Tomorrow’s Plan:

This market is wacky as all get out. There have been great rallies to take advantage of for the past couple days, and both times we have sold off hard into the close. Today the /ES sold off about 7 handles as soon as the cash markets closed (so the futures daily chart is painting a bleaker picture then the SPY). Tomorrow is the day before expiration, so we may have some more wackiness in store. The option market is wacky as well with HUGE amounts of calls being bought on equities (usually retail speculators) and HUGE amounts of puts being bought on ETFs (usually pro hedgers). Based on the price action alone, I would say tomorrow has a better chance of being profitable to the short side, but with expiry, it’s a toss. Gold broke higher with a strong trending day. Tomorrow we may see some great gold MATD action as these chop around to digest this big move. Be careful chasing momentum in GG and other gold stocks for the first hour. One last note; today’s volume profile is very similar to yesterday’s, so just be aware that we may be creating a value zone in the current range (even the high and lows were almost identical).

My Best Ideas:

•I am watching KSS and GG for MATD action tomorrow morning. Both had killer up days and I expect there to be some digestion in the first hour of the day.

•LVS and M both look like great longs. I especially like Macy’s as I think it is much more likely to continue higher. LVS could be pausing here, we will find out tomorrow.

•WFC is still a good looking short. It has not been able to hold under that 25.30-25.20 area yet, so that is the price to look for.

•I do not trade expiry Fridays. It is nice to recuperate and relax for a three day weekend on a day that would probably be poor to trade. I may change this habit as Fall comes and volume comes back into the market.

Best of Luck Tomorrow

Today’s Trades:

Today’s Journal Entry:None

Last Note

I feel like I got beat up today. Some people have panic attacks, I have “wanting attacks.” Kind of a crummy name, but it definitely fits the description. I basically traded this morning from a place of extreme need, and then anger. My bed, and its punch-ability, have definitely been useful these past two days. I described it in my journal like this. Basically I have two modes. The one I dealt with today is not based in reality at all. In fact I have no idea where it even comes from, but it has intense need to be fulfilled.

It wants things ITS way, and no other way. When this mode is active, I will literally watch the market, see money available, and not take it because its not the RIGHT kind of money. I mean this mode is so hard to explain because it is absolutely insane. It is based in this reality that thinks the market SHOULD give me money because of some accomplishment, experience, or ability that no one else is supposed to have. Almost like a poker player ( Phil Helmuth) who thinks he deserves to win just because he has been in the game for so long. If I came to your door and said you had to lose your money in trades against me because I am smarter, more experienced, and overall better then you, would you do it? Hell no! Even if all that stuff were true, you definitely wouldn’t think I deserve your money simply because of it. Yet this insane “wanting” mode thinks reality works that way. I was so angry this morning, so frustrated, and just out of my mind with thwarted wanting.

So I beat the crap out of my bed, did my breathing exercises, and slowly the “wanting attack” passed and the other mode took over. This is the soft mode. It is like water, it flows and never resists. The biggest difference between soft mode and crazy mode is that the former allows the market to present opportunity in whatever way the market wants. It doesn’t demand and get angry when the market wants to do something in a way that is different and surprising. This mode came back, I looked at a chart, placed a trade, and made back all the insanity from this morning.

I tell ya, it is like having this crazy person in your head. The things he says and makes me do are so outside reality, you have to wonder how on earth he ever came to be in the first place. I bet I sound absolutely nuts describing this, but I really cannot describe it any other way. I have a calm profitable self, and a crazy, angry unprofitable self. Slowly, surely, I am clawing back the energy invested in the crazy mental framework. It is tiring work yo.

Lucas

Tomorrow’s Plan:

This is options expiration week, so I think there is a decent chance that the rally that started today will extend into expiry. Volume was HIGHER today! I do not think I can remember the last time that the market went up on rising volume like the impressive show of strength today. The sell off in the afternoon is interesting, and it is definitely making those longs who were going to hold overnight nervous. I think we have to wait and see tomorrow before we can say whether that sell off was something meaningful or not.

My Best Ideas:

•LVS broke higher today on increasing volume, but could not hold the 30 level. I would think it VERY odd if it did not at least try one more time to take and hold 30.

•WFC looks like a nice short as it broke down today on higher volume. The area to hold to the downside is 25.30.

•KSS bounced on lighter volume today, so it is still looking good for a short in the coming days.

•UAUA is relatively weak, and sold off on increasing volume today. I am keeping an eye on this for now.

•All my other names are decent longs, like GG and ALTR, but not worth highlighting.

Best of Luck Tomorrow

Today’s Trades:

Today’s Journal Entry:None

Last Note

Today threw up a lot of red flags in my trading. First, I am beginning to take more flats (two today, one yesterday). Second, I am finding that as soon as I get into a trade, the plan I had goes out the window, and I become much more short term oriented. I also notice that valid trade signals are beginning to feel like a struggle as I try to figure out if it will be a winner or not. All of these things point to me trying to avoid risk. The pattern I have noticed in myself is that when I start to get some winners under my belt, I start to detach and separate from the market. I begin looking for sure fire winners, and getting out of anything that does not show me a positive position instantaneously.

I think it’s a common feeling: you are objective when not in a trade, but as soon as you place one, everything seems so much more risky, and whatever the plan you had before the trade turns into a five minute scalp. I also noticed I was getting angry and frustrated today. I got into ALTR, sat in it for 20 minutes while the market had one of the cleanest moves it has had in months, and then took a flat in it right before it blasted 20 cents higher then my original target. I noticed myself getting angry at the stock for pulling back and bumping me out before the move. I asked myself several times today “Isn’t the market supposed to try and fake me out? Wouldn’t YOU try to fake someone out if they were taking your money?”

Part of me understood that it is the market’s job to put traders on the fence, but another part of me was very angry at the market for not showering me with gold as soon as I hit the execute key. So I was back and forth a lot through the day, and I experienced a lot of anger and frustration. I made a new part of the matrix called “Show Me,” and it is a mode where I place trades so that the market can show me I am a winner. It is completely insane given the reality of the market, but I experience it when I start to get on a winning streak. It is as if I do not believe that I can be a winner, and I want the market to show me that I am actually successful. Of course, it never does, and followed to its extreme, this mindset causes debilitating losses. There is something in my head struggling against the market, and myself, saying that this isn’t right, this isn’t perfect, there is something missing, and this isn’t TRUE success. It is like trying to do something that cannot be done: pure exasperation! Why don’t I believe that I deserve success in the market?

Lucas

Tomorrow’s Plan:

If you haven’t, check out the chart of TLT. To me, that chart just screams professional gap to the upside. These kinds of gaps can lead to trends that last weeks, or even months. If the bond market is leading the stock market, then I think we can count on lower prices. The bond markets are pretty smart, and it used to be back in the day that their movement was closely watched by any stock trader. This is less so today, but I think TLT could be a leading indicator here. If the move in TLT is real, we should see follow through within the next few days. With that note aside, the market environment continues to be chop and slop. In mentor room #3 today I think Erik mentioned that there are many prop traders across New York who are very frustrated, and I can definitely see why.

Tomorrow I expect at least one profitable upside move. I am ready for both sides of the market of course, but after all the sell stops that got triggered this morning within the first few minutes, I think there is some more room higher. I am looking for /ES 1080 and 1087.

My Best Ideas:

•GG keeps on knocking at its 200 SMA and I think one of these days it is going to break through. Perhaps that will be tomorrow, who knows, but I will be ready when it finally does. The GLD chart looks much more bullish then GG, will it will pull GG higher?

•I like M long and ALTR long. Not exactly sure why I like ALTR long except that I got an unconscious urge today to buy it. I looked for an actual signal, but didn’t find one, but I must have seen something. So I am watching both of these names for a long.

•KSS has been an awesome day trading stock for the last few days. I am sticking with this stock as long as it continues to make new lows and trades well. You never know how far it could go from this earnings move. Who knows, it could follow through to the downside for a month.

Best of Luck Tomorrow

Today’s Trades:

Today’s Journal Entry: A Couple Healthy Reminders

•The more focused you are during peak trading hours, the more contented and relaxed you are outside those hours. Think Howard Roark.

•Regret is always a function of not doing your best. Were you as focused as you could be? Did you give in to boredom?

•Emotional Echoes from the past are dealt with by feeling them in their ORIGINAL context (Dad always put pressure on me, I was bullied in school, etc). Convincing yourself of an echo’s opposite is using your intellect to overpower your emotions, and does not work.

•The irony of confidence is that you will always have a degree of doubt no matter what, which will always argue for NOT putting on your full size when the situation calls for it.

•For day traders, where you are DEFINITELY wrong tends to be A LOT farther away in price then you are willing to give the position.

•Successful tape readers read the PEOPLE behind the prices, not the prices.

•Good trading comes from trading conditions, not from trading prices. The best trades are when your stop loss means that something within the current market structure has changed. The worst trades are when getting stopped out tells you nothing about your next trade.

Last Note

SO close to failure. I almost did not make it to three trades today. My last trade was a rebate scalp! (60 cents in rebates per two hundred shares, 45ish cents in commissions…15 cent winner!) I traded KSS exclusively today as I think it has been a pretty good trading vehicle lately. I am not sure how I like this challenge if I am going into the afternoon with two or more trades left for the day. It puts me into this weird scalping mindset where I just want in and out as fast as possible. Both of the scalps I took in the afternoon could have been held for more profit. The fact is I did not want to put anything at risk in the afternoon, I did not see any real reason to.

I am constantly finding that I can only make good trades through the attitude of accepting risk. After the small winner in KSS today, and watching the price action, I found myself starting to withdraw from the market. There was this feeling of distancing myself from the action so as to not put that small winner at risk in such an environment. I knew that if I was going to make more trades, I had to get closer emotionally to the action. I think I draw away like this because I sense a deep regret at losing money in low volume environments. It feels like just stupid trading, and if I lose money in a mediocre environment, the self talk in my head is pretty harsh (“you shouldn’t have…). Fear of regret is what distances me from the flow more often then not.

Oh well, I am going to stick with this challenge because I CAN say that this challenge is making me focus. I mean I sat and watched this price action like a hawk, even though it was literally doing nothing for 25 minutes at a time this afternoon. That focus is really helping me stay in touch with the market’s flow, despite the added struggle of risk aversion. Normally I would be at the gym already, or surfing the web with this kind of market action. I see this challenge as exercising my focus muscle so that when this market does start to get wide participation, I will be ready for it.

Lucas

Tomorrow’s Plan:

I am really focused on the VIX right now, and how it acts over the next couple days. It gapped up on Thursday right into resistance from July, and sold off. Friday it bounced a little, and I think if it can get above 27, we are in for a wild ride lower in the main market. There is a concept I use constantly to predict profitable moves (maybe predict is the wrong word). When I see some type of bottom or top that had volume, emotion, and decisiveness, I keep a mental note about it for the future. In this case, I am talking about the bottom in early July. If I see the market start to head back to that area with any kind of volume, I see that previous bottom as already violated before the market actually breaches it, and trade heavily in that direction. The reason for this is because whenever something like early July occurs, I think of it as outside the realm of “value.” Who wouldn’t love to be long around those July Lows? They were the lowest prices the market has experienced since September of last year, and we only hung out there for around a week! So if I see the market heading BACK to that area, it means that the people who would normally be looking to buy as we get closer to that value, are not there. As far as I am concerned, if the SPY breaks the 105 area, you might as well hold a short to the 100 area and below, because the buyers are not there.

If you think about human nature, it just makes sense. In my mind, if the VIX breaches the 27 area to the upside with conviction, that means to me the buyers are not stepping in yet, and the market is headed for the SPY 105 area. If we continue to look weak at that area, the buyers are still not there, at least not yet, and we will get new yearly lows. By working through a scenario like this, and thinking about how others will react to certain prices, given how they are reacting now, right action becomes self evident. If we break hard this coming week, will people look at the 105 area as a good place to buy (good value)? What would be needed for people who are bearish to start wanting to support prices? What would make YOU view the 105 area as a good place to buy? If I can get a clue into the answers for these questions, price action starts to become self evident.

My Best Ideas:

•LVS has a short term top from Friday. Again, like in the message above, will we start heading back to it, or head lower? I am watching how and if it pulls back from here to gauge how great of a long it is.

•WFC, ALTR, KSS, and STX all look like potential shorts. STX has had a super tight range of the last couple days, and I am beginning to not like it much as a trading vehicle at an $11 price (oh WDC , how I miss thee).

•M is still a long in my book, but I think its potential is getting dragged down in the current market environment. Still, I have it on my radar for pockets of strength.

Best of Luck Tomorrow

Today’s Trades:

Today’s Journal Entry:

Last Note

For some reason, I never got around to doing the July trading review. I think this is because of all the growth I went through. When I go back and review my trades, I am looking for ways to improve. I got a great dose of that “how to improve” over the last couple weeks, so I did not see a reason to go back and look at those trades. Oh well, maybe I will do one for August after it is over.

Lucas