Our Lean

Since last Friday, Globex volume has ranged from 550k a day to 630k, nearly triple the daily average. I think the ES is going back down, but when the futures open way down on oversized volume, they tend to bounce, and when they gap up on high volume, they tend to sell off. Yesterday the ES gapped high, sold off and then ripped, but I don’t think that will be the case today. The PitBull mentioned his rule about looking for a Thursday low before the FRYday expiration, and I don’t doubt that, but I doubt anyone wants to be long going into the weekend. I’m sorry I can’t be more direct, but when there are big ranges like we have been seeing, it’s hard to call the direction because it changes so much.

Signed,

The Pessimistic Bull

AI ES Quick Profile Analysis

Price Level Ladder

Dan @ GTC Traders

People Tend to Seek Excitement Over a Good Trading Process

There is an old quote attributed to Richard Dennis …

“I always say that you could publish my trading rules in the newspaper and no one would follow them. The key is consistency and discipline “

His subsequent experiment proved the truth of this. Many failed simply because they could not follow the very clear process that he gave them.

The error, is simply a human failing. Simply look at Richard’s experiment. Most profitable trading processes contain something uncomfortable inside them. Drawdowns. Long periods of inactivity. Losing streaks. Signals that “ f e e l “ wrong when they fire. “Yes, it says I should take this trade … but this time …” or “Yes … it says I should stay in this trade, but the drawdown is so great and uncomfortable that if this one time I ….”

A system that produces positive expectancy over time rarely feels pleasant in the short run. So what do people do? What is the human response? If a process works, human beings immediately feel the need to improve it. Adjust it. Optimize it. Add a filter here. They want to quote – unquote ‘improve it’. They want to smooth the drawdowns. So they add “confirmation indicators” (what a joke that is). They skip trades that make them uneasy. They tighten stops. They widen stops. They optimize parameters on past data. Remove a rule there. Tweak the entry. Delay the exit. Because you know … they want to “make it better.” And in doing so they usually destroy the very properties that made the system profitable in the first place. By the time they are finished “improving” the system… the edge is gone and they are hemorrhaging money.

Richard Dennis would remain profitable for a very simple reason. He followed the process.

There is another human complication that fascinates me even more.

Boredom.

Give someone a profitable strategy that does exactly what it is supposed to do… and eventually they grow tired of it. It becomes routine. Mechanical. Predictable. The novelty and the rush and ‘excitement’ disappears. And it is at that moment they begin looking for something that will give them a beautiful adrenaline rush.

Years ago a mentor of mine told me something interesting. One of the first questions a prospective trader should ask themselves is simple.

Why do you want to become a trader? The answers were fascinating.

Some wanted to prove they were smart. Others wanted to prove they were just as capable as the professionals they saw on television. One person reportedly said they wanted to show their mother-in-law they could amount to something.

Only a handful answered with the obvious response: To make money.

Which is ironic… because that is the entire purpose of trading.

What many people actually want is excitement. Adrenaline. The emotional rush of being right. The thrill of putting on a large position and watching the market move. And excitement is almost always the enemy of consistent profitability.

At our private proprietary firm we publish a daily note every morning. It reviews the macro landscape. Interest rates. Credit markets. Commodity movements. Cross-asset behavior. We then copy the note and publish it over on GTC Traders. The purpose is simple… awareness. We don’t publish that note, to find ‘trades’. We are simply attempting to anchor us in the environment we are trading in. But we say this very clearly in every single note at GTC Traders. We do not trade off of it. The daily note is not a signal generator. It is not a trading system. It is not an instruction set for placing trades. It is simply a way to stay grounded in the landscape.

Some people probably find that boring.

But boring is often effective.

When someone asks us about high yield spreads or the Treasury curve, we do not have to pull up charts and start investigating. We already know the terrain because we look at it every single day.

And according to our heuristics, right now that terrain argues for something very specific.

Stanley Druckenmiller once said something that stuck with me.

“The way to build long-term returns is through preservation of capital and home runs.”

Right now… preservation comes first.

Interest rates alone have us somewhat befuddled. The signals across the curve are not particularly clean. Other heuristics we have described in this space are telling us to be conservative. Which means the correct posture is restraint. So we are running a number of grey box programs tuned specifically for linear return profiles. It’s not exciting or particularly flashy. Just structured processes designed to grind out consistent returns while preserving capital.

And to be honest… watching that play out day by day is not thrilling. Just like the “Daily Note” is not ‘thrilling’. The 3:00 PM Trade Review we put out each day. We go through the programs. Preset maneuvers we know we may take, or not take.

Rinse.

Repeat.

But trading is not supposed to be thrilling. Trading is about making money. And we are making money.

The way to build an exceptional track record is through disciplined processes that are often repetitive, mechanical, and occasionally dull.

Eventually the environment will change. Eventually the time will come to tune programs for more absolute return profiles. And trust us … we enjoy 30 to 50 percent years just as much as anyone.

But markets move through regimes. And right now the correct regime response is discipline. Not excitement. And most definitely not constant tinkering.

Just process.

Until next time, stay safe and trade well.

BTS Levels:

ESH2026

The bull/bear line for the ES is at 6859.00. Holding above this level keeps the bias constructive; losing it and failing to reclaim it turns the day back into a sell-the-rips environment.

ES is trading around 6867.50 in Globex, just above the bull/bear line. If buyers can defend 6859.00, look for a push into 6876.00 and then 6894.00. Above 6894.00, the next resistance band is 6944.75 our upper range target, with 6950.25 just above it. A clean acceptance above 6950.25 opens the door to 7025.50 as the next upside objective.

If ES slips back below 6859.00, expect downside pressure to rotate toward 6813.25. A break and hold below 6813.25 sets up the lower range target at 6773.25. If 6773.25 fails, the next major downside magnet is 6692.50.

Overall, bullish above 6859.00 with 6944.75–6950.25 as the key upside zone; bearish below 6859.00 with 6813.25 first, then 6773.25 as the main downside target.

NQH2026

The bull/bear line for the NQ is at 25020.25. This is the key pivot for today. Holding above it keeps a bullish/buy-the-dip posture in play; losing it shifts momentum back to sellers.

NQ is trading around 25088.00 in the current Globex session, which is modestly above the bull/bear line. If price stays above 25020.25, look for rotations higher toward 25128.25 and then 25217.75. A clean break and hold above 25217.75 opens the door to 25414.50, which is the upper range target for today. If strength continues beyond 25414.50, next resistance is 25769.50 and then 25785.50.

If NQ loses 25020.25 and can’t reclaim it, expect downside pressure back into 24710.75. Below 24710.75, the lower range target is 24626.25. A break under 24626.25 can extend the move into 24567.50 and 24499.00. Deeper liquidation support sits at 24255.25.

Summary: bullish bias while above 25020.25, with upside targets of 25128.25, 25217.75, and 25414.50. Bearish below 25020.25, targeting 24710.75 then 24626.25, with lower supports at 24567.50, 24499.00, and 24255.25.