Tuesday Notes - Solid Performance

11:54am Nice to see the market acting "normally" within abnormal conditions. Despite the craziness of yesterday's record bounce out of the abyss, we indeed got the expected morning-after-trend action that so often follows a trend day. And as is usually the case, it was the traders' turn to earn their keep from the more predictable day after trend action -- versus yesterday's "trend" of over 100 points on ES (... and if anyone tries to convince you that yesterday's run was a high-probability expectation, I've got some Jan. 2009 Patriots Super Bowl tickets to sell you.) I'll take high probability every day.

At this end, I traded both long and short, with most of the morning's $40K chip gain coming from shorting the opening gap and adding upon confirmation of the initial turn. I could have sized stronger at the open for a home run, but instead opted for modest size and the solid extra base hit as I wasn't as focused as I would like to start the day. I mean I was focused, but not with that added element where I'd be comfortable trading mega-size.

So the week chip counts start: -$11K Monday (playing defense on low probability trend day) and +$40K today (playing offense on high probability morning after trend), or about what I would expect from a win/loss ratio perspective given the two types of days, and I remain pretty pleased with how I managed yesterday. I'm sure many "the S&P NEVER climbs 100 points in a day" traders got torched. Sure, it hasn't happened before and probably won't ever happen again, but that's still not "never".

1:06pm Not sure I'll trade much this PM as the afternoon of the oscillation day is typically a crap shoot at best. The daily downtrend could certainly resume (ummmm, yesterday's 100 point move and the overnight gap was a pullback on a daily downtrend as noted in the chart), but I'm a bit tired and still don't feel particularly sharp. Putting the defense back on the field now and not giving away the morning's work.

3:34pm OK, calling it a day. Nudged the chip count to +$44K by shorting the PM breakdown and then doing some light buying on the 3LB turn north. Very pleased with overall management the last two days. Earlier in my career I would have gotten hurt yesterday and then been too pissed off to trade today well. A decade of experience taught otherwise, and "Day 2" is when I make much of my keep.

I'll do a video shortly on my strong feelings of why "Day 2" is so much more predictable than "Day 1" ... Day 1 usually being the trend day. I find it's often best to simply let "Day 1" happen without major damage.

Also made another decent dent in the Q4 bonus which shot up to 41% complete with 2 1/2 months still to go.

Monday Notes - A Different Dance

Well, we all knew it was coming ... the change in pace. The only question was could those of us that provide liquidity day after day adapt quickly enough to avoid the draws that often initially accompany a change in pace.

At this end, I never could find my rhythm until late in the day (the 2:55pm bull cup helped which finally provided some market pace) -- the low Holiday volume didn't help -- and settled for a low five-figure draw due mainly to high transaction costs and a DAX sequence that caught me a bit. While I'm not particularly pleased with the effort, I'm OK with the result as I expected a draw today, stayed out of major trouble by keeping sizes down, tried to minimize it to the extent possible, didn't give up, and had a couple of nice late afternoon sequences. Plus, most liquidity providers don't plan on making money on strong trend days, never mind when the S&P is up over 120 points on the day.

It's amazing how one can get so used to a rhythm, that even knowing the change is coming and seeing the change in tide (TICK above zero; downtrending 15-min VIX), the feet sometimes keep dancing to the earlier tune.

There's no question I could have adapted better earlier. My reads were pretty good ... it was my feet that initially kept getting in the way.

So we'll give this day to the investors. They needed a respite during this year's continuing bloodbath which isn't likely to let up. I'm keeping an eye out for possible "morning after trend day" action tomorrow and will need to be on my toes.

** VIDEO ** Friday's Market Emotion

Here are some thoughts on yet another historic week, as well as Friday's violent trade. I'll be referring to Friday's 5-minute ES chart below.

The Weekend Trader (Saturday Edition)

Some thoughts on this historic "Saturday After".

Nothing But Net - You know I detest looking backwards at detailed trading statistics, only caring about looking forward with a clean slate. Yet I wanted to use last week's events to reinforce two points, which are (1) all I care about is the bottom line, and (2) I define a "trade" as the net result of a day, week, month, year, etc.

And this is where there is so much misinformation out there, it's sickening. I'll be clear - you can't micro-manage this business. I've worked with a number of engineers and analysts who simply can't see the big picture and only care about looking at their statistics. Those few that do succeed do so not because of their skill at gathering and analyzing stats, but in spite of it. And yes, in my early years, I had wonderful statistics -- sliced and diced a dozen different ways -- to try to get a handle on my performance. I had an incredible array of statistics ... and a negative bottom line.

At this end, the statistics and micro-aspects of last week's events don't mean anything ... the bottom line does. The week was nicely positive despite daily "trades" revealing one horror show (worst $ loss of the year) on Monday. Friday was nicely positive (3rd highest $ gain of the year) despite the majority of my trade sequences being negative. Yet for those insistent on looking at stats, here a few to ponder:

I had 115 sequences on Friday and it was one -- 0.87% of the total -- that provided over half the daily take. 61 of the 115 sequences were negative -- for a 47% win/loss percentage. These stats fly in the face of the cottage-industry trader experts who glue a shingle onto a website and tout win/loss %. As traders we have two choices: (1) have a library full of data to dissect, review, analyze, cuss, and discuss ... or (2) develop a never-say-die trader's mindset and focus on taking shot after shot and varying size to our advantage.

Passing the Train Wreck - A related thought stemming from last week is that we can't focus on the past and have to keep looking ahead -- on a second by second basis. Have a bad month last month? Get over it. Have a bad week? Get over it. Have a bad day, start to the day, or trade (using the common definition of "trade", not mine)? You get the point.

I said last week that my Monday result would have destroyed most. And frankly, my early Friday sequences would have caused most to fold their tent and call their shrink before the day session was 5 minutes old. Friday morning indeed wiped out many traders ... that is, those who were still standing after the first four days of the week. I'll go even farther by saying that my trading for parts of Friday, last week, this month, and this year has absolutely sucked and has been atrocious -- and I mean that in all seriousness.

We can slow the car down, look at the train wreck, and as a result likely cause another crash because we weren't focused on the immediate road ahead. And there were trains off the tracks all over the place last week. Or we can look ahead. It's our choice.

Strength in Weakness - The S&P is down 38% for the year. My fund is now up 147% with the initial crazy $1M 2008 target now serving as a trailing stop on the year with two & 1/2 months still to go. The results aren't because of how good I am, but because of how weak I am. I'm human and have a lot of weaknesses to overcome ... hour by hour and minute by minute.

Counting Down - The ticker says 81 days to go. 81 days of fighting and clawing to overcome everything the market is throwing at us. 81 days of dodging and weaving around the landmines. 81 days of overcoming our individual and collective humanities. Then we'll score the year once and for all.

I'm already starting to think about 2009 and another "game" to keep me motivated. And as I've said recently, if I attain the extra $250K 2008 bonus, I'd like to do something big to give back to an industry that schooled me for a decade so I could absorb and sidestep this year's punches in this market fight of the century. Like Barry Greenstein in the poker world, I want to share the rewards. I have enough.

Whatever I do in 2009, when they finally carry me out in a box some day (boy, I hope I will have closed my last open position when that happens), I'm hoping documenting this 2008 journey will have have helped inspire those who have joined me.

Edwin Lefevre said on page 131 of Reminiscences of a Stock Operator (a classic), "If I knew how to make these statements stronger or more emphatic, I certainly would. It does not make any difference what anybody says to the contrary. I know I am right in saying these are incontrovertible statements."

I feel the exact same way about every letter and word typed here since we began the trek in July.

I'll post a video shortly and will also be in the PalTalk lounge tomorrow at 7pm ET.

Enjoy the weekend.

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.

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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.

Thursday Notes - Heading to Airport

Flat day ... good AM, gave some back PM. Heading to airport now and will post more on Friday.

Wednesday Notes - 86% Recovered

4:00pm Where I do I even start. How's this ... I decided to cover my last Globex short at 6:53AM to take a shower. When I got back, ES had shot from sub-1000 to 1040 on the interest rate cut. Funny thing was ... and I kid you not ... I was thinking in the shower that I should have some small swing long position at the ridiculous ES Globex levels on just in case we got a cut. Who'd have thunk buyers missing that would have had another chance in the regular session -- and at even cheaper prices.

That was about the only thing that went wrong today, and while I don't normally use the "proud" word, I'm extremely pr... pr ... (nope, still can't go there) satisfied with my performance over the last two days -- and today in particular. Perhaps my response in last night's comments says it all in terms of post-debacle EESM mode (which I've been in twice this year, "mini" modes not included) meaning that it means I step up the focus more than anything. And my brain feels it as I'm fried right now.

Suffice it to say that I had my second best day ever and was able to ramp up recovery of Monday's car crash to 86% in less than two full sessions. That's like being in a real crash where your car is totalled, and then waking up in the hospital two days later with a band-aid on your finger. Most of the gains came on shorting the rate cut news in the 1030s, buying the open and adding as the market climbed in my favor, and then shorting the monster climb on its approach to the 15-min resistance. Talk about the monster of all day-after-trend days. While I still don't get why the market gave up its earlier 7AM interest rate cut gains and more BEFORE the open, it's not our job to figure out why ... we'll let the talking heads on CNBC figure that out. Our job is to react, period.

I won't ever be able to fully describe why I trade better and more focused after a draw. I just do. I'll be frank as always -- Monday would have destroyed most. Capital, confidence ... you name it. I got caught in a once in a century tidal wave in a raft. And yes, I purposely didn't disclose the # and have only talked in % terms over the last two days (until today ... more on that below) -- not to hide a darn thing, but to keep my mind focused on the task ahead. It was comeback time again ... this time for real.

Such is life. Yet by comparison, it pales compared to real life issues. Consider these: I likely wouldn't have even been born if my parents didn't have a devastating still-birth before I came along. I once almost lost my spouse to a massively burst appendix a few years ago. As I mentioned last night, my daughter was diagnosed with Type 1 diabetes at the age of 11. I broke my ankle and had a massive virus just before entering 12th grade and missed our basketball team's championship run. I almost went broke when I gave up my executive career a decade ago to trade full-time.

You see, for some reason, and with all due humility, I'm used to coming back. I can be nicked, stabbed, kicked, wounded, ridiculed, challenged ... you name it. But you can't kill me. The strength doesn't waver ... it only intensifies. And I'll again be frank -- my faith in God and the abilities He's honed over years of occasional hardship has a lot to do with it. While I purposely don't choose to flaunt my faith, none of this year's Bamboo Tree experience would have been possible without lots of Hand-Holding along the way over the last 47 years.

The end-of-month and end-of-year charts will show a Monday draw of -$94K (or 5% of my capital), followed by comebacks of $25K on Tuesday and $56K today. Monday shouldn't have happened ... at least not to that extent, and I'll again learn from it. (Find that admission in any chatroom!) Yet it did and life goes on ... step by step. Now, less than two days later, it's essentially as if it never happened and we can start talking about the Q4 bonus again.

The wound has healed remarkably fast.

It's truly a Team effort ... if you know what I mean.

I just wonder where this darn band-aid on my finger came from.

See you in the lounge tonight. Look for the room in PalTalk's Business & Finance / Trading section ... it will be clearly labeled and I'll open it around 6:30pm ET for some audio testing. I'll be the guy with the dark circles under my eyes.