After a pretty hard down move in the SPY’s yesterday we gapped up today and never looked back.  Today’s action reminded me a bit of September 24th when we gapped above 113.60 SPY and never looked back either.  On September 23rd there had been some vicious selling but we held the 112 support area.  Yesterday we held 113.20.  As Brian Shannon (@alphatrends) likes to say often when reviewing his charts “the market put in a higher low and today it established a higher high. price pays!”

One of the most difficult skills to master as a short term trader is to be able to change your bias at a moment’s notice. Yesterday, as we powered below 114.40 my mentality was to be short.  This morning when we gapped above 114.40 my mentality was to look for the upside break.  One potential roadblock that traders face when developing the skill of being able to quickly change their mentality is being punished for doing so.  For example, when we started to power lower yesterday if the market had quickly reversed to the upside and I had been caught short then perhaps I would have been reluctant to trade on the long side today.   And if today I loaded the boat when the SPYs consolidated above 115.40 and we had tanked then that cause me to be hesitant the next time we set up for a similar move.  But at the end of the day if we aren’t able to “do the right thing” we will not survive as traders.

To illustrate how quickly things can change I have included both yesterday and today’s intraday charts from BIDU.  I was happy to see at the end of the day today that many people made money trading it on the long side.  This is following a day where our traders were almost exclusively trading it on the short side.  That type of mental flexibility bodes well for the young traders on our desk.