Can I Short this Pullback? (Re-Balancing Strategy)

Back to work after the Holiday!

After a wild start to the week, markets “re-balanced” after Monday’s Holiday session, and finished the day with bears firmly in control…

With all this bearish momentum, I’d love to sell the bounces going lower tomorrow morning, but there’s something not quite right…

The Emini ES is pretty easy, but the Nasdaq and Gold both look like they may have some tricks up their sleeves going into Wednesday.  Let me show you why…

E-Mini S&P (ES):

E-Mini Keys to Success:

• Buyers started strong, but they failed to hold the overnight gains and price collapsed back to the Weekend Gap where we finished last Friday.
• We expect sellers to complete a pendulum-swing on the opposite side of this range, and we will be watching to see if this choppy price-action turns into a range or a spike and channel.
• Either way, momentum is very bearish, so sellers will be looking for ways to sell retracements off the lows.

Best Trades for Tomorrow: 

• Sell the bounce with buyer failures up around the ‘Battle Zone’
• Sell the breakout with a 2-try trap going lower
• Buy the 123-Reversal

E-Mini Nasdaq (NQ):

Nasdaq Keys to Success:

• Much like the Emini ES, the buyers started off strong, but price quickly reversed and ran lower after the opening bell.
• It looks like a trading-range is developing, but the overshoot of the range low makes it hard to find an easy way to sell short if price pushes higher.

Best Trades for Tomorrow:

• Sell the breakout with a 2-try trap going lower
• Buy the low with a seller failure
• Buy the reversal with a 123-breakout

Gold Futures (GC):

Gold Keys to Success:

• Sellers had control most of the day as they completed a pendulum-swing off the high of last week’s trading-range.
• Sellers have all the momentum, but we shouldn’t be sitting on the pendulum-swing right now.  We should be sitting right at the lows.
• Sellers will be looking for traps to get short if price keeps going lower, but the way the day ended tells me to keep my eyes open for buying opportunities as price rotates back into the range overhead.

Best Trades for Tomorrow:

• Sell the 2-try trap as price goes lower
• Buy the reversal off the lows
• Buy the 123-Reversal as price jumps back into the range.