Monday, December 1, 2008

Monday Notes - True to My Word

4:25pm True to my word over the weekend, I traded minimally today -- actually the lightest I've traded all year at 150 x 2 ES contracts with no Europe trading. (Yes, that's one hundred and fifty and my broker is still looking for me.) Simply put, I decided to let the market tip its hand for much of the day today -- especially given the large gap down -- before dipping more than a few toes in the water. And not only did the market tip its hand, it cut them both off with ES down 80 points on the day!

The result was a very modest +$7K chip gain on a large trend day that often causes major problems for those of us providing market liquidity. More importantly, it was simply another personal step toward the all important December 31 mark. All eyes now turn to tomorrow's (yes, here we go again) possible morning-after-trend day action.

I was considering the 3pm retracement toward 15-min resistance as a heavier short, but passed as I preferred a double top or further extension given the extent of the day's drop, and we only got the single short-lived spike.

Frankly, the best part of today was that it arrived. Weekends can be trading momentum killers, and long weekends can seem like forever for those of us trying to maintain some sort of rhythm. At this end -- if it isn't ridiculously obvious via the weekend posts -- I had way too much time to think and just wanted to get back to business, even if it was to observe and participate minimally.

Another day, another step forward.

Tomorrow should be interesting and I'll look to get my game face on.


Lincoln Hawk said...

Don - can you ellaborate on what you are referring to as the "morning after trend?" From your old posts I gather it is a tool to get yourself focussed and forward looking.

Don Miller said...

Hi Lincoln -

Here's a repost of my response to a similar question from 9/3/08:

I'm actually looking to do either -- or both -- of what you describe. Of the two, my preference is to enter "with the trend" on the next day's pullback and exit in to the subsuquent trend continuation ... which can be in the Globex or regular session (or both). This is because I prefer to trade with the trend and the market can get even more extreme initially the next day if the trend is strong and the turning point hard to sense ... especially if there are no double tops/bottoms or clear price vs. momentum divergences as was the case on Wednesday.

Yet I'll fade a strong further continuation if the TICK is extreme, there are divergences, or and the price bar simply unsustainable (have still never seen a market go straight up or down, although they can run a while). In that case, the exit is on the retracement toward the trend support(s) and I'd be looking for another trade to reverse the position and re-enter with the trend at my back.

Perhaps better said, I'm looking for wholesale opportunities to fade extreme trader emotions (as reflected in the charts) caused by either (1) continued panic short or long covering by losing traders which is likely the only remaining immeidate fuel for the market or (2) poor exits by traders who got greedy and didn't exit into the prior day surge resulting in a trend pullback ... which when combined with one more round of trend pullback-entering traders with new entries and loss-minimizing traders who were caught by the prior day trend and hadn't yet covered, often results in one more trend extension.

Or maybe even simpler, looking to do the opposite of what worked the prior day :-). Like anything though, it's probability of likely action and far from certain. Yet it's a rhythm that I'm very comfortable trading, even though I do run into occasional trouble and have to scamper a bit to get in sync with the "day two" evolving rhythm.

Hope that helps a bit.


Lincoln Hawk said...

Thank you, have been enjoying your daily thoughts.

Don Miller said...

Good to hear Lincoln ... glad it's been helpful.