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.

HVP 2

ER2 was the first to hit HVP and has stalled on the downside a bit. Remember what I said yesterday, if ER2 is the first, it will probably continue to the downside until YM hits its objective. I will play the YM bounce off the HVP but not the ER2.

High Volume Price

Could YM and ER2 be pushing for Tuesday's High Volume Price of 13,978 and 831, respectively? A gap fill for YM will put it right at 13978. Globex low for YM is 13984. If so, I will be looking for a bounce at this location.

Overnight Futures Update

Waited for open to see how how the market was going to react.l My biggest fear was that we would see a filling of the gap following those crappy housing numbers (-10%). There wasn't a big sell off of the gap, but a steady drip lower was kicking in. My momo indicators went south, so I peeled off my last ER2 position for +63 ticks and my final two YM positions when the drip didn't cease (+60 ticks and +52 ticks). Below is the summary of the overnight positions:

YM: +197 ticks (equal to +$975 for one contract position)
ER2: +131 ticks (equal to +$1,310 for one contract position)

Market is attempting to give a good push down to at least close gap to yesterdays close. ER2 is holding up the market with a bit of strength for right now.

CNTF busting out

Wow - looks like the big break finally came with the Chinese Government awarding CNTF with a PC phone contract. Glad I sold down my position the other day - genius! Actually, I picked up a block last night just before earnings of the tech giants not because I thought this was going to happen, but because I though China was going to kick ass today following INTC, YHOO and IBM earnings. Whew! Information can be found on the following link (I'm not going to waste space here by posting the article just click on it):

http://biz.yahoo.com/iw/071017/0316245.html

Up, Up and away.......

The past two days have presented futures day traders with painful chop that made us all sit back and question our momentum indicators. There were sharp up-thrusts immediately followed by down thrusts within the same 2 minute bar leading to many a false signals on the shorter time-frames. But for those that have experienced this before, you were able to tell that this was the battle ground between the bulls and the bears. For me, that meant going on auto pilot and sprinkling in some discretionary scalp trading techniques. Not that I was abandoning my indicator forever, but just during these indecisive times. I am aware that, during these times, that support and resistance are targets to be shot for, but that reversals off of these locations are important areas to watch. These locations include globex high/low, doldrums high/low, double bottoms/tops of significant moves intraday and over the past two days, 50-61.8 fib retracement areas off of significant moves intraday and over the past day, etc. None of these things work for momentum signals because not enough momentum can get going before the signal reverses itself off of support or resistance. Yesterday was no exception. We spent all of the afternoon session in the doldrum chop zone, but I captured the late afternoon pattern that reared its head the day before. That is, with supreme hesitation, the market chops and chops and cops during the day, but gives up its tell the last hour. I noticed the run up at the end of the day and, since we usually get at least a few days of these tells, I decided to go long at the end of the day. I additionally decided to hold it overnight due to a number of factors, (1) big earnings coming out after the close with tech stocks, (2) no expectations for surprises on the earnings front, (3) remembering CSCO Chambers being all geeked out last quarter about how great the world economy is and knowing that this would not just vaporize in one quarter, and (4) a penchant for high risk for high dollar gain. End result was positive upside overnight - doesn't always happen this way, but this is trading.

I peeled off 1/3rd position on my YM holdings and 1/2 of my ER2 holding - I ain't a total dumb shit.

YM: +85 ticks 1/3rd position (equal to +$425 on one contract position)

ER2: +68 ticks 1/2 position (equal to +$680 on one contract position)

Futures Roundup

Well, I don't know how to respond here. I took only one more futures trade in the afternoon session when ER2 broke the bottom of the doldrums range. However, YM did not confirm as it pierced the support but did not perform a clean break. A clean break occurs when support or resistance is pierced by one bar and then has the next bar perform cleanly below the line without touching it. That happened on the ER2, but YM did not have the clean break. So, I went short off the 5-min momentum indicator and sold out for a loss when markets reversed. This is exactly what happened yesterday when, after a long wait, YM closed below the doldrums range only to reverse and go higher. So, I was aware of that previous action. I quickly closed out my losing positions and went long ER2 and YM. I held those futures into the close and waited for the INTC, YHOO, and IBM earnings. INTC and YHOO kicked ass, IBM missed on margins a bit, but otherwise everything was ok. Following the announcements, ER2 and YM screamed higher. I will be holding into the morning and then will peel off holdings as market moves up. Oh, yes, the market will move higher in the morning.

Break of Doldrums Range

We finally had a break of the Doldrums Range by the ER2. That's the good news, the bad news was that it was a break to the downside, so I lost on the longs. I sold the longs and went short with my 15, 5, and 2 minute momentum signals. Only problem with this short trade is that YM has not had a clean break of the doldrums range. It pierced it but has not recorded a 5 min bar clear of the range. We shall see.

Doldrums Range cont.

Doldrums range is still in tact and, as such, no new trades. Yeah, yeah, yeah, I am still holding those impulse longs I picked up before the doldrums set in. YM tested the high of the range and got slapped down, and then ER2 tested the low of the range and got a foot up its ass. So, here I sit, on my ass, waiting.

Futures and Equities - siting on my hands for now

Chop....chop....chop...... Would not even consider entering additional positions until a decisive break of the doldrums range happens. We had a test of the top of the range with the YM a few minutes ago and then it was bitch slapped back down. Now we are headed to the lower end of the range.

Doldrums Range

Doldrums yielded a fairly tight range that has yet to be pierced by either YM or ER2. HVP for ER2 is like a magnet - pops above, comes back, pops below, comes back ad nauseum. YM HVP on the other hand tested it twice today staying below it for the day. Both tests have been soundly rejected. Price is moving up to to of Doldrums range as I write, will see if a 3rd test of HVP for YM is a charm. Oh, BTW, I fell off the discipline wagon and am holding both long ER2 and YM positions. No need to try and justify it, they were impulse plays that I am holding onto.

Bad process.

Futures Morning Session

Short signals triggered across the board about 1/2 hour into the regular session. I had short YM and ER2 triggers on the 15, 5 and 2 min charts. First trades netted +59 ticks on the YM and +10 ticks on the ER2. The net ticks on ER2 were way lower than could have been if I let the indicator get me out instead of a +10 tick profit target. I was satisfied with with the end result and was fully prepared to wait on another 2 min setup to the short side when the market, led by the ER2 decided to push up. Now that I am keeping track of the high volume price from the day before, I fully expected those levels to be targets on both the YM and ER2 given that price was currently below. What tends to happen is that the first to hit a particular objective (be it the high volume price, 50% retracement, pivots, etc.) will usually overshoot so that laggers can catch up and hit their objective. Well, I had the fibs laid over the highs and lows for the 24-hr session for ER2 and noticed that it was above the high volume price from yesterday. ER2 hit high volume price (HVP) stalled and then proceeded past because the YM was lagging on its quest to achieve HVP. This allowed ER2 to move right up to the 50% retrace of the 24-hour session and YM to move dead on to HVP where both stalled and......reversed. I did not factor that into my decision making when the 5-min momentum indicator triggered a long, but given that my 15 min charts were still in short mode, I should have stood aside given this obvious overhead resistance and the 15-min Short signals. But alas - I didn't and took the 5-min momentum signal to go long. I painfully waited for the signals to reverse and settled for a -78 tick play on the YM and -22 tick play on the ER2. In between this mess, I scooped up 6 ticks on a 5 min ZG momentum play. Tough thing here with the ZG was that I was up 30 ticks at one point, but the indicators did not give me an exit signal.

Flat outcome - good process.

My morning results are presented below:

YM: -4 ticks (equal to -$20 per one contract position)
ER2: -15 ticks (equal to -$150 per one contract position)
ZG: +6 ticks (equal to +$60 per one contract position)

24 Hour Range: 148 ticks
Regular Session Range: 95 ticks

High Volume Price

YM closed at 14075 in Chicago yesterday, while ER2 closed at 837.40. As can be seen in my "Futures Roundup " article yesterday, I had 14016 as the high volume YM price and 831.60 as the high volume Er2 price. So, we had a nice run up from these daily high volume levels at the end of the day yesterday. But this morning, early players brought price back in line with those high volume levels. We went from the YM close of 14075 to the 14016 level by 5:30am Cali time (time when volume starts coming into the market). So, I played the bounce off this level and have captured +10 ticks so far on YM (1/2 position). I still have half of my YM position open. I am using break even as my stop on the second half (14015).

Futures Roundup

The Doldrums Range kept me out of chop for most of the afternoon saving me from two false momentum signals. It wasn't until 12:26 that we had a clean break through the bottom of the range established during the Doldrums. It was at this point that I should have heeded two warning signals: (1) we were approaching the last 1/2 hr of trading, and (2) we already experienced 3 legs down in today's session. However, a signal is a signal. I do not have any rules that keep me out of trades at a period "approaching the last 1/2 hr of trading" or when we have experienced 3 legs of price movement. Given that my momentum indicators fired sometime prior to my entry due to price being within the doldrums chop zone, I got in a bit late and experienced a sharp reversal after an initial move down. The end result was -22 ticks on the ER2 and -30 ticks on the YM. That should have been the end of the story with my end result being +28 ticks on the YM and break even on ER2 for the day, but no. Indicator discipline goes out the door and I resort to my old ways of tape reading. I "felt" the reversal. I have been watching the "tape" long enough to get a feel for when the market is giving a head fake - I felt that this was one of those times. No indicators, just pure price movement and bar expansion on the 2 minute chart. There is no reason I should have made money at the end of the day if I stuck by my plan, but ya know sometimes you just need to say "fuck it" and run the red light.

Good outcome - bad process.

Results for the day:

YM: +41 ticks (equal to $205 per one contract position)
ER2: +36 ticks (equal to +$360 per one contract position)

24 Hour Range: 238 ticks
Regular Session Range: 210 ticks

YM High Volume Price: 14016
ER2 High Volume Price: 831.60

YM Pivots for Tuesday:
R3: 14434.33
R2: 14319.67
R1: 14196.33
Daily Pivot: 14081.67
S1: 13958.33
S2: 13843.67
S3: 13720.33

ER2 Pivots for Tuesday:
R3:868.33
R2: 858.57
R1: 848.03
Daily Pivot: 838.27
S1: 827.73
S2: 817.97
S3: 807.43

Futures - watching for now

I am sitting on my hands this afternoon for two reasons: (1) no momentum triggers, and (2) still within doldrums range (range on the YM established between 9:00 and 10:20 Cali time). It's a new rule I am working with this week, so I will post how it fares with momentum indicators and price movement. So far, we have been chopping back-n-forth within this range since 10:20. As I am finishing this post off, we are entering a heads-up for my momentum indicator. We are well within the doldrums chop zone, so it will be interesting to see how this plays out.

Futures - Morning Session

Woke up a bit late this morning and wanted to get the cobwebs cleared out before I started trading, so I didn't take the early momentum trade. Bummer! Nice flush down that would have profited nicely. So, I sat back and waited for the follow-up signal to trigger. By the time the trigger came, the Morning Range on the YM came in at 90 ticks, while the 24-Hour Range came in at 114 ticks. So, we had good range and a short signal. The market hesitated a bit following my entry, which concerned me due to the flush that had already happened. My biggest fear was for a sharp reversal, but the choppiness of the up move the last couple of days coupled with the speed of the sell of this morning eased my fear of a sharp reversal. The move finally took off (2nd leg down for the morning) and I captured a nice amount of ticks.

Good outcome - good process.

My morning results are presented below:

YM: +50 ticks (equal to $250 per one contract position)
ER2: +30 ticks (equal to $300 per one contract position)

24 Hour Range: 198 ticks
Morning Session Range: 170 ticks

TECH - placing order to purchase 200 shares

I will be purchasing my second installment in TECH come Monday morning. This will give me a 2/3rd position. All systems are go on my daily, weekly and monthly momentum indicators. Good thing is that I caught this one at the start of the weekly and monthly momentum run. The all-time monthly closing high of $65 is currently being challenged and I believe that we will be off to the races given the momentum shift that has recently occurred.

Those of you interested in the fundamental side, click on the following link:

http://www.techne-corp.com/pdf/Techne_AR_2007.pdf

As can be seen from the information provided, the company has had a steady increase of net sales (10% increase YOY), net earnings (16% YOY), earnings per share (16% YOY), gross margin was 79% in FY 07, ROE was 22% in FY 07, ROA was 21%, etc.

In addition, this 2.6B market cap company ended FY 07 with 1/4B cash in the bank. Best of all, get this, no long term debt of other liabilities. Last but not least TECH has recently been approved to begin warehouse and distribution operations in China.

All of this leads to a very solid foundation for TECH. The one area that I would like to see improve is revenue growth with it being around 10% per year. As a trend trader, this will need to increase if we are to continue to see a steady increase for the company moving forward. The company is actively thinking about the use of their cash to grow the company through product development, improved infrastructure and outside acquisitions. Most exciting of the expansion plans is in China where approvals for operation were recently acquired. Shipments to the Chinese facility that has 11 employees began in August. TECH began servicing their four distributors in China this month.