Archive for 2008

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The Fed cut interest rates by 3/4% today

Wednesday, December 17th, 2008

Well, they almost emptied the gun today, no more bullets.

Fed funds are at 1/4% now. That means when financial institutions borrow money from the fed, they will do it at 1/4%.  Virtually free money for them. Some people do not know that when a loan for a house or car is issued, the banks borrow that money from the fed and they just create it out of thin air. The tangible asset is the collateral, so when the cash comes through the system it is counted as an asset on the banks books which allows them to loan more money out. The whole process is a bit complicated.  They call it the fractional reserve banking system. It all works fine until you have a situation like we are facing now.  Hope they can work it out.

The S&P did what I predicted it would do yesterday. It held onto the support it recently showed and moved right up. The inital move was done in the futures night trading and this morning the cash market caught up to the futures when the market opened. I knew it was going to be slow going while approaching the fed decision, as well. We did not get very much movement after the open because the move came in the  pre-market overnight. After the open it just was pretty much flat for hours.

That is very typical during big decision days like today. I would have done better to wait for after the Fed decision, but it was OK. I was up for the day by 3 &1/2 points on the NASDQ, but I had taken 21 trades for the day. At $5 per transaction cost, that’s -$105.  I ended up slightly down after transaction costs.

I have a chart of a couple of positive trades and a chart of the Dow and S&P showing the big move they made today. Take a look at the “Wedge” that was forming up to the Fed decision at 11:15 today. I pretty much knew it was going to be an upside breakout but it is still hard to get in there with such a small stop that I run.  I just waited until the dust settled and took a few trades to even myself out for day. Planning for a better day tomorrow. Until then bye for now.

http://screencast.com/t/bSeaOp3etdc

http://screencast.com/t/bSeaOp3etdc

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Fed to lower interest rates tomorrow?

Tuesday, December 16th, 2008

Will he or will he not, lower interest rates tomorrow?

At 11:15 a.m. Tuesday, the Federal Reserve will make a decision on whether or not to lower interest rates.  I believe they will and I think the market believes this as well.  They do not have much more room to go down if they lower the rates tomorrow. I do not think it is going to help very much because banks are not lending money. No money for houses, no money for cars, etc.   I even asked my large bank branch if they were making home loans and she said, “not any”. 

This is only going to help the banks, again.  It’s all about the banks. They will get money from the fed when they need it and if there is any money loaned out, it will just yield the banks a bigger margin. They will hardly pass these savings on to the people. They figure they have the right to make up their losses on the back of the American people. Nothing new there. I think you can tell I am very opinionated about the whole matter.

Today we had what is called an inside day. That happens when today’s range stays within the previous day’s range. This tends to build up pressure for a move in the direction of the breakout. I still believe that the break out will be to the upside.

Moving on, we will be approaching another Holiday week and people will want to buy stock because of the perceived value they will be getting. Everyone likes to buy things on sale, right? Well, I believe this is only going to last for a short while. The stage is being set for what I call, “Pump and Dump”. People will continue to buy stocks for a short time, maybe into early next year. That’s the pump part of it. When prices reach a point where it represents another opportunity for those who did not get out when they had the chance to now exercise that option and get out, that’s the dump part. The people who bought will be left holding the bag waiting for the thing to come back and it won’t for a long time.

This is all just my opinion and things can change. I will tell you, there are a lot of things that have yet to be uncovered within the economy and corporate profits and it is not good news. So we will have to wait and see.  As far as tomorrow is concerned I think it is going to be a big up day blowing past Friday’s high when the dust settles. There should be some good volume in the early a.m. and then it is going to grind to a halt by about 8 a.m. until the news is released at 11:15 a.m.  Then you are going to see a lot of volatility, down-up-down and the final results will be up for the day.

I and anyone else needs to keep and hold there opinion loosely. It could be just the opposite and if you condition yourself to only look for up trades while the market is dropping, you are going to be on the wrong side of the market. Everyone needs to let the market tell us what is happening and not our opinions. Technically, we do need to stay above Friday’s closing numbers to remain in the uptrend. If we break down hard and stay there, the downtrend will likely continue.

I did some trading in the NASDQ 100 futures today. There is a little less risk per trade going on in that market and thought I would give it try. It came out good. I think I had 10 positive trades in a row before I had a move against me. I did take a couple of trades in the S&P but both of those did not work out. The profit I picked up in the NASDQ was more than enough to offset the other and still meet my daily goal for the day.

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Breakout to upside to continue for Monday

Saturday, December 13th, 2008

The market is in a position to make some significant gains next week.  The breakout I anticipated for Monday’s trading took place with a 350 point move on the Dow, but it did not last. We came back little by little until Friday. There was an early sell off on Friday a.m. followed by a nice reversal back up. It looks like it is in a position to make a big move over the next several days. 

I would add though that if the advance does not follow through, the market is also in a position to drop significantly again. As I wrote last week, I do not think that is going to happen, but you have to leave the option open if Friday’s low is taken out. As far as my trading is concerned I was able to pick up 2 points plus on Friday in a short twenty minutes.  I needed to back off a bit this week because of too many things going on. I hope to be back at it on Monday.

Have a great weekend. Vince

http://www.screencast.com/t/o7bhvxHC

http://www.screencast.com/t/8iBvQDcpWjw

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Market Reversal and Rally at Breakout Point

Friday, December 5th, 2008

The last few days I have been writing about a possible upside breakout, that would slow down the sell off for a while. We are almost there.

Today the Dow did make a lower low that I was anticipating, by 25 points, than it made on Dec 1st and the S&P just matched that low. That was the bait and switch I was talking about. We got it on the Dow by a little bit and we did not on the S&P. 

I will have to look at this as a market reversal and the rally will be at a critical breakout point. Monday it will have to have upside follow through and convincingly break out above its previous high for the temporary trend reversal to take place.  For some reason, if it now takes out the lows of today, we will be in big trouble and a potential massive sell off will likely continue. I do not think that is going to happen, but we will have to wait and see. My best guess is we will be up big on Monday.

As far as my daytrading is concerned, I was able to get my accelerated goal for the day of 4 points. I had a few losses but I was able to come back.  The market started to make an upside break and I positioned myself for a few of those points.  The chart below will show a few of them.

On Wednesday, if all goes according to plan as my business plan calls for, I will be moving up to two contracts and when hitting 4 points for the day, it will add up to $400 for day and $2,000 for the week. My plan really only calls for 2 points, but I feel pretty confident I can pick up the 4 points meeting my accelerated plan.

Hope everyone has a great weekend and thanks for stopping by.

http://www.screencast.com/t/JKQURaoUchA

http://www.screencast.com/t/ghhtWG4k7

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Market failed at resistance today

Friday, December 5th, 2008

The market failed right at resistance today, but that is to be expected for the first go around. Since we did not make it through the outside resistance line today, it appears that we are going for the classic bait and switch setup, as I like to call it. Assuming that we can hold the line at 800 on the S&P that I drew a few days ago, that is about the area I expect the market to get to in the next day or two.

I will always leave an open mind as to direction during the day. The last thing I need is to get clouded by an overall direction, where it changes my mindset. You never want to hold anticipated moves too strongly, because it can blind you from the current market action. You will not be able to trade against a position that you hold onto so strongly.

 The answer is, hold down your opinion of market direction during the day to a minimum. You may still be right in the long run, but you might get a big short term rally against you before that happens and you end up being wrong twice and second guessing yourself. You just need to read what is in front of you at that given moment in time, that’s it.

Let me get to today’s trading. I did not do a lot of it, but I did manage to get my daily goal. My daily goal is between 2-4 points. The two points is the minimum I need to stay on track with my stated business plan posted on my website. The four points is the accelerated program, meaning it all just happens a little faster. When I can pick up double the minimum daily goal, it is giving me a little cushion for the time that I may not meet my goal for the day.

I need to enforce the cut off point rule, which for me is to stop trading for the day if I am minus 4 points or the dollar equivalent. This will actually take the pressure off yourself, knowing that you can only go down in equity one of your accelerated daily goals. The key to enforce that is discipline, big time.

If I, or anyone else who trades, can determine not to allow themselves to lose more than one day of profits, you cannot imagine what that will do for you. It frees you up from worry and reduces the emotion that is tied to trading. It allows you to take the trades that are high probability setups without worry. Having a good method is the first key, but having discipline to follow the method is even more important than the first point.

So the moral to the story, resolve now in your mind that you will not allow yourself to lose more than one day of profits and you go forward from there. Tomorrow will present itself to you with a whole new set of potential trades and you can have the previous day’s loss back in no time at all. This is not a sprint, but a marathon. He who finishes the race, wins.

Today I was only in the market for 20 minutes and was able to get my accelerated profit target of 4 points. I am only trading one contract right now, since I am putting into practice what I have posted on my website of picking up only 2 points a day and gradually increasing that as the consistent profits come in. The second week I move it up to two contracts only when I have 5 days of a minimum of 2 points per day. It continues from there, on to three contracts the third week. By the fourth week, if you are able to pick up that modest goal, you are making $400 per day or $2,000 dollars for the week.

It just keeps going, but the key is consistency. When I pick up 4 points I am giving myself a little cushion and that is great. I do not need to trade all day to meet that goal, but only 20-30 minutes and an hour on the outside. Two points can be had in minutes, but it is discipline that you will need the most of  – to control “Fear & Greed”. These are the two strongest emotions that you will be faced with while trading. If you cannot get a handle on them, it is better that you do not even attempt trading the E-mini’s.

It is a process that is very difficult to go through alone. I can tell you from personal experience that it is a big challenge. The thing is, I am willing to change and do what I need to do in order to make it happen and you need that same determination. I never received help from anyone and never bought a trading course or anything. I have learned how to trade the hard way, on my own, by choice.

It does not have to be that way for you. Having a mentor is one of the best and fastest ways to accelerate the learning process. You do not have to make all of the same mistakes others, including myself, have made. But you can streamline the process only if you have the passion. That is what is takes to be successful in this business.

Most people do not make it and that is a hard fact to swallow. Everyone who goes for it, thinks that they are not one of those people. In reality most people are “those people”, but they don’t want to believe it. The way you come out from being a statistic is having, being, doing, whatever it takes to make success happen. And that takes passion, determination, and a desire to change. The change is going to have to come within you and it comes in so many forms that I will need to save it for another post.

I don’t mean to ramble, but I know this may be helping someone out there, so I guess it is worth the read. Have a great day, until next time.  Vince

http://www.screencast.com/t/yGp2rYaPOkK

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Another up day for the markets

Wednesday, December 3rd, 2008

The markets are holding on for now, but we still need to break the outside green line, as I have shown below in the chart. This is going to buy some time for the market to move sideways to slightly up. As this takes place, the amount of bearishness (people who think the market is going down) will start to subside and people will become more bullish.

Right now we are at extreme numbers. There are not very many people who think the market is going up. Each week a poll is taken by the stock newsletter writers. They measure the number of them that think the market is going up and the number who think the market is going down. They get a number and they publish that. You can get a real good idea on the market sentiment, as it is called, which way the market is leaning.

You tend to get high readings around market tops and low readings around market bottoms. There are very few people, around 29% of the stock market newsletter writers, who think the market is ready for a good size move up. Historically, that is a low number and you could read into and come up with a market move in the up direction. Most of those guys are saying it’s going down and that leaves few who think it’s ready for an up move.

You see, they are usually wrong and by going in the opposite direction from what they expect, you can usually do pretty good. Its not fool proof, but I have been watching these numbers for over 20 years and they are very accurate. That is one reason why I think we will stabilize for now, until we can get more people believing the market has bottomed and it’s time to buy stocks again. When we reach that point, and it hasn’t yet, it will be time to sell again - some time next year. Let’s hope we have a little break for now.

I was not feeling very good today, but did manage to put on a very few trades. I was only trading one contract on the S&P 500 Emini and managed to pick up a net 4 points after commission. Between 2 and 4 points is what I like to come out with each day, at a minimum. The trading was a little choppy but it worked ok for me.

Below is a chart of the S&P and Dow with the outside green line that we need to get above to slow the downtrend. As a daytrader, it does not really matter what direction the market goes, but only that it moves, either direction is fine.

Talk to you tomorrow, Vince

http://www.screencast.com/t/xp1mzI71

http://www.screencast.com/t/eaW6Suu4jz

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Pattern holding for now

Wednesday, December 3rd, 2008

The pattern is holding for now. So far so good, but I would have like to see a low set in on this morning’s open, then the reverse. We will find out in a couple of days for sure. For the pattern to reverse and slow this decline, we will need to break the outside downtrend line. Time will tell. 

Today I only traded a little in simulator mode. I am waiting for the institutional players to come back into the market. Today it actually looked like that happened, but I was set on waiting until at least  Wednesday to get back in. I have a few charts posted below of some of my trades with a equity chart of the profit. This is after commission. Trading with 1 and 2 contracts only. I will post again tomorrow.

Bye for now. Vince

http://www.screencast.com/t/zNQPNSB7

http://www.screencast.com/t/CmJpl0NzL

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Light volume around the Holidays

Tuesday, December 2nd, 2008

Hello, just a quick post about the Holiday volume. We had a nice rally during the Holiday week. Usually that is the case during the Holiday period. November and December are usually very good months for the market.

My last post stated that if we broke the support of the week before last, that we could get another significant drop of 1 to 2 thousand points. Well, the next day after that post, we broke that support and dropped 1,000 points exactly and then we started the retracement. We are coming off a 5 day market rally as of today. A retracement again is under way. I am expecting this big decline today of almost 9% to hold. Another drop of about 15 S&P 500 points and 150 Dow Jones points to the downside tomorrow morning and then we need to see support come back into the market. if we can hold this area, we will have a very good chance to mount another meaningful rally of over 1,000 point plus on the Dow and 100+ S&P 500 points.

As I first started out mentioning, the light volume around the Holidays is typical market behavior. The big players usually take off during this time of year and it would appear that this year is no different. The market tends to be very jumpy during this period, because there is no real large volume behind it. The big boys are gone and the retail players are left pushing up and down without conviction. The trend is hard to get established and jumps up 2 points, down 2 points all in one breath. Its a little hard to trade without getting stopped out, especially if you are using only 1 point stops.

Bigger volume should be coming back sometime later this week. It’s not that the market does not move, it’s just that it is easier to manipulate and get pushed around and it’s easier to move because you don’t have the resistance from big players moving against you.

Well, let’s hope this market stabalizes for now. I would expect the market to hold up until the end of the year. Sometime eary next year, I am afraid we are going to go down again for another big lasting drop. The worst is not over, unfortunately. But remember we are not predicters, but interpreters. We read the current market action and we react accordingly. The market is always right.

I will start trading again in 1 or 2 days when the institutional players return and volume comes back into the market. Below is a chart of the S&P and the Dow, to show you where we are. I would like to see the downtrend line on the outside get broken to the upside. This will be the first indication that we will have some time on our hands and the market will start to put in a bottom. This is only going to buy us some time and will not be the final turning point, but that is just my opinion. There again is a good chance this will take us into 09 if we can overcome that resistance. But let’s start with tomorrow and shake out the week hads early in the day, only to close flat or higher on the day. That will be the first task at hand.

http://www.screencast.com/t/GzLjaJ2W

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I hate to say, I was right

Friday, November 21st, 2008

This is a strange title for my post and I don’t mean to boast. In my last writing, I stated that if we didn’t stay above the close of three days ago, we were going to go much lower by as much as 1-2,000 dow points. Well it’s been two days since the market failed and we are down over 900 Dow points. I hope it stops because it is not very good for the overall economy. As I stated before, as an S&P trader, it doesn’t matter what direction the market takes, just as long as it moves. Either direction is fine, but I would prefer up.

If you would like to see me trade live, drop me an email message and I can make the arrangements for you to tap into my screen to see and hear what I do. I like to teach, and this helps me become better at what I do for myself.

Below is a short run through of some of the potential trades that could have been taken for today. I will be showing more of these and more of my trades actually taken. This may give you some insight into my methodology and that is OK. There is a lot more to it, but here are some of the basics.

Have a great day,

Vince

http://www.screencast.com/t/M1ig3dQj

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Markets are holding on

Tuesday, November 18th, 2008

Its been a little while since my last post, but I am back with a market update. We are holding on near the bottom of a consolidation area. There was a good trading day reversal last Thursday. The market was down over 200 points on the Dow and it reversed by day’s end, to up over +500.

That was a good day and it usually signals movement in the opposite direction, which would be up. Did you notice how I said usually, that is because we should have had some follow through. The point is that we did not and that’s not good. Friday and Monday’s trading saw a filling back inside Thursday’s trading range. We are now back to where we were at 11 am on Thursday, before the big move up.

It looks like it was a big short covering rally, which means people who expect the markets to drop, find themselves buying the short position back in the open market to close their position so they can stop the bleeding. That pushes up prices, but only after all the shorts have covered, then it starts going back down without them on board. Amazing.

This week will be critical in that the market needs to stay above where it now is. If it does not, I fear another sell off as big as the one we just recently had.  It could be 1-2 thousand points more to the downside.

There are a couple of things on our side, one of which is the Holidays are approaching and typically that has been a strong time for stocks in general. The other is that there are a lot of people very bearish on this market and that tends to be very bullish, (up). It is best to never put too much faith in anything other than price action. That is always the deciding factor, unless the market can move above and break the downtrend line that it is facing, it will have no choice but to break down. Again, if it breaks and closes below where we are now, I would say, look out below.

But as a day trader all of that does not mean good or bad because we only look for movement and if that movement is to the downside, oh well, go with the flow. I personally do not want the market to break down any further from here because it will have big implications for the economy. As it stands we are headed for some difficult days ahead in our economy.

Below are some of the trades that I took today. It was a fairly easy day in reading the market. One thing I would caution any and all who find themselves reading this blog when trading the markets:

HOLD YOUR OPINION ABOUT MARKET DIRECTION VERY LOOSELY. What I mean by that is don’t form such a strong opinion about market direction that you can not see clearly what the market is telling you. People can become blind to their own ideas of what they think is going to happen. Just let it happen and try not to buck the trend. Sounds simple but it can be hard. Everyone just needs to remember that and it is very, very important.

http://www.screencast.com/t/Gmd6tb2IyYx

http://www.screencast.com/t/RfutENr6X

http://www.screencast.com/t/w63JNRXFPd

http://www.screencast.com/t/3JzPxoA8

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