ALVR Update

I am currently holding the 1/3rd position after selling down 2/3rds of my position before and immediately following earnings. I believe in the ALVR story and will buy up more when the dust settles, unless I experience a 25% draw down of my 1/3rd position.

Purchased 500 shares CLWR @ $21.40

Increased my position to 1/2 on move up yesterday beyond 2% of entry. Had a hard time doing it in all the carnage, but rules are rules. The news was that there are merger talks with Sprint. This is a WiMax play just like ALVR, which has recently tanked following earnings.

Sold 1,000 shares ALVR @ $12.67

Earnings report was ok - in line with everything, but holders were expecting more. I have been watching the stock steadily creep lower. Sold 1/3rd position when my net profit hit 10% - down from 20% at open. So, I sold 1/3rd position at +20%, 1/3rd at +10%, and am now holding final 1/3rd. I will sell if it gets to break even.

Bought 1000 shares AOB @ $14.39

AOB increased to 10% above my entry point thus triggering my buy order for my last 1,000 shares. It is acting very nice with this breakout on the daily charts. I will be targeting 20% profit to peel off my initial 1/4 block.

Purchased 1,000 shares AOB @ 13.36

Thanks Motley Fool for finding one of my holdings after I established a position - appreciate it. Because of that, and the attention it attracted, I picked up 1,000 shares, which brings my position to 2/3rd full. The thing that I do not like about this is that these types of news purchases usually retrace over the next couple of days; however, rules are rules. I am currently up 6% and will pick up the final position once I get to 8% profit.

Sold 1000 shares ALVR @ 13.72

Love the stock, but took 1/3rd position off the table since I had a 20% profit and earnings are in the morning. There is no reason for me to believe that the earnings and outlook would be anything but stellar; however, my rules require me to take off a position when I get a 20% profit.

AVNX +13% - Star Performer of the Day

Yeah, yeah, yeah - after I sell down my position to a 1/4 holding the Bastards come out with the news. Unbelievable. Take a look here if you are interested in reading about it.

http://biz.yahoo.com/ap/071029/avanex_pirelli.html?.v=1

This is the reason to not liquidate holdings all at once - scale in and scale out. This does not apply if it is the first position taken and it has experienced a 25% draw down (toss it under a bus at that point). Now the question is whether or not to re-establish a position. Earnings are coming up on Thursday. I will hold until then, listen to the conf call, and then decide its fate.

Nice run today.

Futures Market Summary

Today's action was classic consolidation/chop that went nowhere fast following the initial move out of the open. The consolidation resulted in one touch and two breaks of the Globex high, and no touch of the Globex low. The Doldrums Range was inside of the Globex Range, which is a tell that we were going to have a non-momentum day. I said this morning that I was going to be looking for a trade only when we broke the Doldrums high or low; however, I held off on the first break because the Globex range was just above and below the Doldrums Range. I held out to see if we were going to get a reversal off the Globex level, which we did. I took the second break because I noticed a buy divergence on the move down before the move up to the doldrums/ Globex highs. The buy divergence signaled that the move up was to be a bit more powerful than the previous. I was able to close out +11 YM ticks. I was up +31 ticks at one point, but the 2,5, and 15 min charts were all lined up with bullish signals, so I held on until price crossed the 20 ema on the 2 minute chart. Price continued to fall after the exit, so good execution. Please note that retrace to the Globex High and Doldrums High following the breakout, as well as where price settled on the day. The point is that these levels act as magnets as well as pivots.

I see two primary reasons for the stagnant action following the open: (1) price located between the 50-61.8% fib zone on the daily chart (most recent daily low to most recent daily high), and (2) Fed decision this week. There just wasn't much reason to put money to work or take money off the table with the Fed Decision coming up this week. The Fib location is a great place to set up came while we wait. A jumping off point if you will when the decision is actually made. We will have guessers piling in Tuesday afternoon in anticipation of the move.

My market summary is posted below:

YM: +11 ticks (equal to +$55 per one contract position).

Good process - flat outcome



Monday HVP: 13,887

24-Hour Range: 77 ticks
Regular Session Range: 74 Range

Morning Futures Action

Yawnnnnnnn....ready to take a nap. Regular session range is 50 ticks, while the 24-Hour Range is a mighty 54 ticks. I will be looking for the break of the Doldrums Range before I even think about taking a trade. If that is a loser, I will not take a momentum trade again until we have a 100 range on the 24-hour session. On the other hand, my stock holdings are on fire....AVNX, CYD, CNTF, APA, MVIS, etc. Oh, BTW, I have not taken any futures trades today.

Bought 100 APA @ 102.90

Rounded out my position in APA today with the nice move up it has had. Stock was upgraded to a $120 price target from a $115 price target at Bear Sterns. I don't rely on the upgrades/downgrades, but the call moved the stock beyond my 2% threshold while I carried less than full position, so I added to my position.

Futures Market Summary

My speculation re: market direction was dead on. I called my bias as "long" when the YM was up 22 ticks - we ended up 134 ticks. Could not have been more right, but it wasn't a clean run by any stretch of the imagination. You could tell there was a battle every step of the way, herky jerky every step of the way. The past several days has seen essentially two daily trends: (1) down in the morning, and (2) up in the afternoon. Good thing about today was that it was a Friday that saw buying in the close. The big battle of the day was 13,839 on the YM, which got tested on 4 pushes up in the afternoon session. Fairly sizable bars up into that level and sizable bar pushes out of that level. The breakout at the end of the day saw a move up and out of that area - good news for longs. Another "tell" for the day was the number of times we came down to the 2 min, 200 ema for tests - exactly zero.

I began the day testing the currency waters again trading the loonie and got pegged for 16 pips (equal to -$200 per one contract position). The four morning momentum positions I took chopped me up and spit me up for -61 ticks. So I stood aside and waited, and waited, and waited. The trend break came and I went for the trend reversal. I was able to pull in enough ticks to erase my draw down and give me a nice profit for the day.

BTW, look at that wedge action between the uptrend and doldrums high and the resulting pop out of that zone. One last "tell" was that we usually see a retest of the Doldrums high once we get the breakout; however there was no "kissing" today.

Below is my summary for the day:

YM: +72 ticks (equal to +$360 per one contract position)

ER2: +67 ticks (equal to +$670 per one contract position)

CD: -16 ticks (equal to -$200 per one contract position)

24-Hour Range: 164 ticks

Regular Session Range: 124 ticks

Equity Markets - The Battle is On

We have run smack dab into the 34 ema on the daily chart, which is the line in the sand for this bounce off of last Friday's tank. We have pierced it once today and have fallen back to lower highs and lower lows since the open. The high is the 200 ema on the 30, 60, and 120 charts, so this is a formidable opponent for longs. With that said, My 30-min chart has a bull flag right up to the 200 ema, my 60 min chart has momentum long kicking in, and my 120 chart is breaking above the range it formed at the 200 ema level. This explains the struggle we have for today. My stocks are also showing fairly good support for the market right now except for IOM (fucker). Crude is coming down from its high, but is still above $91. Yen is above the flat line. Gold is off the charts. All I can say is that we are sitting at very significant overhead resistance, but there are some strong looking stocks out there. Let's see what happens if the morning pattern of lower low/lower high is broken. It is getting shallower and shaller as I type. Net bias is long from here (YM currently up 22 ticks).

Futures Market Summary

I started off early this morning playing a little currency futures before the market opened. Testing the waters with the Swiss Franc I was able to scratch out 30 ticks (equal to +$300 per one contract position). I then turned my attention to the Canadian Dollar (yeah the same one that ripped me a new ass the other day). I pulled in 21 ticks (equal to +$262.50 per one contract position) playing a momentum reversal set up. Both of these currency trades were "clean" and straightforward. I then turned my attention to the Index futures off the open and noticed a sense of heightened stress. I then figured it out. I was trading the currencies off of the 30-minute charts, while trading the indices off of 2,5, and 15 minute charts. Not just faster timeframes, but also 3 times the number of charts.

I was searching for my footing coming off of those currency trades and going to the index futures. Out of the gate I made a mistake (-4 YM ticks). I then went into a non-momentum trade (actually a momentum reversal trade) and ended -15 tick on the ER2. I should have known what was next - two impulse trades. I had the classic lead in with the mistake and a non-momentum trade that did not work out. I should have gotten up and walked around; however, that was not in the cards. The result was -20 YM ticks and -8 ZG ticks. It was at this time that I figured out the direction I was going, stopped and got away until the end of the Doldrums.

All day I was faced with a momentum indicator that was certainly showing me momentum, but the movement today didn't slow down enough for one of my key "trigger" indicators to set up. Therefore, no graceful entries today on the momentum side. With the increased volatility, I am cutting back on the number of contracts I trade with each set up. I am also trying to give the trades a bit more room, as well as staying focused on reversal patterns. It may be too much, but the end result today was a small profit.

The chart below show the action. Doldrums High and Low played a significant role in the afternoon session. As can be seen, price reversed 6 times off the doldrums high and low. Need to keep a sharp eye out for those reversals. You can also see that the Monday and Tuesday HVP served as resting points as well. I will start putting the globex high and low on these charts as well. What is key about these key locations is watching out for trend changes when price hits and stalls there. For example, the downturn from the globex high tended to the Globex low and Tuesday HVP. At this location you need to ask yourself the question "is this where it stops and reverses?", or does it continue. A simple trendline answers the question. You can see the sideways consolidation along the Globex Low and Tuesday HVP, but it doesn't violate the trendline. the volatility around the Monday HVP and Doldrums low created the break and then we were off to retrace the downturn.



The summary for the day is below:

Swiss franc: +30 ticks (equal to +$30 per one contract position)
Canadian Dollar: +21 ticks (equal to +$262.50 per one contract position)
YM: +16 ticks (equal to +$80 per one contract position)
ER2: -23 ticks (equal to -$230 per one contract position)

24-Hour Range: 194 ticks
Regular Session Range: 194 ticks

Monday HVP: 13613
Tuesday HVP: 13675
Wednesday HVP: 13560
Thursday HVP: 13685

No open gap from today.

Hedge - YM Short 13,684

Based on my thesis presented in my October 20th post, I am putting on a hedge by shorting the YM on a swing basis. The timing is consistent with the move up to the 34 EMA, which is the "kiss-n-fall" that I expected. I am looking for price to move to the 200 ema (at least) and will be peeling off at that level. This level is on the cash chart - not the futures chart, so I will activate audibles to alert me when we get to this level. My stop level intraday is set at 13,915 on the cash chart, while my target is 13,159 on the cash chart. I will exit the position if bar close is below the 13,915 level, but above the 34ema level. The ultimate reward-to-risk ratio is 1.8:1.

I am not taking this position because I am a short selling asshole. I am taking this position because I have a shitload of long equities that I need to protect. So, I will be more than happy to be stopped out of this hedge position. I consider it insurance.

CYD - Bought 1,000 @ $12.75

Picked up final position in CYD when it jumped 5% out of gate. My rule is to add as the price goes up 2%. So, I now have 100% position and am up 13% on holdings. I believe new found interest comes from CYD improving corporate goverernence, PR , as well as China's >11% gdp confirmed last night. All supportive of a Chinese engine company like CYD.

NFX - sold 300 @$51.77

Was pushing down and thought that i needed to get out while I still had a profit (4%) given my original thought re: earnings. Seems that others are beginning to see it the same way and are starting to sell it down. Golden opportunity for me to get out with a profit. Thank you.

NFX - sold 300 @$52.19

No reaction to earnings this morning, which was a golden opportunity to sell down and pocket profit. Due to flat reaction, I am holding 1/2 position.

NFX - Big Miss

Let's hope the nice 3% push up today ahead of earnings gives me enough buffer to get the hell out in the morning without taking it too much in the shorts. I have a 4.19% cushion to deal with the miss that NFX came in with. Revenues were way below estimates and EPS was a miss considering the unrealized non-hedge derivative costs - WTF? What a mess. Needless to say, I am out of this stock in the morning. I have held on way too long and have no technical or (now) fundamental reason to stay with it.

CYD - Star Performer (+18%)

"Wow" - that's all I can say about it. I was on the verge of slashing its tires and pushing it down the hill, then it unexpectedly kicks into gear. Why? Well, the only news that I have seen is that the company appointed a new CFO (Ho Tuck Chuen) and the CEO laid out this quote:

"We believe Mr. Ho's expertise and experience will enhance China Yuchai's financial planning and reporting, strengthen corporate governance and improve investor communications. China Yuchai's rapid growth in the Chinese market created the need for improved financial management. Our Board decided to bring in additional resources to help us capture the opportunities for fast growth in China. China Yuchai aims to further penetrate the growing Chinese automotive and construction markets, maintain market leadership and maximize shareholder value."

The last sentence is key since we all know the growth potential in China. To help the cause, CYD retained The Global Consulting Group, which is a "leading New York based strategic communications consulting firm to be its investor relations counsel." The CEO said the following about Global Consulting:

"The Global Consulting Group was selected to represent China Yuchai after a thorough review of numerous candidates," said Mr. Teo. "The Global Consulting Group's strong track record in the automotive industry, its keen understanding of China's market, and its ability to help enhance shareholder value for its clients were the key reasons we selected them to assist us in our investor relations efforts. We believe that The Global Consulting Group's effective communications programs and reputation of developing long-term relationships with the investment community will enable China Yuchai to increase investor awareness and visibility."

Let's move to the chart:

The weekly chart clearly shows an inverted head and shoulders pattern with price moving right up to the neckline. Volume has been a bit more consistent over the past 6 weeks. We will be looking for high volume if and when the neckline is broken. This will validate the head and shoulders pattern.

I picked up another 1,000 shares today when my profit cost basis was 2% above my entry. I now own 2/3 position on CYD and will look to add up on the next 2% increase.

Futures Market Wrap

I allowed myself to be knocked from my discipline today. It would take a long time to explain all of the trades (impulse and otherwise) that I made today. Suffice it to say that I walked away with +24 ER2 ticks and +20 YM ticks. I also played around a bit with the JY in the early hours and ended up breaking even.

Conducting a review of my "AlvariII" momentum indicator reveals that I only had one valid signal today. It triggered long right after the open (see Signal 1 on the chart). Although it doesn't look like it, I was able to get Targets 1 and 2 before I was stopped at break even on Target 3. The only other valid signal popped just after 11 am, but we were in the doldrums chop zone when it fired, so I did not take it.

I tripped myself up when my AlvariII indicator did not trigger on the big down push or up push. That's where I fell off the wagon and resorted to impulse trading. Needless to say, I was disappointed with my approach today regardless of the outcome. I need to sit back and understand that there are going to be those days when the market moves and I am left behind. This is especially the case when properly using trade indicators. Sometimes they just don't trigger.

One of my non AlvariII trades is a fade of the bottom for the day. In my head, I kept hearing the trading pundits on the floor of the exchange answer the inevitable afternoon question: "Um, can you please explain why the reversal today?" To which the trader states: "Well, we went down and tested the bottom, the bottom held, so we rallied". That simple - nothing more, nothing less. I kept hearing that in my head as we headed to the bottom on the YM, but we never got there when it reversed with a vengeance. That's where I resorted to impulse trading. I saw the price action and noticed the extreme volatility and knew it was more than stop fishing, so I jumped on board.

Good outcome - bad process.

Trade results for today are below:

YM: +20 ticks (equal to +$100 per one contract position)

ER2: +24 ticks (equal to +$240 per one contract position)

24-Hour Range: 228 ticks

Regular Session Range: 213 ticks

Monday HVP: 13613

Tuesday HVP: 13675

Wednesday HVP: 13560

Alvarion - Star Performer (+5%)

Nice pop and recovery from ALVR, which is one of my top holdings for obvious reasons. The correction off of the overbought conditions is now complete and we are free to make the next move up. Earnings is scheduled for October 31st - we should get a good feel for their recent overseas contract acquisitions, as well as their future prospects. There is quite a bit of WiMax news out there and some of it focuses on the market potential for WiMax in developing countries. No one is better positioned in this arena than ALVR.

Following quote is from CSCO:"In the U.S., there are a number of choices, and it's nice to have WiMax as another choice," he said. "But there are some places in the emerging markets where it would have been WiMax or nothing."Larry Vang

WiMax's popularity is growing as Internet service providers look for ways to connect more people, particularly in developing countries.

Last week, the U.N. telecommunications agency, the International Telecommunication Union, added WiMax to a global standard for mobile devices, signaling that airwaves designated for technologies in the standard known as IMT-2000 can now be used for networks based on WiMax.

Information on ALVR attached:http://www.alvarion.com/

Futures - Market Summary

We got 3 solid momentum signals today. Solid signals occurred where the 2, 5, and 15 minute charts lined up and agreed with each other. A mistake I made on Signal #1 was that I held and followed the 15 minute signal on both my ER2 and YM plays instead of liquidating positions based on 2 or 5 minute reversal or attainment of profit target - I just got plain greedy. The result is that I rode the move up off the lows and didn't get out until I had a loss.
















Prior to entering Signal 1, I jumped on a two minute signal short where there was no confirmation from the 5 or 15 minute charts. I sustained minimal losses. Following this loss, I sat on my hands and waited for the Regular Session Range to exceed 50 ticks. After a couple of head fakes, the move came and triggered Signal 1.

The bounce off of #1 came with a 2 minute momentum reversal to long, but the 5 and 15 minute momentum indicator did not confirm. We then entered the Doldrums chop zone where no trades were entered. Notice how the Doldrums low was exactly the same level as Monday's HVP.

Following the chop zone, we had a strong move up out of the Doldrums Range, which triggered Signal 2 and allowed me to capture long profits on both the YM and ER2. The move down from Signal 2 did not trigger any short signal, so I sat on my hands once again.

I, unfortunately then needed to leave and was not here for Signal 3. Even though the signal triggered at 12:30 (which is a time for me to walk away from signals), Signal 3 was a wonderful trigger on both the ER2 and the YM. There were confirmations on all time ranges.

The great thing about today, with the exception of the CD trade before the market open (yes, I got stopped out - whaddya think?), is that I took only set ups. Now, I did make a mistake to not take profits from Signal 1, but I took absolutely no impulse trades.

My end of day trading summary is below:

YM: +2 ticks (equal to +$10 per one contract position)
ER2: +24 ticks (equal to +$240 per one contract position)

It is a moot point, but my results would have been as follows if I did not make the 15 minute mistake this morning:

YM: +61 ticks (equal to +$305 per one contract position)
ER2: +70 ticks (equal to +$700 per one contract position)

FWIW - it's important to know what the hell you are doing once you are in a trade and to not start changing exit rules once you are in. Go with the goddamn trading plan - nothing else.

24 Hour Range: 143
Regular Session Range: 143

See chart above for Monday and Tuesday HVP

The chart below shows the HVP for Monday and Tuesday

Good Process - So So Results

MVIS - purchased 4000 shares $4.44

Picked up another 1/4 position due to a 2% increase in price. Now hold 1/2 position.

Bought 4000 MVIS @ $4.27

Have been in and out of this pain in the ass over the past year. I am re-establishing a 1/4 position using some of the cash I generated with the sale of the deadwood on Monday. They signed on with an undisclosed Asian electronics manufacturer to integrate their PicoP display into mobile phones and other devices. The information can be found in the link below:

http://biz.yahoo.com/ap/071023/microvision_joint_venture.html?.v=1

Stock was up over 13% in pre-market, but a fade of the open has taken it back to +3% where it stabilized. Downside for this stock, now that this news is out, is severely limited even though there is speculation that warrant holder pressure is currently keeping stock price down.

MCRI Buy Order 400 Shares

I am establishing a 1/3rd position in Monarch Casino and Resort. This company runs the Atlantis Casino and Resort in downtown Reno Nevada. But the reason I like it is its strong fundamentals and the fact that it is strategically located across the street from the Convention Center and has a built sky bridge connecting the casino to 16 acres of land that has yet to be developed. The company has a debt-to-equity ratio of zero, has net income that exceeds the S&P within their industry group, and the company has increased their earnings per share by over 40% in their most recently reported quarter. This company is in the Consumer Discretionary industry, which has come under pressure this year. However, MCRI, like DIS, has rebounded nicely since the July downturn. I feel that this stock, with DIS, allows me to be well positioned when the consumer shows during holiday season that it is not dead. This stock also gives me a gaming replacement for LACO, which I am downsizing from my portfolio.

Canadian Dollar

I missed the BIG correction in the CD last night, but I will not walk away from this one given that the correction off the 3-Headed Monster 200% extension is far from over. As I called out this morning when I realized I slept through huge potential profits, I will wait for a bounce up to test the 34 ema on the 120 minute chart and then I will go short with two positions. I will be looking to peel one position off at the 120 minute 34 ema and the second off at the daily 34 ema level. The CD is getting hit with the triple whammy: (1) falling crude, (2) falling gold, and (3) a dollar that is just plain tired of falling.....for the time being. This time, I am going to have an audio alert on so loud it will make the dogs down the street bark wildly into the night. I am not missing this opportunity.

Below are the daily and 120 minute charts:

Disney

I will be picking up a 1/3rd position on Disney in the morning. Earnings are coming out on November 8th and I want to be positioned ahead of those numbers. All fundamentals on Disney are solid, save debt, which is a bit high. However, with the Olympics coming up, as well as the elections, I see the potential upside on their Media segment to benefit greatly in the next year. The stock has done nothing for the past year. The swing low is 10% below my initial entry, so the risk is far worth the potential reward on this one. Disney is a Consumer Discretionary stock, and we all know that this sector has not been doing very well of late (since June of this year). The XLY fell 12% from its open on July 6th to the close on August 16th. Disney fell half that (6%) during the same period. From the July 6th high, Consumer Discretionaries (as measured by the XLY) has fallen 9%, while Disney has INCREASED fractionally during the same period. Technically speaking, the bullish reversal bar today off the 200-ema and the reverse head and shoulders on the daily and weekly charts just solidifes my desire to have a piece of this company at this time. I held DIS some time ago when they purchased Pixar and Steve Jobs joined the Board. My hope was that the synergistic effects of jobs-pixar-apple-disney would create and outstanding investment opportunity. Apple's portion of the equation far exceeded my expectations, but I cut DIS loose at about this level when it was just churning. Now is the time to give it a go one more time.

Futures - Market Summary

The 100 tick range on the Doldrums and a failure of the doldrums bullishness to continue kept me out of momentum trades (since my last post). However, I did catch a bounce off the 50%-61.8% Fib Zone (aka, Fib Zone). This helped to cut back on the chop losses that I sustained at the top of the doldrums range. Below is the 5-min chart of the day. You can clearly see the 100 point run up during the doldrums, but we had only one bar clear that zone. You can also see the the rejection that resulted. The bar on the right side of the chart was in response to AAPL earnings (glad I held onto a partial position - great news on earnings). The bounce off the Fib Zone had the elements that I look for most - two areas of support: (1) Fib Zone, and (2) 200 ema. The only disappointment was seeing the 100 point pop during doldrums. I am not a doldrums trader due to false signals and choppiness that usually happens. Today was a big exception.





Futures Trading Results are below:

YM: -56 ticks (equal to -$280 per one contract position)
ER2: +25 ticks (equal to +$250 per one contract position)

HVP
YM: 13,612
ER2: 803

24-Hour Range: 225 ticks
Regular Session Range: 186 ticks

Doldrums Range

I was so focused on following trade triggers and avoiding impulse trades that I failed to adhere to the one basic rule coming out of the doldrums, which is to not trade unless and until the doldrums range is fucking cleared. There was a battle going on after the doldrums closed between those that wanted to push out of the range and those that didn't. This chop created several signals both long and short that resulted in me getting a bit chopped. I believe that I need to simplify my charts a bit to ensure that I do not miss any of my rules when entering trades. I am happy to say that none of the trades I entered were "impulse" trades and that I got up and walked around when I took small loses.

A quote from "Charles" has been on my mind lately:

"Small losses can be easily recovered in the next few trades. Large losses can be psychologically damaging that take a long time, if ever, to overcome."

So obvious, but how often I forget it when I am in the zone.....or just zoned.

We remain in the doldums chop zone. Regardless of set-ups, I will take no positions unless and until we clear the doldrums range.

Futures - Doldrums Thought

Futures making nice upward headway during the doldrums. Overhead resistance is at 13672, which is the 50% retracement line for the big move down. Also 13675 is the 200 ema on the 15 minute chart. Given that this move happened during the doldrums and we have two different time periods with overhead resistance in essentially the same location, I will be looking to short at these levels if my signals line up. I will test the zone with 1/3rd position given my rules allow for the fade of the 50-61.8% zone.

Futures - Morning Session Roundup

I took two YM trades and one ER2 trade this morning for a net of +3 ticks and +30 ticks, respectively. The two minute chart was not showing any momentum pops at the outset due to the fluctuating nature of the market. My indicators look for a slowing period followed by a momentum burst. So, I turned my attention to the 5 min charts which did have a momentum pop to the upside before the market opened. Following my rules, I enter a long position, but entered with only 1/3rd position due to lack of 15 min YT and given that it was pre-regular session action. The Momentum indicator switched to neutral after about 1/2 hour, so I exited the 1/3rd position with -17 ticks (equal to -$85 per one contract position). After the open, I received another 5 minute momentum pop followed by a 15 minute momentum pop on the YM. Going long 1/3rd position for each, I was able to bag +20 ticks (equal to +$100 per one contract position). Net on the YM was +3 ticks. I also received a 5 min momentum pop long on the ER2,, which I rode for $300. Given the volatility of the past couple of sessions, I used a trailing stop on that play.

Upset of the day is the CD. I called out the need for a correction after a 3-Headed Monster appeared over the past couple of trading sessions. It was extremely bought, but I thought that a graceful entry would be offered - how wrong I was. Nice 1.46% pullback (151 ticks - equal to +$1,510 per one contract position), but alas I was not there. A missed opportunity? Yes. But I felt ok with that given I was following my rules. I now await a pullback to the 34 EMA for a short entry.

Morning summary is as follows:

YM: +3 ticks (equal to +$15 per one contract position)
ER2: +30 ticks (equal to +$300 per one contract position)

Regular Session Range: 104 ticks
24-Hour Session Range: 146 ticks

Morning HVP: 13,475

ER2 Long

Went long 1 position @ 802.60 based on long signal from 15 min trend indicator.

Update 1: Market made a quick move in long direction. Moved stop to 805.60 +30 ticks.

Update 2: Stop hit, out at +30 ticks (Equal to +$300 per one contract position)

Equities Update

I followed through with thinning out some deadwood and adding to some strength. The following is my list of trades today:

APA: Bought 100 @ $92.07

LACO: Sold 1,000 @ $8.84

BRK.B: Bought 5 @ $4,205.90

CEPH: Sold 200 @ $70.43

AAPL: Sold 100 @ $170.15

YM: Second Morning Trade

I got back in with 1/3rd position on YM due to momentum long signal on 5-min chart. Set stop at -20 ticks and target at +20 ticks. While in trade, 15-min YT and momentum indicator went long, so I added 1/3rd position.

Contract 1: 13508 Entry, 13528 Target, 13588 Stop
Contract 2: 13522 Entry, Open Target (based on momo indicator), Stop based on momo indicator

We got the push up and I got my first target +20 ticks. Still in Contract 2. Two min momo indicator just went neutral, but 5 and 15 min are both long.


Regular Session Range: 94 Ticks
Running cumulative ticks for day: +3 ticks.

Update 1: Set a stop at BE for Contract 2.
Update 2: Stop on Contract 2 hit. Out at BE

Dow Futures

My 5-minute momentum indicator just went long for the YM futures. With oil down over 1.50 and gold correcting big time, I am going to put on one long position here. My down side will be 30 ticks given the volatility of the past couple of days. I will be holding until the 5 min momentum indicator tells me to exit. I will add to the position if my 15 minute indicator goes long. It is netural at this time.

Entry 13474: 1 position
Stop: 13454
Target: defined by momentum indicator.


Update 1:


Position has started to move in a positive direction. I do not have a "Yellow Tip" yet on my 15 min charts, so I will just hold with one position. I will add to that position if my momentum indicators switch to long and I get a Yellow Tip. A Yellow Tip (YT) is a cross over of the 8 ema with the 20 ema. I call it a YT because I switch the moving averages to histogram to more easily see the pattern (see below). This also allows me to easily see the 3-legs.




Update 2: Exited partial position when 5 minute indicator went back to neutral. 15 Minute YT never triggered. End result was -17 ticks (equal to -$85 per one position).

Canadian Dollar Update

The 200% Fib extension was too much for the Canadian Dollar last night. I was looking for the "kiss" of the 34 ema for Leg 3; however, I suspected that the overbought correction could come sooner than later due to its super extended nature. Leg 3 has been aborted as can be seen from the chart below. We did not have any gracefully entry for the correction. I will be looking for a pullback to the 34 ema and then will go short for a trade down to the 200ema. This break of the support line officially kicks off the daily correction, which I expect to last a few days.

Sunday Night Gold

Gold made a very strong push down tonight establishing Leg 1 of what should be a 3-leg move. I fully expect any move up to the 20ema to be the start of Leg 2. I will put on a short at this location if my 5-minute momentum indicator stays short. I will use a 15 tick stop. Target would be the lows of Leg 1.

Gold Play Update: Gold play was aborted with no entry triggered.

Sunday Night Futures Action

Futures are getting clocked tonight with Dow futures down 100 points and Russell futures down 9.5 points. Japan is shitting the pagoda (-483 points), while the yen is blowing higher. Crude is down again and gold is flat. The ability of the yen to hold these levels is very important. It is at the 61.8% level of the most recent high to low move. Blowing past this level sets in motion more carry trade selling which will be negative for the markets. For me, it's all about the carry trade - a failure of the yen to strengthen as we go through the evening means the markets continue on their slide. Crude showed us on Friday that its pullback didn't mean anything. Gold the same - it was flat on Friday and nothing from the markets. So, we need a 1-2-3 punch that has to include the Yen. Otherwise, we move to the daily 200 ema rather quickly (13150 ish level for Monday). Look for the downside to stall a bit at the 13365 level for $INDU, which is the bottom of the weekly uptrend line. However, the stall will not be for long without the Yen cooperating.

Canadian Dollar - Just Watching for Now

I have been watching the Canadian Dollar for the past week since I noticed the overbought conditions. Being powered by strong commodity prices in gold and crude, as well as the dollar melt down, the Canadian Dollar (CD) has run to significant overbought extremes on my charts. I typically see the 3-Headed Monster pop up at 161.8 extensions from the initial peak. CD is currently at 200% extensions with the monster just appearing (see below):

Jumping down to the 120 minute chats, we can see the beginning of what is the 3rd leg on the run up. I would say that it is a bit premature to look for a short term correction just yet since the breakout just started and the 34-ema has yet to be broken with a bar close below it. Price appears to be coming back to "kiss" off support as well as the 34 EMA, so I would want to wait for that break and close of the 34-ema to occur. I would also be waiting for a bar on the overbought histogram to close lower than the previous day. This way, we are assured of a 3-Headed Monster that has "set". With these lofty overbought levels, this break could happen sooner than later. I just have it on my "watch" list right now.

Equities - scaling up and getting out

As previously mentioned, I scale into positions as they exhibit the ability to move up. I try not to dollar cost average as stocks move down. I will scale into positions in 1/3rd increments or 1/4 increments. My decision on a particular stock depends on sectors, strength of sectors, time of year, and strength of stock within a particular sector. The "trigger" is based on pops created by pressure generated by sideways consolidation. I have an indicator for this, but basically it is when the bollinger bands compress and fall within the keltner channels. This occurrence is easily observed by placing both indicators on your charts and just looking for those situations on daily charts for stocks that you have filtered as "good prospects".

Once price moves up 2%, I will put on another position and will continue this process until I have a full position established. My initial stop loss after entering the first position is 25% draw down. I will cut a stock loose at that time because I was just plain wrong about it. I initially decide to enter with the understanding that momentum has hit and the price will move up, if I get a 25% draw down on my first position....well, doesn't take a genius to figure this one out. I will not add to my position if it moves down during the initial phase of ownership. My price target for adding to the position doesn't come down with the draw down. I will not add to the position unless and until we get a 2% pop above initial entry price. As price is moving up and I am adding positions, I will then target 20% for the first peeling of of a position to bank some profits. I then start employing a trailing stop of 4 x ATR of 10 periods. This was a rule I adopted from "Trend Following" by Michael W. Covel. This technique has worked very well for me in defining when a trend is done for the short term. With that said, I will jump back in with a position if my monthly trend indicator is still bullish and the weekly/daily momentum indicator turns back to bullish and the stock has not completed 3 legs of up or down moves.

I am a firm believer that stocks move in 3 pushes (or legs) before a prolonged rest or entering a significant reversal. I am not a student of Elliott Wave nor have I seriously studied it. My 3 leg technique evolved from use of my divergence indicator where I observed strong corrections following 3 divergent heads on the indicator (see figure below):



Overbought conditions can stay overbought for a long time, but I have very rarely ever seen it create 4-heads. The 3-heads means that we had 3 legs up to the move. I call it a "3-headed Monster" because it will destroy you if you do not get out of its way when it comes through. The example above with VDC is a current example of just this case. I have scaled the time down to the 120 minute chart below so that the 3 legs and associated consolidation areas are recognizable. The 3-legs peak with the 3-headed monster on the daily divergence indicator I use. I did not look long and hard for this example - they happen all the time, that's why I use them. I just started using this on currency futures and was able to pull out a nice profit on the yen recently. However, I have been using this technique on equities for some time.



There are times when I will not exit the entire position when the 4 x ATR (10) has been hit. This is for "favorites" that are still above the 200 ema and exhibit a long trend on the monthly chart. An example is AAPL (see below).



With that said, I just noticed that I was up 23% on my AAPL position, so I will be selling a partial position in the morning to bank gains. I then plan on buying back that position following earnings if there is a sell off on the news.

AAPL is also a good example of a 3-Headed Monster in the making. The chart below clearly shows this, so peeling off a position at this time is a no-brainer. But, AAPL is a "favorite", so I will be holding it for some time.

In summary:

1. Scale into positions based on fundamental and technical analysis,
2. Place 25% stop of initial position - done if hit, move on,
3. Add to position if it gains 2% from entry and use 4 x ATR (10) for exit of position,
4. Peel off 1 position when gain is 20%,
5. Hold 1 position of "favorites" if price is above 200 ema and monthly indicator is still long even though 4 x ATR was hit.
6. Exit "favorite" position completely if either the monthly indicator turns neutral or short and/or closing price below 200 ema.

Let's Review Shall We?

We got our three legs on Friday with the first and last leg being the nastiest. A clue to the weakness off the double bottom was the complete failure to even get to the 50% retracement level. We usually see a tap of the 50% and 61.8% before ultimate direction is decided. We could not even muster up the strength to get to the 50 on Friday. In addition we see a strong double top below that level with the right side being lower than left - a signal of a strong double top formation. Coming out of the doldrums, we see consolidation on the doldrums low, a kick up
to the 50% retracement of that move down and then off to the races once there was a clean break of the doldrums low. There was a move up to kiss the low once the break happened, but it wasn't fooling anyone, except me. The....well, then classic stair step down for the rest of the day.

My 15-min momentum indicators stayed solid short from 6:00 am to the end of the day. My 5-min indicator was short from 5:15 am to 8:45, and again from 10:05 to 10:50, and then from 11:05 to the end of the day (3 legs). At no time were either the 5 or 15 minute indicators bullish. My 2 min triggers fired a long at 9:45 which I would not have taken if I was properly day trading because the 5 and 15 were short. I then had 3 solid 2 min triggers short, which would have made me a nice profit if I was in the right frame of mind. So, in the end, my day trading signals did not miss the day.

A day does not make a trend, but......

....it sure gives you a reason to critically look at things. The markets first stop on the downside will be the 200 EMA, which will be smack dab in the middle of the 50-61.8% fib retracement of the August low to October high by the time it gets there. I have the 50% move at 13,358 and 61.8% at 13159. Switching to the weekly chart, the up trend line is at 13,365 - just on top of the 50% retracement. Last time we hit the weekly uptrend, we significantly pierced it before closing just on top of it.

Short term, I expect a move to, and below, the weekly up trend to the 200 EMA on the daily chart. I will be watching for the piercing of the weekly uptrend and "kiss" of the 200 daily EMA within one day. I will go long at this point for a short term move up. If we get a bounce out of the gate on Monday, I will wait to go short the YM for a move to the daily 200 EMA if we get 3 successive up days or a re-test of the 34 EMA.

We all know that overbought conditions can stay overbought for some time; however, (as can be seen on the chart above) the move on Friday cracked the uptrend line on the daily chart. Thus, I will look for a trend down to correct the monthly chart.

A full blown monthly chart correction is between the 11684 and 12164 level. A move to the 12164 level is a 14% correction from the highs. Will we get there?

What does this mean for currently held long equity positions? Not much. The monthly trend indicator on the DOW is still long even though the monthly chart is overbought. So, I can expect pullbacks, yes, but not trend reversals. Another words, I am not looking for exit positions of favored holdings. There are some crappy holdings that I have that recently experienced trend signal reversals. I will be burning these stocks next week not waiting for the 25% draw down of my initial position. My other favorite holdings will be treated as follows:

1. Switch of daily trend indicator to flat or negative - sell 1/3rd of holding.

2. Switch of weekly trend indicator to flat or negative - sell another 1/3rd of holding.

3. Switch of monthly trend indicator to flat or negative - sell final 1/3rd of holding.

My trend indicators are much quicker than a moving average cross over, so I will not be waiting for major moves to get out of these positions. This serves to preserve capital. The comeback response to this is "well it may get you out too soon." If my daily trend indicator turns back to bullish if price is above the daily 200 EMA, I would put on a partial position. I never forget about my favorite stocks. Always watching them.

Equity Update

The following actions will be taken on Monday:

TECH: Hold position

ALVR: Hold position. Will sell down 1,000 shares if falling momentum is confirmed after Monday close.

AVNX: Sell down 5,000 shares

ROCM: Hold position. Will pick up 1/3 position if trend change on daily chart.

LACO: Sell down 1,000 shares

BRK.B: Buy 5 shares

CEPH: Sell down 200 shares

AAPL: Hold thru earnings. Buy 1/4 position on sell down of good earnings.

DNDN: Hold

IOM: Hold

MDVN: Hold

NFX: Hold

AOB: Hold

APA: Buy 100 shares

developing.......

Market Summary

The tough thing to do is to post to this blog right now - it would be much easier to just walk away and put on a happy face for my family. However, the reason for doing this blog had nothing to do with perpetuating self deception, in fact it was just the opposite with the hope that I could shake the smoke and mirrors that I put in front of me when it comes to trading. So, with that, I follow through with my post responsibilities - if to no one else than myself.

Needless to say, the losses experienced today were the worst one day losses that I have ever experienced trading futures. Yes, I did exit my long contracts before the end of the day - but not much before the end of the day. The most difficult part is that I was fully aware of the action and should have had the most profitable day ever. Just to look at my posts today, it was obvious that we were going down. But it was my stubbornness and refusal to take a loss from yesterday during the chop session that resulted in what I experienced today.

On the good side, I allot less than 10% of my investment money to futures trading. As noted previously, I sold down half of my equity positions to raise cash.........for exactly this reason! I'll get excited about that later, what I am dealing with now is my inability to implement a disciplined plan for futures trading. What is the reason? Why did I get myself in the position I did yesterday. Exploring that a bit may lead to some answers.

It actually started Wednesday afternoon when I went long at the end of the day following two "impulse" plays. I call impulse plays those trades that are based on nothing related to trade setups. Before this, I was up nicely for the day but had just experienced a head-fake on a break of the doldrum lows. The loss was not significant and I was still up a respectable amount. I think I have an issue with losing trades when all indicators line up - I feel like I was dooped. Another words, I take it personal. So, my response was to jump into two impulse plays because I didn't have time to wait for those fucking indicators to trigger. What resulted was my being negatively positioned and holding into the evening. Then comes the justifications for being in this trade overnight. The justifications were coming fast and furious - INTC, YHOO, IBM earnings, tech is going to lead the way. I had a million of them. And then the worst thing that could happen happened - I made money on my false justifications. This perpetuates these off handed trades for me. This set the stage for Today. Funny thing is that I said that very thing when I cashed out with my nice profits. I said that this approach that I use was one day going to burn my account.

Yesterday I was up a bit less than the day before by following my signals - but I was up. I do remember getting frustrated by the choppy action and jumped into an impulse trade just before I put on those ridiculous long positions at the end of the day. I think part of it comes, in part, from feeling frustrated working all day and not having my P/L show as much as I believe it should. So, a quick impulse trade will boost the bottom line right? Well, sometimes but a few blow out loses like today negate each and every one of those positive outcomes....and more.

In reading my recent blogs, I noticed that I was slowing justifying this approach. I was pretty crafty in doing it too. Claiming that there is a place for "intuition" in the market, or that "...this is trading", etc. I must put out to anyone that may read this that I am not posting to this blog to educate anyone but myself, so the only sound advice I can give to those that read this is to not follow any of my recommendations. I am using this blog as a mirror on days such as these so that I can correct several wrongs that I have worked into my approach. With that said, I continue. One more point about that. The reason I am doing this is because I genuinely enjoy trading and know that I have flawed approaches that are deep seated in my personality, so I am determined not to give up or to blow out my account.

Impulse took over again on Thursday afternoon due in large part to frustration and boredom with the choppy market. Following the close, I again justified my approach...well, it's pretty obvious if you read last nights post. I basically got myself into the negative position, did not allow myself to accept a loss that was 1/10th of what I experienced today, and came up with a hopeful thesis that ended with praying as a means to have an acceptable outcome. I should have sold right when I typed in those words. I knew what I was doing but was so stubborn and unaccommodating of market realities that I allowed disaster in the house.

Enough of that, now for some solutions:

1. Doing nothing and not panicking is a good approach but not for highly leveraged vehicles such as futures. All positions shall have pre-defined exits that are entered and not moved throughout the trade.

2. All trades shall be based only on accepted setups that are recognized in your trading plan. Missed opportunities are just that - missed opportunities. There will be plenty more. To "miss out" just means that you did not possibly make money, but it also means that you did not lose. The downside of "missing out" is so much more than the upside. Stay out if no setup.

3. Recognizing that I have a problem with losing trades no matter how small they are, I will amend my trading plan to include provisions for getting away from the trading screen immediately following each loss. "Revenge" trading is the core of my bad trades - it's not personal, it's the market. Remedies should include getting up and away from the desk if even for just a few minutes. I will also use the blog to post each and every futures trade made so as to give myself a vehicle to immediately analyze trades made.

This week was a disappointment due in great part to my inability to stay disciplined all day long. I started off great each day, but slid into my old ways. It seems that the beginning of the day is the "new me", while the end of the day descends into the "old me". I just get lazy and unfocused. With that said, I will also consider doing absolutely no futures trading in the afternoon session. I may just focus on equities in the afternoon. I will give this more thought over the weekend.

The other disappointment was the deception that I thrust on myself with the write ups in this blog. The bog was intended to give me honest, truthful feedback and I found myself continuing with the deception. Now that I have blown past that, I will endeavor to be completely open and honest about my every trading move.

Enough of that for now. I am off to review the days activity on the equities side of things. FWIW, I lost 25% of my futures trading account today. How could I have possibly allowed that to happen with my 2% rule? Amazing. Thank god futures makes up less than 10% of my account. Probably the smartest decision I made.

I will come back from this as long as I stay open to the markets uncertainties and stay honest to myself.

Futures Morning

Well, when I get myself in a predicament like this, I tend to focus on the direction of where I made the mistake until I clear those positions out. Definitely is a day trading flaw but that is who I am right now and I haven't yet blown out my account doing it this way. In focusing on the long side, I have made 4 ER2 plays today with 3 winners and 1 loser. Total take is +23 ticks (equal to +$230 per one contract position). I have not taken any YM long positions. Between the gold and Russell plays today, I am performing fairly well; however, we cannot forget the longs that I held overnight. I am taking considerable heat on those contracts and they all came from a day trade that was rolled over to a swing trade - crappy process. It may end up drawing my account down below an acceptable level (it already has), but I have my finger on the catastrophic loss button that has yet to be hit.

Weak shorts are getting stopped out of the head fake we just had to the downside, but I am not fooling myself into believing that the downside is done - not by any stretch.

Doldrums Over

Doldrums are over and we are sitting at the bottom of that range, which is no surprise. Like I said before, I fully expect the second leg down to kick in even though I am holding long positions. It will be painful but is inevitable. Watch that double bottom head fake, but be prepared to go short on scalp trades if you have the desire. (click on image)

First Leg Down Finished

Thankfully, the first leg down has been completed. Make no mistake, there will be two more legs before this thing is over. The only exception to this will be a positive shock to the system like INTC CEO interview being a complete surprise, which I do not put out of the question given Chambers' memorable giddiness at the end of last quarter when he was questioned about world strength. I also remember INTC's Andy Bryant reacting the same way a few days ago. However, I am not banking on that happening today. Option expiration and the big fucking move down today means we need to wait for all three legs and then see what the sentiment is. My chart below shows the first leg.

Gold II

Just cashed out of my gold trade for +80 ticks (+$800 per one contract positions). I used my 10-minute chart with 200 ema to get out. There is an unfilled gap ($759.20) from day before yesterday that I think will be targeted today, but I will not get greedy given the ass kicking I am receiving in the indices. I typically use the 200 ema as a profit taking target, today is not the day to change that.

Gold Cooperating...that's about it

Up about 52 ticks on the gold move down (equal to $520 per one contract position), but that is just serving to take the edge off on the ass kicking that I am getting in the index longs that I still hold. Trend down has been violent for an option expiration day. Crude is also cooperating being down over 2% today. Yen chopping around and not cooperating (up 10 ticks since the market open). So, we have two pieces in place for an easing of this shit kicking and now just need yen to fucking relax a bit.

Futures Morning Thoughts

What a time to be stubborn with my trading and hold lindex longs overnight. We have options expiration today. For me, I might as well go the Vegas, grab a big fat Guinness and mosey on up to the crap table. Set-ups today mean nothing. The whipsaws that happen today will be mind numbing for futures traders. Best thing to do is either sit on hands and be a student of the market just by watching the action during various time periods to further educate oneself about price action during this period, or do quick scalps based on tape reading. With my longs in-hand during this period, I choose to be a student. Besides, can't trade with your fingers crossed. My thesis for today is that profit taking in both crude and gold, as well as upward resistance for the yen will result in an upward chop for the market. That said, I will not be mopping around the house this weekend wondering what happened if my p/l is lower at the end of the day. If I have left any doubt, options expiration day is not a good day to trade futures.

Futures Roundup

First, let's take a look at the ER2 chart. There is a lot going on there. As you can see below, once price broke above the Doldrums Range (time period defined by vertical lines) it was off to the races to the Tuesday HVP. The 50-61.8% Fib retracement of the Tuesday/Wednesday HVP was a magnet for price today. Once the Tuesday HVP objective was hit, price came back to chop around the fibs. The play would have been to sit on your hands and wait for a break of the Doldrums Range and then go long with Tuesday HVP as the target. Did I do this? Of course not. I cheated before the end of the doldrums and went short, had my ass handed to me, and then caught the pattern long only to get chopped due to ER2 pullback - shit! Interesting to note that price is breaking above the wedge following GOOG and AMD earnings. The Thursday HVP (seen in the middle of the chart) should serve as a bottom in the overnight period baring any other bad earnings (or other) news. I am holding both ER2 and YM long contracts overnight - yeah, yeah, yeah, I know - bad fucking process. Outcome is also terrible today.





The YM chart is very similar to ER2 except that this bitch did not make it to HVP. This little fact is what screwed up an otherwise fucked up trading day. I was planning on the overshoot from ER2, which was the first to achieve Tuesday HVP. So, I had sell orders in for partial positions on both ER2 and YM at the YM Tuesday HVP - never got there. Thus is the reason for my holding longs into the evening. Ouch! Look at the YM pattern after it broke out of the doldrums range - how the hell do you trade that. Answer is you don't. You recognize it for what it is, have your market thesis and ride out the storm. Failure to ride it out leads to being chopped up in-n-out, ad nauseum. My market thesis at that time was Tuesday HVP objective. Now it is a matter of waiting it out.

No finishing numbers tonight due to open positions and a bad attitude, but let me just say that a nice move up through the night will probably get me back to even for where I stand at this point for the day.

Friday Market Thesis: trade the frigging patterns, but since I am long I offer up the following:

1. Gold has had a good run up and thuse will pause and pull back on Friday like it has a habit to do - market long positive.

2. Yen will pause in its push up from the 200 ema (daily chart) once it hits the 50% to 61.8% fib area (around 25 ticks above the high of today). At this point, it will cease its move higher on Friday - market long positive.

3. Oil - ouch, no guesses here. The only thing I can toss out is that it falls off after achieving $90 per barrel. However, overall market long negative.

4. HVP - uptick from Monday-Wednesday levels - market long positive

5. Prayers - can't hurt. Net market long positive (at least in my mind).

In the end, I should not be holding the longs given that I am a frigging day trader with these contracts, not a swing trader. But alas, trading is trading.

Bad process - bad outcome

HVP Update:

YM: Thursday 13915 - uptick from Wednesday level
ER2: Thursday 827.90 - uptick from Wednesday level

HVP Today

Looks like an uptick to HVP today for both YM and ER2:

YM: HVP Thursday 13915 (13895 Wednesday)
ER2: HVP Thursday 825 (824 Wednesday)

Bought 1,000 shares of ALVR @ $13.20

I like the way the stock is acting the past couple of days. I have been waiting for the downturn to base out so that I could pick up a block of shares. This may not be the end of the shake out, but I do want to be well positioned in case it is. Fuck CSCO, I never got into this stock because of the potential buyout. It stands on its own and will continue to pile on the new contracts. CSCO will be left wondering what the hell happened in a year from now.

Having a Hard Time.....

.....just sitting back and waiting for the appropriate setups to materialize. I am currently getting caught up in candlestick movement going long....switching....going short. Has nothing to do with the indicators, it's all me. Financially, it means nothing, but from a discipline standpoint, it is creating a lot of anxiety. The best play here is to draw a line above the 61.8% retracement of the Tuesday/Wednesday HVP Range and below the Tuesday HVP. Then, I need to sit on my hands and do absolutely nothing until a clean break of this range happens. Watch for the head fakes and then look to the momentum indicators. It's that simple right? Right!

Futures Morning Session

As can be seen from the chart above, price action has been chopping between the Wednesday HVP and the 61.8% retracement of the Tuesday/Wednesday HVP. This is a weak signal that has me looking for further weakness below the Wednesday HVP if price cannot mount a charge above the retracement level. I say this because we have a "trend day" with price trending 106 ticks in the 24 Hour Session and 70 ticks in the Regular Session. I am currently in a YM short due to momentum signals that fired prior to doldrums setting in.

Morning results, so far, are presented below:

YM: +18 ticks (equal to +$90 per one contract position)
ER2: +10 ticks (equal to +$100 per one contract position)

Bought 500 MDVN @ $22.86

Added the final 1/4 position to MDVN - now am fully positioned here. I wrote awhile back about the breakout we saw and said that I would not have been surprised to see a pullback to the breakout line. Well, we had that a few days ago and are now moving higher (see below).

Stay Focused

Focus is so important in this profession, one needs to be aware at all times of positions, orders and finances. Redundancy is mandatory because mistakes are made. Well I had a YM short position on this morning from the time of the BAC earnings. My goal was to sell off 1/2 of that position when we got to Wednesday HVP of 13895, which we did in fact hit. But instead of taking off 1/2 position, I added 1/2 position. This is where the old me takes over. I held after I realized what I did. Market went up to test the 50% retracement of Tuesday to Wednesday HVP and I was seeing red. Believing that we would reverse, I sat on my hands. In fact, we did reverse to test the Wednesday HVP one more time. Where, I was to sell 1/3rd of my new position. Instead - yeah, that's right, I fucking added once again. It was at this time, that I cleared my positions in their entirety. End result was +85 ticks on the YM (equal to +$425 per one contract position). Madness. Off to get a cup of coffee and figure out why I got up so early.

Bad fucking process - good outcome

ER2 HVP

Thought it would be interesting to see ER2 HVP lines. Action is dead on with YM - kiss off the Tuesday HVP with BAC earnings news and rocket down to Wednesday HVP. Other thing to note is that the HVP for both YM and ER2 have been lower each successive day this week. I'm not looking for reversal signals in the market unless and until the current day HVP closes above the previous day HVP.

Old Me vs. New Me

As a quasi-full time futures trader that is transitioning into a real life full time futures (and equites) trader, I need to get a hold on my impulse trades and try my best to work serious discipline into my trading life (even if I don't have it in my personal life). But the roughest thing in the world is when you have a trading impulse that you hold down because there is no "setup", walk away, and then come back to see that it rocketed your way. Not that it "moved" in the direction I thought, it "rocketed" in the direction that I thought. I was sitting here thinking about my YM shorts and looked over at the ZG (gold) charts thinking "wow, seems to be squaring with a long position, but this that and the other thing doesn't square so the "new me" will just walk away. Came back 10 minutes later and fucker jumped 60 ticks. Not just that, but the new disciplined, conservative (yeah right) me stayed away from piling on ER2 shorts with the YM - another 40ticks left on someone else's doorstep. I know in the long run that type of discipline will assist in my trading survival, but its hard to get past the fact that I firmly believe that impulse (aka, intuition) does have its time and place.

BTW, take a look at the chart below. It's an up-to-date YM futures chart (just click on it for a clear picture). It shows the HVP for Tuesday and Wednesday. You can see the kiss-n-drop at the top when BAC came out with earnings. The bottom shows Wednesdays HVP where I took 1/2 of my position off. I must say that I didn't catch the full run. I couldn't run down the stairs fast enough to catch the full run after I heard the BAC news. So, I caught it from 13941.

BAC Takes a Dump-Going Short YM

Went short YM at 13941 following BAC earnings this morning. This financial bellwether can dance around as much as it wants with the language, but the numbers speak for themselves. The market has been searching for direction all week. The action has been herky jerky at best and anyone that trades futures knows this. It's during these times that you go with the news. The bid under the market is shaky at best due to the non-stop runup we have had and the bad news coming out of the financial earnings, which is hammering the S&P earnings for this quarter and will revise next quarters. My thesis is that tech will eventually lead out and lead the way for the rest of the market through the end of '07. However, we trade for today and with that I will flow with the BAC earnings today and go short. This will help me bank coin today and to hedge my decidedly long equity positions, which is tech weighted. But, I saw this coming last week and increased my cash holdings to 50% waiting for a pullback of sorts to happen through earnings season. We lost sight of the effect of financial earnings on the 4th quarter when the fed lowered rates, so this needs to be worked back in to the markets, which it will do in the next week or so as we see how bad the financials get pounded. Once that shock wears off, we will all ignore reality again and focus on tech and China and the market will continue its tear back up. Once I get wind that that upward reversal is happening, I will deploy cash to bank serious coin before the end of the year and impress my wife. Good news that tempers the slide down are beats by pfiser and nokia. Will hold the shorts through the open - I am willing to risk futures trading capital to hedge my equity position. I am more than willing to risk a few bills to gain necessary insurance. I will peel off 1/2 of my short position at yesterdays HVP, which is 13895 giving me 46 ticks on my first 1/2. I will then hold through the storm with the remainder. Banking the profit with the first 1/2 will allow me to comfortably ride out the volatility with the second.

Futures Roundup

I have been noticing a trend all week long, push down through doldrums, chop around a bit within the doldrums range and then head fake back up. Today was easy to spot with the big legs down in the morning session and during the doldrums. The third leg was a weak attempt to pull more shorts in, but with the HVP of Tuesday well above and the HVP of today's session above, there was no way I was taking that bait. We got ER2 back up to today HVP (824) where it caught its breath and then continued on up to Tuesday HVP or 831. Matter of fact, it ended the day dead on Tuesday's HVP of 831. Sick. YM kicked on up to today's HVP of 13895 where it got a bitched-slapped but pushed higher. YM topped out at 13973, just 5 ticks shy of the Tuesday HVP. Interesting thing with YM, it stopped dead at the 61.8% retracement to Tuesday's HVP from today's HVP and reversed almost dead to today's HVP and then proceeded up to the highs of the day. This is better understood with a chart - see below. The solid horizontal lines represent the Doldrums Range:

My trading was well disciplined in the morning session, but not so much in the afternoon session. I punished myself by forcing myself to sit on my hands after I exited my 12:00 trade at 12:07 (Cali time). That proved to be costly punishment since staying with my thesis would have brought in another 50 tick on the ER2 and about 100 ticks on the YM. However, rules are fucking rules.

Good outcome - so, so process

Day trading results are presented below:

YM: +119 ticks (equal to +$595 per one contract position)

ER2: +2 ticks (equal to +$20 per one contract position)

Cumulative day trading and overnight results are as follows:

YM: +316 ticks (equal to +$1,580 per one contract position)

ER2: +133 ticks (equal to +$1,330 per one contract position)

24 Hour Range: 247 ticks

Regular Session Range: 247 Ticks

Monday HVP: 14016

Tuesday HVP: 13978

Wednesday HVP: 13895

I include a 5-min chart with the HVP included:

Third Leg was weak

I stayed cautious on that third leg down, which broke below the low of the doldrums range. Last two days has seen a nice reverse from this attempt. So, given third leg down and rejection of break below low of doldrums range, together with a YM HVP level at 13978 - I went long the YM and ER2. I will scale out as we move up to the HVP level of 13978.

Update - I exited my longs on the test of the 200 ema (2 min chart). This is a bit below the HVP of 13978, but my process of trading today was not well disciplined, so I came to my senses and exited with what I had. With that said, I fully expect a test of YM 13978 by the end of the day. My ride up netted me the following:

YM: +96 ticks (equal to +$480 per one contract position)
ER2: +3 ticks (equal to +$30 per one contract position)

Looking at the move up, I am convinced that I need to develop rules for these trades.

HVP for Today

YM: 13992

ER2: 834.60

We have had only 2 legs down today. Not going to say how far down the third push will be, but given HVP today and yesterday, I will not be holding shorts for too long. I do expect one more break of the lows today - boldrum range, but my finger will be on the trigger to eject just in case.

Doldrums Approaching

HVP for the YM and ER2 acted like a magnet this morning - as expected. But before that, I shook off my long positions for nice gains and then went short on a quick ER2 play accumulating an additional 10 ticks. I then sat back and waited for the move to HVP for both indices, ER2 got there first and YM followed shortly after. I then played the bounce that I was waiting for picking up +15 ticks on the YM. Sprinkle in a few more momentum plays and scalps and you have the following results for this morning:

YM: +6 ticks (equal to +$30 per one contract position)
ER2: +20 ticks (equal to +$200 per one contract position)

The above results do not include the overnight profits - just morning trades.

24 Hour Range: 106 ticks
Regular Session Range: 106 ticks

I am still being mesmerized by price movement during my day trading. I gain a lot out of watching price bars and their relation to each other, but I am constantly fighting the urge to enter or exit trades on their movement alone. I have gone back-n-forth with bars only vs. indicators only on my screen. What I am concluding is that I need both but I need to allow the indicators to get me in and out of trades, not price bars. Tough battle.