Hello again

It's been awhile and I think that's been a good thing for me. I've taken a 2 week vacation, relaxed, read, and have made a huge effort to fill my life with more than just trading. It's been the best thing I could have done, in my opinion. My trading has been much much better these last 3-4 weeks, in fact it's probably my best run of the year. I think having other things to do and think about.... dog, dating, new place to live, new social activities ect.. ect.. have allowed me to feel less attached to my trading results. It's been a bit of an improved market too, so that has helped, but mostly it's me just taking a different approach. I've seen a few friends get so stressed out that it was ruining their lives and their health. One of my good friends also quit the business after a long bout of stressful trading. If you really love the markets, like I do, then I think you have to structure your life make the process healthy for you. Making a lot of money trading doesn't mean shit if I'm sick and stressed out all the time, so I started doing yoga, get a massage once a month, occasionally taking a half day, and other things to enjoy life. Results seem to improve (often with a lag) when you take this approach but either way it's essential to longevity in the business.

The correlations have broken down a bit lately, but equities are still pretty tight with the dollar. Bonds seem to be anticipating deflation and stocks/assets are rising b/c of the massive liquidity influx worldwide. I think we could have a nice retracement here in the market but it will be yet another buying opportunity until this liquidity is yanked from the market. And remember even when they do pull it out via payments on bank reserves, no more stimulus projects, rate increases ect. it still takes 9-18 months for the effects to be felt. Given that I expect a floor under this market for the foreseeable future. The potential inflation/next bubble disaster that may be created is a ways off in my opinion. Bonds will get hit when they recovery is legit, meaning it's not government induced and then inflation will pick up. I think people are puzzled because of all the supply being issued, but if you look at what bonds trade on over a 100 year period it's basically one thing...inflation(cpi rate). We've been getting some weaker data on stocks lately so maybe after this window dressing business is done we can get some sort of a move down to stir up volatility. So in summary here are the interesting things I'm noticing/watching.

-30 year bond as a guide to when the real recovery is starting

-the US running a higher tax, liberal, and generally anti-dollar regime vs. much of Asia (yen/yuan) and Europe running pro-business and potentially tax reducing regimes.

-can domestic retailers keep up this rally in the face of an inevitable personal savings rate increase?

-does high yield and other corporate debt continue to rally?

End of the week

I went 3/4 this week with a manageable losing day and 3 moderate winning days. If I can continue this kind of grinding while keeping my losing days tight, I will latch onto some big days when I least expect it. I'm keeping my trade quantity down and looking for more quality on my entries. I'm also being real flexible and piecing out more rather than going larger winners. So in sum, I'm very happy with the week and things are once again moving in the right direction.

I'm keeping my eyes on the British Pound for the reasons I mentioned a few weeks ago but it still isn't near the area where I'd like to put a position on. I'm also watching the long term development of interest rates around the world and it seems like the major central banks will be on the sidelines for the time being. When the rate cycle begins again there will be some great trades and spread trades between countries, so it pays to stay ahead of the game on these stories but for now it's not an issue.

Treading water

I've been basically moving sideways so far this week and that's OK with me because one or two decent days will make a solid week at this point. The market continues and will continue, in my opinion, to be a sloppy trade in the med/long term as the giant pile of cash that every country has dumped onto the world economy goes to work. China is now said to be participating in the PPIP program and it's interesting that this is more of a side story because 6 months ago it would have been THE story. Bernanke himself said that when we see private firms and/or other nations willing to invest in our distressed assets then we'll know this crisis is healing or close to over. That seems to be happening quietly before our eyes.

I'll continue to patiently look for 1-3 x per day to make 1-2 handles and keep my losing days tight until the market starts to move in a more predictable fashion to me. Chipping away with moderate size when I'm not necessarily seeing it the best has always started my biggest runs and I have no doubt it will again. Streaks, momentum, and confidence seem to feast on themselves if you can sustain them long enough. It's survival time for many traders right now and to me that means chipping out a living and staying in the mindset to capitalize when the next storm hits. You can make money everyday but the facts are that 90% of your money is made in 10% of the trades/time/ideas whatever you want to define it as. Staying around for that is what this is all about.

Thoughts on holding periods and market noise

Dr. Steenbarger has some great stuff out recently on the increased noise in the markets and how they are causing a shakeout before a meaningful move happens. I've been thinking the same thing for awhile now and it's that a market must make it's fundamental move but the manner in which that happens has changed a bit. It's our job to adapt and learn how to capitalize on that change, if that was easy then everyone would be doing this job. A strategy I've been using that has helped me a bit is to enter with my same base size but piece out a bit faster when I see a bigger picture move coming. The reason being I know that many shakeouts and squeezes will be present before the move materializes so buying myself some room allows me to do two things... 1) I can sit through the noise and capitalize on my idea which is huge for my p/l and confidence and 2) I can be nimble if I'm wrong b/c I'm not overly committed but also I can re-add to my original position after the violent shakeout b/c I sat through it and felt the turn. This is very very hard to do if you hold your entire position and try to kill a move. Your instincts as to why we should turn are often correct but the process is painful so you need to stay light on your feet to take advantage. I've found this very helpful and I plan on doing more of it. If I'm unable to add more or if I only hold a small piece well then so be it, at least I got something and I feel good because I got paid for my idea.

I was able to grind out 4 handles Friday and make a modest week of it despite Thursday's big blowup day. I'm hoping to use these strategies this week and get the ball rolling again. I feel I've stabilized myself since my large drawdown (which I'm still in) and now it's time to put a streak together and finish off the year strong. I'm real optimistic about doing these things.

A day to forget

I posted my stuff in the Euro and the ES today. My ES trades were pretty awful... I was at the tops of bars and buying as the market was trending down. I felt the turn higher coming but I was way too early and stubbornly kept at it. The result was a 7 handle losing day which puts me at scratch for the week. It's been a typical pattern for me this year and I have to find put a lid on it. I started off down 2 handles right away after the 7:30 jobless claims data and I just didn't feel right after that. I was unsure of what the market was doing today and had no scenarios to trade off of. Yet I traded anyway against my better judgement and it cost me big time. I need to pay attention to that feeling inside of me on these kinds of days and keep things tight until I get clarity.

I may or may not keep posting my charts each day, the point of doing it is to help me with my trading but I'm not sure the work of scanning and posting is paying off that much. I haven't used the blog as a historical reference as much as I thought I would so we'll see going forward how I decide to do it. I may talk more on trade ideas and how I feel each day vs. how I trade or about lessons I've learned. That seems to stick more than looking a shitty day's trading where I lost my head for an hour or two. The lesson is usually elsewhere. I'll try to make a week of it tomorrow if the payrolls data gives me something to trade. The market is still in this holding pattern as it decides its next move, which I still think should be lower to correct some of this huge rally. This data tomorrow is old and doesn't speak much to what the picture is now so it's more of a daytrader's play.

Tight range

We had a consolidation day today as the market decides whether it will fail and head back up or continue lower. My bet for now would be to continue lower but we have to wait and see because this long rally has failed to move down many times before. The one thing that seems to be different this time is that the market internals have been weak for a few weeks now. I was able to chip out 2.5 handle today after giving back a handle in the slow midday chop. I'm quite pleased with that given how little there was to do in there. The only thing I'll add today was something I heard from a really good trader I know. He said in these slower markets it's so important to get that early lead because if you do then you can be ultra patient and wait for 1-2 more trades and book a solid day. You also tend to keep all your 3-6 tick winners that threaten to come back to scratch. On the contrary, when you start down because of something stupid you tend to overtrade all day and let all your 3-6 tick winners come back for scratches or losers because you're looking to get back to even. The switch in mentality is typical of someone who is up vs. down on the day. I think we can all relate to that. I'm hoping for a few trades tomorrow early in the session and then a slow afternoon after the 30 year auction as we wait on payrolls.

All it takes is one idea

As we've been discussing the market internals have been deteriorating for the last week or so and the potential for a selloff was fairly high. I brought that bias into today and used the strong ISM number (which was rumored early to be strong....55) to get short figuring it'd risk 10 handles to make 30-50 on a longer term basis. I was able to pull out 4.5 handles day trading by catching some of the downmove but also get short in my long term account the 1026.50s looking for a move into the 970 area. I did some silly fading after the big rush down happened but was able to still hang onto 70% of my day... luckily. I'm trading less and trying to be more selective until I get a better beat on things. It's not 2008 and it pays to keep my risk lower, size smaller, and psychological/emotional distress to a minimum until I see things clearly again. So far so good since I've been back from my vacation.

Tight range after the open

I found some good stuff to do early on after the ISM data, but then spent the rest of the day giving it back before catching a late trade to finish up 1 handle. I'm happy to claw anything out today and keep my modest streak alive on a day with such low volume. The rest of the week is loaded with data points so we should get some good stuff to trade on.

As Dr. Steenbarger continues to point out, the 20 day high/low data seem to suggest the market is running out of steam. We also see China and the commodity complex weakening but so far the US markets have hung in there. I like being short here but I'm a bit concerned with all the talk in the media and various articles I've read about how ripe we are for a correction. The rally often goes on and on beyond sensible means until it finally corrects, so I'll be on my toes for one last push up or even some renewed strength.

Back from the Baltic

I'm very excited to be back after a great 2 weeks off. My fuse is about 5 x longer than it was a few weeks ago and I'm feeling re-motivated and very optimistic for the remainder of the year. That doesn't mean the markets will be rocking and rolling but I'm ready to improve my own personal trading regardless. Things got off on the right foot today as I was able to chip out 4.5 handles on some patient trading. When the markets are slower like this I tend to do much better when I pay less attention to every single tick and let my eyes wander back to my screen when I see a setup I like. That sounds a bit odd, but it was a great strategy for me a few years back when the market was slower and my convictions were lower. I know what I like to make trades on but I struggle when it's slower and I try to make a scenario over every single little move. My goal each day is to find 1 or 2 instances where I can make 1 handle. I'm confident I can do that and when it starts happening things will snowball and I will have bigger days with bigger sizes. I've gone through this many times and recognition and acceptance of it is a key to moving forward.

As far as today the one good sequence I saw was late morning when AIG started to sell off and the ES was consolidating near the day's lows. I was able to steal a few handles in there and then basically pack it in for the day. I did a few other trades with small size but that trade was the bulk of my day. In the bigger picture we're still in that dicey area where it's anyone's guess what the market will do. While we could correct a bit here, I expect a further rally over 1100 before this market is ready to make a significant move lower. The original area where the government banned short selling is up around 1060 and that lines up with multiple fib levels and old weekly cash levels. It's almost a certainly in my view that we will take these prices out with force before moving lower. Markets just seem to work that way.

FOMC Meeting

I skipped the morning trade because I didn't want to waste my bullets in case the FOMC did anything drastic. I was able to chip out 3.75 handles today and break my losing streak. I'm going to trade tomorrow morning and then be gone by 11 am CT for two weeks. When I get back from my trip I'll be posting my charts and doing a lot more analysis. I've just been detached a bit lately and focusing more on leaving tomorrow than anything else. Good luck to all who are trading and I'll be back Aug 27th.

I noticed 20 day highs are not where they were last time when the market was above 1000, they're still outpacing lows but they're definitely slowing down. It feels to me like were in a consolidation process up here and waiting for the market to go higher. Check out the book Hedge Fund Edge for a great read on how the liquidity cycle works, I think it's one of the most underrated and important things in understanding markets.

Hit my goal early but....

I had very modest goals today of finding one or two trades in which I could make one handle on. I did exactly that probably four different times, yet I still finished down 1.75 handles. The culprit today was some news that the fed's coupon pass had been canceled. I dove in and sold the 10 yr note and lost a quick 3 full ticks, then I went in and tried again... lost, then I reversed and bought when the headline came down that it was all a non-event. Yes you guessed it, I lost again on that last trade. This mess cost me about 3.5 handles on my ES size and it doomed my day, I was actually up 2 handles trading equities today. I guess I'll chalk the first click up to freakish news and the cost of doing business, but the next two trades were just frustration and it cost me what would have been a nice small day. I'm pretty frustrated lately and my vacation is coming at a great time but you've probably guessed that since I talk about it nearly everyday. I'm hopeful tomorrow and Thursday can bring me some better results and I continue to do my best to keep the risk tight and string something together. It's just not quite going how I want it to go right now but I'm the only one who can change that. I will start by reviewing my list of what I do well vs. what I don't do well tonight and get back to the basics. If I had to guess, trading the 10 yr on random news is not on my list of strengths.

Some weaker China news overnight and also lots of talk from Dick Bove and from S&P that banks are trading on fumes and it's time to take profits in there. I see we're getting a bit of a late day selloff which doesn't surprise me. We'll see how it shapes up after tomorrow's FOMC meeting. I'd also mention that 20 day highs are barely outpacing lows now and we're way off from where we were last time

Took another rest day

I was off again today but I plan and trading the next 3 days before I head out of town. I took some time today to review my results and also do some reading. I'm ready for a productive week starting tomorrow.

Vacation Mode

I'll be posting this week but for the most part I'm gearing up for my 2 week vacation that starts in a few days. For the first time in as long as I can remember I find myself reading and thinking less about trading and just taking some downtime. I've been on a bit of a rough patch the last few weeks and I'm hopeful I can leave Thursday with some small victories under my belt. When I get back I'll be extremely focused on getting my hands dirty and digging back in to the extent that I have been in the past. When you do this long enough sometimes, no matter how much you like it, it just gets time for a break.

When I get back I'm going to go on a 3 day detox diet to symbolize a cleansing of my body as well as my trading. I figure a little extra discipline in my life would do my trading some good too. Rough periods in your trading are often the best things that can happen to you because they force you to re-evaluate everything with an open mind. I plan on doing that and working very hard to get myself back to a place where I feel I'm at my potential. Lastly, I'll add that almost everyone speaks of needing more "discipline" but it's not always a fair thing to do. Sometimes you just lose your edge for awhile and it's inhuman to expect perfect discipline in that environment.

Still working out the kinks

I have been struggling to find my swing lately, but I'm quite optimistic it's only a matter of time (down 5 handles last 2 days combined). I say this because I started to make a bunch of changes when really only a few small things were wrong. That has caused me to stagnate even more than I should have and feel a bit lost lately. I'm going to get back to the basics tomorrow and early next week before I head out for my 2 week Europe trip. I'd say my timing on leaving is pretty good but I'd also like to leave on a good note and I have 4 days to do so. The market is stuck in no man's land up here and I continue to think this rally has further to go before we get a real and lasting correction. China is exploding right now with extremely loose monetary policy (the whole world actually) and from what I'm reading some very shady money loaning practices. The state owned banks are loaning like there's no tomorrow in India and China, while private enterprises show much slower loan growth and an outright decreases in many cases. It's my experience that this kind of thing runs much much further than people think but always ends badly. I'm trying to be flexible and just let it play out for now. Here's a few ideas I'm thinking about....

The British Pound has been a currency I've been watching for awhile and it's getting near an area where I will consider a decent sized short position. As I see it you can't practice QE with your currency, NOT be the reserve currency (USD is) and not see a major deterioration in your paper. The US has the luxury, for now, of being the safe haven and enjoying massive domestic and foreign buyers of their debt. Britain isn't as attractive as an economy because it carries more public and private debt than the US, it is more isolated to the world, and it's heavily dependent on asset price appreciation, specificially real estate. The 1.70 area is an old weekly low and it's also near where we stopped before the extended QE announcement this morning. The announcement was bearish but in all likelyhood it still means their QE program is closer to ending than beginning. That being the case I'm still bearish because of the aftermath of their aggressive inflationary policy maneuvers. Here's my setup.... I would like to see us take out the 1.70 area with some force and flush out all the shorts who are in from today's announcement. As that rally fizzles I'll scale into my positions and look for something in the 500-1000 tick range as a target. It could very well go further but I'm looking to find a low risk area that coincides with bearish fundamentals and also with a short squeeze. I'll chart my progress.

Lastly, are we creating an auto bubble? More cash for clunkers, cheap financing, huge cutbacks in production? I don't know but it's something to think about. If it's so, then who's financing this mess if people can't pay for their shiny new rides in 2 years?