Summary
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Market response to the 7am economic event will likely set the bias for the morning session. Today's VPOC(1168.75) > yesterday's VAH(1162) therefore, there should be some upside bias at 1167. Not as confident about this number because today's value area was so compressed.
Despite the fact that this market is overbought, all signs on the charts point towards more upside still. I will watch 1171-1172 for a (real or false) breakout to new HoY. This likely means 1.5pt - 2pt target initially, because it may be a false breakout. Price action will dictate final target.
A close below 1158 is still the criteria to confirm a short term top. I will watch 1165-1164 area for a potential breakdown (spike in sell volume).
Other areas to do business: 1155.5, 1158.5, 1160.5, 1163, 1176, 1179
Euro:
Euro Futures (6EM10) consolidated between 1.35 and 1.3440, which is above the area of the past 3 days. It has appeared to absorb 1.3490 resistance. Euro left an unfilled gap at 1.3410. That is the area I will watch for going long.
Other areas to do business: 1.3435, 1.356
Monday, March 29, 2010
Market Notes for March 30, 2010
Thursday, September 10, 2009
Potential Euro Short Term Top ?
Strange.....
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Yesterday, as I was watching the Euro, I started having this urge to sell it. I was looking only at the Euro chart and nothing else, and after staring at it for a while I wanted to sell it. I couldn't explain exactly why I wanted to sell it, only that I wanted to sell it. So I sold one contract @1.4565, just to test the waters. Price went against me shortly after I sold it. Strangely enough, I was reading "Reminiscences of a Stock Operator" at the time, and can compare it to this excerpt from the book:
I was looking-over the quotation board, noting the changes they were mostly advances until I came to Union Pacific. I got a feeling that I ought to sell it. I can't tell you more. I just felt like selling it. I asked myself why I should feel like that, and I couldn't find any reason whatever for going short of UP.
I stared at the last price on the board until I couldn't see any figures or any board or anything else, for that matter. All I knew was that I wanted to sell Union Pacific and I couldn't find out why I wanted to. I must have looked queer, for my friend, who was standing alongside of me, suddenly nudged me and asked, "Hey, what's the matter?"
"I don't know," I answered.
"Going to sleep?" he said.
"No," I said. "I am not going to sleep. What I am going to do is to sell that stock." I had always made money following my hunches. I walked over to a table where there were some blank order pads. My friend followed me. I wrote out an order to sell a thousand Union Pacific at the market and handed it to the manager. He was smiling when I wrote it and when he took it. But when he read the order he stopped smiling and looked at me.
"Is this right?" he asked me. But I just looked at him and he rushed it over to the operator.
"What are you doing?" asked my friend.
"I'm selling it!" I told him.
"Selling what?" he yelled at me. I f he was a bull how could I be a bear? Something was wrong.
"A thousand UP," I said.
"Why?" he asked me in great excitement.
I shook my head, meaning I had no reason. But he must have thought I'd got a tip, because he took me by the arm and led me outside into the hall, where we could be out of sight and hearing of the other customers and rubbering chairwarmers.
"What did you bear?" he asked me.
He was quite excited. UP. was one of his pets and he was bullish on it because of its earnings and its prospects. But he was willing to take a bear tip on it at second hand.
"Nothing!" I said.
"You didn't?" He was skeptical and showed it plainly.
"I didn't hear a thing."
"Then why in blazes are you selling?"
"I don't know," I told him. I spoke gospel truth.
"Oh, come across, Larry," he said.
He knew it was my habit to know why I traded. I had sold a thousand shares of Union Pacific. I must have a very good reason to sell that much stock in the face of the strong market.
"I don't know," I repeated. "I just feel that something is going to happen."
"What's going to happen?"
"I don't know. I can't give you any reason. All I know is that I want to sell that stock. And I'm going to let 'em have another thousand."
I walked back into the office and gave an order to sell a second thousand. If I was right in selling the first thousand I ought to have out a little more.
"What could possibly happen?" persisted my friend, who couldn't make up his mind to follow my lead. If I'd told him that I had heard UP. was going down he'd have sold it without asking me from whom I'd heard it or why.
"What could possibly happen?" he asked again.
"A million things could happen. But I can't promise you that any of them will. I can't give you any reasons and I can't tell fortunes," I told him.
"Then you're crazy," he said. "Stark crazy, selling that stock without rhyme or reason. You don't know why you want to sell it?"
"I don't know why I want to sell it. I only know I do want to," I said. "I want to, like everything."
The urge was so strong that I sold another thousand. That was too much for my friend. He grabbed me by the arm and said, "Here! Let's get out of this place before you sell the entire capital stock." I had sold as much as I needed to satisfy my feeling, so I followed him without waiting for a report on the last two thousand shares. It was a pretty good jag of stock for me to sell even with the best of reasons. It seemed more than enough to be short of without any reason whatever, particularly when the entire market was so strong and there was nothing in sight to make anybody think of the bear side. But I remembered that on previous occasions when I had the same urge to sell and didn't do it I always had reasons to regret it.
I have told some of these stories to friends, and some of them tell me it isn't a hunch but the subconscious mind, which is the creative mind, at work. That is the mind which makes artists do things without their knowing how they came to do them. Perhaps with me it was the cumulative effect of a lot of little things individually insignificant but collectively powerful. Possibly my friend's unintelligent bullishness aroused a spirit of contradiction and I picked on UP. because it had been touted so much. I can't tell you what the cause or motive for hunches may be. All I know is that I went out of the Atlantic City branch office of Harding Brothers short three thousand Union Pacific in a rising market, and I wasn't worried a bit. I wanted to know what price they'd got for my last two thousand shares. So after luncheon we walked up to the office. I had the pleasure of seeing that the general market was strong and Union Pacific higher.
"I see your finish," said my friend. You could see he was glad he hadn't sold any.
The next day the general market went up some more and I heard nothing but cheerful remarks from my friend. But I felt sure I had done right to sell UP, and I never get impatient when I feel I am right. What's the sense? That afternoon Union Pacific stopped climbing, and toward the end of the day it began to go off. Pretty soon it got down to a point below the level of the average of my three thousand shares. I felt more positive than ever that I was on the right side, and since I felt that way I naturally had to sell some more. So, toward the close, I sold an additional two thousand shares.
There I was, short five thousand shares of UP. On a hunch. That was as much as I could sell in Harding's office with the margin I had up. It was too much stock for me to be short of, on a vacation; so I gave up the vacation and returned to New York that very night. There was no telling what might happen and I thought I'd better be John ny-on-the-spot. There I could move quickly if I had to.
The next day we got the news of the San Francisco earthquake. It was an awful disaster. But the market opened down only a couple of points. The bull forces were at work, and the public never is independently responsive to news. You see that all the time. If there is a solid bull foundation, for instance, whether or not what the papers call bull manipulation is going on at the same time, certain news items fail to have the effect they would have if the Street was bearish. It is all in the state of sentiment at the time. In this case the Street did not appraise the extent of the catastrophe because it didn't wish to. Before the day was over prices came back. I was short five thousand shares. The blow had fallen, but my stock hadn't.
My hunch was of the first water, but my bank account wasn't growing; not even on paper. The friend who had been in Atlantic City with me when I put out my short line in UP. Was glad and sad about it. He told me: "That was some hunch, kid. But, say, when the talent and the money are all on the bull side what's the use of bucking against them? They are bound to win out."
"Give them time," I said. I meant prices. I wouldn't cover because I knew the damage was enormous and the Union Pacific would be one of the worst sufferers. But it was exasperating to see the blindness of the Street.
"Give 'em time and your skin will be where all the other bear hides are stretched out in the sun, drying," he assured me.
"What would you do?" I asked him. "Buy UP. On the strength of the millions of dollars of damage suffered by the Southern Pacific and other lines? Where are the earnings for dividends going to come from after they pay for all they've lost? The best you can say is that the trouble may not be as bad as it is painted. But is that a reason for buying the stocks of the roads chiefly affected? Answer me that."
But all my friend said was: "Yes, that listens fine. But I tell you, the market doesn't agree with you. The tape doesn't lie, does it?"
"It doesn't always tell the truth on the instant," I said.
"Listen. A man was talking to Jim Fisk a little before Black Friday, giving ten good reasons why gold ought to go down for keeps. He got so encouraged by his own words that he ended by telling Fisk that he was going to sell a few million. And Jim Fisk just looked at him and said, "Go ahead! Do! Sell it short and invite me to your funeral."'
"Yes," I said; "and if that chap had sold it short, look at the killing he would have made. l Sell some UP. yourself ?"
"Not I! I'm the kind that thrives best on not rowing against wind and tide."
On the following day, when fuller reports came in, the market began to slide off, but even then not as violently as it should. Knowing that nothing under the sun could stave off a substantial break I doubled up and sold five thousand shares. Oh, by that time it was plain to most people, and my brokers were willing enough. It wasn't reckless of them or of me, not the way I sized up the market. On the day following, the market began to go for fair. There was the dickens to pay. Of course I pushed my luck for all it was worth. I doubled up again and sold ten thousand shares more. It was the only play possible.
I wasn't thinking of anything except that I was right 100 per cent right and that this was a heaven-sent opportunity. It was up to me to take advantage of it. I sold more. Did I think that with such a big line of shorts out, it wouldn't take much of a rally to wipe out my paper profits and possibly my principal? I don't know whether I thought of that or not, but if I did it didn't carry much weight with me. I wasn't plunging recklessly. I was really playing conservatively. There was nothing that anybody could do to undo the earthquake, was there? They couldn't restore the crumpled buildings overnight, free, gratis, for nothing, could they? All the money in the world couldn't help much in the next few hours, could it? I was not betting blindly. I wasn't a crazy bear. I wasn't drunk with success or thinking that because Frisco was pretty well wiped off the map the entire country was headed for the scrap heap. No, indeed! I didn't look for a panic. Well, the next day I cleaned up. I made two hundred and fifty thousand dollars. It was my biggest winnings up to that time. It was all made in a few days. The Street paid no attention to the earthquake the first day or two. They'll tell you that it was because the first dispatches were not so alarm ring, but I think it was because it took so long to change the point of view of the public toward the securities markets. Even the professional traders for the most part were slow and shortsighted. I have no explanation to give you, either scientific or childish. I am telling you what I did, and why, and what came of it. I was much less concerned with the mystery of the hunch than with the fact that I got a quarter of a million out of it.
Ok, so maybe it wasn't as extreme as what Jesse Livermore did. Later, as I was reviewing the charts of the other currencies, I found out something to confirm my bearish hunch on the Euro:
Lower highs on the Loonie:
Broadening mega-phone top pattern in the Aussie:
Potential Triple Top in Cable:
As it turns out, my hunch on the Euro was correct:
Euro made a lower high, and a sustained move below 1.4510 will confirm the short term top in Euro.
UPDATE: covered my Euro short @1.4540, on the sidelines now waiting for new opportunities
Wednesday, July 01, 2009
Performance stats for Euro Futures trading System
1st month of testing my new Euro Futures Trading System has completed.
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As previously mentioned, I have been developing a semi-automated Euro Futures Trading System, and have been testing it in the month of June. Initial results look promising:
Total # of trades: 30
%winners: 22/30
%losers: 8/30
Avg. win: 61pips
Avg. loss: 90pips
Worst losing streak: 2
expectancy: 20.7pips
There's been a few times where I thought about following the system with real money. However, I always have this nagging feeling that as soon as I start using real money, the system will go on a real losing streak. Despite the real positive performance stats, I guess I still don't have complete confidence in this system. Pretty ironic, eh? I've developed a system and I'm fearful of going live with it. I will work on the psychological hurdle for the month of July. Probably the biggest hurdle to overcome is being completely accepting and at peace with the possibility of losing 90pips on a trade. The other possibility is to program a simple C# app to fire off the signals to bracketTrader. That helps psychologically to separate out the system to stand on its own and have its own identity.
There's also a few tweaks I can make to the system to decrease the # of losing trades. More to come.....
Saturday, June 06, 2009
Short term Bullish US Dollar
Summary
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Patterns repeat, and History rhymes, so chances are that USD$ will likely see a repeat of the Mar20 - Apr20/09 sequence before heading back down to test the lows.
Though it may seem redundant to look at Gold if I have already analyzed the likely scenarios for the USD$, I still thought it would be an informative exercise to see what would be the likely scenario for Gold. I think Gold needs to stay above 985 for at least a couple hours to have any chance of challenging the psychological 1K mark, and I just don't see that happening this coming week. In other words, my thesis is that the more probable scenario is a print below 944 before we see it challenge 1K.
Given that the USD$ is going to retrace up, and Gold will trend downwards (at least for the next few sessions), I see the Euro going down as well.
Thursday, May 14, 2009
Taking The Punch
They say that to be a good boxer, you have to have the ability to take a good punch.
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I had just woken up to see that the Euro was on the upswing. The swing low during the overnight session was 1.3535, and in fact the Euro double bottomed at that price level. It looked like it wanted to challenge the overnight highs, so i got long @1.36.
No worries, the structure of the chart indicated that this was just a pull back. It was safely above VWAP, so I added to my position @1.3592 and again @1.3581. Then the test of my patience began.
I pre-calculated my breakeven point (91), and when I saw price recover to 1.3597, I thought well, good, just take out my worst entry (1.36), and I will be in a very comfortable position. Except that never happened. So I stubbornly held it while it drop back below my breakeven point.
Euro probed 1.3595, and when it failed to break above 1.36 again, I unloaded one position @1.3593. Then I sat and waited to salvage this trade. Then the triumvirate of fear, uncertainty, and doubt paid their visit yet again. Euro went sideways for a while, and as time wore on, I wanted more and more to get out of my position. As a result, I failed to observe that this sideways action stayed above 1.358 the whole time, and in fact there was a semblance of a mini-box pattern setting up. So when it broke out of the boxed range, I sold my remaining positions @1.3585 and @1.3594.
So, net profit out of the trade was around -$15. The frustrating part was that had I just stuck to my original plan of waiting for price action to take out my worst entry @1.36, I would have netted over +$200 profit. Instead, I had to eat a -$15 loss.
The only silver lining out of this fiasco was that I did not let my emotions go out of control. In the past, I probably would have went on tilt and try to revenge trade my way back to profit. Instead, I ate the frustration and loss, and stepped away from my station so that I can mentally recover from this trade.
In trading, like in boxing, success really comes from the ability to take these hits and recover.
Sunday, April 26, 2009
Euro Upside Exhausted?
Traded the EuroFx futures in the evening session.....
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Short E6M9 @1.3220, stop@1.3235, exited @1.3185
As mentioned in my Twitter tweet, I had a downside bias for the ES, and this also led me to a downside bias for the Euro as well. Euro opened Sunday Evening's session with a small gap down that was filled. But on the hourly chart, it looked like the odds were high of a continuation of the selloff that started near the end of Friday's session.
I watched the tape, and observed it spent more time in the mid 1.3225's rather than challenge the session high of 1.3241. So on the next time it made a new session low, I shorted. The retrace came as expected, but it was shallow, never exceeding 1.323, so my initial stop was safe!
Then I left my desk. I came back later to see it drop below 1.3190. My target was really 1.3155 (which is where it is currently trading as i type this post), but I covered my short @1.3185 for a couple of reasons:
1. I was not interested in holding thru a retrace that may go all the way back to 1.3220. As it turns out, the retrace never broke above 1.32, but who would have known that ahead of time?
2. If I had used the 9 or 20 EMA as my exit criteria, it would have gotten me out of the short at around the mid 1.3180's anyways.
3. I knew i would not have time to be at my desk to continue monitoring price action.
EuroFx futures (in general) does not move for more than 30pips without at least doing some kind of retrace, so I am learning to be at peace with hitting these small singles and doubles. I still long to hit those home run 100+ pip trades, but still have more mental preparation and tactical planning to do before I am ready.
UPDATE:
Euro is around 1.312 as I type. Yeah it sucks to have covered my short too soon. Kind of bittersweet irony to be talking about hitting a home run one of these days, and having a home run slip away right under my nose. But I knew I wasn't going to be at my desk, and I didn't want to scratch this trade, so I exited where I did. I suppose I still have some more learning to do in terms of finding the happy medium between not letting a profitable trade turn into a losing trade, and letting your winners run.
Friday, February 27, 2009
Euro is Bearish
Summary
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There are a couple of reasons for the bearish on the Euro:
1) Recession is spreading across Western Europe
2) USD$ is trending up still (surprisingly enough)
As indicated by the chart, we have a series of lower highs. The 1.272 - 1.273 area is where i will be looking for resistance and reversals.
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