Daily Archives: June 28, 2010

Market Focus (by FacesinCabs)

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As of the close
Friday, I am mildly short in equities (no longs and no commitments in
commodities).  For this last week, I
added about 8% to my main trading account. 
I would add that I am not risking too much here.  Certainly not as much as when the market pull
back began and turned into a major decline out of the market shock event, which
I discussed here in some posts in April.

 

My summation
currently would be that the markets can go either direction this next week, and
that important trading traits are nimbleness and patience.  The weekly charts clearly suggest that more
downside is in the market's mid-term future. 
Even with Friday's oversold bounce, I would note the many bearish
engulfing candlesticks on the weekly charts. 
Here are examples.

 

 ($SPX)

Snap8

 ($INDU using different chart settings)

Snap9

 

In the short term,
factors like the end of the 2nd quarter will more than likely trump any bearish
factors.  For example, money managers
(both domestically and in Europe) will be eager to ensure investors about this
quarter after the market correction from April to June.  Two areas that I will watch this week for
leadership are banking and real estate.

 

 (Banks)

Snap10

 
(Real Estate)

Snap11

 

I am personally
leaning towards a mild and measured move up this week.  However, I would comment that if the markets
see redemption selling this week and an increase in volatility then this summer
will most likely be a complete bear fest.

Even Steven

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It's 10:15 in the morning as I'm typing this (I have no idea when it'll be posted), but I thought I'd bring you up to date on my day so far….

+ My biggest stinker was a (small) long position on UNG; what a dog!

+ My biggest winner thus far was a medium-sized short position in SLV, which I covered about half hour after opening it. 

+ The Euro just can't seem to get off the mat. It's disappointing, because a strong Euro would make trading easy for a week or two, and it would be a great setup for a zillion short positions. As it is now, it's just a huge tug-of-war.

+ I am not in any big positions at all, but I choose my 27 best long ideas and my 27 best short ideas and entered those. I am thus neutral, inasmuch as the quantity and size of the positions is roughly the same, although I'm hoping the "best" nature of the shorts and longs might yield a profit irrespective of market direction.

+ I am counting the minutes until this quarter is over, because I feel hamstrung from a risk perspective until a new quarter starts.

Patience And Endurance Are Essential to Trading Success (by Sean McLaughlin)

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Patience

 

Patience has always
been one of my biggest problems…especially when it comes to trading.

It takes patience to let what's working, work. I've always had trouble
balancing my long-term goals of "trading success" with my very real
short-term needs to make money to pay bills and rent.

Recently, I've had success in the markets. I am earning very respectable
percentage gains that if left to continue compounding, will in the long-run
amount to a tremendous fortune. Of course when these runs happen, my natural
tendency is to want the long-run to hurry up and get here as fast as possible.
Naturally, this is not possible, and this is where I usually run into problems.

They say the first step is "admitting you have a problem." So this
blog post is my effort to throw my recognition and acceptance of this problem
out to the universe. Now, the next step is to learn to practice patience.
Keep my head down. Keep plugging away and duplicating what I know is working.
Make it as automatic as possible. Focus on the process, not the results. The
results must take care of themselves.

The other tactic I am beginning to practice is visioning that I've already
achieved my goals. Allowing myself to experience what it would feel like to
already be there. In which positive ways would my life be different? Imagine
it. Feel it. One amazing result I've had during these mind games is to realize
that in a lot of ways, I'm already living it. Maybe my money clip doesn't
reflect it. But my attitude, and the way I spend my time does.

 

Endurance


While the act of patience requires one to go with the flow and to base your
actions with the big picture in mind, the struggle you often face is finding
the strength to keep moving forward when strong headwinds blow in your face. It
sometimes takes every ounce of power you can muster to keep the wheels spinning
and the car on the road – when the road takes unpredictable turns, ups and
downs, and on top of all that, the road is covered in a sheet of black ice! To
focus, you need endurance.

This week, my account equity touched new highs. However, it had been over a
full calendar month since my last new high. During the period of battling a
slow-bleed drawdown, I found solace in knowing that with just a few small
tweaks, I'd be able to right this ship and get headed back in the right
direction again. I had absolute confidence in my plan and knew that over time,
these will just be small bumps in the road. My perseverance paid off,
and today we're back at new highs.

The struggle for me constantly is this: Since the summer of 2009, I have
completely turned around my trading and have settled into a groove that is
yielding excellent results. We are talking annualized percentage gains that are
too embarrassing to publish because they don't look real and you probably
wouldn't believe me. This is a good thing, right? Yes and no. The problem is
that although I am employing a great strategy that is highly scalable (meaning,
any Trader should be able to trade the same way I am regardless of whether he
is trading a $1,000 or a $1 million account), I'm still trading with an account
that is too small to really enjoy the rewards. All the gains that are being
achieved must remain in the account so that I can continue to grow it so that
it can get to a level where I can then begin regularly withdrawing cash to
spend as we please. Its frustrating performing so well, yet still having to
live frugally and continuously make "either/or" decisions instead of
making "yes/and decisions." Instead of saying: "Yes, lets go to
our friends' wedding in Mexico AND buy tickets to that concert we want to see
next week" – these days, we're always saying: "We can take our cat to
the vet, OR we can buy that dresser for our bedroom – but not both, we need to
buy groceries."

So, I'm faced with the very real situation of having to ENDURE the time it
takes to get from Point A to Point B. And the trick to do this is to stay
COMPLETELY FOCUSED on the method that has fueled my turnaround, ignore the
dollar balance of the accounts, and minimize real-life distractions along the
way that inevitably get me thinking about whatever may be wrong outside of
work, but not about what is right and working on a daily basis.

The one thing that keeps me motivated is knowing that the in the end, the
Journey will have been totally worth it. My line of work is one of the hardest
professions to master. The road to Market Wizardry is littered with thousands
of well-intentioned (and some VERY well-funded) carcasses of promising
individuals who believed they had what it took to make a living as a Trader or
Speculator. But despite the challenges and long odds against the majority, the
few who make it are true masters of their universe. I don't mean to imply they
are gods or some kind of superhuman. I mean that the ones who truly make their
living in the markets have the best jobs in the world. In fact – to them (dare
I say "us"?) – trading or speculating isn't even a job. It's
something they love to do. And nobody can take their job away from them. They
are their own boss. They can trade any market in any country they want. They
can trade in boom times and in recessions. They can trade whenever they want.
They can vacation whenever they want.

This is true freedom, and freedom is what makes it all worth it. Patience and
Endurance will get me there.

Leisa here:  I asked Sean to give Slopers a brief introduction. . . . .

In a past life starting in 1997 I traded equities for
several proprietary shops. I then moved on to start and manage a small
Commodities fund with a handful of investors. Following this, I leased a seat
at the Chicago Board of Trade.

 
Now after nearly 13 years, I exclusively trade options for
my own account out of the comforts of my home office in Chicago.

 
My trading strategy is discretionary and tends to be
swing-trade in style. My trading thesis is centered around being positioned for
the frequent and inevitable negative market surprises that throw lessor
mortals' trading plans into the vortex of indecision. 

 
Outside of trading, I'm a hardened skeptic of governments
and politicians, a hockey fan, and lover of great music and cheap beer. You can
follow me on twitter: @chicagosean. And I've recently begun a blog titled I Guess I'll Say it Here.


 

ES & EURUSD Declining Channels Broken – Rally? (by Springheel Jack)

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Both the declining channels on ES and EURUSD broke on Friday, and
various others including oil, CADUSD, AUDUSD & GBPUSD broke up
too. That was a significant show of strength, even if the rally on ES on
Friday afternoon was nothing to write home about.

What I’d normally expect to see on ES and EURUSD at a
point like this would be a rally, and that is what I’m expecting, and
the question in my mind is how far that might go.

Here’s the broken declining channel on the ES 60min chart:

100627_ES_60min_Declining_Channel_Broken

Here’s the other broken declining channel on the EURUSD 60min chart.

100627_EURUSD_60min_Declining_Channel_Broken

Looking at the main broadening descending wedge on the EURUSD daily
chart, I was calling for a return to the top trendline in the 1.28 to
1.30 area when we last hit the lower trendline at 1.1875, and while that
sounded like a pretty wild prediction then, if we were to take another
two weeks to reach it the top trendline would be at just over 1.28, and
from 1.2385 at the time of writing, that no longer looks that far away.

Here’s the broadening descending wedge on the EURUSD daily chart:

100627_EURUSD_Daily_BA_Wedge_and_Bull_Flag

Looking at the action on EURUSD since the last low, we have what looks
like a wave up, then a retracement wave down. In combination they look
like A & B waves, forming a bull flag, with the C wave just
beginning to take us the rest of the wave to the top trendline of the
wedge.

On ES at the same time, we have also had a ninety point wave up followed
by an almost seventy point wave down, if those were equivalent A
& B waves, and EURUSD is now starting the C wave up, then I’d
expect to see that C wave up on ES as well.

So how far could that go?

On ES the last wave up was stopped exactly at the declining trendline
from the top and that would be the main resistance level to consider
from here on any rally. That would be found just over 1100 on ES, which
is also the location of serious range resistance at 1101.5.

If ES can get past that declining resistance, then I could still see SPX
riding EURUSD’s coat-tails up to near 1150. Here’s how that would look
on my primary SPX bear scenario:

100627_SPX_Daily_Model_Bear_Scenario

That’s pretty far out on a limb stuff. 1150 SPX looks a long long way
from here, and resistance just over 1100 ES looks pretty solid. If that
breaks though, then 1150 SPX will be the target I’m expecting to be hit
on the next rally.

Arthur Hill and jesterx both mentioned the IHS
forming on the RUT. I’ve had a look at it and maybe. It is
pointing to an almost complete retracement of the fall since April from
here and I’m having trouble visualizing that in the near future
but it is worth bearing in mind:

100627_RUT_60min_IHS

Updates will be erratic until Thursday as I’m away from home and my
internet connection is a bit unreliable.

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Lake Icy Freeze

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Here I am, mentally preparing to water ski tomorrow today on a lake made of recently-melted snow (the mountains around here are still partly covered with it). I was going to completely blow off any water skiing this week, since I'm a temp wimp in the first place, but having (non-deliberately) tumbled into the aforementioned lake while learning to paddle-board, I recognize that I can survive the plunge, so I'm going to keep the yearly tradition going.

May Jesus Christ be holding on to my shoulder.

Toshi

 

(Leisa here): I have just the thing for you, Toshi….your own personal SJOAB necklace

Sweet jesus on a biscuit 

[Note: I managed to delete Tim's picture when loading SJOAB. I'm not sure if that portends anything or not, but tighten up your stops, just in case. Be nice to the next person in case I get axed)



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