Friday, July 25, 2008

Friday Morning Sequences

8:00 am Back from a nap after doing some early DAX trading. [More on that in a moment.] Following up on closing thoughts from yesterday, obviously late-day buyers never showed up despite the attempted turn after a prolonged trend. Still, it was another good example of how the 5-min 3 line break was a great guide during a trend day as it turned back south after the bounce attempt:

3 Line Break [ESignal refers to it as "Point Break"] is a great indicator when the market is trending, although it's less relevant when the market is in consolidation/oscillation mode. Steve Nisson has some good stuff about it in his books.

Interesting that Europe didn't gap up into the resistance from yesterday, but did trade up to it on an intraday basis where I was able to nab some shorts:

I've found the DAX rhythm extremely tricky -- often prone to trend extreme spikes on low liquidity -- and it's a bit tough for me to trade both it and ES given differences in pace & the fact that the DAX is priced 5x that of ES [kind of like playing both cash and tournament No-Limit Hold 'em]. Some hard lessons in the past have resulted in keeping my sizes very modest in that market. And up until this year, I had problems making the transition from the closing of that market to the opening of the U.S. market. For some reason, I've been able to improve that by treating them as totally distinct events and charts. Still, good eye and decent trades thus far with profits in pocket as I now focus on the U.S. open. The low 1260s "should" be early resistance. We'll see.

A quick note on multiple timeframes. While I love and fully exploit the concept to determine market bias and which timeframe is currently in play, there's an inherent danger in terms of using them to justify ignoring stops. ["Hey, I'm OK ... the next larger timeframe is at my back."] Still, there's usually always one timeframe in play, and using the lesser timeframes as triggers can help reduce the chance of stop-blowing.

8:39am Low liquidity ES Globex spike to 1260 on the Durable Orders #. Scalped a small short sequence. Best entry fill 59.75 and covered on the drop toward 58. Going to wait for normal session open to attempt any sizes. By the way, I rarely look at news. Right now, I have no idea what the # was, or whether it met or beat expectations (I assume so). I do have and the TV talking heads accessible, but usually only peek if the market is acting completely out of the ordinary. Gets back to how irrelevant news really is unless it's something catastrophic. However, I am aware of the economic calendar. Don't forget Don that we have Michigan Sentiment and New Home Sales today at 10am.

8:55am Entering my personal no-trade zone of 9:00-9:30am. Gotten me in a lot of trouble over the years, similar to 3:30-4:00pm. Getting better at simply not trading then.

9:01am OK, bent my rule a bit after looking at yesterday's closing charts again [Mom always said look both ways before crossing the street], shorting on the small pop back to 57.50. Navigating the no-trade zone by keeping sizes small. Covering on the drop. Flat; best cover 56.00. That should be it for me until open. Going with the strong short bias after we open though with resistance in the low 1260s. Need to refocus for that. Hope the 10am data doesn't ruin the plan.

9:25am Rule bend #2 shorted a small lot at 58.50 "just in case" that's it for the pop. Wide leash and will let it run toward 61. Managing risk with size. Target cover 55s. Want better entry during liquid session but who knows if we'll get it. Feels like it may shoot straight down at the bell, but we'll see.

9:30am Added to short 58.25. This should plummet.

9:38am Flat ... best cover 55.25. Got 2 solid points on the meat. Can still run more but probability questionable. I want Aces or Kings. btw, if I could define my perfect trade, it would be high probability 2 points with size. Size was still fairly modest given the timeframe but OK. If it runs further, will gear up for the next overreaction entry.

9:50am So far, a repeat of yesterday where I underestimated the extent of the barf-a-thon. Could have held some until the TICK went negative which I was watching. Oh well, solid read, strong entry points, and got initial target. Maybe the DAX didn't gap up into resistance but ES sure did. Economic data coming up shortly.

9:57am Took bathroom break. Wowzer 8 point pop. Cover looking pretty good now. Eying potential short 62ish if we pop on news.

10:01am Short avg 61.50; best entry 62.25; stop 63.

10:05am Looking for a Wile E Coyote dive toward 57.

10:17am Bit of a rough ride during that 10:11 to 10:17 window, but finally getting the drop. A few covers, scratches, re-entries, along the way to manage risk and P&L. Still expecting 57ish. Free-rolling on partial lot with 62 stop.

10:22 Feels like it for the upside wiggles. Sitting in 57s for final covers.

10:25 Flat at 57.50. Can't complain. Again, there could be more but do I care? Will take 4 points any day. Still underestimating the runs a bit though. Look at this 30min ES chart and compare to the DAX one at the top. Love it when both plans work.

10:34 That may be it for the day. Increased chip count by $16K to end a very solid week. Don't want to give it away. Look for the weekend update shortly.


nocved said...

Hi Don

Yesterday's market had me dazed and confused. Felt like I was playing against the 80s "Show-Time Lakers" backing up on my heels and off balanced all day. Luckily I got out with a scratch.

Today's game plan was to buy early violation of yesterday's low or look for short in 1263.50 area.

Shorted 1261.00 but coverd little to early for small profit. Felt a little nervous up there, perhaps letting yesterday's frustration seep in. Oh well done for day going on vacation to Maine with wife and kids.

Appeciate the blog, helps me process market better.


BTW Where can I find your technical methods? If they are availabe.

Don Miller said...

Hi Tom.

Seems your reads today were pretty good, and yes it got a bit volatile in the 1260-62 area (probably the concept of the whole world seeing the same thing). I had to do some dancing to keep a piece of the short on while minimizing risk.

Re: yesterday, sounds like you did better than most people. It was a odd day aside from the perspective that as of Wednesday's close, ES was overbought on larger timeframes (i.e. daily) and thus ripe for a trend day down. But even I was surprised by the lack of any sustainable intraday bounce as I noted in the blog. I have gotten better though at simply not trading when confused.

I'll do a post on the technical stuff I use and how I use them over the weekend. The Stocks & Commodities article I mentioned in one of my earlier posts gives a pretty good summary, but I'll put something together for the blog.

Have fun in Maine, eh?