June 25, 2014

So When Is This Correction Going to Start? – Tuesday’s Chart, $NQ_F

This was how most of Tuesday’s conversations started for me.   After the dismal GDP figures the markets appeared to accept bad news as bad news.  Then the opening bell rang and it was ground hog day yet again.  Seems that the buyers moved into the futures markets when the NQ failed to break below 3780, which is considered a ‘value area’ and 1935 in the ES.  Hard to believe but that is the perception these days and without any stronger selling pushing prices lower, the path of least resistance was up.  The good news was that volumes in the futures were strong and there was sufficient 2-way trade to make it an interesting day.

reconsideringthepathTechnically, nothing has changed outside of the intraday ebb and flow the stochastic oscillators remain at extreme overbought levels.  It would seem that the perception or belief is that the SPX will move to 2000, the DJIA to 17,000, and then NDX back to 4000.  However, perception is not always reality and while it may seem that nothing can break the stamina of the bull it will happen.  Volatility continues to flash the warnings signs and those signs are being ignored, just as they were ignored in 2007, 1999, 1990, and 1987.  It is the primary reason I made the change from position trading to day trading.  When the extremes get pushed deeper and further as complacency reigns supreme the pressure also increases.  The global markets are running head strong into uncharted territory and are relying on the Central Banks to bail them out when things go wrong or the bubbles burst.  Why not, that has been the pattern thus far.  Unfortunately, that well will run dry and there won’t be any safe passage to get out of harms way.


oldhabitsI believe it comes down to understanding that history does often repeat itself, because animals, (yes, Gracie we humans are animals) are creatures of habit.  Experience also plays a role in how we develop and rely on our habits.  How often do you find yourself answering when asked, “Why do you do that, that way?” –  “Oh that’s how I’ve always done it.” Good or bad, old habits die hard or are just too difficult to change.  Given the choice we will always choose a shot of endorphins over adrenaline, calm and peace over fear and chaos.  So why sound the alert?  Why rock the boat?  Why fix something that isn’t broken?  For starters, the boat is filling with water and listing severely and not realizing something is broken will not relinquish the necessity to fix it.  Reality always wins – resistance is futile.   Fires eventually run out of fuel and burn out, however the size of the burn area is not always within our control.  The winds of correction, normalization and a return to the mean are picking up strength and will carry hot embers farther than most anticipate.  To believe that the US is immune to what is happening within our own borders and around the globe, politically, economically and socially is for me akin to playing chicken with a oncoming train.

I continue to prefer day trading versus position trading for the near term.   I do though; also carry a few options positions, which are geared towards volatility expanding.

I’m still favoring the NQ as my primary trading market.  The balance of the top five would be the ES, GC (gold), ZB (30-yr bond), and ZC (corn).  Equities and ETFs high on the list are AMZN, FB, SPY, TLT, TNA, TLSA, TWTR, and UVXY.

I am not a fan of shorting naked puts as an asset class and if you don’t get my gist this strategy has been deceptively sold to the masses by more so called experts and is currently being employed with impunity.  Selling premium at historic lows in volatility can turn and bite with great force when volatility expands and velocity increases exponentially as fear becomes rampant.


Check out today’s chart on the $NQ_F for trades and discussion.

6-25-2014 7-26-45 PM_NQ_Eagle


Steer the course and don’t compare yourself to everyone else.  You are not they and they are not you.  Remember to trust and believe what makes you unique at this moment in time and in this situation and allow others to choose for themselves.  Don’t be swallowed up by the chaos and false emotions swirling around.  Remember it’s just a number.

Three-keysTrading the number remains key to being able to reduce and separate the “noise” from opportunity.  This takes knowing and executing a well-defined strategy and allows you to see opportunities amongst the “chaos” and by trusting the mechanics of your strategy, be able to take advantage of them.

Opportunity continues to knock on our doors.  While it doesn’t come without risk, risk can be defined and more manageable. Volatility and broad moves are exactly what a day trader desires and being able to respond without questioning is a luxury many are unaware of.