Tomorrow’s Plan:

The morning action with the news was pretty amazing. There was tons of selling in both the broad market and home builders coming into the announcement, and when the number came out, there was panic selling. The whole scenario reeks of sell the rumor and buy the news. I placed a swing long in the SPY after the event, and I see the entire market as playing out in one of two scenarios. The fact is, this morning’s action is how bottoms are made. Whether this is THE bottom or A bottom is yet unknown. If it is A bottom, then I expect some churning to the side for a short period of time, and then new lows to be made and the SPY 101 area re-tested. The VIX did not have a gang buster up day, and would say this is unlikely. TLT did have a gang buster up day, and would say this is very likely. So some mixed signals from these outside sources. If this is THE bottom, then I am much more excited for the next few days because we are going to get many opportunities where selling comes in, but does not follow through. Traders will wake up, see the market higher, and think “wow the news the other day was bad, shorting this is a no brainer!” Their blood would fuel the upside move that would eventually culminate in a puke higher.

I think the second scenario would be very profitable because you can basically operate from the premise of “buy any dips” for a solid few days. It could be that we get this scenario, but just not right away, or after another plunge to the downside. I think most traders come to love downside pushes because they are fun to short while they are going down, and then offer great long opportunities when they begin to turn higher. Some of the best long opportunities out there are not in slow, plodding bull markets, but oversold bounces during bear markets. My swing long in SPY may be premature, but whatever happens, trading is going to be great for awhile here. Tomorrow may definitely have some MATD action as there are many people who missed out on moves today. The market may have mostly chopped around after its gap down, but many stocks had trending days, so expect there to be momentum chasers tomorrow.

My Best Ideas:

•UAUA closed below the 20 area, and sold off really hard this morning pre-number. It was tough to trade because it was simply straight down, and then bounced after the number came out. Hopefully in the days ahead, it will offer some good shorting opportunities. The hourly is pointed straight down, so until that picture changes, it is a short.

•WFC looks like an awesome short, but again, it is getting a bit squirrely. Notice it did not make much of a tradable down move in the morning compared to stronger stocks like UAUA and LVS. I still keep my eye on it for set ups intraday, but its action is getting less and less discernible.

•STX broke out lower from its consolidation, so it may be a good short here.

•As volatility rises, independence falls. That means that a stock’s character diminishes as volatility rises, and it adheres more closely to its sector and the main market. So if this market keeps falling, short LVS, short UAUA, short the names that are moving intraday, whether they be strong or weak on higher time frames. When volatility is up, you want to narrow your focus to the action at hand, and ask less questions about why something is moving; just go with the flow. WFC should have been a great short this morning, but LVS was better. Why was KSS the only stock not outside its previous day’s range for most of the day? Who knows, just follow the money, adapt.

Best of Luck Tomorrow

Today’s Trades:

Today’s Journal Entry: Do The Emotional Work

If you have no emotional work to do after today, then you are either brand new, or very experienced. I woke up today feeling much better than I did yesterday, but I was still angry right out of the gate. Anger has been quite the companion lately. I am not exactly sure why I am so angry, but I am dealing with it in a healthy manner. I write it out, I beat the crap out of pillows and my bed, and I curse a lot. I do NOT trade the anger out.

The whole market was on egg shells this morning, you could just FEEL it. The number at 10:00 EST was going to be big and furious. I shorted some LVS, and made my first mistake of the day by listening to a mentor, and exiting for a small loss despite my read on the stock. I was angry, but I knew I wanted to exit before the number, and most of my trading would come afterwards anyways.

When the number came out, the market straight up panicked. I was reminded of 2008, where people just want to get out, and at all costs. It was an amazing spectacle to behold. It was also a great example of a puke, where the majority of market participants get it wrong at the turning point. There is always this saying that the crowd is wrong. That’s not true! The crowd is usually right, but wrong at turning points! When it really comes down to making the best risk decision, they get it wrong when the chips are on the table.

I liked GG long after the puke. Gold had been doing very well on the day before the number, and I thought it had a great chance of bouncing. I went long and put in a pretty wide stop, knowing that it could easily chop me out of the trade if I was not open to letting it settle. My target was about 40 cents away, I was looking for yesterday’s lows. Something went off in my head when it started to move in my favor. I was scared and my plan seemed all together foolish; if I let this winner turn into a loser, the regret would be massive. I was frightened that I was buying a stock on a day that was massively down, and after terrible home numbers. It felt like standing in front of a massive train. I had HUGE confidence that the market had experienced a puke of giant proportions, and was most likely not going to retest those lows anytime soon. I had NO confidence in my ability to choose the right spot so soon after the news. I had my finger on the trigger to get out.

I got out at a 12 cent gain and so started one of the most angry experiences I have had to date. I was so mad and full of rage, I could barely even see straight. I was punching the crap out of pillows, couches, and my bed with abandon. I had missed at least a 40 cent, if not 50-60 cent winner. If it was soft and cushy, I was punching it while cursing at the top of my lungs. I was so mad, I knew that I should have stayed in the trade, but I was so afraid of losing on such a crazy day, I let my anxiety make my decision for me. The best trading I do is when the market bleeds emotions into my perception, yet I rest on a core of confidence that trades according to what I perceive. The worst trading is when the market bleeds emotion into me, and that becomes my core experience. When that happens, I am apt to make all the mistakes that everyone else is making: getting out too soon, jumping the gun, not booking profits, holding losers, you name it.

I want to be a part of the market, yet separate from it. I want to flow with it, yet know its next dance step. Most traders are so bad because they are so close to the market, they are experiencing exactly what most of its participants are going through. The good traders have that one step of distance.

I then made a trade in GG that gave back all my profits in one fell swoop (actually I had a 10 cent scalp before this). I could not believe it, I sat there in disbelief. Yet something switched in my brain that said the trade was not done, and so I jumped right back in, and made almost all of it right back. Not the greatest outcome, but I will take it.

All in all, I had a crap ton of emotions today. I think most people did. Do the emotional work. That means exercising to take the edge off. Eating good food and avoiding alcohol, caffeine, and other mind altering substances. Sit quietly and slowly go over your experiences of the day, focusing on what happen, not what you should or could have done. Don’t even bother with how you can improve at this point, just feel, because if you don’t, and it festers, then whatever you made today will soon be gone, and any losses you experienced will soon be larger.

I feel a bit beat up, but also excited about the opportunities to trade in the days ahead. I took a swing long position in the SPY this morning that I plan to hold for a couple days. Tomorrow should also offer some great MATD action, and more retail participation as today’s market gets plastered all over the news. The end of 2010 should be a great time to trade.

Last Note

I wrote in my journal today “I hate winning.” It is so odd and funny that I would say that, but part of it is true. I have been on this winning streak in both the market and poker, and part of me hates it. Part of me wants to give all the money I earned back. Why oh why? I think I hate the pressure I put on myself everyday when I am winning. I hate waking up in the morning and thinking that I cannot make mistakes, that I have to toe the line, get serious, and get focused. I hate winning because when I am winning, I am not carefree. There is an amazing amount of freedom in having nothing. When you lose all your profits, lose your market reading ability, and lose everything you tried so hard to get, you are free. You feel free, clear, and peaceful (after the initial feelings of loss, pain, and depression of course). It is like being on your deathbed: there are no more worries that need to concern you. You really won’t be around much longer for it to matter.

When I start winning, this pressure starts to creep in. I can feel the exact moment it triggers. Usually it is after a big win, after a certain dollar amount, after some “perfect” trade, or a complement from those above me. All of a sudden I feel like I have to get serious and stop messing around. I cannot feel carefree, or be in the flow anymore. I cannot make mistakes, I cannot lose money, I cannot have losers. I mean, it is so obvious now why I have been in this same cycle for years. Whenever I earn any money from the market, I give it right back so that I don’t have to deal with the expectations I have around being a “winner.” Once those expectations are gone, I proceed to win easily until I once again cross that threshold. The real questions I need to ask myself are “what does it mean to be a winner to you?” and “why do you believe that to continue to be a winner, you must struggle?”

Rest assured I am asking myself these questions and seeing how deep I can go with them. It is so funny because one year ago, I would have traded places with myself today in a heart beat. A problem with winning? What a problem to have! Yet I hated today, I hated winning and I was so angry this morning. I hate this pressure I feel when I mentally step away for a minute. One more question I am always asking myself, like today in the afternoon LVS trade, is: “can you just let the market give you what it will give you?” Any comments on this entire post will be very appreciated, I would love to hear what you guys think.

Lucas

Tomorrow’s Plan:

I am thinking that we could easily hit 1050 tomorrow in the /ES. The market gave a swing long signal this morning by rallying over Friday’s highs, but then about faced and closed weak. That kind of action is easily good for some continued selling pressure tomorrow morning. My internals today were messed up, so I am not completely positive on the day’s stats, but I do know volume was less, and selling was pretty modest by the close. Tomorrow there is some home numbers coming out and the expectation is that they will be pretty negative. So keep that in mind for early trading. VIX has also been in a range these past couple weeks, it needs to get over 27.50 and stay there for the shorts, and under 22-23 for the longs.

My Best Ideas:

•Macy’s is pulling back on slightly higher volume, but so far its buying order-flow is still intact, so I like it as a long. The first bounce off this pullback will probably be the strongest. If Macy’s doesn’t make new highs from that bounce, it will probably be a lower probability trade for a couple weeks.

•NTAP has a very interesting daily chart. It has made two daily bearish candles, and I am interested to see how they work out. It may be that some selling comes in that gives traders an opportunity to buy off that monstrous bullish candle from three days ago. I am keeping an eye on this one.

•WFC is slowly churning downwards. It has not been acting like the great short it was a few days ago. I was watching it today, and it is definitely pretty choppy. It is still the best short in my list, but I am less inclined to short and just hold it because I think it is passing from the phase of violent selling into slow dribbles of selling, but no aggressive buying. In other words, a slow move downwards with shrinking volatility and ranges.

•There is definitely a buyer in JNPR, and I am watching to see if it can push through that overhead resistance that aligns with a gap fill. Also continuing to watch UAUA, but it was a bit disappointing today after the bullish energy it showed on the open.

Best of Luck Tomorrow

Today’s Trades:

Today’s Journal Entry: None

Last Note

That NTAP trade was kind of funny. I needed to make one more trade on the day, and when NTAP was breaking out, I figured I could scalp it for 10 cents no problemo. I took 3 cents out of it and loudly proclaimed my great success to my skype chat room. About 10 minutes later, the boss of the company I work for came on the mentor room mic and said that NTAP was no longer tradeable on the day as everyone but ONE person who had traded it had lost money. Of the 20+ people who traded it, only one person had made money and they were only up three dollars. Great Success! I had a good laugh.

The morning was pretty rough. I woke up with high blood sugar, I had not dreamed while sleeping (dreams=sleeping well and refreshed, no dreams= groggy and stiff), and I was pissed off as hell. I was mad because I felt like my edge had dulled over the weekend. There is this weird thing that I think most experienced traders have gone through where if they are not constantly learning, getting better, and most of all plugged into the flow, it feels like you are getting worse. I felt like that this morning. I felt slow, not very focused, and I was really mad about it.

I am not completely sure why, but for some reason, whenever I meet with success, this thing in my head goes off and says “Hey! Alright buddy! Relax man! Let the money just flow in, no need to focus, get some cookies!” This theme of a “great success” being the very top of your performance plays out every where you look. I have experienced it on countless occasions. On a macro level, America’s crowning glory of the nineties was quickly followed with some of its worse times in decades. There is this odd human behavior where if you achieve something through focus, persistence, passion, and love of what your doing, then soon after, you think you deserve it and slack off. It is not slacking off in the general sense of being lazy. For me, it is more like I stop doing all the things I know are good for me. I eat more sugar, exercise less, play more mindless video games, and watch more movies and TV. None of these things really make me happy, yet I find some reason to do them when I begin to have more success.

So you can see that success in trading can be just as debilitating as failure. At least in failure, you are a bit more motivated to pay attention; you are getting beaten. With success there is no such motivation. On Sunday, I had a big poker win online, and afterwords I felt the starting of the anger I experienced this morning. It seems odd, but I was mad I was doing so well. That is so strange! I am definitely going to explore these feelings more. I ended the day down one dollar, which is kind of great considering how I felt this morning. On the other hand, I only added liquidity on 100 of the 600 shares I traded, which just goes to show my lack of focus. Have a great night all : )

Lucas

Tomorrow’s Plan:

Hi there, hope you had a great and relaxing weekend. Friday’s daily candle was a bullish reversal, but change over to weekly charts for the SPY and you see a bearish candle. I would give more credence to the weekly charts, and am inclined to have more confidence in the bearish side for this coming week. Monday after option expiration is always a bit out of character. There are many option traders putting on positions for the next expiration cycle, so you get a very liquid options market. I am not sure what to expect, but my spidey sense tingled when I thought about Monday morning trading.

I heard this weekend that there is quite a bit of bearish sentiment out there. This doesn’t mean the market will go down, it may, but as shadow trader said this weekend, it is very tough to be a comfortable short when everyone is bearish. The funny thing about the market is that we really have not moved much since the start of June (in fact I think price is practically the same), yet sentiment has slowly become more and more bearish as the months have pasted. Back in April, it was “V-shaped recover ho!” Now people are grumbling about a double dip, worsening forecasts, and bad job markets. I don’t know, but I am not convinced yet. I think as traders, we have to be married to the tape, and the tape above all others. So far, at least speaking from my own observation, I have not seen the beginnings of massive amounts of liquidation. Most sell offs over the past couple months have been short lived and more like a bottle rocket then a mac truck.

If market sentiment is slowly worsening, yet price is staying the same, it tells me that either there is covert buying, or simply no sellers. I think the later is more likely the case as covert buying tends to get noticed rather quickly. What we are left with is a market that does not go down because no one is liquidating, but at the same time, a market that does not go up because everyone is bearish! Sooner or later something will give and one side will get an advantage. Who knows, maybe the bears will really pick it up this week! We can only wait, and then trade.

My Best Ideas:

•I mentioned awhile ago I was interested in UAUA when it came back to the 20 level. 20.02 was tagged on Friday, and I am watching to see how this stock acts in the coming weeks ahead. 20 is a level of support that I think should bring in some buying. On the other hand, UAUA has been in this longer term consolidation at the highs that could be seen as bearish. The hourly chart is definitely pointing down. I am watching to see if buying comes in around these levels, and what kind of volume we see. Volume has been so anemic, I have stayed away from trading it, so it would be nice to see some interest come back if I continue to watch it.

•M and LVS both look like great longs. LVS had a bullish candle on Friday, but I get the sense it will not follow through with feeling if the main market does not support it. In other words, I think its days of going up while the market churns or goes down are numbered, but I have been wrong before!

•WFC is pausing in its downtrend, but still remains the best short in my list.

•JNPR is getting kind of interesting. It came up to strong resistance and sold off. I would like to see if this can retest those highs, and maybe push through them. The other names in my list are less interesting. STX is flat lining (clear!), and KSS turned into a chop mobile in the past couple days (oh how character can change).

Best of Luck Tomorrow

Today’s Trades:

Today’s Journal Entry: None

Last Note

Lucas

Tomorrow’s Plan:

No trades tomorrow as I take options expiry off.

Today’s Trades:

Today’s Journal Entry: None

Last Note

I’m packing it up early for the day. The “soft mode” was definitely dominant this morning. I placed trades smoothly and happily. The biggest problem I had was the problem I always have while I am in winning mode: getting out of trades too early. I was okay with it though. I am always okay with exiting a trade if I see a reason and act on it, knowing I am doing my best. I think the third trade was an exit right at the extreme of a pause, and I actually said I felt like I was exiting at the extreme in the mentor room when I got out. Again, I was alright with it. I did not have confidence that there was consistent selling on the day, only that there was momentum. So I had no conflict or struggle selling momentum again as the stock came down. It was a great morning no matter what my bottom line was because I was in the flow. It just doesn’t really matter what your results are as long as you dance the best you can.

On another note, I have been sized up at my firm. I was only able to trade one stock at a time at a max of 200 shares. Now I am able to trade three stocks at a time with 500 shares between them. Quite the bump! I definitely think I will have some emotion around this as some of the lingering “you have to do well” pressure in the back of my mind finds a reason to attack. I will be ready for it whenever it occurs. I also think trading will become much easier in some other ways.

One of the HARDEST ways to trade is with one stock and one lot (one contract or 100 shares). Once you can expand into more then one stock, with multiple pieces you can add and take away, the impact of any one trade is lessened. You can hold good trades longer, cut the laggards faster, and size up and down depending on the situation. I have been itching to place more then one trade when I have a good feel for the main market, so I was definitely ready for this improvement. On Tuesday, when I was long a lagging ALTR as the market blasted higher, I was eying Macy’s but did not want to bail on ALTR. One of the worst things I have done is bail on my stock to jump into another, and then see the previous stock move while the one I jumped in lags.

So I am sure I will have more posts detailing all the emotions I feel with this new responsibility. I know there is this thing in the back of my head that wants success and recognition, (right now please) and will probably make itself known at some point. I also know that there is something else in my head that wants to use that success to dominate, control, and manipulate the environment around me. That second thing (which I experienced yesterday) is pretty caustic; it is directly opposed to the market environment, which is more about following then leading. You will get to hear about all these things in the future, but I am tired for now; time to rest. I wont be trading tomorrow, I may do a post if something comes to mind. I will be playing 1000 hands of poker, marathon style. Have a fantastic weekend.

Lucas