Friday, October 10, 2008

Thurs & Fri Notes - Dodging the Carnage

12:50pm (Fri) Wow. Wow, wow, wow, wow, wow.

Where the hell do I start? First the daily chip tallies for a week that none of us will ever forget:

Monday -$94K
Tuesday +$25K
Wednesday +$56K

That much you already know.

Then comes Thursday at -$4K and today at +$57K (I updated this # after I wrote everything below). But we need to dig deeper into the box score of the last two days to get a true appreciation for my attempt at riding the roller coaster.

We'll start with Thursday in which I had a solid morning and then gave back the gains on the market's late afternoon belch ... which at the time -- let me repeat that -- at the time most of us thought was the final capitulation. Yea, I know I don't normally trade late afternoons. But the afternoon meltdown really felt like the big one. Suffice it to say I escaped the day with no gain and no pain. I still can't believe the VIX is 73 as I'm writing this.

Then comes today which made Wednesday's "monster of all day after trend days" look like a kitten. Actually, "today" started last night when I had to pick up a relative at the airport and wanted to put a small swing position on at the close after the 600+ point / 7%+ Dow vomit. So I got to Logan at about 6pm and bought ES at 908 (15 contracts) with a planned exit in the 920s on an overnight reaction back up. I watched it for a while ... trading up to 915ish ... but decided to simply let it cook a bit for a while (keep in mind it was a small position for me). Then we stopped to eat on the way home where I peeked at the position and it was still holding 910 or so and I felt good with the entry. Then we drove home and an hour later I sat down at my station to see the market gave it up again ... to the tune of the 880s.

At that point I proceeded to minimize the damage by scaling out into the moves up and actually did pretty well navigating through the storm so to speak.

Then after two brief naps overnight, I nibbled a bit in the pre-market and did OK and again wanted to put a small long ES position on before the open and again saw the market give it up on a Wile E Coyote dive.

Then (catching my breath as I write this), I go long right at the bell, see ES spike 10 points or so, take off half for 8 or 9, buy the first pullback with the lot I'd taken off for the prior gain, after which ES decides to completely ignore the VIX and barf yet again through its opening price to the tune of 30 points ON TOP OF the gap down.

All I could do at that point was wait for the eventual pause and buy the daylights out of it ... which I did after a few probes and stops, with the best and final price of 839.25. From there I scaled out for +10 to +20 which finally put me back in the green for the day, and more importantly FINALLY got me in rhythm with this damn thing ... which led to several sequences of 3-6 points throughout the day and has led to the decent day's take.


1:54pm Some TICK vs. price strength divergence on that last drop ... could we finally be seeing the b ... b ... b ... bottom? I'll be shocked if that isn't the low. Yea, I know I was "shocked" on Monday and this morning. VIX at 75. Cruel.

2:02pm Bought the post-divergence pullback at 46.50. Small size because I'm exhausted.

2:05pm Flat.. best price 58.75. I'll post a pic of that divergence over the weekend.

Might be another buyable pullback coming, but I may just watch it from here. Did I mention I'm exhausted? Shorts are likely exhausted as well, so this could push big time if we get any momentum on the 5 min.

2:54pm Tried one last minor pullback by but scratched it for small loss. Small size. If ES loses 41, I'll indeed be shocked again.

3:11pm Shorts scampering ... asks disappearing. Not stepping in front of this possible train and way too tired to time pullback longs on any climb. Billlllly, don't be a hero, don't be a fooooooool with your life.

3:18pm I lied. Caught 87.25 to 81.75. It had reached the "stupid not to take it" price. Small size (ten).

3:22pm VIX finally breaks 15-min uptrend with less than an hour to go. Cruel for those having left early for the long weekend.

3:44pm Caught some of that last power pullback for a final chip.

Whew. My goodness.

I'll be clear ... for most of us, this week was about survival ... period. Those who survived the week (few and far between) will live to trade another day. Those that didn't will be replaced by others, some of whom will make it and most of whom won't. This business is a war of attrition, and the chips go to those who survive when others are getting slaughtered. Chips are always trasnsferred from the large number of losing traders to the small number of consistent winners. Although my broker just emailed me telling me that many good traders got killed this week.

At this end, the weekly score will show a $40K chip gain and a decent dent in the year-end $250K target bonus. But it could have been higher as the box score is another story, as I was early more often than A-Rod peaking before the playoffs (apologies to NY sports fans) in this market where the term "extreme" gets re-defined hourly. Fortunately, I was able dodge the carnage that's lying everywhere and managed well enough to live for another week. I realize many others aren't as fortunate and feel their pain. My parents -- and their parents before them -- had AIG and all the banks in their portfolios.

I'll post a video over the weekend ... after I recover from the motion sickness.

A reminder we'll open the PalTalk lounge Sunday evening at 7pm ET. We had a great time Wednesday night as about a dozen folks (including one on a train!) talked about everything from my Monday brain cramp to New York sports fans. All are welcome.


Anonymous said...

Good stuff Don! I trade the opening hour on my train ride in to downtown Chicago, and managed to ride ES on the long and short side in the AM for some pretty good point gains. I've never seen the market move this way. I think the mini-dow went from being UP 290 points to negative 180 points in less than 10 minutes in the afternoon. XLF held up which is giving me a little hope for a short-term bottom here. We'll see! Have a good weekend! Talk to you Sunday, and this time, I'll be able to use the mic since I won't be on a train :-)

Anonymous said...

Hey Don:

You are correct. I hear a lot of traders are either taking a break or stopping trading. This week was like playing short stacked in a short handed game against 3 big stackers...... you had to play super tight and pick you spots carefully....It was nice to talk to you all. Look forward to Sunday.


Derek said...

wtg Don (and others), the last couple weeks have definitely been historic.

I know you sometimes keep some funny trading hours at night and was wondering if you had looked into the FESX at all? I just started following it last night and today. seems to have ample volume and volatility, just not as touchy as the DAX. i haven't traded it yet so i have no idea about fills, slippage, queue depth, and so forth. anyway, just a thought ...

also, thanks for mentioning 3LB. i've been using PnF charts, and when i read how the 3LB works it piqued my interest. so far it looks very clean, like a less noisy PnF. still very very new to it so there is much to learn, but so far i'm really diggin the 3LB.

btw, thx for putting together the room the other night. sounds like it was well received; i know i'm looking forward to the next one.

take care and have a great w/e -


Don Miller said...

Thanks all.

Derek - Thanks ... I'll check it out, keeping in mind there's a distinct possibility I may abandon Europe trading altogether. Yes, 3LB is a great tool in a trending environment. It's of course less useful when we're just chopping around.