Tuesday, October 28, 2008

Tuesday Notes - Dodging Landmines

1:35pm After a rather adventurous overnight Globex session in which Japan -- and then Europe -- took the U.S. back out of the Monday PM abyss and through its late day range break low, ES is again trying to form an inside day heading into the late afternoon session.

At this end, I traded portions of the overnight session -- focusing on shorting approaches toward Monday's late-day resistance, and took some losses in the form of repeated stops until it was clear ES wasn't going to give it up overnight. The good news is that I recognized what was happening, kept sizes fairly light (I think I took 4-5 probe entries), and kept the loss at that time to under -$7K (heeding my lessons from earlier in the month).

From there, I didn't do much until the U.S. day session and have continued to focus on short-term contra-trend scalps, keeping sizes and holding times extremely light in light of continued decreasing intraday ranges and trends ... the late day 30-minute barfs notwithstanding. I've had a moderate degree of success thus far, having turned the -$7K chip loss into just under a $10K chip gain.

As I write this the 15-min ADX is down near ten and pretty much flatlined with no trend in play. Even the 5-minute hasn't seen much of a trend over the past few days, which leaves 1-minute trends and fading extreme TICK spikes the main games until the winds again change.

2:27pm ES again trying to break to the upside. One of these days -- who knows when -- it's going to stick for one of the all-time short squeezes. Watching for now. VIX also trying to turn down.

I'm admittedly running a bit on empty heading into the PM session given the long night session with only a few naps, so the thought process at this end is to stay out of trouble.

2:51pm Shorts getting squeezed. Still cautious here as I'm not particularly focused and need to find another gear if I'm to trade this aggressively.

4:15pm Not a big surprise (Note 2:27pm comment). Considering how tired I was and the huge potential for liquidity-providing locals to get killed on the squeeze, this extremely tough grader is going to give himself a rare A++ for both market read and staying out of trouble throughout the day ... and especially on the late PM climb. I actually even managed to grow the chip count a bit more by scalping clear extension and pullback extremes to end +$14K on the day.

For those new to the blog, I don't typically make much $ on strong trends ... which is the case for most liquidity-providing members of the exchange. The morning after the trend is typically when we do well, and I'll need to be on my toes tomorrow, especially with the FOMC decision looming.

For me, today was about avoiding potential landmines -- both during the Globex and regular sessions -- and not about profit maximization.

The modest chip gain was a bonus.

Check back later tonight for a video with additional thoughts on today's action.


Pablo said...

Hi Don,

I hope you are going well. Have you changed the 3-min and 13-min charts for the 5-min and 15-min? Thank you,


Don Miller said...

Hi Pablo -

There's really not much difference ... 5 & 15 provides a slighly larger perspective, but the 3 min 15MA and 13 min 15MA are still approximations of the 1 min 50 and 200 respectively.

The difference is pretty immaterial in the scheme of things.


Chuck said...

I guess that if the market dare gap up on the open tomorrow you will be on it like a jackhammer on thin concrete? But with so many people (no I did not take a survey) predicting a collapse tomorrow maybe it will defy them all and stage a 2nd straight "shock and awe" short squeeze? Just a thought.

Don Miller said...

Hi Chuck -

Not sure about the jackhammer, but I'll certainly be on the lookout for oscillation setups in the morning.

We've indeed seen two day runs more often than usual over recent months, and we've still got earnings and FOMC to dodge, so anything's possible.

I actually remember a similar situation many years ago where there was a huge run on Day 1, and then CSCO came out with earnings on Day 2 which drove it straight up again ... much like the 10/14/08 - 10/15/08 combination.

Of course, ES has already retraced 14 points off its late-day high tonight, so it might be tricky (what else is new in this new paradigm?)