March 22, 2013

• Trading Update: 3/18 – 3/22

  A very tumultuous week packed with strong moves both up and down, but interestingly the week ended almost exactly where it ended the prior week (for ES). Despite the sum total “non action” of the week, each day had a strong move which provided good trading opportunities.

  As for my trading week – two words – mixed bag- I had my share of high and low points.

   

  Sunday: As I suspected, the attempt to levy a fee on Cyprus insured “guaranteed” deposit holders spooked the market and futures went lower. The was of course, great for me since I had a nice size short position that I had rolled over from the prior week. It feels good to have a position established at the starting point of a move since that means there’s the good chance of getting big returns. The market basically moved in just one direction, down all through Sunday and into the night. My intraday account had a nice big fat surplus of profit. With my planned targets, I though I might even have a shot at a record breaking five figure day. I didn’t want to miss getting the max gains if my targets were exceeded, so I decided to stay up all night monitoring the action.

  Monday: Early Monday morning I was expecting one more leg down move to reach my target area, but prices starting drifting higher instead. I didn’t think anything of it as I felt certain my targets would be hit. But slowly but surely, prices continued drifting higher. There was a time when prices were zig zagging back and forth and I thought, ah, this is where it drops back down and continues. Instead, prices decided to surge upward as if it consumed an energy drink. I looked on incredulously and the market ramped higher and my mighty profits kept shrinking. The day ended down, but well off the overnight lows, and I had to live with the fact that 2/3 of my profits went bye bye. The remaining profit was still decent, but compared to what it was at the market lows, felt empty. It’s like being on a game show where you have $500K in potential prizes, but you goof and wind up with a $70K prize. You don’t think about the $70K gained as much as you do the $430K lost.

  Analysis: Losing potential profit has to be taken in stride when you’re looking for a bigger profit target. If I cashed out whenever the market made me feel any doubt, I’d never the big win days. This is why most traders lose over time – they cash out too soon for fear of losing their profits but when in a bad trade, they stay in until the loss is bad enough to force them out. What they are doing is minimizing their gains and maximizing their losses, and results in traders losing weeks worth of gains with just one bad trade.

  Looking at my chart analysis, I was chagrined to figure out that I made an error and the market did indeed move to my target area – I just had the target level wrong, doh! After that realization, then I truly felt bad since it was a definite screw up on my part. To get handed such a nice gift and let it slip away feels “almost” as bad as losing money outright instead of just profit.

  So I reanalyzed my price charts to make sure everything looked good and prepared for Tuesday. I didn’t get much sleep as I compared price movement to my new analysis to make sure everything synched up. It was then in my sleep deprived state that I started getting additional insights in predicting price movement in the short term, which was great.

   

  Tuesday: The market is moving as expected, and I expect some energy up from the counter trend before the market heads lower. I decide to “rest” my eyes for a while, and that is exactly the time the market chooses to do what I “thought” it would do the prior day and move straight down like a meteor towards my target. And because life is like that, this time I didn’t have my preset auto trade targets set. So when I woke up I went back to see my target area was hit and now the market was on its way back up again. Give me a double shot of doh!   No one to blame but myself which adds to my frustration. Actually I blame the market too since it seems personally out to thwart my plans.

  The interesting thing was the target hit was just the 1st one, and it should have gone lower to hit additional targets, but it didn’t and bounced instead.

  I’m left wondering why it didn’t break lower, looked over my analysis , and don’t see any errors this time, so I’m thinking my target is right, but the path taken there won’t be direct due to all the market gyrations.

  Wednesday: Market heads all the way up and reclaims all area lost the prior day, except this time I’m expecting it to do that via my analysis.

  Thursday: Market is very choppy and does numerous zig zags, but ultimately heads lower, which is what I also expected. I still have my main position that is rising and falling profits like the tides. I’m also making some actual profits on my hedges throughout the week.
  

  Friday: Today I expect the market to finally drop lower to my secondary target, but it again decides to slowly ramp up and make up the losses from the prior day. I’m still confident in my analysis that the market should be heading lower, but again, it’s taking it’s sweet time to get there.

   

  I did make some modest gains this week with my hedge trades, but they could have been much greater. Still figuring out the best way to apply them. My main trades are still on hold as the market plays out going into next week.

  Cyprus is still in negotiations on a bailout deal since they rejected the 1st one requiring those deposit fees. The two market dangers here are the following:

  1) Reinstating charges on insured deposits that could trigger a bank run across Europe. It sets the precedent that banks are not safe – even with so called “insured” deposits.

  2) No bailout for Cyprus, their banks fail and they are forced out of the Euro. The first country being allowed to fail would trigger bond prices surge and make it more difficult for the banks of other troubled countries to borrow funds. It sets the precedent that not all countries will be bailed out which raises the risks for all other problem child countries.

  Both scenarios are bearish in the short term.

   

   

  • 11:29 pm
  • 2 Comments