I took a hit on SPX longs today...

Title of post says it all. I went short puts yesterday and closed out the trade today for a loss of around -$700. I had the put spread at 1025/1075 but market sank is continues to do so today. Out of emotions for wanting revenge on the market I immediately flip sides and went long NDX September puts. As of now I am at a lost on the NDX position due to my aggressive purchase price, but will be happy to hold through it in the next few sessions.

Reasons for shorting:

1) the $NAMO index is not yet bottomed to previous lows. -60 is what I am looking for, until oversold condition reemerges, and probably within the next two/three trading sessions.

2) Sentiment is negative, and with good data out today and stocks still did not rally leads one to think market is headed lower.

3) The ADP employment data will come out tomorrow. Everyone expects a terrible number, and Friday is big job's number.

I anticipate a fight around SPX between 1040 and 1060 but soon 1040 will fail. I give it a week, therefore I am long NDX September puts.

dumb trade with ok ending

About an hour ago I sold a vertical 18/19 call on FAS at $0.35. I thought I was selling 19/20 for a premium but the stock was at $18.32. SH*T man, why so stupid I do not know. Market is shooting up and I set myself up for a short? What a mistake, I went with the trade without review and click ok on order. The order went through in a blink of an eye. Funny how the top of FAS stalled and I bought back the call spread for $0.25. After comissions I got $3 gain. Dumb trade indeed when I was fighting a trend. Wasted a day trade too. Now down to two day trades for the week.

Market bottom maybe in for now...

Market fluctuated in first 30 minutes of trading. INTC lower 3rd Quarter expectations and Ben Bernanke spoke at 10am. All the pessimism seems to be priced in for the day. The market is up presently but not by much, SPX about +4 and Nasdaq about +5. There is something to take a note upon with respect to TLT.It looks that TLT is fighting a support that held two days ago. Yet it has not made a higher high in the previous two sessions while the market has been very much stuck in a range. A crack in TLT around 106.75 support will be a indication for markets to go higher.

Also to note the 1040 on the SPX was defended today and therefore a bottom may have been in place for intraday. With all the negative news out and the market is still up, it gives me the support to go long the market today.

Disclosure: Short a couple of 105 SPY weekly puts.

You win some, you lose some

Reading twits on stocktwits I see a lot of people say they are getting stopped out today. This is good on the part that a lot of the guys on that site know what they are doing and being truthful with their results. I am grateful I was on the other side of the trade today. Yet yesterday was not an easy night for me to sleep through.

Even today in the morning after the 8:30AM weekly jobs numbers coming out -473k, which is a lot lower than consensus. I thought, sh*t. Everyone is optimistic in the morning, yesterday could have been a bottom. It is never easy when one goes all in with a trade. I was short but others went long. Trends were still for more downside but a lot of people bought into the market yesterday. I feel the market has been more at a range than going in a trending direction. (I have been lucky enough to manage a small gain through it. There were trades I made this month that I knew I should not have made and got lucky with small losses. Best example is two weeks ago on my OEX trade. I twitted it on stocktwits. I went all in with selling a vertical call spread with the OEX weekly and got a small loss.) These experiences shape people into being good traders if they remember not to make the same mistakes. That is very hard to do.

For the year to date I am slightly positive, but since my very first trading loss of 2008 to date I am still very deep in the red. Taxes and commissions has wiped out a lot of my gains for this year, but getting green makes me happy. I know how much others feel when they lose, but its apart of the game. You win some and you lose some. Just make sure you do not lose more than you can afford to. Its very difficult to dig yourself back out of a deep hole.

Learn to blog or record all your trades no matter if its a win or a loss. I did not post much in 2008 and 2009 because most of those days I was losing and wanted to forget about my losses. Yet it is not the right thing to do. Not learning from mistakes is a cardinal sin in the trading world. I to this day still have trouble following with that, but that is apart of the job if I want to "succeed" in trading.

Best of luck to all who are trading.

My view on the market:

The market still seems to be in a range. From mid May of this year to date the SPX range has been between 1020 and 1120. There could be a possibility for the SPX to test 1020, but since it held 1040 yesterday I do not think 1020 will be hit in August. I could be wrong with revised 2nd quarter GDP number tomorrow coming out, but Mr. Bernake's speech will be key. If we do test 1020, it will not be a good side for long term traders.

No supports?

The 1050 on the SPX was breached this morning after the horrible housing data, but came off the lows. No real reason to buy though do to no real good news. There is a saying that when people are fearful, I should be very greedy and buy and when people are greedy, I should sell. The bond market is soaring with 2 and 10 year yields continue to fall. Marco economic data are horrible.
As for predicting the market. We are in a downtrend and will continue until the MACD and RSI downward slope is subdued. This will probably not happen due to poor outlook with GDP and unemployment data. I look forward to making money on the down side with expectation of the SPX to reach 1020 and NDX to 1750.

Third Strike, I missed!

I have learned it is better to wish I was in the right side of the trade than to wish to get out of a losing trade. I did not short the market yesterday, so I miss the morning collapse. I missed a PCLN gap down. I miss making probably the largest profit I could make for the year. Yet I an fine considering I am not losing money, excluding retirement account.

Housing data has not come out yet, but negative sentiment is too heavy to make me bullish. Hopefully the housing data can turn the market. Yet the market does not care about hope.

Why did I not short the market?

I have several reasons why I did not end the day shorting the S&P. First and foremost my marked price for 1075/1100 SPX weekly puts were not triggered, therefore the trade was out of my risk/reward range. I had no control over that, my instincts just told me not trade it. The premium for puts in all indices seemed to high for my taste. That leads me to the second reason of not shorting the market, to much negativity.

Second, the trend is pretty much negative, too negative that is. Everyone I am hearing expects a bad housing number tomorrow and is shorting the market. From what I have seen last Tuesday when a bad number did not come in as expected the market rallied more than 1%! The lack of trade volume effects the market significantly due to lack of conviction both in bulls and bears. The bears have a slight advantage over the bulls tomorrow, but I am afraid any positive outcome from tomorrow's housing number will only raise the market.

Technically the SPY should continue to go down, but something did not jive with me. The chart above shows that the $tick rating has been towards +1000 more often than -1000 near the end of the day, illustrating institutions are buying even on the end of the day drop. For support on the SPX there is the 1064, last Friday's low, 1060, and the 1050.

For types of trade I am looking going into tomorrow. If the market drops significantly I will look to sell weekly puts. For the SPX the 1000 and 1025 and for the NDX 1700. The market would have to be crushed in order for the ranges I just listed to be hit, not saying it is impossible. If the market rallies then selling calls 1100 on the SPX and 1880 on the NDX. For the week I am concentrated in collecting premiums on options, because I am getting set to go short once September rolls around. I will be trying to save some capital for a big short and expect to position myself before labor day weekend due to jobs report the first Friday of September.

SPX levels

So market opened down and for the entire day the market stayed in the red except the Nasdaq got barely in the green. Interesting the low for the SPX today came in at 1063. It clearly is not a solid support so I am positioning to short the index. The SPX ended at slightly above 1071, and I hope Monday will go up.
As always looking at at a fix range for the SPX between 1060 and 1100. Presently it is at the lower range so a bounce maybe imminent. If 1089 can not be breach, where the 50ma is, then a short is in order. Both the 50ma and the 200ma is flatting, and have become resistance.

I want to add a twist onto my analysis with past prices as some traders say there is history with prices. I wanted to note that the first day of trading in August the market was up pretty significantly. From the great folks at Bespoke Investments a chart record of performance in the SPX after a rally on the first day of August trading and for the rest of the month of August is shown below.

http://www.bespokeinvest.com/thinkbig/2010/8/2/best-starts-to-august.html


Only in 67 and 85 did the SPX end the month in the red. Presently the SPX is around -2.7% from its high of August 2. We have 7 trade sessions left in the month. Recent marco economic data has been mostly negative, however technical data is on the sides of the bulls. I will wait until Monday to see how the market plays out.

Fundamental, Technical, Structural, Psychological

Yesterday Stanley Druckenmiller, awesome last name, called it quits to his hedge fund. A speaker on Bloomberg yesterday around 5pm talked about Mr. Druckenmiller's abilities that set him apart from other traders. The speaker broken down four specific categories that made Druckenmiller very profitable trader.

1) Fundamentals

2) Technical

3) Structural?

4) Psychological

1) Fundamentals would cover the macro environment. Today is a simple example of how the fundamentals affected the equities market. When jobs and Phillie numbers came below expectation the market sold off. Factoring how economic data is part of fundamentals of the market. In conjunction the company one plans to invest in has many fundamental data to consider before investing. Those data include P/E ratio, revenue, profits, and so forth.

2) Technical covers charts analysis. One can derived trends in the stock price to determine best point of entry and exit. The analysis covers many tools such as time interval, MACD, VWAP, Vol, CCI, RSI, and so forth.

3) Not sure if I heard it incorrectly but structural was another category. I need to think about this a little longer because I am not sure what it really means. If I have to make a guess I would think it means the type of trade to make in a stock. Whether one goes with trading common shares, preferred shares, and/or options and the quantities with respect to each type of trading vehicle. In options one has to consider the greek letters and spread values when making a trade. Common shares would not make as much profit as options if trader correctly predicted outcome, however common shares do not have an expiration date that decays it value as time passes.

4) The human mind is what makes one trade a certain way. Although computers may rule in trading today and the future, it is the human the has the final say in trade executions. They are the operators of the computers. If they turn off the computers then there are no automated trades. Going off in a tangent. Emotions can effect the types of trade one makes, and understanding those emotions can benefit his/her trading.

I only generalized the four categories and more can be elaborated within each. At least this is a start.

Day Trading

Timing a day trade is very crucial. For the past two weeks I have missed to big drops in the indices and I just cannot get over it. Knowing how fragile the market is right now I came really close to scoring big but due to bad timing in trades I missed out on most of the downward drops. On August 10 I was unable to participate on the short side of the SPX due to going all in on a PCLN short. I made a decent profit and will leave it at that. Just two days ago I went short the NDX via purchase of put spreads but sold them on the same day of purchase because I did not want to lose a four figure profit. Of course if I had held them all to the end of today I would have raked in 7 times the four figure profit I took. Man it almost hurts as much as losing money in a trade.

My touch on the markets' moves are getting better. However I should be very cautious now considering I have been unscaved the past two weeks. I guess preseving capital is much better than winning big in the market. Although if the market is ready for a third drop in the next week I hope I will be in it shorting.

From stocktwits commentors and my own technical analysis the market seems to be ready to fall again. The sentiment on Wall Street seems to be very pessemistic which is why I do not want to just go short the market. Yet if I have to put a number in I would expect the SPX to drop to 1060 before a bounce. I hope tomorrow we have an up day so I can plan on shorting it but if we hit 1060 first I have missed the next big drop. 1050 and 1020 are other support lines but I need to do a little more research before diving in with shorts. Pun intended.

To help myself become a better day trader I have linked a stocktwitter by the name of blackmart. I have been reading through blackmarkt's blog and found his entries on day trading very insightful. He lists all his trades at the end of the day and shows his gains and losses. Furthermore he talks about the periods of trading during the day that I think every type of trader should read. It talks about the 9:30 to 4:00 period of day trading.

http://blackmarkt.blogspot.com/2010/03/daytrading-time-zones.html

Short PCLN...

After reading my last Friday's post I realize how far off I was in predicting the market. The SPX is at 1096 as I write this. Yet I am betting the index will not hit 1100 by the end of tomorrow. Crossing my fingers.

Also today I took on an early short vertical spread of PCLN. I sold a Aug 310/320 spread around the open and that was when PCLN went up, way up! It reached over $309 around noon. Yet as time progressed the stock begins dropping and is now below $298. I should be more patient with the price movement but I am comfortable for the option to expire at the end of Friday.

My reasons for believing that the stock would have trouble hitting through $310 are as follows:

1) Sentiment for the day seemed more neutral than directional. Since yesterday's big rally the market I assume would more likely consolidate then to move up again. This would be a bullish sign for the market overall. Hence I assume PCLN would not go up by much for then next 2 trading sessions.


2) The PCLN 50MA crossed over the 200MA. Being contrarian I saw it as bearish and expected more likely that PCLN will stall out.

3) The MACD has been neutral to slightly lower after 2 weeks but prices has moved up at least 20 points since. A sign of over priced in stock value.

Today I feel I got lucky with PCLN's outcome but wished I held my cash a little longer before go short. If I had held from short for about 3hours I would have doubled my unrealized profit today. Then again at noon time the market did not seem to be a good time to go short.

Almost time to go all in...

This past week I missed on a great opportunity to buy puts in SPX weekly. Yet I still manage a profit for the overall week with a short on PCLN. From all the frustration I have been through with the market I am happy with any type of profit. Now to my anticipation of what to look ahead in the markets.

The "flight to safety" has intensify the past week and the first chart shows how bullish the dollar is. As of Friday the sentiment in Europe's ability to pay its debts is again in doubt the dollar is strengthening against the Euro. It is interesting to note that since early July the dollar index UUP has been declining until last week while the SPX 500 index has been stuck in a range since the UUP decline. I would have though with a weaker dollar the equity market would increase, but that is not the case here. I sign that there is weakest in the SPX.


Next chart is the volatility index. There are many very good blogs out there that can go further into the good and bad of volatility indices, but the reason I wanted to post the VIX is because it is becoming very bullish. As shown in chart below the VIX was able to use the 200MA as support at around 23 and it just made contact with the 50MA resistance around 26.7 last Thursday. The sentiment from traders have been more pessimistic than previous weeks. Rightful so to be pessimistic at this point due to the fundametals both on a mirco and marco stand point being negative relative to investors' expectations. For instance Cisco profit estimates for future quarters were lower than expected. First time unemployment claims are going up again and ISM data has been dropping in recent months. The mood on wall street is more uncertain, which can very well lead to VIX spikes. With greater volatility there is better chance for market to move in significant direction, and presently after this week it seems the market wants to move down.


The bond market is just amazing! Yields are at there lowest since pre-Lehman collapse. The yields seem to only want to go down even more and the bond market illustrates that. For instance TLT is rising and it just broke the 102 resistance today. With a flight to safety mentality around the market TLT if can hold above 102 it can go up further. With money going into bonds it would mean then that equity market will have a void. That is another reason to consider why I think the overall equity market will go down further very soon.

The final chart of this post shows how SPX for the week fail to break through 1130 and fail to hold support at 1100. 1100 was just cut through like butter even though there were over 100,000+ calls/puts at that level. I would have assumed that buyers would have at least try to defend the 1100 instead of letting it fail so quickly. This goes to show that SPX is weak at the moment.

I have read through a lot of blogs past few hours and many are anticipating of a quick bounce before further drop in the overall markets. Any bounce here could be significant so rather than playing the short side I will wait for confirmation. My confirmation will come by the end of Monday where if the market stays flat or positive I will sit out, while if it ends in negative territory I would sell vertical OTM calls of the SPX. My values would probably be at 1100. I think there will be a bounce to 1100 but fail to get above it.