An attendee at the webinar I did yesterday asked me about my comment this morning on bond futures. I said: “Sell Short day; the swing high at 118-01 is resistance. 117-24 is the reference price.” He asked me what I saw there. I started typing him an email, but I thought I’d put it up as a post instead.
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I labeled today a Sell Short day for bonds, By the Taylor count it should be a Sell day; looking for upside follow through to enhance profits from yesterday’s longs. I find that breakout moves often end up creating the ‘excess’ that marks the end of a run (an ‘auction’ in Market Profile parlance), so I look for an opportunity to sell in the session following a breakout rally. (When does a market look better than at the top of a screaming rally?)
On a Sell Short day; the previous session’s high is the reference price for a short sale, so the Taylor technique would have told you to sell after they dropped back through 118-00. You would have put your stop loss over today’s high of 118-09. Looking at the intraday chart, you can see that they chopped around 118 until the results of the 5 year T Note auction; they broke after that.
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I was watching the 117-24 level because it is a 50% retracement of the selloff from the Feb 6 high. If that level held; I thought (maybe over thought) that yesterday’s breakout rally signified a real change in sentiment, and there was only small money in getting short.
Anyway, wherever you got short, I’d now be watching 117-16 (the 20 day EMA) and 117-10 Fib support as downside targets.
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