Back to the Future?

Was following news articles written by Michael Grynbaum from The New York Times, and, as I was going through his archive, something caught my eyes.

You see, as I was taking a glimpse at the subject headings on his archive list, I had, by sheer coincidence, on my other screen, DOW's daily chart, which I hadn't closed after doing my daily analysis.

I'm attaching both screens below. See if you can spot how the recent development in the market is mirroring that of Jan to March's and notice how the DOW has responded accordingly (the period in question has been highlighted in grey tetragon in grey) in both periods.

My question is: From this point on, does it look like DOW's going to repeat what it did post March (ie. resume its upward move) or write a brand new chapter by going down?

I would take into consideration the fact that unlike in March - where price actually retraced to Fib 61.8% when it was on its way down - this time, we have retraced to only Fib 38.2%.

Archive of Articles written by M. Grynbaum (Jan - Mar 08)










DOW daily

About "White Noise"

Came across this and can't help sharing it.

I like this guy.

Weekly Analysis & Pre-Market Analysis 8/4

Revisiting Last Week

We've had a fairly exciting week that ended on Aug 1, the first trading day of the month.

The finance sector, which has been the biggest mover of the market for a while now, ended with a modest gain. Hardly surprising given the kind of support they are continuing to be getting from the government (see my earlier posting regarding the topic in question).

Oil ride seemed bumpy for the week, right after a nice trend down from its peak.

Then there was a heap of economic data that confuses at best.

After all those roller coaster rides through the week, the week ended surprisingly flat - S&P rose 0.2%, and DOW went down by 0.4%.

So there you go, just another week in a trader's life.

Looking forward, the first thing I want to do is clear my head in the midst of all the noises , look for patterns, and get a sense of what to expect in the week to come.

Been following the news and nothing out of this world has caught my attention yet. The market is still in a jumble (that seems to have become a CONSTANT these days...).

So I'm going to turn to my charts now.

I'll like to start with my monthly chart for DOW, since I've not taken a look at it for a while now.

1) Monthly



Bullish Hidden Divergence (lower low in MACD not matched by lower low in DOW), which tells me that uptrend since at least Oct 2002, if not 1900, will resume after the current correction.

Doji tells me that bears are taking a break.

We've hit 50% Fib retracement level. Price could go anywhere from here. I'm mildly bullish at this point, and you can find my reasons for being bullish - at least for this week - as you read on.

2) Weekly



Bullish Divergence for week of July 21 and July 28

Volume shows that selling pressure is at least wanning - a temporary relief for the bulls after seeing price dropping accompanied by heavy volume since May .

I would be concerned though with what seems like an evening star and bearish engulfing patterns(in grey tetragons) that formed at the top of the trend and as price was coming down. Seems to me that there's a strong resistance at the level DOW reached in Oct 07. Rallies after that were constantly being impeded by strong bearish candlestick patterns as bulls attempted to push price back up to the high reached in Oct 07.

3) Daily



Bearish wedge. Suggest a high probability that price will tank at some point after DOW has inched up to a certain level (where exactly I don't know - at least not on daily chart).

The declining volume since mid july suggest that the rally is not supported by new players coming in but simply bears taking profit or short covering (hardly surprising since SOME PEOPLE WHO REALLY HAVE GOOD REASON TO GO SHORT CAN SHORT NO MORE BECAUSE THEIR HANDS ARE TIED).

Anyways, I'm going to be a broken record and reiterate that bears are not going to be of serious threat at least up til mid Aug.

4) OIL
Let's take a look at the daily chart for Brent Crude futures



Seems to me that oil is consolidating after the steep fall off its top.

The box-range trading pattern is consistent with the prevailing sentiment. It's just nonplus all over - on one hand, we have rising tension between Iran and Israel, which is bullish for oil; on the other, confusing economic data and the ailing housing and banking sector (the health of which underpins the growth of the country) are holding bulls back (In fact there's been reports of substantial shorting of oil contracts based on expectation that the gloomy economy is going to impact on demand.

5) I mentioned the following in my posting on Jul 31:

Price moving towards Fib 61.8 - countertrend and corrections typically end at Fib retracement level of 61.8%. So, unless DOW goes up beyond around 12,250 (the 61.8% Fib retracement level of the fall from May to July) and stay up there, I'm going to continue to see the current rally as just a mishmash of bears' profit taking and opportunists jumping in to ride on the current rally in the financial sector (which, as I mentioned, would last only for as long as the government is willing to continue to bail out irresponsible companies)

With the expiry in mid Aug of such initiatives to prop them up e.g SEC's temporary restriction on naked short selling on financial institutions, I'm expecting their happy ride to be over by then.


My Thoughts on What to Expect for this week

Based on my points 1) to 5) above, and in the absence of any surprise from OIL and on the political front, I'm bullish for the week of Aug 04, and mildly bullish for the month of Aug.

Economic Data for today
Not a whole lot for this week. For today, watch out for the following:
08:30 Personal Income for Jun Consensus -0.1% Previous 1.9%
08:30 Personal Spending for Jun Consensus 0.5% Previous 0.8%
10:00 Factory Orders for Jun Consensus 0.7% Previous 0.6%

Reprogramming the Mind to Take 7-Figure Profits

An article that caught my attention.

Story's about an index futures trader who aspires to bring his profits to the next level.

Inspirational. Got me springing into action.

Reviewed my goals and objectives, made some adjustments, and am gratified that I finally have a vision that I'm most happy to work towards.

Seabloke, I DO WRITE SHORT AND SWEET. Occasionally.

:-D

D III

D and I started our Saturday early. It was the last day we got to keep our old home. An appointment was scheduled with HDB at 9am for the place to be inspected and surrendered. It was hardly a joyous occasion, but I certainly didn't feel half as traumatized as I did during my last visit.

D's presence had been most comforting. We had a little time to kill before the appointment, so we had coffee at a food centre nearby.

The "yellow box" (smoker's zone) there was exceedingly commodious.

BUT, it was the only part of the eatery that was totally uncovered.

"That's discrimination against smokers." D's disgruntled.

"Clearly it is. Nicotine's bad..."

"Then it should be banned"

"But revenue from tax is good..."

This went on for a while and then we sidetracked and started another equally trifling topic.

It's a known fact that I haven't enough "small-talk" skills to save my life. I can't carry out small-talks with anyone else (Seabloke's the exception of course). The main reason I haven't called my granny in weeks is coz I fear I will bore her to death. That's basically the very reason for my not calling any of my friends too. Unless I have something intelligent or jaw-dropping to share, I seldom talk.

But for some strange reasons, I thoroughly enjoy silly conversations with D. And I can't care less about appearing silly or clumsy when I'm with him now.

I'm not sure if I should feel happy that our "friendship" seems to be blossoming...

But I'm always happy to have D.

And it doesn't really matter what form he comes in.

Round is best!!!

:-D

Pre-Market Analysis 8/1

In the spotlight yesterday was GDP - data for Q2 was better than Q1's but it was not as good as expected. Revised data for Q4 of last year showed the economy shrank at a 0.2% annual rate. Bad news from Labor Department too - the number of newly laid-offs was 448,000 last week (the most in five years), and more job cuts are expected in the months to come.

Personal consumption expenditures is up by 1.5 % from April to June. Not entirely impressive. Since consumer spending drives about 70 % of the U.S. economy, this is a significant data. As it is now, consumer confidence levels are at record lows.

AND, Former Fed Chairman Greenspan has spoken again and remarked that there will be a 50-50 % chance that a recession is imminent.

The result of all the above is here:

Dow dropped 205.67 points.
S&P 500 dropped by 16.88 points (1.31%)
COMP dropped by 4.17 points (0.18%)
RUT dropped by 4.34 points (0.60%)

On a slightly cheery note, export growth rose 9.2% after rising 5.1 % in Q1, thanks to a weaker USD. BUT, it is expected that inflation and energy prices will slow it down.

Oil
Oil dropped by $2.69 to settle at $124.08 a barrel after it's Wednesday high. The threat of a recession (think less flying, less driving, less SUVs, etc) was alleged to be the reason causing oil traders to dump their oil contracts. Large investment funds are also reportedly liquidating their oil positions over the past months, and are in fact shorting crude contracts. Overseas, demand for oil has dropped in China due to restrictions imposed on driving and the closing down of environmentally unfriendly factories.

There's sure a whole lot of mixed signals from everywhere - inflation, no inflation...recession, no recession....not enough jobs to go around, yet people are spending (thanks to tax rebates payout)...

So what's a daytrader to do with all these info?

Beats me.

Trading is an art. And D's the right-brainer here. Not moi.

During times like this, I like to go back to my charts.

Yes, I love charts. Wonder if I mentioned that before...

But I'm not showing any charts today.

Coz all the charts shown in my pre-market analysis yesterday are still telling me that market will continue to soar until DOW and S&P hit Fib 61% level. The current rally seen on the charts are actually forming patterns of bear flags and wedges. Signaling that downtrend is likely to resume after the rally that began in mid July is over. Possibly by mid Aug.

But unlike the DOW and S & P, RUT's daily chart is showing signs of it coming down perhaps as soon as today.

So, yes, I remain bearish on ER2. Especially when today's the first trading day of Aug. Traditionally, it has been bearish.

Been digging into the genesis of the housing and credit crunch issues and I found myself time traveling to Bretton Woods time! I've digressed again.

To cut a long story short, US always has a way of creating a new problem from a previous solution, but hey, they're still thriving today - look, DOW has been on an uptrend since the beginning of the century, hasn't it? And CEOs are continuing to take home income and bonus in the tens of millions. They will find a way.

As traders, we just need to ride with the trend, follow the smart money (ie. don't buy when they are selling it to you!), keep close tabs on everything the Fed and US congress are saying and doing. And don't we forget the former FED chairman and mad Cramer.

Keep an eye on the following economic data to be released later today:
8:30am EST Nonfarm Payrolls for July consensus -75K prev -62K
8:30am EST Unemployment Rate for July consensus 5.6% prev 5.5%

D's ER2 Trades 7/31

D's trades for today (yes, he's retired for the night). As you can see, he doesn't take more than 1 point in losses (D's ultra stressed when he losses money...).



D's profit for today (figure includes yesterday's profit) :

Pre-Market Analysis 7/31

DOW was up 186 points (1.63%) yesterday on:

1) Surge in price of oil (rising by $4.58 to close at $126.77), giving a boost to the 2 big players in DOW - Exon and Chev

2) Gains in the financial sector thanks to a string of policies to prop up financial stocks

3) Rosy ADP employment figures

S&P 500 went up by 21.06 points (1.67%), COMP went up by 10.10 (0.44%), RUT went up by 4.31 (0.6%), ER2 (Sep settlement) is down by 0.06%

So, what do I expect to see in the sessions to come?

First, on market internals: COMP and RUT are showing weakness relative to DOW. ER2 (which is what I'm trading now) is now in negative territory. Price of oil is apparently affecting the small caps. I'm expecting ER2 to trade down today.

Now, on the market in general:

Government's advance reading on Q2 gross domestic product is due to be out today at 830am EST. Consensus is 2.3% , Q1's fig was 1%. Thanks to tax rebates, figs for Q2 might just look like there's some growth in the economy.

In the long run, the surge in oil and other commodity prices will continue to put pressure on consumers. In the absence of any transformational remedy to the credit and housing problem, and stabilizing oil prices, it is difficult for investors to get optimistic about the economy.

The recent rally that we saw was due to a number of factors that are not hinged on a truly healthy economy. Here are some of my reasons for not being optimistic that a bullish reversal is anywhere in sight:

1) Financial sector
To recap, market rallied for the past few days mainly because of a soaring financial sector. I don't know about the others, I personally won't keep any financial stocks. With the expiry in mid Aug of such initiatives to prop them up e.g SEC's temporary restriction on naked short selling on financial institutions, I'm expecting their happy ride to be over by then.

2) Although ADP employment figures were much better than expected, I've only been seeing news of layoffs by the thousands from big names. Am I the only one that's been missing out something?

3) Homebuilders sector closed in negative territory, small caps companies not doing all that well (diverging negatively from DOW and S&P), US' MONUMENTAL Budget and Trade Deficit, etc etc

Going back to yesterday's late day rally - seems that part of it was due to institutional investors adjusting their holdings before market closed, typical of them to do that in times of volatility.

Now, let's look at some charts.

DOW Daily



What I see here:

Bear Wedge, declining volume since its low on Jul 15 - suggest that rally is probably due to bears taking profit rather new bulls coming in

Bearish negative divergence is still there - reinforcing my belief that this is simply a short-term rally in a bear trend

Price moving towards Fib 61.8 - countertrend and corrections typically end at Fib retracement level of 61.8%. So, unless DOW goes up beyond around 12,250 (the 61.8% Fib retracement level of the fall from May to July) and stay up there, I'm going to continue to see the current rally as just a mishmash of bears' profit taking and opportunists jumping in to ride on the current rally in the financial sector (which, as I mentioned, would last only for as long as the government is willing to continue to bail out irresponsible companies)

In a trend like today's, any news, good or bad, WILL MOVE the market. A volatile time indeed.

S &P chart mirrors the DOW chart so I shan't show it. There are no divergence between DOW and S &P.

Since I'm trading the ER2, I'm looking at RUT and ER2 charts too.

RUT Daily



What I see:

Bear flag, bearish divergence for Jul 29 - 30, bearish hidden divergence (suggesting downtrend that began in Jul 07 will continue).

Fib 61.8% retracement level from fall of early June to July hit - accompanied by 3 spinning tops, I'm thinking likelihood is that party's over for the bulls

ER2 (Sep Settlement)

What I see:



Nothing too different from what I see in my RUT chart.

When I add in the factor of RUT and ER2 showing relative weakness against DOW and S&P, I can't help but be bearish. Both towards RUT and the general market, especially with Nasdaq showing weakness against DOW too.

What this is telling me is that DOW is pretty lonely and will soon join the others.

But as I've mentioned above, the rally is still on, and we should see the general market (except maybe russell and nasdaq...) moving up today (From DOW daily chart, we can see that MACD lines are moving into positive territory). Don't know about tmrw though, since 1 Aug has traditionally being bearish.

D's ER2 Trades 7/30

D, as usual, got his more than 1-point gain - all in an hour's work! *&*&*$(&#!

D has clearly found his way. His success rate is 6 out of 7 on average.

Here's something worth mentioning about D: he hasn't a big risk appetite, and won't take a loss of more than 1 point.

Because of that, he accepts that he will have to go for smaller wins each time.

D makes it a point to get out of a trade after getting 4 ticks. And whenever he breaks that rule, he'll find the trade turning against him.

As shown in my earlier post, D looks at just one chart. He has his focus on how price moves, and enters near the top of the candle if he's going short, and near the bottom when he's going long.

D's system is extremely simple - he looks at support and resistance, and gets news update from me.

D's triggers for entering and exiting his trades are different each time (typical of right-brainers??) - but they would be one of or a combination of these: news, DOW's movement, ER2's movement.

So far, D's method has worked very well for him. He keeps his target at 1 to 2 points. And he usually achieves it before 1pm EST. This is very likely the reason that he's consistently been able to keep his profit - he knows when to stop, and that's when he's physically and mentally too drained to carry on. And that's around midnight.

D works full time in a highly aggressive environment, and hence getting enough sleep is important to him. That's why he doesn't trade the after-lunch session.

This is typical of what I see on his TWS whenever he calls it a day:



And these are his trades for today:



I have always known that there's really no right or wrong way to trade. The only thing that's certain as far as trading is concerned (besides the opening and closing price) is that there's no holy grail. That much I knew.

But knowing is different from appreciating. Today, I'm beginning to appreciate and respect the difference between the way that D and I trade.

For once, I'm not going to insist that I'm right and that D's clueless. Coz he's apparently come up with a system that works extremely well for him and he stuck to it despite my frequent teasing.

D's SO COOL!!!

:-D

Pre-market Analysis 7/30

The market rallied yesterday on:

1) Declining oil (questionable now, really, since I was lost yesterday as to who was leading who...)

2) A soaring financial sector

3) Better than expected consumer confidence data (which we know has little correlation with real consumer spending, but do daytraders really care? Any data that has bearing on immediate sentiments MATTERS)

4) Good earning reports from companies

5) The fact that it's Tues (??)

So, DOW gained 266.48 points. Nasdaq, S&P and Russell all closed in positive territory.

This is how my daily chart looks now:



As mentioned in my pre-market analysis for July 28, my take was that we were going to trade in a box-range til today.

So what's special about today?

Well, traditionally, the last 2 days of the trading month are good trading days. For the bulls at least.

I still see my bear flag.

I don't know what else to say about my chart.

Let's see if support holds today.

Unless price gets higher than the high of Jul 23's session, I'm not going to turn bullish this week or even next.

And even if I have reasons to be bullish, I will tread very carefully for each session coz any bad news intraday will send the market plunging. By the same token, on a very bearish day, a single piece of good news can send the market soaring for the day, depending on how desperate people are in looking for signs of a reversal.

All said, I'm bearish for now. Treasury Secretary Paulson is not letting the free market do its thing, and I'm anticipating repercussions over time. It could happen in the days or weeks to come, maybe months. In any case, if the current generation is not paying the price, the next generation or the one after, will. And thanks to globalization, we're all going to have to pay (in fact, with my investment account in USD, I am already officially paying... $#*(@$*%)...

But, as a daytrader, for today, I care more about what's going to happen from now to 4pm EST.

By the way, oil has found support at around $122 and holding steady for now.

ADP Employment data for July will be out at 815pm EST. Current consensus is -60K, revised from -79K.

D's Simplicity & Jule's Jumble

Can't help but just have to take a screenshot of the following which sent D and me rolling on the floor laughing when we noticed the striking contrast:



The above is just one of the screens I look at when I trade.

Elsewhere, I have my SPX, COMP, NDX and UTIL charts to look for divergence with DOW, and also of course my level II screen, and news on newsflash.

D stares at ONLY this on his 21-inch flat panel:



Sidesplitting.

Not to mention mind-bending.

Coz D has been netting between 1 to 2 points almost DAILY, and never bothers to trade after 12pm EST!

So, what does this tell me?

That should I ever find myself totally lost and confused, it might just pay to come back to earth.

But for now, my screens and I are inseparable.

D's COOL, isn't he?

:-)

Pre-market Analysis 7/29

Dow -2.11%
Nasdaq 100 -2.4%.
Russell 2000 -2.0%.
S&P 500 -1.86

The above are just 4 of the indices that closed in the negative territory yesterday.

I've said more than enough about the sick US economy / market (can't tell one from the other now, can we?) in my earlier posting.

Regardless of the measures taken to alleviate the housing and credit crunch problems, and whatever the motives and agenda behind these initiatives, DOW seems it's going to be DOWN for a while.

Fundamentals and common sense aside, Dow's daily chart shows that it's sitting on support now. If consumer confidence data (to be released today at 10am EST) is good, or if there's release of ANY news that's mildly bullish, we should see bears taking a breather AGAIN. Maybe in the form of another doji or spinning top. Otherwise, for today, it's likely going to be a long bearish candle that falls through support.

That's my personal take.

Yes, I'm bearish.

Doesn't mean I'm a bear. I can be a bull anytime the market turns bullish :-D

Pilot, Seabloke, the SPF & NDP

One of the reasons I love my new home is its central location. It's an irony that being somewhat of a hermit, I've always chosen to live within, or just a few minutes' drive from, the business district. For up to a decade that I was in Edmonton, I've lived within the business centre.

Where I'm living now is so near to where our National Day Parade (NDP) will be held, that I get to see our air force rehearse their stunts whenever I'm home - which is, like, every time they have a rehearsal. Yes, I'm always home.

I LOVE, LOVE, LOVE fighter planes. Had I not suffered from severe myopia since I was a child, I might just have joined Pilot at the youth flying club.

But as I was growing up, and I can't recall at all now how and when it happened, I developed an intense fear of being in the air (Little wonder that I never once flew back in the last 5 years that I was in Edmonton. While for the first 5 years I came back at least once a year mostly for my Dad's sake, I saw no reason to come back after he passed on). So there goes my dream of ever flying a plane.

So, anyways, Pilot managed to maintain his perfect vision and grew up aspiring to join the air force. Strangely, he ended up in Commando camp instead. Today, he's a commercial pilot. A really mischievous one. Seabloke and I are still very tickled by this that he's been YEARNING to say over the intercom:

"Ladies and gentlemen, this is your Captain speaking (another thing that really baffles Pilot is why all captains have to identify themselves as "SPEAKING" :-D). It's been a pRessure having you aboard the XXXX. We hope you've had a nice fRight."

My baby brother, one of the few things in my life that I love with all my heart.

Like me, Pilot is COLD by default. We hardly talk (by that I mean both to each other , and with other people). But when we do get together, we talk about things that others simply can't get excited over. Things that intrigue us don't seem to interest anyone else. Well, maybe except for Seabloke. But I'm darn sure that a topic like the mathematical model of life will send even Seabloke running for cover...

It's bizarre, but with our National Day just around the corner, I've been thinking about Pilot a lot. I could have just picked up the phone to call and find out how he's doing, instead of missing him. But that's just not us. I could have asked him out for dinner. But get-togethers with Pilot happen only a few times a year - his birthday, Seabloke's, and mine; Christmas; Chinese New Year, and on occasions when Seabloke decided that it was time for the 3 of us to catch up.

National Day also reminds me of my former workplace. It's been a year now since I quit the force to find myself. I miss SPF. I miss my superiors - Supt B and DAC J. I miss my colleagues - DSP Daniel, DSP C.Razario, ASP Tze Ai, David, and many others. Most of all, I miss Dawn, who's now a TEACHER! It's been only a year, and a few of my ex colleagues have gone on to do different things. Fan has joined the private sector...boy, I really, really miss Fan. Those happy Traffic Police days...

Ok, I'm getting nostalgic. Something that's been proven to be really bad for my health.

There's something about Seabloke's birthday...Oh, but that was yesterday...

Apologies, Seabloke! You can't blame me. I HAVEN'T BEEN HEARING FROM YOU!! FOR 24 HOURS NOW!!

:-D

Simply A Lovely Day

Today's a special day.

It's SEABLOKE's BIRTHDAY!!

Happy birthday, Honey. Another year older. Hur hur hur...

And today's the first time in weeks that I drove D to work! Oh how I missed my tank!! Driving down the highway has always been an amazingly therapeutic activity for me.

But getting out of the house was a struggle initially. Had to take the car coz there're too many errands to run.

But even the errands turned out to have a calming effect on me. Sitting through a car wash was relaxing. Waiting at what used to be my favorite hangout, Cedele, for my bread to be sliced, turned out to be an extraordinarily pleasant experience - they've renovated and now has a very cozy smoking corner! :-D

It's a lovely day. How I wish Seabloke had been here with me. She couldn't make it for breakfast coz she's quit her full-time homemaker job to join a diving centre.

:-(

Well, it's still a wonderful day.

Off to pick D up now!

Pre-market Analysis 7/28

Looks like we're going to have a choppy session today.

There are a few things I look at to get a sense of what the market is likely to do.

First I look for a theme. Seems like we have more than one - housing and financials and OIL.

Then I look at economic data.

Finally, I look at how risk averse investors around the globe are. So I follow the close of the Asian and European markets, and I look at the Yen.

On the housing front, things just look worse to me despite the following report from Briefing:
The Wall Street Journal reports U.S. Senate lawmakers on Saturday overwhelmingly passed a broad package of housing legislation. Meeting in a rare weekend session, the Senate voted 72-13 in favor of the bill, which includes tax breaks for homeowners, a $300 bln program to refinance loans for struggling borrowers, and a dramatic rescue plan for embattled mortgage finance firms Fannie Mae (FNM) and Freddie Mac (FRE). Other provisions include an increase in the federal debt limit to $10.6 trln and long-sought reforms to the Federal Housing Administration. "For Americans out there today with distressed mortgages and worried about their economic future, we hope this legislation could be the first piece of good news in a long time," Senate Banking Chairman Christopher Dodd (D., Conn.), told reporters after the vote. Treasury Secretary Henry Paulson said provisions in the bill dealing with Fannie and Freddie, including the creation of a new regulator, were especially important. "These components are orders of magnitude more important to turning the corner on the housing correction," Mr. Paulson said in a statement.

Extremely annoying trumpet blowing. Do I think that homeowners are really going to believe that the benefit of the $300bil handout is going to be passed on to them. ABSOLUTELY NOT. To me, it is apparent that this is yet another desperate answer to SOS from the very people who have, during better times, profited at the expense of people whose houses they are foreclosing now.

Bloodsuckers.

Nonetheless, both DOW and S&P have reacted positively. I'm really keeping my fingers crossed that they will continue to rise. One just need to do the math and use some common sense to see that there's really no light at the end of the tunnel YET. The pie is still the same pie. The pie has NOT increased in size. The slices have simply been snatched from those who thought they were going to enjoy them, to be redistributed to we-know-who. The bill is simply not the answer to the credit crunch problem, to say the least.

Which brings me to the next highlight of the day:

Bank failures: Consequences of expansion - WSJ
The Wall Street Journal reports Friday federal regulators shut down First National Bank of Nevada and First Heritage Bank of Newport Beach, Calif. The $3.2 bln in deposits of the closed banks were acquired by Mutual of Omaha Bank, a unit of insurer Mutual of Omaha. The branches are reopening Monday. The two failed banks were units of closely held First National Bank Holding, based in Scottsdale, Ariz. Both had been grappling with problem loans and had a combined first-quarter loss of about $140 mln. First National Bank of Arizona, which was absorbed into First National Bank of Nevada in June, had a Q1 loan-loss provision of $95.9 mln. Efforts by the struggling banks to raise capital this spring were unsuccessful, and they also approached other banks about selling themselves, according to a person familiar with the matter. They are the sixth and seventh banks to have been shut by regulators so far this year.

Need I say more about the health of the financial sector?

Now, we've come to oil. Price rebounded. Approaching $124/barrel. Here's an interesting read that should give us an idea of whether price of oil has seen its top.

Both Europe and Asia's markets have closed down.

USD/JPY 60-min chart is showing a short-term downtrend.

NOw, the DOW daily chart:



Here's what I see:
rally that began on 16 July couldn't go any higher than its previous support and came down on 24 July, taking all the gains from 18 Jul to 23 Jul. In the midst of weak market internals and chaos in the housing and financial sector, I can't see last weeks' rally as anything more than a deadcat bounce.

On top of that, I see a bearish hidden divergence, which reinforces my view that the said rally is shortlived and the down trend that began in May will resume.

But given the housing "good news", i'm thinking that the market should find somekind of support at its previous session's low. We might be trading in a box-range until 30 Jul.

What follows after the first few trading days of Aug doesn't look rosy to me. But that's my take. And it's what I see on my chart - a bear flag.

But the market (Fed?) always tells its story best.

Will be trading the ER2 tonight. D opined that I've chickened out of trading after something I did really wrong about a month ago, which saw me losing in one trade every penny that I've ever made and have YET TO MAKE.
Maybe I did chicken out.

Cutting losses seems to be D's forte, not mine.

Like I said, I trade like a man (refer to my earlier posting on the topic here)

:-D

Back to Basics

Was reading KH's blog and found his latest entry on trading ER2 awfully enlightening.

I've been spending most of last 2 weeks catching up on my reading. I spent the rest just really going through what I've been doing so far and pondering on whether they make any sense to me at all.

Like KH, I've ditched all my indicators. D knows this about me: I have no qualms about scrapping months of work or anything that DOESN'T WORK for me.

I'm not against Richard Dennis' turtle model, neither am I an advocate. My passion for trading has little to do with its potential monetary reward. I want to be great at trading for reasons that I won't discuss today.

Anyways, for the past few days, I've been watching just price movements and studying the Dow.

I should have more to share after I'm done with what I'd call a very small-scale research on a theory I'm developing.

Pre-market Analysis 7/25

Was looking at the DOW chart and noticed a few things.

Market saw its peak in Oct last year. From then on, we've seen some rather fierce rallies but more often than not, they are immediately followed by steeper declines.

Jul 16's rally after the sell-off in mid May seemed short-lived. But that's hardly surprising.

July usually doesn't end well during bearish times.

Today's Friday. Friday in a non-bullish time. Generally, this means market participants will be more reluctant to hold their positions through the weekends.

Yesterday's sell-off came after the rally that began on 16 July. Whether the rally will resume is really a matter of how confident people are that there's a basis for the rally. Positive company earning reports aside, mid July is traditionally bullish anyway thanks to the inflow of retirement funds...

I'm thinking it's likely that today would see a follow-through from yesterday's sell-off.

Why do I think that?

Because the US economy seems to suck, albeit not big time:
- Weekly jobless claims figures are bad,
- Existing home sales figures are not rosy either (spells trouble for the financial sector, which has been THE sector moving the market for a while now)
- Sectors such as the hotels, resorts & cruise lines, automobile manufacturing, etc did poorly (when these guys don't do well, it says a lot about people's confidence in the economy)

On the news front, we see a mix of good and not-so-good reports and news from various companies across the sectors. But what caught my eyes was this report:

"...after BofA's (BAC) disclosure of Countrywide's loans, could be worth far less than the stated values, and reserves taken against possible losses are inadequate. And if bank capital is overstated, firms could again be forced into dilutive capital raising. The reduction in the value of Countrywide's loans raises the question of what would happen to other banks if they similarly marked loan portfolios to prices they could fetch if sold in the market today. Typically, banks create reserves equal to 1.5% to 3% of those portfolios, but the prices applied to Countrywide's loans show those set-asides could be too low. Applying a mark of 5% -- more aggressive, but still well below Countrywide's -- at Citigroup (C), J.P. Morgan (JPM), Wells Fargo (WFC), Wachovia (WB), Washington Mutual (WM) and Bank of America (BAC) results in 10% to 30% reductions in the banks' stated book values. Push the mark to 7.5% and book values are 20% to 50% below stated levels. "That is why you see so many banks trading at such a discount to book value," says Craig Emrick, a bank analyst at Moody's Investors Service."

AND, OIL HAS RISEN AGAIN, a follow through on previous session's gain after dropping for 2 weeks.

So, I'm really not so sure that the market will fade up today.

But then again, this is a crazy market, and anything can happen.

Good Trading Course

Regarding my posting on Tribute to My Trading Coach, Simply the Best Coach in Basics of Trading, I have people asking where they can find more information on M and his course.

Trading for a Living is the name of the course and details can be found on their website here.

M doesn't advertise, but conducts regular previews where you can pick up really useful tips from him on trading basics eg. how to make good investment decisions, what tools to use, and what kind of information you need to help you make those decisions.

These previews are free, and are conducted over the weekends.

Here are the date and time of his next previews (tmrw and the day after):

Saturday 26 July 2008, Sunday 27 July 2008
Time: 2.30pm – 4.30pm
Venue:
#08-12 Burlington Square
175A Bencoolen Street
(right next to Sim Lim Square)

If you are seriously looking at trading to supplement your income, or even considering trading full-time, you'll find M's course immensely useful.

Whether you're keen to be a daytrader, swing trader or even a longer term investor, M will be able to impart you with the knowledge and skills to go into the market with confidence.

If you're looking for a coach that teaches options strategies in a language you can understand, do check out M's course and sit in at his preview tomorrow or on Sunday.

Reply

Yesterday was the first day since July 14 that I went out (not counting the day I went back to my old home for an hour and then came straight back to my shell after that).

Was supposed to have breakfast with Seabloke, but she couldn't make it. Was supposed to have lunch with Ken, but I overslept and didn't make it.

But I'm proud I made it to coffee with JD. I was early and even had some time to catch up on my reading while waiting for him.

Now, how do I even begin to describe JD? He's 11 years younger, and I knew him when he was coaching my batch at the AKLTG's Patterns of Excellence Program.

I always tell JD that for someone his age, he's got a really old soul. And he's one of the rare few that somehow is able to get me to step out my house to get some sun.

Even my granny couldn't get me to leave my house to visit her...

Anyway, we spent more than 3 hours just chatting over coffee and hanging out at the bookstore.

When it was time for me to leave for M's class, JD took a train with me, alighted with me, and walked me to the building where M's class was held.

At first I was amused that he actually thought I could lose my way.

But I was grateful he did, coz if not for him, I really wouldn't have found the building. Yes, I'm hopelessly lost in the country that I've lived for 23 years.

Class was very fruitful. D couldn't make it coz he had to work. The plan was for him to pick me up after he knocked off, but he was still in his meeting when class was over. I decided to wait for him, coz I doubt I knew where I could get a cab, and because my heels (not been in them for the longest time!) were killing me, there was no way I could walk aimlessly til I could get one.

M was very nice and waited with me.

D didn't take long to arrive. We had a smoke before we got into the car. I couldn't stop talking about my day.

Perhaps JD is right. I do need to see some human beings. It's gotten to the point that I actually felt nervous on the streets. In class, I had to put my bag on the chair next to me to prevent anyone from taking that seat coz I wasn't sure I could stand having a stranger sitting that close to me for 2 hours.

I knew that something's seriously wrong with me when weeks ago, I had what seemed like the onset of a panic attack, just from shopping with D. It was the Great Singapore Sale and the crowd overwhelmed me.

I gather I'm never going to be able to return to corporate life. One day out of the house, and I was thoroughly drained. I slept throughout after seeing D off this morning.

I'm happy with my life now. I love what I'm doing, coz I love to analyze things to death, and I love not having to interact with people. I have loving siblings, and a small circle of very good friends that never fail to warm my heart, and D, who's always going to be my best friend.

I don't remember a time that I really hated my life. I've turned my world upside down, but it's my world nonetheless. And I can't hate it. No matter how upset I could get sometimes, I always feel that things could only get that bad - much like those days when people kept talking about the market having seen its bottom, yet each day saw a lower low and the market never stopped churning out optimists.

If someone were to ask me, I would say that the only regret in my life thus far, is that my existence has not been of value to anyone. I love to be in my own world so much, and embrace my values and my likes and dislikes so much, my life has had no room for others. I did as I wished, and lived as I wished. I love my freedom so much, I wouldn't give the world a new life. But well, the world is over-populated as it is now anyways...

And if someone were to ask me, I would say that the only past that I can't cherish, is the one where I've turned others' world topsy-turvy, and, scarred the blameless.

Other than that, I have no complaint.

Being a Christian, I believe that my life is truly blessed.

So do I believe in happily ever after still?

Yes, I do.

I believe, and I know, that everyone can live happily ever after, if only he/she would choose to.

Tribute to My Trading Coach, Simply the Best Coach in Basics of Trading

Warning: This is a long posting (what's new??). For those who just want to know where to find a good coach who doesn't burn a hole in your pocket, please scroll right to the end of this posting.

This coming Wednesday will be lesson 19 of M's class. One more class to go and it completes the syllabus.

As I was going through his presentation slides for lesson 19 on Inside Bars, I was amazed by its clarity. One almost doesn't have to attend the class to make sense of the chapter. The slides are mostly charts that identify the inside bars. Then there are charts that show you WHERE exactly to enter and WHERE exactly to place a stop loss.

Although the presentation includes another broader topic - Fibonacci - it does not confuse. Because of the way the syllabus is structured, M's students would have already become familiar with Fibonacci by now. Support and Resistance was thrown in, along with oscillator indicators.

And what you have is a blueprint of where to enter a trade WITH CONFIDENCE, provided that you FOLLOW THE RULES.

M stands out from his counterparts in the region. He REALLY teaches the fundamentals of trading. His syllabus is truly designed for novices. The simplicity of the setups he shares and the step-by-step guidance are a godsend for people who are so new to trading it's not unreasonable or insulting to label them as "idiots".

I started off as an idiot. The course I took prior to M's was designed for those who have been trading for a while, but for some reasons (usually a result of having learnt from self-proclaimed gurus who are more idiotic than the average idiots), were totally slaughtered by the market and had sought the help of my previous trainer. It was not the right course for me although it teaches the basics of trading. For someone who has never entered the market, I needed something even more basic.

6 months after graduating from my first trading course and after having done a lot of reading on topics that even some professional traders can't be bothered with eg. Elliot Waves, and I became quite an expert in indicators after having done extensive research and backtesting on them. Yet I had little experience on TRADING itself. I was kinda "forced" into the real battlefield by D, who was getting quite fed-up with my very academic approach towards trading.

And it was around the time that I was also beginning to wonder why I am so afraid to trade. Yes, I know that I hate to lose and that's probably one of the reasons. But there's something else. I knew I was missing out something.

It was then that a friend who was attending M's class, even though he was already helping to coach my previous trainer's class, recommended that I check out M's class.

I did. And I have to say that M was truly refreshing. He speaks melodiously. Calm and confident, he was not my idea of the typical daytrader. My idea of a serious daytrader has to be unkempt, edgy, and shows a reluctance to teach coz he would rather be trading than teaching. But M showed me enough during his preview to convince me he was who I was looking for to teach me THE fundamentals of trading.

I needed to know how exactly to ENTER A TRADE. WHERE, WHEN, HOW. I would have looked like a complete idiot had I asked in my previous class coz EVERYONE seemed to know where to enter a trade. I might know all the setups, the indicators, what moves the market, recognize patterns that signal a reversal or continuation of a trend. Hell, I can even laugh at authors who write about how useless oscillator indicators are coz I recognize the periods they were making reference to were trending periods, where oscillator indicators, being oscillator indicators, will just stay in oversold or overbought region.

But I don't know where in the world to place my entry.

And I was beyond grateful on the day that M taught the class exactly where to enter a trade. I couldn't believe my eyes when I saw the 2 huge candles on the slide with the lines indicating where you enter and where you put your stop.

Breathtakingly amazing.

Truly for both newbies and traders without actual trading experience, like me.

I know that over time, trading does become more arts than science. But for a bona fide trading novice, M's step-by-step guidance at least gives him/her the confidence to GET STARTED.

I'm not one of those who love living on the edge (Yes I drive fast, but I am at my most alert when I drive and I know every intended move of the drivers around me). In many aspects of my life, I need a blueprint for everything. I tread carefully and I strive for precision in executing my plans . Same goes for trading. I need to know precisely where to enter before I will step into the war zone (I am not delusional though. I don't think that a good entry will guarantee a winning trade. In fact, I've stopped looking at trading from the perspective of winning or losing a trade. But more on that in a separate blog entry.).

Back to M's class.

M's class is designed to get you started on where the real action is: in the market. Without stepping out of the academic/theoretical mode into the market, you will never get the experience you need to practise and sharpen your skills, and you'll never become a successful trader.

Before looking at M's presentation notes for lesson 19, I thought I knew Inside Bars. After going through his presentation, I realized I knew only the definition but not the application of inside bars in real-life trading.

I began to go back to look for his notes on topics that I've become very familiar with eg. Fibonacci, divergences, etc. I hadn't even taken a look at them after I missed those classes (I must have missed half of his course because of conflicts in schedule...long story...)

I am SO going to go back for his make-up classes (once his student, forever his student. You can go back for his lessons as many times as you want and you have Wednesday, Thursdays and Fridays to choose from) on these topics that I thought I had mastered. I have mastered the theory but I'm impressed by how much M knows how to USE them in his trades, through his near 20 years of trading experience.

And Michael loves to teach. I asked him how he does it - to have to be at a certain place (in class) for all his Wedesdays, Thursdays and Fridays. He laughed and said he actually looked forward to his classes. It's not a chore for him. It's his PASSION to teach.

For those who have been trading for a while and still struggling coz you haven't a clue as to what you are doing, M is possibly THE person who can help you.

Although the PIONEER in the field, M charges a fee that is not just reasonable, but amazingly affordable. I don't want to use the word "cheap", because that is the last word I would use to describe his course, which is packed with value.

Let's just say his course is really VALUE FOR MONEY.

And this is the part that M is probably not going to like very much but I'm going to do it anyways:

Go google on "Trading For a Living" and check out M's course.

:-D

D II

Did I mention that D is the one and only person in my life that can ever make me JUMP?

Guess this is about the only thing that's "woman" about me.

Just learned that even when I trade, I trade like a man! :-D

So, how do most men trade?

Here's some insight.

D

I'm a typical INTJ; D, a typical ISTJ.

One of the traits that INTJs and ISTJs share is this: they think they are always right.

Under normal circumstances, it would have been impossible for D and me to live under the same roof for 15 days, let alone 15 years.

There's something about D that makes it agonizingly hard for me to tear myself away from him.

He's wise.

In the 15 years that I've been with D, he has taught me many things. Had it not been for him, my life would have been a mess. I would not have gotten my degree, and I would most probably have turned out to be just like my mother.

Something that he's told me recently got me thinking about what kind of a person I really want to be.

Do I want to continue to insist on getting my way - at the expense of others - and be eternally unhappy despite getting what I want?

Or is it time to step out of my shoes into those of others so that I can appreciate what they want and find happiness by giving instead of taking?

When I chose the latter, I had no idea how easy it is to just live and let live and how therapeutic it is to not have to keep tabs on whether things around me are working out as I wanted them to.

When the going gets tough these days ie. when I don't get my way, I look within myself - not so much for reasons, logics and answers anymore - but for peace.

And I'm gradually seeing the benefit of not looking for something or someone to blame when I'm upset: I haven't the reason to continue to be upset anymore.

D has this innate ability of constantly finding a way to keep moving forward in the face of adversity. He doesn't give his adversaries - human or inorganic - any power to control his state.

And this is the kind of person I want to be, someday.

D's Trades (ER2) 7/18

D's winning trades!

Pre-Market Analysis - RUT 7/18

RUT's WEEKLY CHART


What I see: Bearish Hidden Divergence
My interpretation of what I see: Downtrend from early Oct 2007 continues.

Unlike classic divergences, hidden divergences suggest CONTINUATION of trend. Any deviation is often a correction (in an uptrend) or a corrective rally (in a downtrend), or a re-test of price lows and highs.

In the case of the RUT, the rally from Mar this year up to early Jun looks like a re-test of price high (prior to that we were seeing lower highs that confirm the downtrend), and that RUT is still heading south

That said, I see also a Bullish Hidden Divergence suggesting that the corrective rally from Mar is resuming after price slides from its high in Jun. See channel I've drawn showing that upward trend.

To make some sense of what's going on (ie so what trend is RUT in??), I look at my moving averages. They are pointing down, with the slowest on top and fastest below. Candles are beneath MA50. Bearish setup.

Hence this is how I would see the counter rally in the past 2 days - its upward move is greatly restrained. Prices are hemmed about by the main downtrend and the ceiling of the up channel ie price is unlikely to test late Dec 07's high.

Looking at technicals, the stochastic momentum index is showing a very oversold market, which can continue to stay oversold, suggesting that a breakdown in price is possible after a consolidation period (prices nearing moving averages, tells me any movement up or down is going to be held back).


RUT's DAILY CHART

To give me a sense of how much further price is moving up for the week, I zoom into the daily chart. It's showing me an overbought situation. It's not likely to stay overbought, based on pure technicals, since price is going up towards the moving averages, MACD line is in bearish region in spite of the bullish crossover (price moving up in a downtrend - talk about swimming against the current...).



So, seems to me that we are going either sideways or down.

Putting the weekly and daily chart together - now this is purely from my point of view, very personal, and I could very well be wrong so please do your own analysis (what kind of society do we live in where we constantly have to make disclaimers...jeez...):

On weekly chart, we are going to see an oversold market that's here to stay. SMI could stay below -25 in the weeks to come.

Having said that, if the market today is anything like that of late 98's, we could see an end to the correction soon. And we are actually not doing that bad now considering that we've only retraced to Fib 61.8, as compared to the retracement to 50% in Oct 98.

Now this is really just a combination of gut feel and what I'm seeing these past few days: the market is going to resume its upward path. If you look at the DOW chart, you'll notice that the Great Depression is but a blip on the chart, (ok, you won't notice. ZOOM right into the 1920 to 1940 area). A retracement is actually good, necessary in fact. Afterall, what goes up must come down. If we go up too fast (parabolic), we'll fall even harder.

Ok, will stop before I get philosophical.

So what am i doing all this for? Besides the thrill I'm getting out of killing my eyes and my neck, I need it to trade my ER2. Yes, I do intraday trade, mostly scalps in fact, but I need my big picture. Even if it's wrong, what I have is the confidence a trader needs on the battlefield. Not arrogance (coz I do KNOW that there's a 50% chance that I'll be wrong), just merely the assurance that I have gone in prepared and equipped.

In a nutshell, I hate to move in the dark.

My Life...& Forex...& The Iron Man

Ok, I didn't go back into the market after my last blog entry. It had been a long day with multiple migraine attacks (which miraculously went away slightly before market opened last night and came back this morning...)...

Most of all, I didn't want to over-trade. It was a mistake I made once before and it nearly destroyed my state and I don't want to repeat it. I hate making the same mistake twice, which is why I do "after action reviews" after major screw-ups. I conduct a postmortem and then generate from the result a list of "to do's" and "not-to-do's" and put them somewhere where I can see them often enough (Back at my old home, I had 10 mistakes I vow never to make again as a relationship manager printed out and plastered on the walls of my study, my bedroom, where the TV was, right by my dressing mirror, and yes, in my restroom too. Drove D nuts.).

Ok, back to last night.

So I took an hour to document what I did right and wrong for my trades. It took me an hour, coz, like I've mentioned, I had put in bracket orders for all my trades, for the first time. Which means I had my stop loss and profit target figured out for each. Which means I have REASONS to enter each of these trades (or more precisely, no reasons NOT to enter...boy, I've got to learn to be more laconic with my description...), and hence, more to write.

Then I did a little reading and turned in at probably a quarter past 5 in the morning. Struggled out of bed 2 hours later to have breakfast with D (while stealing glances at the charts on my computer screen).

When D was done getting dressed, I was already on my forex trading platform.

D couldn't believe his eyes.

I promised him I would get some rest.

But of course after PATIENTLY waiting for him to get out of the house, I dashed back into my study's to see how US market has fared last night, how the world has fared, what the central banks and the policy makers are cooking now and brewing for the days, weeks and months to come, how commodities are doing, did someone who can move the yen say something, etc.

And this "morning tour" is the part that I love best about trading forex. When it comes to forex trading, I have become less fixated on technicals coz as much as I love my charts, I started to see consistently good results only when I began to drop them, albeit not totally. As far as charts go, I will take a look at where the pair is trading within a 10-year, 1-year and 1-month period and that's it.

Many would disagree with my approach, and it's ok. Trading is really a personal thing. So, to each his own.

I used to trade a few currency pairs at one go, especially during periods when a certain prevalent trend or "theme" seemed to be there to stay. For instance, when there were signs that carry trades were unwinding coz the global market was really letting the Japanese down or freaking them out, I bought Yen and sold US and all those affected by US (EUR, GBP, CAD). Other than CAD, I didn't touch the other commodity currencies coz commodities were (and still are today) doing well then. When there's no clear winner and loser in a pair, I just don't trade the pair.

What I usually do is to buy just one lot to reduce my exposure to too high a gearing that's very generously offered by most brokers. Because there's no precise entry, I am ready to give room for the trade to go in my direction, as long as I have confidence in my short and intermediate view of where the pair is going.

Unlike stocks, currencies trade around a median, and as long as you are somewhere around there and going IN the direction that it's going, you will eventually get there (where the pot of gold is). But if your view is wrong, it'll be like taking a wrong bus. In which case, once you realize the bus is not heading towards your destination, get off and wait for the RIGHT bus to come along and hop on.

How do I know I'm on the wrong bus, since I allow my bus to take detours? Well, I keep tabs on news almost the entire day.

The only news I don't keep up with is my own country's.

The reason that I have no problem walking out to get a smoke by myself at 3, 4 and 5 am is because I feel safe in this peaceful little island. Nothing much happens here. Uneventful is how most living here will report their typical days to be.

Anyways, if anything MAJOR does happen, I would hear it from Seabloke (e.g. the first time in the country's history that someone broke out of prison...Actually, he's not the first. The first man who successfully got out, but was caught again, is now a esteemed pastor who recounted his very interesting life in his book "Iron Man"...check out Neville Tan..the bit that sent me rolling on the floor laughing was when he related how, while being incarcerated for manslaughter, he had randomly torn out from a bible a page to use as cigarette paper to roll his smoke..and - if I didn't get this mixed up with another similar story - it turned out that the page he tore out had John3:16 on it...hmmmm....).

Now, where was I?

Oh, Forex.

But enough of Forex.

I'm such a junkie.

When Ken wrote me to ask how my day was and that he's was boring, I replied,"Too many books to read. Too many charts to see. Too many forums to follow,. Too many things I wanna write on my blog. Too GREEDY!!"

"A small lady with a big stomach...tzk tzk tzk...."

Spot on, Ken.

But I'm getting smaller only coz I'm forgetting my meals! :-D

Moving On

Was at my old home for the last time today to let the movers from the town council clear out 3 huge items.

Notice I said moverS.

Imagine my surprise when a dark and refined looking chap less than an inch taller than me (I wasn't in heels) and probably less than 10 kg heavier, showed up at my door.

"Are we waiting for your men?"

"No, just me."

Faint...

The Jude Law lookalike dragged my sofa out in less than 3 minutes, came back for the refrigerator which was out in under 5 minutes (he struggled with the cord for about a minute...). After that he stood silently by my study table, the grandest item in my home, looked under it, and then picked up his phone to call for reinforcement.

While waiting, he yanked out a ply of wood from one part of my table, using pure brute force.

Impressive.

A few minutes later, another ply from the other end came off.

The plies started piling on the floor.

The middle part of the table was as sturdy as it was when it came in 10 years ago, and posed a real challenge to the mover.

The course he eventually took to separate it from the table's frame bordered on a small-scale demolition...all I can say now is that I was glad that as of today, 99% of my neighbors have vacated the building.

I resisted the urge to capture the kodak moment...

But my desire to share with Seabloke anything out of this world got the better of me, and I took a few shots of JL...and my very badly battered table.

I stayed a while after the mover left. What used to be my home had been completely emptied of its contents. It was in a sorry state. But mine was not any better. It's 10 years of memories with D that I was leaving behind.

And those were the better days.

The day I moved into my new home was the day I knew that D and I would no longer be who we used to be.

Little wonder that I have always resisted growing up. I've never asked my parents what lied ahead when I grew up coz I KNEW what it would be like and I prayed it would not come true.

Much as I've always hated que sera sera, I've come to terms with the fact that I have no control over life's circumstances from this point on. The best I can do is choose the best way to react to them.
And I can think of no better way than to simply move on.

Empty Your Cup

Paper traded the ER2 last night using a different approach from that which I've become accustomed to, and my performance was unimpressive at best. I was stopped out at least 6 times, and I stop counting after that. It was after I resumed to using my scalping method that I recovered some of the losses. But I was hardly consoled. I knew it's time I take a pause to figure out what exactly I have been doing and whether I'm sabotaging myself in the long run.

What transpired last night reminded me of 3 scenes from " The Forbidden Kingdom starring Jackie Chan and Jet Li.

In the first scene, the impressionable, kungfu obssesed protagonist was seen furiously cutting away wild grass as part of the training program devised by the drunken beggar played by Jackie Chan. Jason, the protagonist, needed to master martial arts in a very short period of time in preparation for his mission: to take on the Jade Army and use the "magic staff" to free the Monkey King that has been imprisoned for 500 years by the evil Jade Lord.

"When are you going to teach me kungfu?" Jason, who was hardly hot on the heels of the powerful opponent he was to take on, was getting frustrated with Lu Yang, the drunken beggar, for the latter's indifference to his lack of progress.

"You want to learn kungfu? I'll teach you kungfu" Lu Yang responded with a spoonful of sarcasm, before hitting Jason apathetically in his arm with a stick.

"That's called STRIKE; tomorrow teach you BLOCK".

Lu Yang's message clearly didn't get through to Jason. In the scene that followed immediately, Jason was seen reciting enthusiastically names of kungfu techniques like Buddha's Palm, Iron Elbow, One finger Death Touch, probably hinting to Lu to teach him these techniques.

Lu was pouring tea into Jason's cup as he was yakking away, and overfilled his cup.

When Jason told him to stop coz his cup was full, this was what Lu said,"Exactly, how can you fill your cup when it's already full? How can you learn kungfu when you already know so much?...no Buddha Palm. Empty your cup."

In the 3rd scene, Jason was totally nonplussed by Jet Li's character, the Silent Monk, and Lu Yang, who were competing to get Jason to learn their respective techniques. One was traditional; the other, unorthodox at best. Both equally potent, but were clearly overwhelming for Jason, who hasn't any FOUNDATION in kungfu to begin with.

The 2 kungfu gurus' attempt to enlighten Jason on the way of the martial arts culminated with them taking turns to utter what seemed at first to be a heap of kungfu mumbo jumbo :

Kungfu, hard work overtime to accomplish skills...
Learn the form, but seek the formless.
Hear the soundless.
Learn it all, and FORGET it all.
Learn the way, but FIND YOUR OWN WAY.

So much for counting on gurus to really teach you something. :-D

I have to say that I'd never have expected to take away so much from a Jackie Chan movie.

All the above martial arts gobbledygook have offered much insights that I find applicable to trading.

What I was reminded of is this: if you find yourself lost and losing precious capital, it's worth taking a step back. Go back to basics, start from taking a good look at how you manage your finances and the risks you're taking with your trades, learn to read pure price movements without the help of indicators (Jesse Livermore could do it, so can you), learn to identify key supports and resistances, etc. Drop your software, your systems, your Elliot waves, your Fibonacci fans and arcs, the 50 indicators you use for entry signals etc, etc.

Just go back to learning how to block and strike properly before you venture back into the market with your Iron Elbows and Buddha's Palm, only to get clobbered by gurus who have put in years of hard work to fortify their foundation.

Do something about those itchy fingers that are ever so tempted to hit the "transmit" button (Now, that's what I'd call the "One Finger Death Touch").

I've saved the best for last - the single most important trading skill that you have to learn, one that's probably the most difficult to master is this:

If the trade has gotten awry, before the situation gets dire, like what M said, "RUN!"

A Friend for a Husband; Compassion vs Passion

A friend whose wife has left him for some time now said that he was a better friend than a husband to her.

This friend is one of the calmest persons I've met. I haven't known him a long time, but from what I observed, he's the kind that tends to be able to take things in stride. And by that I don't mean that he's a doormat. He's the type that deals with people accordingly - he has rather strong opinions about issues that are beyond the mundane matters of life, and is guided by a distinctive set of principles that I've yet to make out, but he is gentle and accommodating in his treatment of people.

Based on what he's related to me, I think he would have still been happily married today had he met someone who's able to appreciate a soulmate who's a better friend than lover.

I speak from personal experience.

While I've been taught from young by my Dad and my granny that a kind and gentle man who devotes his time to work and contributing to society is the marrying kind, my mother has taught me that if I'm ever going to be happy, I'll have to look for someone who puts me on a pedestal.

Maybe it's genes, maybe I just don't take to my mother's teachings very well, I grew up shunning men who dropped everything else to attend to me. On the one rare occasion that I chose sheer fervor over benevolence, the relationship ended in disaster and left a really bad taste in my mouth.

Looking back, the person was callous and hostile whenever he was crossed or felt let down. And in misery, he made sure that he dragged me down with him. This was the same man who treated me like a princess whenever life was hunky dory - the wildly passionate and poetic kind who was willing to drop almost everything for the object of his infatuation.

There have been times that I ponder on whether I've been unfair to him - I walked out because I felt it was the right thing to do. I cannot imagine living with someone whose temperament is as unpredictable as the choppy market these days, and who doesn't seem to have an identifiable set of rules and principles that guide him in his dealing with people and life in general. He seems moved entirely by his emotions and that petrified me.

I admire a man who has integrity, a big heart and stable temperament, who stands by his rules and principles, has his views about people and everyday affairs but keep them to himself until such time that he's asked for them. This is the kind of man you can trust to never hurt you - unless you CHOOSE to feel hurt , because while you were looking for full-blooded romance, all you got was heartwarming companionship.

A partner who's more a friend than a lover is someone who cares about you in ways that will make you a better person even if one day you have to part. Unlike the wildly passionate and romantic kind, who do things for you to satisfy an intense need to be appreciated, the "friendly" sort thinks and acts with your interest and well-being in mind. They are gentle with your feelings and will not impose on you. If they have to keep their opinions to themselves to not upset you unnecessarily, they will do so without hesitation, and without having to make an issue out of it.

Because of their meekness, their acts of benevolence usually escape the eyes of those looking for out-and-out declaration of utter devotion and adoration.

Blessed are those who are able to appreciate this type of love, and reciprocate with the same tenderness that will keep a marriage ever so warm and the bonding so robust that it can weather any trying times and circumstances.

I believe that my friend, who has been single since, is truly as happy as he claims he is. And although he claims that he was a better friend than a husband, I think he has loved his ex-wife the way a woman should be loved.

A person who can find happiness within himself is the kind who is able to give love without expecting anything back. Unfortunately, i reckon, this lack of "aggression" in demanding for affection is often what drives a woman who's looking for excitement and fireworks away. In which case, there is no loss to the man and he can now wait for someone who knows the true meaning of love to come along to walk the rest of his life with him.

Meanwhile, he's much better off spending his leisure time playing poker with friends.

Trader's Instinct

A few days ago, I sent out an SOS via email to my trading instructor after having been nonplussed by the market, my trades, and everything I’ve been doing so far in my scalping activities.

M was very kind and responded by calling (well, ok, the truth is, M's not really big on writing). In the course of our conversation, the words "instinct" and "intuition" came up a few times. I've been mulling over them since. It doesn't bother me a bit that my trading coach believes that "instinct" plays a part in trading, probably coz I tend to see trading as an art. I believe that to master it, our “sixth sense” SHOULD be included in our depository of trading arsenals.

For me to make a claim like this seems a tad out of character, since I'm supposed to be among those whose left-brain is somewhat more developed than the right – a typical INTJ. Logical and pragmatic – that’s what we are. I reckon that it's precisely the pragmatic side of me that makes me see the folly of hanging on to the limiting belief that the only way to figure out the market is via logical and scientific analysis. In fact, it's senseless to even want to figure out what the market is going to do in the next few minutes as if it will let you, if only you'll TRY.

Truth be told, the market is essentially organic. It's alive and is constantly growing and evolving. That's because the market, at its very core, is merely a hodgepodge of institutional players (hedge fund companies, members of exchanges, the specialists, the market makers etc) and retailers (the general public) transacting with one another. Whenever we talk about moving the market, we are talking about moving "people" – living things with cognitive abilities, emotions, agendas, and what have you – in certain directions. While in time, people do see the development of patterns and figure out the course the majority is taking and catch up with what they are doing, in the here and now, your guess is as good as mine when it comes to predicting the result of the collective actions of hundreds of millions of market participants (bearing in mind that just because you don’t buy or sell stocks or invest in anyway, it doesn't make you a passive observer of the market. You are, even if you don’t step out of your house, a participant in the market. Here's a simple example: when you use your handphone, you’re contributing to your mobile service providers’ revenue. Don't wish to get long-winded, guess we get the drift here) in the minutes, hours, or days, or even weeks to come.

For players using very short trading timeframes, any attempts to make sense of where the market is heading exactly in the next candle will more often than not prove to be futile. As short-term traders, in particular, daytraders and scalpers, all we can do is to make the best of what we have at our disposal: the knowledge we’ve acquired so far, the lessons we learn from on the field experiences, the skills we’ve sharpened through tireless practice, and the market signals that we pick up with all our senses throughout the day and over days and weeks (I’m not talking about the ‘tips’ you HEAR from your fish mongre..monger…I mean, although if I hear the same from the vegetable sellers too, and other fishmongers and vegetable sellers in other wet markets, and if the cab drivers are echoing a similar opinion, I would probably start digging deeper in case the ‘tips’ is indeed supported by legitimate basis).

Now that’s really a mouthful. Many, like M, would simply call the above “intuition”, or “instinct”.

If I’ve started losing everyone since paragraph 2, Brett Steenbarger, who wrote “The Psychology of Trading”, might help to clear the air on the difference between longer-term trading / investment and short-term trading and the distinctive skills required to excel in them:

"The expertise of the diagnosing physician is akin to that of the long-term investor. Other forms of expertise, such as those of the short-term trader, do not allow for the luxury of extended decision making. The fighter pilot, hockey goalie, or SWAT team member must integrate information on the fly, making critical decisions by "instinct" alone. Such instinct, however, is actually highly automatized skill. The expert scalper integrates a huge amount of information from price, volume, time of day, and shifts in the depth of market. This integration, however, is not a deliberative process. It is built into the scalper's perception."

The above is extracted from his blog entry here.

Here's the sequel where Steenbarger talks about how traders who apply the wrong skills for the timeframe they are trading or using the wrong timeframe for the skills they’ve developed are doing so at their own peril.