buyers and sellers and when you get one side too heavy - in this case on sell side after 4 days down - it's easy for the bulls to come in and move it the other way. Once a few stops get taken that fuels the buying frenzy and the bulls just load the buy orders as they know they will get paid. It's a zero numbers game where for each winner there is a looser.....I feel sorry for the person on the other side of my trade ....they are not having a good morning at all
Q: This bear BBQ does not really mean that the trend is turning up? A: Well it's up for now of course, longer term we go to 11350 /500. The next way point is WP 12130