Have You Heard The News? It Doesn't Matter.
Key Edge Levels (ESM4): 5160, 5170-75, 5200, 5220, 5240, 5257*
IMPORTANT NOTE: All futures levels are from the June contract (ESM4). I’ll leave this message here until 3/15/24.
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The fundamentals of a news release have no, Zero, ZILCH reliable effect on intraday direction.
If you trade based off the fundamentals of a release, you might end the day green 50 percent of the time. Really, you’re better off blind-mouse-buying. Or using astrology. There is no edge because data will confess to anything when tortured, and Mr. Market knows this.
Edges come from trading like an algorithm. This means exploiting traps and favorable market structure using a consistent system. Every time.
Yesterday, this newsletter identified 5185 as a key Edge Level coming into CPI. Why? Because this level represented trendline support connecting the lows from 2/22/24 and 3/5/24.
Yesterday’s trade capitalized on a textbook reclaim of this support, which implied its continued significance. Remember: like fine wine, resistance and support become better with age.
And as you can see in the above chart, the trendline continued to hold significance today. Price retested it once right after the news release, then AGAIN at ~09:45 EST.
From there, we squeezed to 5207 (next Edge Level up), which was the top of today’s Opening Range. After a brief consolidation, Price Accepted this level and broke out. During lunch, Price backtested this level (almost to-the-tick) and bounced.
I review all this to emphasize the value of technical analysis as earmuffs for the noise. Analyzing the news won’t make you money. Reacting to Edge Levels will.
So since today was a technical adonis1, I made a killing, right?
No, I’m a Johnny, and talked myself out of participating during the live stream.
I reasoned my way out of it because the news was so bearish!
Just kidding, but might as well be serious as today’s P/L would look the same either way (ZILCH).
CPI days, like FOMC, are notoriously trappy and chaotic. So I was looking for traps, unwilling to take an A+ breakout of 5207. Classic Hindsight Bias.
Because we had the breakout confirmation at ~10:20:
Textbook Acceptance.
Textbook ABCD.
“Edges come from trading like an algorithm. This means exploiting traps and favorable market structure using a consistent system. Every time.”
I failed to execute “every time” today, succumbing to the FEAR voice. And I missed out on a VERY profitable opportunity as a result.
It makes a lot of sense if you look at my “IMSAFE” today:
Illness: I tweaked my shoulder yesterday, affecting my sleep and morning routine speed.
Medications: this caused me to consume more caffeine than normal, increasing underlying anxiety.
Stress: Hindsight Bias mentioned above.
Alcohol: probably drank a little too much wine last night to distract from the shoulder.
Fatigue: suboptimal sleep further harmed performance and led to a tardy start to the day.
Emotion: all resulting in a louder FEAR voice.
But hey, at least we still had a good time on the live stream:
For tomorrow, bulls again have momentum as long as Price is above today’s low. The only short that interests me is thus a backtest of the high.
All Virgin POCs (vPOCs) are below Price, leading to enhanced upward drift. The first vPOC is at 5228.75. Below that is 5096.75, with PLENTY of potential supports along the way.
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Bigger picture, the Daily trend is up until Price Accepts below the 50 SMA (currently ~492). Again, there is no room for even short-term bearish discussion until Price is below 510.44.
Long-term, Price remains in a state of Imbalance as long as it is above the 450 level in SPY 0.00%↑. It would need to pull back more than four standard deviations to even test the top of Value.
You can watch this morning’s live trading in the video below. Electronic vibes courtesy of P.O.S. live at A State of Trance 2024 (Saturday | Area 1).
Please feel free to join us HERE tomorrow!
Thank you for your attention.
Talk soon,
Mastro
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LEGEND’s word of the day. Means, “a very handsome man.”