BS"D

RULES AND CAVEATS

Pivot Magic Trading Course
First rule:
"...Any time you don't know what is happening, get out!"

http://www.TradingThingys.com

MARKET IN REVIEW - LITE
Thursday (08 December 2005)
_____________________

Good morning,

Almost perfect parabola day. One thing became
very clear to me yesterday. It is time to write
a FAQ (update the course book later) discussing
two things:

* Preparing for rollover day

* Large long-term Sideways Channels

I'll need to touch on it a bit in today's commentary.

***********************

1 = Morning session opens at the Close, continues to trade down from the Overnight
(bottom left chart) and begins bouncing on some invisible S/R level (blue dashes -
influence repeats throughout the day). This turns out, after the fact, to have been
an Anomaly reversal through the Close. On nice strong Volume, BTW (middle chart).
The Price Window to the Pivot was too small for our criterion, but, following an
indistinct signal, we are looking for a Second chance to enter this booming move
at the Pivot.

2 = Gotcha! Squint and you'll see the 123 "S" at the Pivot. (Sorry, I didn't have
room to include a snapshot of a line chart to show this 123 more clearly.) Volume
is stupendous (middle chart)! Entry is 0.75 above the Pivot and we're off and
running.

A = The breakaway candle is a monster easily overrunning the Pivot and Mid.
Briskly move the profit-locking stop under the Mid. (I'd jump to "free trade"
position, personally.)

B = Nice large white candle taps on the Historical S/R (blue line).

NOTE: This is the S/R that dogged the market for the past
week (at 1264 on the December contract). December 2005
and March 2006 contracts were trading at disparate Price
levels. Part of the preparations for Rollover day is to
locate such levels on the new contract (60-Minute, bottom
center chart, blue line). Interestingly, 1264 S/R is
influencing this new contract today as well (blue dashes.
See above.)

Per our rules, move profit-locking stop under the low of this candle. Considering
exit as Price Action stalls here with a series of Dojis and Volume drops off.
However, it is unlikely that the Bull BBs would get this close to R1 and not take
a stab. R:R is 50:50 on this one so either choice would have been ok.

3 = DVS Reversal (middle chart). Lunchtime is upon us. "P" Signal. DT Double
top (2-bar completes on 3rd candle and entry is on the 4th). Although we normally
don't like to enter during the lunchtime. In the circumstances ("Gravity" and
Rubber-band to the Pivot) a retest of the Pivot is highly likely and risk is almost
nil. Reversal. 4 points

NOTE: Price Window is just within our requirements, so
consider and prepare for a Pivot scalp exit at the Pivot
if Price Action bounces there.

Price Action hovers. But the action is below the blue line so our Pivot retest
logic holds.

C = Failed test of MA. Although the rules say to move profit-locking stop above
the MA, this trade has been on pretty long already, with little results. Being
risk adverse, move profit-locking stop aggressively to "free trade" position.

D = Giant red candle rips through the Mid and Pivot. Since the Pivot was our
primary objective, move profit-locking stop above the Pivot.

E = Here's where this trade gets sticky:
Option 1: Do Nothing.

Large red candle crosses the Close (green arrow). Aggressive chice would be to
move profit-locking stop above the Close. The non-aggressive choice is to place
it above the high of the candle, where it is already. Since the Volume tells us
that the BBs are still out drinking lunch, we avoid the aggressive choice to avoid
choking the trade during the drift.

Option 2: Move profit-locking stop above the Close.

Second healthy red candle closes below the Close.
Notice that this choice in fact chokes the trade
on the next candle.

Option 3: Observe the Vital Signs.

Volume is dead. The BBs are at lunch. Rule is to
avoid choking the trade. Preceding series of
mid-lunch Bull Volume bursts. Active traders
clearly want this move south to continue.

Best choice (2 out of 3 options) turns out to be:

Leave lunchtime space to work out. Don't do anything.
But that is a conclusion that only the more experienced
advance traders would have taken. Most of us got
stopped out here. +/-4.25 points
Still not a bad trade!

F = Bull Volume suddenly comes to life (middle chart). Advanced traders finally
exhale and move profit-locking stop above the MA at this failed test of the MA.

G = Hoo Ha! Giant Bear DVS (middle chart) as huge spike stretches through the S1
and lavender line. (See PERSPECTIVE discussion following.) Exit as soon as the
tail of this nasty red Bull Dragonfly pulls back through the S1. 10.5 points for
the brave advanced trader!!!

NOTE: Should this be a reversal (it was), the Price Window
to the very proven S/R at the Close is too small to even
scalp AND EOD hiccup is coming. No reversal this time.

PERSPECTIVE

G = Thursday's Price Action tapped on the lavender line.
What is this line?

(Daily, bottom right chart)

Well, per our definition this hit defined a long-term
Sideways Channel (lavender channel lines).

If you recall, a few weeks ago we discussed large-range
Sideways Channels. In short: If we demote all the Primary
PLs, as is normally our rule, the inside of such a
large-range channel would be untradable. We'd effectively
have no topography orientation. Thus, we only promote
the channel floor and ceiling and leave the other PLs alone.

So here we sit with Price resting on the channel floor,
hopefully halting the .382 Fib retracement (blue dashed
line) and implying instead a charge back up toward the
channel ceiling.

Additionally, we must "promote" the blue line, current
repeating historical S/R, and give it full respect.
Perhaps we will even need to view this level as a channel
ceiling for the near future???

TGIF!!!

REMEMBER: Trade the Tape, Not my Prognostics!

Asher
=] ;-)>
Pivot Magic Trading Course
http://www.TradingThingys.com

Thursday's PMT chart: