How I Trade The ER2 II (Scalping)

The above is the correct chart for Sep 10.

The one shown in my posting yesterday was the chart for Sep 9's trading.

So, I ended up making 3 scalps yesterday because I didn't want to take a pre-market entry at 718 (a 4-point risk, since I expected 722.35 to be tested SOMETIME in the day and I had no idea when that'll be).

718 became resistance for the day. ER2 did go up to just touch 722 before coming back down again, finding support at around 715 at market close.

On non-trending days, I keep a lookout for patterns like double and triple tops and bottoms (tops mostly of course, since I'm bearish).

On a day that starts choppy, I focus on the 1min-chart, only stealing glances at the 5min now and then.

The 5min chart on such days totally stumps me. At about 10:40am EST yesterday, I was finally able to see a triple top taking shape. In general though, the 5min charts are NOT friendly on a day like yesterday.

Best to use the 1min.

On trending days, I use fib for entry on the 5min chart. I'll wait for the first wave to be formed (on days that I don't get an entry by 8:30am EST). When it retraces (on a down day, the first bullish candle is a sign), I draw a fib retracement. ER2 usually retraces to fib 38.2% - so that is where I draw my resistance (again, I'm referring to a down day).

I do not take a trade at the resistance though. The resistance is simply the price that I think ER2 will retrace to. If the next candle move above that line, I'll expect it to retrace to 50% or even to 61.8%.

ER2 will usually consolidate within the area bound by where it stops going down and the resistance level - with 3 to 4 short body candles. I will go in when it moves out of this range (that is, if ER2 retraces by only 38.2%. If it retraces beyond that to 50% or 61.8%, it usually will go up in channels of ABC corrective waves, and form tops and bottoms and mountains and valleys, on its way down. That will be a topic for another day)

Sometimes it goes back up a little before falling by 3 to 5 points. It's a chance that I have to take.

Sometimes I wait for a bearish candle to close below that range first. Sometimes I don't. It depends on how nervous I feel the market is.

On a lazy down day, I take my time, coz on these days, ER2 could retrace to 50% and I don't want to take that ride UP.

On a nervous sell-off day, everything happens fast and I go in when I see the chance.

I exit when price starts plunging. My target is usually around 1 to 2 points. So far, I've found it hard to hold for 2 points. The ER2 is predictable only IN RETROSPECT. Ironic. But true.

I find it easier to just take profits off the table whenever I can in a market like this. This is simply not a time to go in for a killing, for me personally. I could end up getting killed.

I'm making fewer trades now than before, because I don't have to make up for losing trades (which usually were winning trades that turned into a loss while I waited for my 2-point gain).

And I don't run as quickly as I used to. Now I wait for market to do what it has to do before giving me the plunge that I'm waiting for.

The challenge is in knowing when waiting in confidence becomes HOPING.

Knowing what the general market sentiment is (for the day and the past few days) helps here. In a generally uncertain market like the one we're seeing since the beginning of this week, the likelihood that price will go south is higher than the converse. Which is why I still can't make myself BUY.

But I'm always anticipating a crazy up day, hence I watch up for signs that ER2 is turning up.

The line that I set for the day on my 30-min chart, the line that makes bulls run - that's my POINT OF NO RETURN.

If I decide to hold any trade, and ER2 hits that point, and stays up, I'll exit. It's not happened yet. That day will have to be a day that offers a very attractive potential reward for me to want to take that risk.

How I Trade The ER2

In this posting from yesterday, I mentioned that if ER2 doesn't break above 742, I'll short it to 723.

I was asked how I would deal with the other resistances below 742.

I haven't been able to explain that. I suck at explaining anything.

So, what I'm going to do is to show exactly how I plan for my trade/s on a typical trading day.

The first thing I do before I even look at my ER2 chart is to see how the market has done yesterday and the days before, and if I can, find out WHY the market is behaving the way it's behaving.

Knowing the whys gives me a better sense of whether a trend will last. Knowing the whys these days tells me whether YESTERDAY's trend will last (nowadays, you just can't think beyond 1 day's trend), and who (bulls or bears) will be the jittery one today should price fail to hit a support or resistance.

In a climate where no one knows for sure where the market is heading, and where most players are opportunists taking a ride hopefully on the right side, what we are all playing is just FEAR. What I have learnt so far about an uptrend is that it is motivated by HOPE and GREED and a downtrend is fueled by FEAR. But these days, a decidedly strong upward move could be one that's driven by fear too -frightened bears covering.

As far as ER2 is concerned, you seldom see ranging sessions these days. They are either strong trending days or CHAOTIC sessions that give you fake breakouts and NO PATTERNS. These are all signs of extreme sentiments to me. Everyone's jumping in when they see an opportunity, and fleeing when it looks like the party is going to be over sooner than they thought.

Did I digress again??

Anyway, an example of the things I look at before I study my 30min chart for intraday trade has been documented in my previous post.

Now, my 30-min chart.

This is the zoomed out view of my 30-min chart (click on chart for enlarged view), which I use to find key support and resistance lines:

First, I look for the lines that I think are the ones that the bears and the bulls will be hoping to see breached. And if these lines are not hit, you'll get a trend in the first (sometimes longer, maybe til 11am) hour of the trading session (On some days, I simply can't find a line that I can work with and that's usually when there's nothing much happening in a market that's going nowhere in the first place...).

For today, I do have something to work with: a rally on Monday on ONE SINGLE piece of news that has so far not exactly been well-received (except by those who bought of course), and a Tuesday where almost all the gains on Monday were lost.

So, my question at this point would be this: was that just profit taking, or frantic offloading (afterall, and I'm refering to just ER2, yesterday's session failed to reach the high of Monday's session, and this is not exactly the sign of a healthy uptrend)? If it's the former, will price continue its upward move following Monday's gain?

At this point, I take a look at Monday's price movement. Not at all bullish. The gains were from the gap. After that was DOWN almost all the way, followed by bears taking profit and covering (maybe even some new buying??) in the later part of the day.

So, now, I really have no reason to think that the market is optimistic.

But on a day when everything's so grim, bottom fishers would start coming in, won't they?

So, there you go - my thoughts all in a jumble again.

I go back to my chart to seek some solace.

I look for the first resistance that I think would discourage the bulls if it's not broken. That would be the support from Monday's session. 722.35 (in lilac - my favorite color - dotted line on my chart).

Then I look for the first support that I think would send the bears covering if it's not breached. Yesterday's low. 707 (in brown dotted line on my chart).

As far as I'm concerned, I don't care about all the other support and resistance between them. By a certain time, if either one of them has been tested but not breached, that will give me a rough idea of who's going to be running for cover.

On some days, the lines are not tested at all before market opens. That's when I don't get an entry pre-market. Those are the days I play by ear and SCALP.

Back to today. On my charts there are lines below and above my lilac and brown dotted lines. Those are my DREAM profit-targets. When looking for these lines, I look at where ER2 will likely hit by the end of the trading session. The support and resistance lines that will hold are the ones that have never been tested before or tested just once or twice. I look for those lines. But if they are too near (ER2's range is hardly less than 10 points per day), I look for the next line above when I'm looking for resistance, and the next line below when I'm looking for support.

For today, I'm bearish. So I'll be expecting ER2 to test 722. If it does, and test it several times before 830, I'll enter short and set my stop loss a few ticks above 722. My profit target will be 712 (Sep 4's low, which I think is likely to be where it will pause before making the next move). That's a 10 point move. If I get in with 2 contracts, I'll let my 2nd one run and set my profit target at 707 (yesterday's low).

On scalping days, I look at 5-min chart (I use 1 min chart to make sure I'm not shorting when price is moving up) and use Fib for resistance and support.

So, as far as I'm concern, all the other support and resistance lines on all the other time frames except the 30-min's are invisible to me.

For now, ER2 is trading in a range between 712 and 719. If it goes up and doesn't break above 719, it will mean that it's another scalping day for me (not entering coz 722 will be at the back of my mind. It's a line that remains to be tested).

Premarket Analysis (ER2) 9/10

During a time when most are asking if we have seen the bottom, I find it odd that I keep asking the opposite: when are we really going to PLUNGE??

In other words, I kept looking at ER2's 764 and wondered if that's the top.

By now, I'm no longer wondering. I'm theorizing that 764 is MY top. It's a view I take. And I trade accordingly, until I have reasons (market conditions mainly...and when all who are calling people to buy because we have bottomed finally stop talking) to believe that my view is wrong.

Chart time!

Not going to go into DOW, S&P and NDX - we know how they are doing. Their charts are just indecipherable (to me).

RUT

RUT daily chart from 1991 to 2008:

I take a seed (the green shaded area) and draw both fib retracement and fib projection using the seed that is my wave 1.

Rut is currently about 40 points above fib retracement level of 38.2% (663). And it looks like it's wave c in the making.

Key support is at around 608, and that is where fib retracement 50 and fib projection 100 are too. Given that 663 has already been tested multiple times, my thinking is that if outlook continues to be grim, this support is not going to hold, and RUT is going to fall right through it. And the next support is at 608.

RUT daily chart from May 2008 to Sep 9 2008:

RUT has closed below MA 50 and 200 support, and below neckline (in brown). Another close below the neckline would give me just a little more conviction that it's going to be falling right to 647 in the short-term (days??).

The long bearish candle on Sep 9 has closed the gap between Sep 5 - 8. Putting aside the reality in the market, the chart alone tells me that a gap up in a downtrend is going to be trouble for the bulls. Granted that profit taking is happening right now, given that sentiments are so bearish all over (all major indices lost more than 2 % yesterday, and sectors across the board are doing terribly), today's direction is likely to be DOWN.

That's just my take, of course.

The only econ data to be released is oil inventory. But whatever the result, I don't think it's going to have any bearing on the market anymore.

Everyone's focus is on the finance sector now.

ER2

For those who bought on Monday's rally, some will be holding on as price slides across the sector, and the rest should be selling in frenzy, a reaction to the Lehman saga. Whether all who bought and wanted to get rid of what they had have sold yesterday remains to be seen. What I know is that if the session today does not go down to the a level below yesterday's low in the first half hour of the session, then sellers who jumped in yesterday and had not covered will be covering in frenzy, and we might just see something like this for today's session:

Or like this:

Premarket Analysis (ER2) 9/9

There's nothing much to analyze anymore really.

In an UNNATURAL market like today's, the best that I can do is to PLAY BY EAR.

Given that DOW, S&P and RUT gained 2. 58%, 2.05% and 1.95% respectively and NDX lost a mere 0.3% in the last session, there ought to be some form of follow through today.

So, if ER2 doesn't break above 742.4, I'm shorting it all the way to 723.

ER2 30-min

Solfest's Posting on Peak Oil

I don't know if I've mentioned this: I'm a fan of the conspiracy theory and anything to do with OIL (I don't trade it coz I have no idea where and how to start...anyway, I started following oil for reasons that have nothing to do with trading...).

Here's the newest post by Solfest on the topic of peak oil that I find very interesting.

Premarket Analysis (ER2) 9/8

Everything's gapped up (thanks to US government's bailing out of Fannie Mae and Freddie Mac):

YM 30-min


ES 30-min


ER2 30-min


RUT

Rut Daily


What I'm reading from RUT daily:

• A hammer - suggest bullishness in the short-term
• Bullish divergence for period Aug 26 - Sep 5
• Resistance at 743 and764

ER2 Daily


This is a freak.

I don't know what to make out of it.

So, I'm going to use this instead:



And this:

What I'm reading from the increase in open interest from Aug 20 - 29 is that there was both selling and buying. Volume is not fantastic - a seasonal factor and hence nothing much to read into.

Open interest dropped from Sep 2 onwards as price plunged on increased volume, and this tells me that contracts are being liquidated and weaker buyers are being squeezed out.

When the weaker sellers are being squeezed out as well (today will be a day of fierce short-covering), we should start seeing some sort of a rally.

Whether the rally will last will depend on a myriad of factors, among which will be the performance of the finance sector (lots of buying of banking stocks from Friday on and if price doesn't continue to move up, it will be really bad for the bulls), the price of oil (OPEC's decision regarding supply restriction will play a huge role), USD (if oil goes up, this would likely come down. After the bailout of the two banks, USD should come down a little...), a string of key econ data to be released this week.

For now, ER2 has found resistance at 746. If it breaks up, the next resistance is at 751. If ER2 breaks the 764 resistance, and stays above that, I will be convinced that Russel 2000 has completed its retracement and is on its way back up (regardless of where DOW and S & P are heading).

Let's not forget our Hammer on the RUT's daily chart. ER2 should be going up for the next few days, regardless of any moderately bad news.

That's just my view of course.

As far as today's concern, ER2 will have to break out of 751 resistance to convince me to go long. It should break out of 746 easily today. If it doesn't, it simply tells me that ER2 is still LOST.

Magic Pill For An Indisposed, Oil-Based US Economy

This report amuses me:

.....while investors had been applauding the drop in oil prices since then, there was an assumption that lower commodities prices would hasten a recovery in the U.S. economy. Now, he said, investors are worried that the economy might be weakening even as oil falls.

"It's disinflation coupled with an accelerating downside in the economy. That's not what people were prepared for. I think people were expecting disinflation as an economic recovery was under way," Lee said. "The surge in unemployment today really underscores that fear."

So, the plunge of oil in the past 2 months was supposed to somehow miraculously save tens of thousands of people whose fates were probably decided - I don't know - maybe up to 4 to 6 months (if the world hasn't changed much since I came into this hidey-hole of mine a year ago, and if my memory serves me correctly, companies don't decide to do axing overnight, nor do they start re-hiring on sudden and drastic drop in oil ; and those that have shut down don't just suddenly somehow within 2 months decide that this is the best time for a comeback - especially in an environment where both banks and customers are not exactly going to be able to give them the best deal) before oil came down?

We would need a time machine to do that, won't we?

My limited knowledge in economics (macro?? micro....??) tells me that recovery in economy hinges largely, if not solely, on:

1) The collective spending power of local residents who are still GAINFULLY EMPLOYED, and who are still willing to spend even if they can AFFORD to,

2) A declining trade and budget deficit, and

3) The ability and willingness of the country and her people to SAVE

And point 1) above depends on how much discretionary income, or simply, SPARE cash, the general population has.

After having to fork out for taxes, INCREASINGLY COSTLY mortgages, increasingly costly basic necessities - thanks to inflation (and really, is OIL the only reason behind the cost of everything, including HOUSING, skyrocketing? Does inflation not have perhaps just a little to do with too much money that's NOT supposed to be there in the first place floating around for grabs, in a culture that is known for its insatiable appetite for material possession? Does it not have something to do with the fact that we are living in an era where the very idea of using money that you've NOT earned is not only no longer frowned upon, but actually encouraged, advocated, and - this is the most detrimental part - EMBRACED? Let's be honest, if you were a waiter working in a clean, decent restaurant, and one day you send a diner a bill that comes up to, let's say, $200, and he pays in CASH, wouldn't your first thoughts be along the line of: jeez, doesn't this dude earn enough to own a credit card?) - little wonder that at this time of the year, and with the prospect of the country's economy in such a questionable state, that money would be very prudently allocated and spent only on such necessities (applicable to first world countries only) as college fees, summer traveling and cooling of homes (which makes me wonder how demand of oil could have dropped and hence caused oil to drop......??).

On my point 2):
I am not even going to use the more direct "positive trade and budget balance" here, because to expect that to happen - particularly amidst a rising greenback in a global economic slowdown - in the near term would be akin to expecting oil to fall to $85 dollars per barrel after OPEC holds their meeting next week to see if they want to CUT SUPPLY.

On my point 3):
I've lost touch with (can I be blamed??) how and where banks get the bulk of their capital these days, but it used to be the nation's SAVINGS.

Well, today you have an endless list of sophisticated structured instruments that banks can churn out and market to the public who won't ever stop buying things that everyone else seems to be buying, and anything that promises low-risk, if not no-risk, and unimaginably (only coz it's crazy, ridiculous, and the method with which to derive the figure stumps even a college graduate) high returns, and the usual bonds and stocks they can readily issue to the unwary (I mean, it's a bank! If you can't trust a bank, can you trust your neighbors, your best friend, why, even your dog Lucky??) public.

I've digressed AGAIN.

Where was I?

Yes, SAVINGS.

Er......

What's there to say about savings?

Except that to the best of my knowledge, the country prefers to SPEND, and wants her people to do the same. Why, you've got to get your people out there spending to boost the economy don't you?? After all, didn't you give them a free-flow of cash to dispose of whenever and however they fancy, and the promise of even far better things to come?

I don't remember a whole lot about economics. I took them more than 10 years ago and the only things that have stuck are my funny (only coz he thinks he's funny) professor, and (this one's really clichéd), the words "SUPPLY" and "DEMAND".

So, I'm not going to continue to dwell on what makes or breaks a country's fortune.

What I care about is this: for as long as buying continues (for a variety of reasons but probably mainly instigated by a strong USD - which is strong only coz the others are WEAK...ok, I shan't confuse anyone anymore), and for as long as there are enough bulls out there who are full of hope one day, only to be dismayed days later at a seemingly unsustainable rally, I can still relish every minute of my happy bear sessions!

Take Me

I wish I were dead.

Every morning, I wake up cursing "Damn!! I'm still alive!"

I fit the profile of someone who will die in her sleep.

And that's the way I want to go - without having to say good-byes, without having to go through the whole ritual of regretting what I have not accomplished in my life, of counting the wrongs I have done, of fearing the unknown of the after-life. And no sorries to say to anyone.

I am not afraid to die. Only people who have things they can't leave behind fear death. I have nothing that I can't leave behind. I do not worry for Alberto and Keisha coz they will be well taken care of.

What I am afraid of is the process of dying. Just holding my breath for one minute gives me an idea of how unbearably painful it feels when our cells stop getting the oxygen that they need. And how terrifying and hopeless and helpless it must be in the moments when life is fading away, to know that you're going to be no more.

So I lived everyday waiting for my life to be ended without my knowledge. Meantime, I tried to be useful.

But I no longer want to.

I no longer want to wait.

And all that I need to do is to allow my heart and blood pressure to do what they have been doing prior to all these wasteful intervention.

I don't see a point in fighting anymore.

Not when the one I'm fighting is You.

You created me depressed and physically weak. If until now I haven't been able to use these to benefit anyone, I don't want to stay.

I see very clearly now, why I was born.

It is to show that You are God, and You can do whatever You want, and You don't owe us an explanation for why we turn out to be the way we are, and what purpose we serve on earth. You made us, and our duty is to live for as long as You plan for us to. Now and then we are thrown some curve balls, and sometimes we don't even know who has thrown them. Then You watch how we react.

I have always said my thanksgiving for everything that I've been given - both good and bad. I've thanked You for the way I am - defiant, dark, domineering, deceiving, unrelenting, unloving - coz I can't help but don't want to be anyone else despite my disturbing flaws.

As a child, I always thought I would grow up to be an outstanding figure. I am not the kind of person who accepts mediocrity. I wanted to be the best in everything I do, and in the fastest time ever achieved by anyone. I gather You wrote that on my DNA.

I also wanted to be a perfect wife.

I stopped to look at my life today, and realized that I have achieved nothing, and owned nothing.

My whole life has been a failure and a joke.

I am a complete and perfect failure.

So, take me, Father, in my sleep. I don't want to die sick, old and wretched. I don't want to die only when I start having a life - if I ever am going to have one - when I have too much to leave behind.

I am writing this on my blog and if this is not strong enough a plea, I don't know what else to do.

Why do you do this to me? To make me part monster and part human? What's the purpose of my existence? Besides to inflict pain and to feel pain.

To feel human?

Is that what my life has been about?

DOW, RUT & ER2

(Click on charts to enlarge)

Dow's monthly chart is not looking so good. With resistance at 11780, and both the 20 and 50 MA above where Dow is now, while support is all the way below at 9760, the path of least resistance is pretty obvious. Can't help but notice the July hammer though. If candlestick pattern is anything to go by, we should see market climbing up further before taking a plunge.

Dow weekly shows a prolonged rally on low volume. As in its monthly chart, DOW seems to want to go up first before coming down in the longer term.

Dow's daily chart reminds me of Lego. ABC corrective patterns form the building block of all the upward, downward and sideway moves. The current rally looks seriously out of proportion compared with the left side of the chart (from 1900 on). Definitely an odd-looking 4th wave....Well, the longer it gets, the longer the 5th wave.

As a bear, I should be celebrating.

But I'm not.

I most definitely don't want to see 1929 happen again.

RUT & ER2

Both charts are just too bizarre to offer any insights into where we are heading. What I can say for sure is that today's going to be another choppy session for ER2.

If I have nothing else better to do, I'll sit back and let my charts humor me...surely it can tell me a thing or 2 about where it wants to go by now??

If ER2 hits 743.8 and come back down again, I'm most likely to go in for shorts.

OIL, USD, & the US Economy

In my posting on Aug 15, I mentioned under "factors likely to move the market" that if oil were to plunge to $99, investors would be anything but happy.

I was really just making fun of the market; I was merely kidding.

But seems like it's really happening - market's reacting negatively to falling oil!

Actually, I'm not even sure that the 2 are correlated. Perhaps the equity market was reacting to Gustav, thinking that it will kill oil supply and drive oil back up (logical thinking). Oil traders, on the other hand, were probably less concerned about supply when demand's the spotlight. And demand for oil has dropped as the world goes through a tough time.

Anyway, I'm thrilled that FINALLY, the market is in syn with oil. Or to put it more aptly, the market's no longer affected by the intraday fluctuation of oil prices.

Which is definitely good news for me.

What seems to be moving the market for the past few sessions have been the USD, econ data (even those that the market used to brush off), the financials and housing saga, Bush smiling on TV to a cheering crowd, and an awing array of other factors - some of which you'll find out only after the close of the trading session.

What looked like a possible bullish turnaround for the market in the beginning of the week might have caused some to enter into long positions. I can't say for sure that I feel bad for them. They might have gotten themselves a really good spot from where price could blast off (Haven't looked at DOW and S&P charts, but am expecting to see some really mind boggling patterns...)

If we put aside market's knee-jerk reaction to the sudden plunge in oil, and think rationally, less costly oil is actually good for everyone immediately (so I can start driving around again!!) and most definitely in the long run, except for the oil companies of course (they are filthy rich anyway).

The world needs cheaper oil.

CHEAP OIL IS GOOD!

Is anyone even listening?........

And a strong USD is great. Why, my investment account is in USD!

That said, USD will have to start climbing slower else its exports are going to suffer. Let's face it, the other parts of the world are doing even worse than US now!

Ok, I'm starting to talk like the bulls.

I should shut up now coz the bear in me is feeling really uncomfortable talking about an imminent end to my happy bear days.

Hunter

I've gone back to trading 5 contracts, after trading 1 contract for a few days.

I totally understand the wisdom of trading single contract, but it doesn't work for me during the 930 to 4 trading hours.

During the quieter period, I stick to trading 1 contract (if I hold more than 1, I risk not being able to close all my positions given the low volume), put in my stop loss, set a profit target, and take my eyes off my charts to do some other stuff.

But once the US market opens, trading 1 contract has caused me to hold a position through deep retracements that drive me crazy. Once I came out losing less than what I earned for that day after sitting through almost the entire trading session. Yesterday, I lost more than 3 points shorting (I'm a bear by nature, I just can't go long no matter what the news and my head tell me) when ER2 retraced. I gave up right at the point that it began its 12-point plunge.

I don't know what's wrong with me.

What I do know is that I'm most confident and comfortable trading this way: I wait - sometimes for up to hours - and pounce on those movements that I've been HOPING (again, I know it's a bad word to use, but what else can I do in an erratic market like this?) to see once they emerge. I go in with 5 contracts for a quick ride, and scram when price starts to hesitate or turn up a tick or 2 against me (unless it gaps).

I started monitoring ER2 5 hours before US market opened today, and figured I had one shot - a fierce profit-take - at shorting, after which the only constant remaining is UNCERTAINTY.

Having been with cats for almost half my life might have something to do with my trading style. After all, I do spend A LOT MORE time with them than with people.

When Do We Run? When Do We Stay? What is Life When Life is Without Hope, Without Trust?

I trade as I live my life: I hang on to things that I have no business keeping.

Feeling Bullish!

Ok, it looks like ER2 is going nowhere else but up.

It seems very possible now that July 15 was the low, and ER2 is going to continue its uptrend regardless of what the big guns are doing.

Is this really happening? A clear trend finally? No more crazy, haphazard sessions? Can I finally put in a trade and sit tight now?

Will the string of econ data to be released this week have any effect on the trading community?

I'm wondering, does the strength of USD have anything to do with this? After all, it's not been this strong for a long, long time.

ER2 Trade (Pre-Market) 9/2

Enter SHORT at 739.2
COVERED at 737.2

Profit: 2 Points


739.9 has been rejected 3 times since ER2 began climbing up from 736.

Demand level is at 735.5

With stop loss at 739.9, I'm risking 7 ticks for a potential reward of 3.9 points.

That said, 736.7 seems a likely support, given that it's typical of ER2 to trade within a narrow range when both the Europe and US market are closed.

Hence profit target was set at 2 points.

Postmortem Of A Losing Trade I Won't Ever Regret Having Taken II

Got up this morning and the first thing I said to D was:

Why didn't I take the trade down from 742 since I was so sure that that was the highest ER2 was retracing to by the umpteenth time that it hit it, and that it was surely coming down?? At other times, I would have done it wouldn't I???

I was so preoccupied and obsessed with proving myself right that I lost all those chances to make good trades!

I lost my focus. And I took myself too seriously. I got personal!

DAMN!!!

Pre-Market Analysis 8/29

Performance of Major Indices

Econ Data To Be Released Today

ER2

When I compare RUT with the other indices, it's obvious to me that it has relative strength over them. Whether that means anything, I'm clueless for now.

Both volume and open interest are still flat. While ER2 has rallied fiercely for the past 3 days, volume and open interest are not increasing significantly or even steadily. That tells me that despite the rise in price, market is fundamentally weak (I feel like a broken record).

Having said the above, the fact remains that price is going up. For now.

My monthly chart tells me a bullish story about ER2; my weekly chart tells me otherwise.

My daily chart's no longer talking to me.

Econ data's going to start coming out in less than 2 hours. Besides personal income and spending, I'm not sure the result of the others will have any bearing on ER2.

But we've not forgotten OIL, of course.

And the USD.

And Financials.

And workers going on strike and those getting laid off.

And the WEATHER.

And when I put everything together, the picture that emerge is....

A BEAR

In fact, I'm bearish right this moment, even as price is continuing to move up.

Am losing more than 1 point as I write.

But I'm not running until price hits 746 or when I have reason to believe that ER2 is going to immediately resume its upward trend.

To make it easier on my heart, I've customized the layout of my TWS (Interactive Broker's Trader Workstation) to NOT show me my unrealized LOSS.

It's dumb (coz I know exactly how many ticks and points I'm losing every second).

But it works for me. I simply can't stand seeing red under the unrealized profit column. When I see red, I make stupid decisions.

I'm not hoping for the market to do what I think it ought to do. I've simply taken a position.

And if I'm wrong, I'll get out with a loss that I'm willing to give to the market should I be wrong.

But of course I won't be watching when that happens.

D's the one who goes through the statements.

:-D

Pre-Market Analysis (ER2) 8/28

Performance of Major Indices

Econ Data To Be Released Today

ER2

ER2 is still on an uptrend, and I don't see how that's going to change if price doesn't fall to a lower low. That said, it's now nowhere near the high it made yesterday either.

I see some selling (probably profit taking) and then some buying...Buying might continue into the trading session (the active one I mean, from 930 to 4), and if price doesn't reach yesterday's high, then we could have another choppy session with people unloading what they have; and new sellers coming in for a ride down, then profit take quickly to avoid being trapped in a market that doesn't continue to go down.

It would be great if today's a seller's market. But after seeing what happened in the previous sessions, I doubt there're enough sellers with conviction to push price down to a level that screams "BEAR MARKET".

I would be equally happy if bulls will just come in and drive price through the roof.

The lack of decisiveness and COURAGE in the market is frustrating. A line that tells me vaguely what trend I'm in is simply not enough. We are in a situation where most are clueless (yes, that includes me) at every point as to whether a pattern is the real stuff or a fake, and if we are still in the trend that we thought we were in.

Open interest for ER2 has remained fairly flat (went down marginally yesterday in fact) although price and volume have gone up a little. So, I see that people are liquidating their contracts, but I don't know what to make out of that anymore.

Am staying out of the market to maintain my sanity.

I'd rather re-read "Reminiscences of a Stock Operator" and give Al and Keisha some loving attention and massages.

Charts, Fundamentals & Live News Feed

My response (sanitized to protect ME) to Propriety Trader (a great trader who has given me some very sound advice on trading...great guy who started his blog for the purpose of helping his friends who wanted to learn how to trade)'s email to thank me for inspiring his most recent blog entry :

You're most welcome :-)

I agree with most of what you said.

But I question the rationale of buying and selling based on news and data that can be interpreted in a myriad of ways. It doesn't help too that they have to be digested in minutes, if not seconds.

During the short period that i traded with live news on (briefing.com), I went in and out of my trades confused and frustrated. The additional input distracted me. When I did without it, I traded much better.

Unlike a typical daytrader, I hardly stay in a trade for more than 5 minutes. I'm usually in and out before the candle is completed. Because of my style of trading, I can't be choosy about my position. All I know is if I'm selling, I don't want price to go up. And I wait for the moment that I feel that price is going to CONTINUE to go down, and I take a point - if I can - out of a typical 3-point move. Sometimes I exit after a few ticks when there's hesitation. I don't like it when buyers and sellers pause to think. When they do that, the next move is sometimes drastic and will kill me if it's against my direction (losing money makes me lose sleep for days - happened only once but I'll always remember it).

I don't totally ignore fundamentals. I'm a news junkie. I read all kinds of things. So, i do know what's going on everyday. And what I know gives me a view about the market.

But I don't know how that helps me in scalping. When I scalp, I can buy in a downtrend and sell in an uptrend. To take a few ticks out of every retracement regardless of how shallow it is is surprisingly fairly easy once you know the chart of a specific time-frame intimately. For instance, I use only 5-min chart to scalp. I can't scalp with a 3 min or 10min chart coz I haven't studied their patterns.

ER2 is a very predictable instrument. Even the moves have specific ranges. I know that the first move is always 6 points on a normal day, retracement is 4 poitnts. The next move is 5 points and retracement is 3 points. On a trending day, you have 3 continuous moves and retracement is almost always 3 points. i don't even need to use Fib levels. The benefit of knowing this is that I can be late in my entry and still get 1 point. And I just noticed yesterday that the charts (for any timeframe) are divided into just 4 main "levels". An accidental discovery when I was drawing on paper the moves on different days.

I gather your style of daytrading is the kind that professional traders adopt - you sit tight and wait for a decent profit. I don't. Not for scalping. For me, scalp means "grab whatever's on the table and run".

But I'm really tired of doing that and I really don't want to have to do it forever. Swing trading works for me. Afterall, I've been looking at monthly and weekly charts for detailed study. But I have no use of them when I scalp. I have no use of daily charts for that matter when I scalp. So, I really appreciate your inspiring me to just hold a contract for as long as it should be held. That will also give me time to trade all the other things I've been wanting to trade, and also time to SLEEP (no more staying up til market closes!).

:-D

Bears Causing Rally??

This looks like panic bear-covering to me...I can't see any sense in buying at this level and under the current market condition.

Well, I went in for the ride anyway. At the wrong time though and got out slightly better than breaking even.

Not going to hold a long position, that's for sure. Tmrw's probably going to be the last day of any residual short covering.

D was asking why I thought bears would need to run. I said coz the market didn't plunge as it should. And bears who can't sit tight (yes, like moi...) would react and start covering. So I really think that it's the bears that are causing the rally. But then of course, when price keeps going up, you'll see some buying interest...and then when price fails to reach its previous high, reality will set in AGAIN, and ER2 should plunge.

Yup, I form stories in my head all the time.

Pre-Market Analysis (ER2) 8/27

Performance of Major Indices

Econ Data To Be Released Today

ER2 Daily

I don't know if something's wrong with my eyes, I keep seeing ER2 going up for today, even though it's been in the red for the past few hours.

These are what I see on my chart:

• A key support from June 12 (at around 719.6) which subsequently became resistance
• A head and shoulder that's forming, and the spinning top from yesterday's session could possibly be where the right shoulder starts to form
• And, of course, a spinning top (considering that we're actually still in a downward move from the top that was formed on Aug 15, a spinning top should at least stop ER2 from going down further)
• An upward trendline (in green) which was broken, yet the bears are still not in control (sideway move for the past 5 sessions!)
• ER2 closing above 200MA again!
  

Hence, I can't help but feel bullish about ER2 today. It looks like it wants to test resistance (trend line in green)....

Haven't really taken a look at DOW and S&P or RUT for today, but given that RUT had shown relative strength over the other indices for most part of yesterday's session (totally resilient and stubbornly refused to turn red when all the others were in negative region prior to release of FOMC minutes), my thinking is that RUT is going to be strong today, and the other indices are likely to close up too.

Pre-Market Analysis 8/26 & ER2 Trade 8/26

Performance of Major Indices

Possible market-moving factors (for Aug 25)

1. Financials down
2. Oil up

Economic Data to be released today

Dow Daily

Dow has closed below channel support but I’m not sure that it’s going to continue to go down. Another close below with more volume would be needed for me to get really bearish.

I’m thinking that today is going to be a choppy session of profit taking and short covering.

ER2 today

I’m neither bearish nor bullish. If I’m forced to take a view, I’ll prefer to be bearish than bullish.

Entered SHORT at 721.8; Stop Loss at 725

D's ER2 Trade 8/25

D's changed his trading strategy too...

1 trade, 3.3 Points, and he's done for the night too.

This is definitely a better way for him.

What Will I Be?

My conversation with D this morning when we were having our morning nicotine session prior to seeing him off:

J: You look happy on Mondays. There're sparks in your eyes. They are dead on Saturdays and Sundays.

D:....

J: Are you unhappy at home?

D: There's no simple answer....

J: I have my answer then. I'm not naive enough to think that there's anything simple (between us).

D:......

J: Is there something you want to do, and I'm stopping you?

D (shakes his head, and smiles ever so kindly and gently):....focus on trading....


Now, that's really the last thing I need to hear from anyone, especially from D.

I trade coz I love to trade. It's more than an escape to me. It is something I'm passionate about.

At least that's what I would like to believe.

Now I'm beginning to doubt myself.

What am I doing with my life exactly?

When will I ever truly accept that living for myself and no one else is the only way that I can carry on living?

When will I ever learn to be happy for no good reason?

When will my life stop revolving around a single person?

When will I ever stop DOING THINGS, and pulling all kinds of stunts to get his attention and get back at him for having stayed with me all these years simply because he felt I needed him, not because he loved me?

When will I ever truly find myself?

Will I ever learn to live just for myself?

When will I ever put a stop to pondering, analyzing, finding out the truth, blowing my top then retreating into my shell, only to emerge a short while later to carry on living, then start pondering again, and analyzing, and basically get sucked right back into the whole cycle again and again and again?

When will I ever accept that I've been with a man who has never ever loved me, and has stayed simply because the savior in him just couldn't desert me?

When will I ever stop hating him for wasting 15 years of his life on a totally unworthy cause?

When will he ever stop wanting to be a hero and an angel on a mission, and start living the life that he wants to live?

WHEN????????????????????????????!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Technical Analysis - DOW

When DOW first made its major decline in area marked A, drop was steep and increase in volume was anything but gradual. What it looks like to me is that selling was panic-driven. What happens after seems to be a period where confidence has returned to the market, albeit not with full force.

DOW Weekly

In the period I’ve shaded and labelled “B”, the decline seems more “controlled” and “purposeful”. After each of the first 3 sizable bearish candle comes a pause (deliberation, profit taking, short-covering?), and after that we have 2 long bearish candles in a row. Speaks volume about the “hopelessness” that is felt in the market…. The increase in volume is gradual this time, which suggests to me that selling was the result of more rational assessment of the market than mere fear and panic. It seems people have a better idea of where the US economy is heading – perhaps reality has finally set in that there is something fundamentally very wrong about the “resilience” of the US market.

Personally, what I see when I put volume and price actions together, is that the existing rally is merely a mishmash of profit taking and short covering.

But of course we could attribute the lower volume that accompanies the current rally to traders going on vacations.

In any case, until I start seeing price rising gradually with volume picking up equally gradually, I’m not going to be bullish in the months to come.

What I see on DOW’s weekly chart is a bear flag, and a strong resistance at around 11,895. Failure to break up above resistance in the next few weeks, or a break below the flag’s support with a surge in volume could send DOW tanking.

For the coming week, I’m more bearish than neutral as far as DOW’s concerned. What I see for the week that just passed is a “hanging man” at a price that’s in the region of Fib 38.2 resistance. Any confirmation that price is going down from here will, of course, need confirmation since the candle itself – without taking into account the price level it’s found at - is inherently bullish, given its long lower shadow.

So, I’ll be watching where DOW opens on Aug 25.

DOW daily

Aug 22 has closed above resistance shown in chart above, with unimpressive volume. For Aug 25, I’m going to take the view that it’s likely to be a session of profit-taking. Add to the equation selling pressure from rising oil prices, and we might just see a long bearish candle for Aug 25.

OIL

I can’t resist but have to say this about price of oil: unless global demand goes down, it’s just going to continue to go up. Even at $147 per barrel, oil was apparently still affordable. When oil becomes so costly that countries could no longer offer generous subsidy to their people, most companies could no longer operate, and the average US family could no longer afford to drive or heat up their homes, that’s when we will see demand going down. Until that happens, oil is not likely to stabilize.

Ring My Bells

Seabloke wrote the following on her blog on Mar 17 2008:

Ring My Bells
(Watch video)

Land recently posted an article about a "nice" song that made Sea twitch. Not that the song isn't nice... but... but... hmm..

Here goes the lyrics:

Ring my bell, ring my bells

Ring my bell, ring my bells

Ring my bell, ring my bells

Ring my bell, ring my bells

Sometimes you love it

Sometimes you don't

Sometimes you need it

then you don't and you let go

Sometimes we rush it

Sometimes we fall

It doesn't matter

baby we can take it real slow

Cos the way that we touch

is something that we can't deny

And the way that you move

oh it makes me feel alive

Come on

Ring my bell, ring my bells

Ring my bell, ring my bells

You try to hide it

I know you do

When are you ready?

Wanna us need come and get you

You move me closer

I feel you breathe

It's like the world just disappears

when you are around me oh

Cos the way that we touch

is something that we can't deny

And the way that you move

oh it makes me feel alive

Come on

Ring my bell, ring my bells

Ring my bell, ring my bells

Ring my bell, ring my bells

Ring my bell, ring my bells

I say you want, say you need

I can tell by your face

know the way it turns me on

I say you want, I say you need

I will do all your things

and I would never do you wrong

Cos the way that we love

is something that we can't fight

oh no

I just can't get enough

oh you make me feel alive

So come on

Ring my bell, ring my bells

Ring my bell, ring my bells

I say you want, I say you need

I say you want, I say you need

Ring my bell, ring my bells

Ring my bell, ring my bells

(End of song)

My favourite trainer once mentioned i'm a very "visual" person. All audio input inadvertently gets converted to images in my mind. How did he know? I dunno... remind me to check with him.

What was Land thinking playing me that song?!!

What was i thinking?

Make an educated guess.

(End of Seabloke's blog entry)

By the way, Sea, this remains one of my favorite songs...in fact, I'm playing it over and over as I write.

I'll be most happy to play it for you again and again!! :-P What was I thinking when I made you listen to it?

I wonder...

D, The Beautiful ER2 Open Interest Chart & U of A

This is the work of a professional:

For almost 2 weeks now, I've been working on coming up with something visual that D can use , and I came up with this pathetic looking table:


I told D that I've been seeing a clear relationship between open interest, volume and price. From the charts we've been using for trading, we can see volume and price bars, but no open interest bars. D asked why I haven't converted the data from my table above into bars.

I said I would if I knew how to. I'm an EXCEL idiot.

So D began working on my table and in a matter of minutes, produced a very decent looking open interest chart (see above).

I'm impressed.

D is, afterall, a computer engineer by training. Well, I can't be blamed for not remembering, coz he's been a banker for the longest time.

How could I have forgotten that 17 years ago, we were classmates in the Engineering faculty at the University of Alberta? It was our first year, and among the 200 over students in the lecture hall, less than 10% were girls, and there were maybe 3 asians? I was one of them so naturally, D and his friends noticed me. And of course when I disappeared after a year, they noticed too.

I lasted only a year in Engineering, not because I did badly for my engineering and physics classes. I excelled in them. But what I couldnt' do was FORTRAN, the dumbest programming language I've ever come across. I dropped out of engineering coz I needed to pass Fortran to go on to year 2, but FORTRAN's logics' just beyond me. It was much later on that I realized that the reason that I sucked at FORTRAN was becoz I was not good with logics.

So there you go, I am by nature, an illogical person. I was naturally attracted to anything that defied logics.

But after being with D for 15 years, I find myself now a more logical person than him. And definitely COLDER.

Hur Hur Hur....

Long Live The DOW!

I always think I'm going to die young, mainly because dying young seems to be the trend in my family. My father passed on in his 40s, so did my aunt and my uncle, and a close cousin. They killed themselves.

Putting aside hereditary (chemical imbalance??) factors, my lifestyle alone is enough to kill me slowly.

I smoke, live in a space that's air-conditioned 24 hours a day, hardly see the sun, hardly exercise anymore other than doing my daily push-ups (I've dropped skating, pilate and kickboxing all together ever since I found myself stuck to my chair and in front of my computer screens), hardly see other human beings, take no coffee or tea (I read somewhere that these are actually good for me??!), frequently took more pills than the dosage prescribed because I couldn't keep track of what I've taken, frequently took the wrong pills, sleep too little, have a heart that beats almost 100 times per minute on average, steadfastly skip all my yearly body examinations, and drive like a maniac.

My only consolation is that, longevity seems to run in the family too. Both my grand dads died in their 90s, and both died in their sleep. They were both perfectly healthy until, well, the day they passed on. My dad's mum is now in her 80s, and has a clearer mind than me. My mum's mum was killed by a nurse when she was in her 30s (she overdosed her with sedatives), a cousin died in the Pam Am air crash, another went over the Niagara falls...so I count those as accidents... Most of my other relatives are living healthy.

I may be a tad naive to go along with this, but it comforts me: and that is that as long as I don't kill myself intentionally or accidentally, and as long as I stay away from doctors and nurses, airplanes and holidaying, I should at least live to see DOW hit 20,000?

:-D

Now, if I ever REALLY, REALLY want to know for how long I'm going to be sticking around, I might just consider using this to get a ballpark figure.

LOL