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2023 October 13 ES Daily Candle

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Temet Nosc,

The monthly ES October candle opened red as predicted. However, the bear trend was subsequently followed by a small bull rally. Now I feel the market is in limbo with no clear bearish or bullish trend and giving us random 30 to 60 point moves, from week to week, as well as intraday. The situation is great if you are good at picking a direction, but not so good if you have not learned the fundamentals of charting. You should always have an idea of where the market is going and what is may do once it reaches it's destination.

During my top down analysis I always try to identify upcoming reversals so I can catch the beginning moves. How long I stay in the trade will depend on the the time frame and what my indicators show me. I can easily make a couple of dollars catching the beginning of the trend and getting out early with my profits. That is the best thing to do if you are trying to grow your account without taking too many losses. The small wins will eventually add up to big gains. However, I am in the process of mastering my strategies and testing the limits of how long I can stay in a trend.

Below is a daily ES chart displaying the start of a bearish trend on Friday October 13, 2023. The morning started off okay, then the drop happened which caused the candle to close red. So the chances are high that the Sunday candle will open bearish. As you analyze the candle, you will see although it is bearish, it has wicks on the top and bottom which means the trend is not as strong as it looks. There is a small chance the next candle could open bearish and reverse to the bull side. So what should an astute futures trader do?

As I stated above, if you have no idea where the price could go, stay on the sidelines until you see confirmation of the trend you think is forming. In situations like this because I think the direction will be bearish, I have found success buying At The Money (ATM) PUT options, and looking to enter short when the opportunity presents itself. Always remember that things can reverse quickly, so be prepared to identify reversals, and aware that trends do not last forever.

The ES, MES, SPX and XSP PUT options are in my sights and my targets of choice. One thing I love of about futures options, is the ability to enter and exit as many times as you like without having to worry about the pattern day trading rule. For one of my small accounts I am trying to grow, futures options allow me to be very flexible. When I trade the SPX and XSP in my small account I have to tighten up my entries and exits, but that is a good thing. Sometimes with big accounts you make up for your mistakes by throwing more money at that problem, which does not always work out. 

There are six trading days in week, so that means if the bearish trend gains momentum, there will be at least two more red candles. For the newbies, that means the price will continue to go down as candles open lower and lower. Once the trend starts to lose momentum, the bodies of the candles should get smaller and exits should be examined. Knowing the reversal candle patterns or using an indicator to identify reversals will be critical for the setup of the next trade.

I hope my analysis helps you see something you did not see, or confirmed what you already saw. As always do your own research and manage your risk.