Summary
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I made a few trades in the Nasdaq 100 eMini Futures (NQ).
Trade1:
637a: Long NQ @1954, stop@1952, exited @1956, profit=2pts
Trade2:
1038a: Long NQ @1962.25, profit=2.25pts
Trade3:
1127a: short NQ, 2.25pts profit
Trade4:
1132a: short NQ, 1.25pts profit
Trade5:
1158a: short NQ, 2pts loss
Trade6:
1205p: long NQ, 3pts loss
Trade7:
1215p: long NQ, scratched.
In between Trade1 and Trade2, I made several boredom trades which wiped out my initial gains. After that, I took a break and left my office. I came back thinking focus, focus, focus.
Once the Fed made their long anticipated interest rate announcement, I came out swinging and scalped NQ as it chopped its way down to 1942.
On Trade5, I was making a play of a potential double top. As it turns out, I was shorting without waiting for confirmation. So I was basically calling for a reversal which never happened, but I was okay with that, since the amount risked was acceptable to me. However, the last 2 trades (Trade6 and Trade7) were basically mistakes. In those two trades, I was betting on a continuation of the 30pt run-up that NQ had just put in. I actually had a sense that it would make one "last gasp" rally before topping out and reversing. The question would be how much of a pullback would occur before that happened. Again, I was premature in jumping in without waiting first for confirmation of continuation of trend. I thought it would only pullback 2 or 3 points, but it was actually much deeper than that. The last one was especially annoying because I was playing with my stops too much. I should have given the trade a wider stop because I was anticipating a 5 or 6pt last gasp run-up. The last trade was actually a correct decision to enter (broke out of the pullback), but the trade was mis-managed.
So the moral of the story (with which I am still struggling to improve), is to wait and wait, and then wait some more the for the low hanging fruit which inevitably appears. Following this rule would have avoided making Trade6, which would have saved me a couple points. For that last trade, I need to plan out the trade more carefully the next time, and improve upon my analysis of the stop placement.
Tuesday, August 07, 2007
Today's Trades
Monday, August 06, 2007
Review of Today's Trades
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I called the bottom today in the Nasdaq100 eMini Futures.
That was the good news. Unfortunately, calling the bottom isn't even worth the binary code in which it was transmitted, if I am unable to take advantage of the bottom call.
Next time, if I am going to call the bottom, I should at least have the sense to check the hourly chart so that I would realize that 1926 was also a few ticks away from Wednesday's Low, hence it was actually a double bottom on the hourly chart.
Had I realized the double bottom on the hourly chart, I would have been a little more confident to risk the initial 50% retrace, and subsequent 20+pt run-up.
Sunday, August 05, 2007
Trend Following Friday?
Taking a look at Friday's action one more time....
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I inquired whether Friday was shaping up to be a trend day. I noted the price level of 1469 because I thought that it was a key price level at the time I was watching the charts and the tape. As it turns out, ES did break above 1469, but what I've learned to be more important now is whether that break above can be sustained. Price moves almost at random sometimes, stops get taken out, shorts cover, etc. so touching a price point is not as significant as sustaining a price area. And, we see the reversal of trend @925a as a the strongest sign that the move above the 1469-70 area could not be sustained. That should have been the sign to look for as confirmation of trend day.
Friday's action must have left some more hedge fund managers spewing blood in the streets. Just when you thought it was safe to go long, we see another cliff dive into the close, trapping more bulls from Wednesday and Thursday.
In 1997, we had the Asian Currency crisis. I think I will call this latest downtrend the "SubPrime Lending Crisis." You heard it here first.
Notable characteristics of this trend:
- Previous two days were marked by massive rallies in the last half hour of trading.
- The time window of entry without suffering through any retracements was in the first 20minutes of trading. After that, you would have to suffer through retracements of up to 12points if you were short.
- There were 2 low risk entries: the first was in the first 20min. of trading, and the 2nd opp. was just after 11a, when price put in a double topp-ish looking lower high after the reversal of trend @925a.
- The best part of the trend occurred after 11a.
- The market dropped 17pts in the first hour, then spent the next 100min. retracing 75% of that drop, double topped and dropped for the rest of the session.
- Trendlines were broken on numerous occasions, making this trend day hard to catch (despite the 40pt drop).
Saturday, August 04, 2007
SnP500 Analysis
Get ready for another dead cat....
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Friday's selling into the close created more oversold conditions as indicated by the MACD and PVO. Unfortunately, oversold just doesn't mean that much anymore in the current market environment. Not only that, but Friday's bearish action utterly and viciously engulfed the 28pt monster rally on Wed.
The Bulls have their work cut out for them, as there is now resistance at every major level: 1450, 1460, 1470, 1480. The biggest one is at around 1490.
If the dead cat starts bouncing on Monday, then 1440 can be looked upon as support.
In the bearish scenario, the market will start probing 1420.
Friday, August 03, 2007
Tracking Trend days
3 Trend days since July 24/07. Going forward, I will be tracking them all here.
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Starting from July 24, The first one was on July 24:
notable characteristics:
- previous day was a (relatively) narrow range, low volume day
- trend duration was just over 3hrs starting from 930a
- no 100% retracements after impulse moves. The biggest retracement was after the first impulse move, which retrace about 75%
- market opened gap down -10. Initial attempt to fill the gap produced a double top failure. Reversal triggered the trend.
- if you had entered short any time before the third hour of trading, you would have to suffer up to a 9 point retrace. The real Trend did not really start in earnest until after the third hour.
To avoid a 9point initial stop, you would have to recognize in real-time the formation of the double topping pattern. There were two low risk entries:
The first was when price reversed the second time at 1543.5, enter at 1541. The second Low risk entry was on the high volume breakdown below support at 1536.
The next one was on July 26:
notable characteristics:
- The biggest retracement was just before the final impulse move. There was a 83% retracement of the middle impulse move.
- 20MA was not broken for more than 2 candles.
- previous day was a high volume, choppy, range bound day
- trend duration was at around 4hrs, and accelerated in the afternoon
- market gapped down -12 to open, and the trend came from a failure of the initial attempt to fill the gap.
- if you had entered short any time before the third hour of trading, you would have to suffer up to a 9.5 point retrace. Trend did not really start in earnest until after 8am (PST).
There were two low risk entries:
The first was to observe the attempted gap fill, and enter on the reversal at 1512.
The second was on the high volume breakdown out of consolidation at 1506.
A borderline trend day on July 30:
notable characteristics:
- if you had entered any time before the first hour of trading was complete, you would have to suffer up to a 12 point retrace. However, if you had entered any time after the second hour of trading, you would only have to sit through a maximum 66% retrace. The moral of the story - it pays to be patient for a trend to clearly establish itself.
- there wasn't anything special that happened in the previous session which indicated even a hint of a trend day.
- market dropped 8pts in the first 10min. but then reversed for an equally impressive recovery. A subsequent test of the LoD reversed and started the trend in earnest.
- the real trend did not occur until after the third hour of trading. After that, the 20MA started trending up for the remainder of the day and was never violated.
- 19pt move over the course of 3.5 hrs.
There were three low risk entries:
The first was the reversal at 641am, enter on the break above 1464.
The second was the reversal after the double bottom was put in at 1461, enter on the break above 1463.
The third and last low risk entry to catch this trend was the break out of consolidation, enter at 1466.
Tuesday, July 31, 2007
Get Ready.....
Something interesting is going happen in tomorrow's market session
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ES down 16, NQ down 17, YM down 133, ER2 down 13 as I type this. Every market is down 1%, with ER2 leading the way of course. The culprit? Probably this rather grim piece of news about the troubles facing one of America's biggest mortgage lenders, AHM.
We are going to gap down tomorrow. Huge gap downs tend not to get filled (at least not within the first few days), but if they do, that is a rather bullish sign.
How, when and how much that gap gets filled will speak to the conviction of the bulls. We should see the PPT make an appearance tomorrow.
It will be interesting, make sure to wear your crash helmets !
Friday, July 27, 2007
Stick a Fork In It
The Uranium market is toast for at least the next 4 months, maybe even longer.
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Regardless of all the cheerleading news about how uranium stocks are the next best thing since sliced bread, the chart says it all, and the chart does not lie. My uranium index is in a downtrend, and has been in a downtrend ever since that fateful day in April2007. I do not plan on touching any uranium stock, not even with a 10foot pole.
Gold is acting weak, and the Loonie is in a correction. This just means no one is interested in buying uranium stocks for the next little while. Stick a fork in her, she's done.
Wednesday, July 25, 2007
Trend Days
Some of my own observations of trend days.
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I have an archive of the eMini S&P500 Futures intraday charts from the past three and a half months. I went back to review the charts to see how many of them were trend days.
Before I share the results of that research, I want to first qualify what makes a trend day. The Market Wizard Linda B. Raschke wrote an article about it. She characterizes trend days as follows:
To that, I would add the following additional characteristics:
- typically, either the 10 or the 20MA has not been breached for more than 2 bars during the life of the trend. At a minimum, it must follow a manually drawn trendline. This is paraphrasing LBR's point about minimal and shallow retracements.
- trends typically take 3 to 6 hours to run its full course, although I have seen nice trends start and finish within 90 minutes. From this we can infer that as the trading session progresses without any signs of a trend, then it becomes more and more unlikely that a trend will develop. The absolute last chance for a trend to develop would be around 2pm EST.
Anyways, my own review of the daily ES charts reveal 26 trend days out of the 86 trading sessions that I have archived. That means a trend day will occur 29% of the time. Just to be real conservative and unbiased, let's throw out the worst 10 of those trend days. Then that will reduce the frequency of trend days down to about 18.6% of the time. Well, guess what, that means on average, a trend day will occur (almost) once per week !!! Yes, believe it or not, a trend day occurs more often than you think. So, the implication of this is that each trading session that occurs with out a significant trend taking place actually increases the odds of trend day happening in the subsequent trading sessions.
So, starting from the acknowledgment that we will never truly be able to predict with 100% accuracy whether today will be a trend day or not, we can still gather pieces of information which will help give us an edge in identifying trend days.
In that same article, LBR outlines some tips to help identify which days will be a trend day. I want to increase the odds even more. Here are some additional things which I think will help me identify a trend day.
- economic reports. Nothing moves the markets better than a better or worse than expected economic report. Sometimes, these economic reports can trigger a trend day, especially reports that are released at the 530am or 7am(EST) times. Some of the more significant ones that are known to move the markets include the CPI, PPI, retail sales, and of course, the Federal interest rate announcements.
- breach of a significant support/resistance level. Breakouts fail as often as they succeed, but the ones that do actually succeed tend to set the tone for the day, and thus more likely to produce a trend day.
Ok, that's what's in my head at the moment, hopefully I can use this knowledge going forward to take advantage of upcoming trend days.
Tuesday, July 24, 2007
Still a Noob
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For the past month or two, I have been working hard on cutting down on my overtrading habits, developing a trading plan for the day and cultivating enough discipline to stick to the plan, and of course, improving upon my patience.
I thought I had improved in these areas, and up until today, revelled in that illusion. But today, I discovered that I am still a noob stuck at the beginners level when it comes to trading futures.
Today was a trend day in the indicies. Of course, no one knew that at the beginning of the session, but as the morning progressed, it became more and more clear that it would be a trend day.
I had two chances to partake in this trend day. In the first opportunity, I went short based on the double top formation. The call was correct, even though the entry may have been a bit early. Unfortunately, as soon as the trade went in my favour, I basically wanted to protect my profits.
In the second opportunity, I was impatient with letting the trade develop. It dropped down to a support level @1538, and ran back up to my short entry @1540, but never took out my initial stop, or even my revised stop, for that matter.
So had I left the trade in place, with the original stops, I would be sitting pretty. Instead, now I have to write about what I did wrong, think about what I could do differently the next time, and try to accept the bitterness of this pill that I have to swallow. I don't know what it is about me that makes me want to take profits so soon. I really thought I had progressed past the noob stage, but apparently I have not.
This market has absolutely no room for self-pity, so I'll probably spend the rest of tonight accepting the fact that I am still a noob. I might take tomorrow off to regroup, and refresh my mind (unless we get another big trend day).
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