Commodity Futures Day Trading The S&P 500 and E-Mini - Observations - PART 3

By Thomas Cathey

Not all conventional commodity trading folklore is correct. Some is and some isn't. Much is anecdotal. Most of it is designed to make you feel comfortable in a trade. Feeling "comfortable" is the fastest way to the poorhouse in commodity trading. We are paid to provide liquidity and take on risk. Read on to see if you adhere to this basic and important market law.

More S&P 500 and E-Mini Futures Contract Observations: PART 3

“The side which gives you the least opportunity to get in is usually correct.”

It’s funny how this works. An extreme example would be a one-way bull day when the e-mini futures corrections are running just two points. The market stair-steps and keeps finding support on the previous highs and then goes higher. The shorts continue to bid the price up to get out.

On these days many traders are stuck short and think the big correction will come at any time. These are the days when you often get sharp up-moves in the last 30 minutes of the session when the frustrated bears throw in the towel and cover. Looking at the market in hindsight, you can see how difficult it was to buy a dip. The dips are often too shallow to be convincing.

Another version of this is a creeping, struggling e-mini up-market. The dips are also small, but so are the rallies. The selling keeps coming in, holding the rallies down. The price action looks bearish, but somehow it keeps working itself higher all day until the climax panic at day's end. There have been times when I’ve been fooled and got caught in these moves on the wrong side. I now have a rule to never sell a creeping futures market. It’s a classic Gann rule.

The way to tell the difference between a bullish creeper and an anemic bear rally is the creeper’s price action looks bearish - it's a fooler. In contrast, a real bear rally can be strong and sharp, looking like a new bull move and many times follows a perfect bullish trendline - it's also a fooler. What tricksters, huh?

But sometimes there is no real way to tell and you need other indications to put the whole e-mini market in context. Where has price been recently? A real bullish creeper will come off a big bottom. Whereas, a bear rally will come after a previous climax top and secondary top try. But sometimes the real answer is to stand aside and just let the e-mini futures market lead the way.

No position is sometimes a great position. It can make you smile when you sit it out and then look back at the last two hours. Everyone’s slugged it out while the market is where it was from the start. Another Jaws V chop day with lots of blood in the pit and on the computer mice.

Part Four of Five Parts - Next!

There is substantial risk of loss trading futures and options and may not be suitable for all types of investors. Only risk capital should be used.

Thomas Cathey - 27-year trading veteran heads the managed futures division of Thomas Capital Management, LLC. View his TimeLine Trading market predictions and get his complete 44+ lesson, "Thomas Commodity Trading Course" - they're all free. Main site:

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