In this video, John Paul covers the E-mini market activity almost a month ago where a new high was reached. By examining the behavior of the market on September 18, 2013, we can take better advantage of similar market behavior in the future. The January Effect has shown that for nearly every major pullback and return, once the previous high is broken, trading conditions are optimal for a long trade. Almost always, price “blows” through the previous high, making new highs. By positioning ourselves to go long at the previous high, we can possibly position ourselves for profit.
An example of breaking a new high can be found at 2:50 in the video. An FOMC news event seemingly drives price up, past the previous high. Notice that John Paul points out the previous high occurred in April (he’s using a daily or monthly NinjaTrader chart for these long-range comparisons).
Why does price seem to pattern itself this way? John Paul claims the January Effect is responsible. The January Effect says that because January 2013 closed higher than it opened (on the E-mini S&P), we can also expect the E-mini S&P to close higher (for the year) than its opening price. In previous videos, he has explained that the January Effect is a consistent indicator of price behavior. For a review of the recent year and the previous year, fast forward to 5:05 in the video.
At 6:13 in the video, the bad news of the government shutdown as produced some unusual candles. If price breaks 1725 mark, it may be a good idea to go long. In the last few days, the closest we’ve been to this previous high is 1700.25, so we have quite a ways to go. Certainly, if there is news on the debt ceiling or resolve regarding the government shutdown, be ready as price may take off in a favorable direction.