The Boys are back

 

Well, what an interesting day. Overnight globex ramp up, then gap up at the open taking out last week’ s high.

Clear sailing, right?

Wrong. Another misdirection trade catching traders buying the pullbacks all day long. Momentum didn’t begin in earnest until the lunch breakdown.

Overight actiivity is always suspect since volume is low and price can be easily manipulated.

In a book I am reading, a theory of war was being discussed. CI (Commander’s Intent) theory was suggested, as “No plan survives contact with the enemy”. I instinctively knew what the author meant. Planning is important, but then we must react in the heat of battle, just as skilled athletes need to perform under pressure.

As a technical trader, the “why” doesn’t concern me. Stops are stops, targets are targets.

The range for the past three weeks seems to lie within the big yellow box.

Many breakouts are false; seeing the bigger picture allows us to take reasonable trades where resistance may give us better odds for a reversal.

There are many good traders out there like Bernie Mitchell; make sure you check them out and get an education from someone willing to mentor you.

It’s too costly in this business to learn from only your own mistakes. 

 

Riding the Waves of Summer

I believe that everything in life serves me.

Summer vacation at the beach last week is no exception. A few observations:

• Watching the waves, almost imperceptibly, the tide turns.
• Swmming with the current that ran parallel to the shore was effortless.
• Swimming against the current that ran parallel to the shore was impossible, even for Michael Phelps.
• When riding the current, “getting out a little sooner” was easier than waiting until caught in the chop.
• A come-along was the tool of choice to pull an off-roading BMW X5 out of the sand.
• What a difference a day makes; one day sunny and pleasant, another cloudy, windy, and cold.

 Newly released Elliot Wave research has revealed some eye-opening results that will most certainly prove to be controversial.  Take a look.

Micro-wave

Robert Prechter’s Elliot Wave International is perhaps the most famous of contemporary wave theoricsts.

The main thrust is 3 impulse, 2 corrective waves.

The corrective phase against the main trend is the a-b-c wave; the one I call the microwave. It helps me keep clear what is the main direction we are going next. As a day trader, that is all that matters, try to scalp and position your trades along with the current momentum.

Some traders say that Elliot wave, although extremely elegant, is only easy to see in hindsight. I continue to study the methodology, but must admit I find it challenging to make the correct count in real time.

Deciphering the geometry of markets is also an art form; leaving a few lines on the chart helps me to remember to look for structure. Combined with the secret code, it’s a one-two punch that’s a knockout.

One of the hardest trades to take is to go long the hard gap up open. Every ounce of my being wants to short and keep shorting it. If the signal is there, I take it long, it’s as simple as that. If I can’t bring myself to do that, then I try to be patient and do nothing.

Letting the first hour range set up gives me an edge, as I can step in from a logical counter-trend play. Intuition and a few major indicators are the key to sensing this situation. This play is deadly because it is infrequently seen; thin volume today helped to make it happen.

Using prudent stop losses if we get it wrong is a must; never jeopardize our account to a major draw down because we are careless.

Another summer Friday that the boys hit it in premarket.

Speaking of waves, summer is rapidly moving along; there’s more to life than just the market; time for some R and R at the beach. See you in a week after vacation.

 

micro wave and the geometry of markets

Grinder day

 The market opened near today’s low, chopped around, then made a steady climb to fill the 73+ gap. After a soft pullback on profit taking, the market continued to grind higher until the last half hour when traders took their profits.

The secret code traders were well rewarded today by staying true to their belief in the magic numbers. They are so consistently reliable that they offer the knowledgeable trader a significant advantage.

What’s your edge?

If you can’t define it, you don’t have one.

No system works 100% of the time, and it doesn’t need to for us to make money. A positive expectancy arises from having the discipline to take only the best trades and take small risks.

Defined risk trades like today’s long entry gave a huge risk/reward bias to the long side. Learn the secrets of the pro’s so you can play right alongside them.

 

grinder day

See saw day

Today was a see saw day. Up and down in a range, with a few head fakes thrown in for good measure.

Find the basic range, and trade 80% of the middle is a reasonable strategy for conservative traders. This plan is for range trading. In the chart below you will see the ends as “tails” above and below the highlighted box.

The fulcrum kept moving throughout the day, as the long’s and short’s stops were run. The morning low and high held for the rest of the day, but there was good travel range, providing nimble traders with multiple trades in both directions.

After the 63 held in the afternoon, the late day jam squeezed the shorts who went to the well one time too many.

This business is about making money,not guessing every wiggle right.

 

 

 

See saw day

Deja vu

These wonderful lines are from the movie deja vu.

Doug Carlin: What if you had to tell someone the most important thing in the world, but you knew they’d never believe you?
Claire Kuchever: I’d try.

---

[last lines]
Claire Kuchever: What if you had to tell someone the most important thing in the world, but you knew they’d never believe you?
Doug Carlin: I’d try.
[Doug turns on the radio and the Beach Boys song from earlier plays, and he give Claire an odd look]
Doug Carlin: Nah…

What if I had something important thing to tell you, but I knew you would never believe me?…

All I can do is try.

If you want to be a professional trader, my system will be of great benefit to you.

Self -directed traders are like eagles; you find them one at a time. They do not run in packs or hang out at the water cooler.

They stand tall and proud and go it alone.

If you want comeraderie, go to your favorite sports bar and cheer for your team with the crowd.

If you want to make money, learn how to trade. With a system like mine or someone else who has taken the time to put together a consistent, reliable method that gives you an edge.

There, I tried.

Gap down, gap unfilled, weekly low broke, testing lower, range trade rest of the day.

 

testing for support

Eisenheim Day

 Eisenheim : Everything you have seen here has been an illusion.

Nothing is what it seems.

Monday’s misdirection play was a thing of beauty; even the great Eisenheim would have been applauding.

Traders were so busy looking through their rear view mirrors at the premarket high that they forgot to look at the cliff they were driving off.

After Friday’s low broke, the bull’s had their heads held under water until they were finally let up for air late in the day. Intraday shorts scrambled to capture profits before the closing bell after kissing last week’s low.

All eyes are on that uptrendline on the daily chart.

 

Eisenheim Day

Range bound

In what many thought was going to be an option expiration ramp day up ended being a restrained day of measured pace.

You know the drill, summer Fridays at the office in August are for the recreationally impaired. The work is done early, then it’s party time. I hope you play by the same rules; life seems more fun this way.

The Illuminati certainly wont sit around on Friday afternoon waiting to grab two tics out of the market. It’s about getting optimum results in as focused time as you can.

See if you can pick the few bars that the big boys made the most money in the least amount of time.

The rest of the day was sideways action with a well timed stop run at the end of the day for hapless shorts thinking about a late day plunge.

Fuggedaboutit.

Secret code traders again laughed all the way to the bank.

Let me know when you are ready to join them.

 

 

10 am reversal

 

Git ‘er done, go play.

75 and bulls are still alive

After the markets tested 75 at the open and held, it rallied to the psychology area. Profit taking ensued as the market pulled back to support in the afternoon.

Scalpers against the trend were finally right, but had to endure a number of stop outs first at a few logical areas.

Secret code traders had a big edge on the pullback, and made profits in both directions.

Position traders have not had it easy lately, as markets have struggled to reconcile themselves with the 50 day moving average.

Markets fluctuate; they go up, they go down, that’s all I know.

Mental toughness is required for this business. If you are in the right direction for the trade there is nothing to do but manage the trade. If you are flat or in against the stream, the decisions are more complex. Where to enter, where to take the stop.

Re-entry trades are also part of the game. With profits, we have more alternatives, not to mention a more positive attitude. If we have recently been stopped out, we need to have a mechanism in place to make sure we are not “revenge trading”. Sometimes there are excellent opportunities for re-entry; other times we just get it wrong and need to admit that our timing and judgement is incorrect.

In those times when we are out of synch, remember the goal is to live to fight another day.

 

75 and still alive

Confuse us says: The long and short of option expiration

Option expiration is a study in volatility.

If you accept the premise that wall street insiders have an edge, then you are ahead of the game. The trick is to synchronize our mind with theirs, and stay one step ahead of the pack rather than always being a step behind.

If you also accept the premise that the market tries to confuse as may traders as possible, go to the head of the class.

The early longs got trashed at the open, and it looked like the trend down day was being established. The two tick lower low at lunch then smoldered awhile, and then squeezing the shorts, ran for 20 points, passing the globex hi. Profit taking set in at the weekly middle, and the market closed near the daily middle.

The battle between long and short term traders continues, as it always will.

Trend traders cannot be stubborn when the bounce is stronger than expected. Many professionals prefer to go to lunch flat and relax. Then they will risk a portion of the morning’s winnings for the afternoon session. 

Trading with the trend until it stops working is one of the most valid forms of trading, and should be embraced by typically conservative traders.

Fibo traders were rewarded for guessing right regarding the down up down sequence.

 

 

Confucius short and long