V is for volatility.

The $vix.x hit 40+ and the market reversed from just over +100 points for the week. We have been expecting a violent reversal, and only liars or the extremely talented know exactly where and when it will come.

The V bounce gave a few clues but guessing against the trend is just that: guessing. If you have been prudently selling rallies, then if you took an attempt or two at logical resistance, that is all that was required.

The profits playing the trend the past few weeks on the short side more than compensate for any few small losses you endured today. If you played according to the plan, it was an exceptional day with serious profits.

The smart traders walked away after a great morning and let the market sort itself out. The really smart traders hit the reverse button after they realized the afternoon breakout was taking hold.

V bounces are mysterious creatures that occcur so infrequently that they trap the unsuspecting who average in and lose everything in one bad day.

News reversals are an important part of trading; the government must do all it can do right now to prop up the market or the house of cards collapses.

The “Too big to fail” concept evidently applies to AIG but not to Lehman.

A few cheap options on either side is another way to hedge a schizophrenic market like this one that is searching for a bottom. The other aternative is to stand aside until the market becomes more normal.

Secret code traders had no problem today understanding the rhythm.

fallen from graceland

Has Elvis left the building?

The market plunge continues to frustrate bulls and bears alike.

Extra-ordinary bounces like yesterday are meant to do one thing: squeeze shorts and hope they go away.

The egregious run-up over night is a great example of mis-direction. It stops out the shorts position trades, and then it entices buyers to be looking the wrong way and buy pullbacks as the car is falling off the cliff.

Smart shorts NEVER short too low, accept stop outs, and if unwilling to ride the elevator up courtesy of the PPT and rumors about bailouts, at least wait until the apex is hit and then use the signal bar technique to say “take a shot here”.

Trying to buy pullbacks long all morning was suicidal. Today’s double bottom bounce that had bulls cheering for 1200 and 1210 at the close was wishful thinking.

They were still reading from yesterday’s playbook. A new page was inserted, and only the most gullible of newbies believed that script.

Sometimes we need a hound dog to sniff out the truth, sometimes just a little common sense.

Ferocious rallies are the hallmark of bear markets.

No one knows until hindsight. I have noticed, however, that secondary indicators like the Svix.x, tick, trin, etc are helpful, but only a fool will call for a bottom without seeing sideways action and/or major capitulation first.

Let the talking heads on CNBC make their claims; for me the travel range offers unprecedented opportunities to make money in BOTH directions.

Remember Shawn and Nastia? Try to flow and be as flexible as they are when you are trading if you want to put the gold in your pocket.

Who cares if it is over or not; all we want to do is find the travel range, and catch a piece of the action.

Catching a falling safe, however, is another matter.

Trend traders will keep attacking the prevailing trend until it stops working. Jesse Livermore said it best; “The market is never too low to short or too high to buy.”

Play the trend until it stops working is my plan. how about you?

As Mark Twain would say, “The reports of my death are greatly exaggerated”.

bull chases bear

Hi All.

Please be patient as our new site is being built.

More challenging than I thought; but we are making progress.

You can continue to view our posts here until the new site is up and functional.

E.

Today was what I call the bowling alley trade.

The premarket dump turned out to be the perfect setup for the 123 lower low as the price rebounded. After a long lunch slim jim, the globex hi was taken out on the other side in the afternoon. Then the boys played the same game and caught the late buyers buying the pullback.

You can only anticipate moves like these by being in front of the computer for a number of years and seeing all the games that they play. Experience is one of the best teachers I know.

Marginal lows and high’s are a bit tricky, but the enlightened ones know how to play this game exceptionally well. Being aware of possible reversal zones and times is the key to catching these trades that change direction.

Kevin haggerty’s signal bar strategy is one of the best techniques out there day in and day out to capture these powerful ricochet moves.

If you know the secret code, taking money out of the market is a lot easier.

Today’s ugly chart pattern is a thing of beauty to the market participants who know how to read it.

If you are not one of us, what is holding you back?

Day after day, week in and week out, opportunities abound.

Knowing where and when expected support and resistance lie is the whole key.

Applying that knowledge is the answer to all your financial challeges.

Sorry for the inconvenience with our website. Please be patient as we are rebuilding a few things.

E

Ugly is Beautiful

Chevy Chase at his finest.

Round and round we go. Market bottom is in. Housing crisis solved. Etc, etc.

What can Mr Bernancke and the government cook up now?

We’ll just have to wait and see. The market loves to squeeze the shorts. When “they” run out of gas, re -enter until it stops working.

Meanwhile, looks like taxpayers are now officially on the hook for all the indiscretions of the past few years.

Just take advantage of the volatility and take your signals.

If the odds favor  regression to the mean, play it.

Gap and Trap

“Amity Island had everything. Clear skies. Gentle surf. Warm water. People flocked there every summer. It was the perfect feeding ground…”

At 11:30 I suggested to colleagues to take their short profits off before noon today. It could have gone to any day low, but I felt the weekly shorts should capture their profits early after such a great week.

It turned out to be a lucky call.

Guessing against the trend is never easy, but odds and probability shift and you have to adjust your plans accordingly. (Remember the Commander’s Intent theory?) 

There are many techinques that technical traders use to project possible targets, but it is not an exact science; it is more about being prepared for areas  or “zones” of support and resistance, and then not being stubborn when the momentum clearly shifts from one side to the other.

When there is blood in the street, be on the lookout for jaws.

jaws loves to catch those late to the party

Do you remember the game of chutes and ladders?

It was a favorite of mine when I was a kid.

Sometimes a picture is worth a thousand words.

Learn to see the big picture.

Bear markets jump out the window, so you either take the leap of faith or miss the move. 

Chutes and ladders

 Sloppy and choppy trading for the vast majority of traders unaccustomed to sequence trading.

 Plenty of setups today in both directions if you know what you are looking for.

Grabbing the majority of the move and leaving the last tic or two for the greedy usually works best for me.

That’s the essence of risk and reward; where do the odds of a small or large reversal begin to dictate your choice in direction?

Trend trading is my preferred method of playing; but in range days (or reversal days!) it seems wiser to play the range trading game until it doesn’t work anymore.

Having multiple contracts on increases our risk, but allows us to scale out our first points and then trail for the larger move. Scaling into a position is also viable provided we aren’t deluding our self about the true stop and breakout areas. These are gray areas that each trader has to address in our own business plan.

If I sense a big move is coming, I will assume a little more risk; not by adding more contracts but by scaling in early and then a bit late if it takes a little more time to develop the play.

I also am willing to assume more risk when the count is in my favor. Bases loaded, no outs, and a 3-0 count I assume the pitcher is coming with a fast ball right down the middle. When I get my favorite pattern setup, at the right time, and with the right volume signal, I am all over it.

Many ways to play the risk reward game; as long as I am willing to pay the price when I am wrong.

Staying in the game long enough to get another at bat is what it’s all about.

slice and dice