Posted on July 19 , 2009 In Weekly Updates

The Flow

This next week coming up has three Almanac readings: Tuesday through Thursday are bearish.  The market is starting to flash some very overbought readings, and the McClellan Oscillator which I showed a few weeks back is above 200.  This usually means that a short term correction will present itself.  Whether it will be a few bearish days in a row or just some side way action should tell us how strong this market really is.  The volume on Friday left a lot to be desired for, so indecision is the name of the game at the moment.  However if we get a few more days like Friday in a row, that will be overall bullish for this market.  I have heard that we may be setting up for a broadening top (the pattern that looks a bit like a megaphone), but I have yet to see real evidence for this.  The SP500 would have to make it above its June highs for this pattern is become valid.

I named this update The Flow because lately, I have not been in it for writing.  I used to feel anguish over how I would be able to do something really well one day, but by the next week, I would not be able to bring that same skill level to bear.  This is especially relevant with day traders who may have a whopping great day where they nail every top and bottom, only to see the next be the exact opposite.  I had to accept overtime that cycles did occur, that there was energy affecting me from sources that I had no conception of, and that resisting “down” times only made them persist.  I have been busting my butt to come out with “Mastery,” but for some reason, it’s just not flowing.  I have about 2 pages written so far, but every time I sit down to write, the inspiration just does not come.  So another week will go by with no static content update sadly, but accepting the times when creativity is at a low point is crucial to living a happy life.

Gnothi Seauton,

Lucas

Posted on July 11 , 2009 In Weekly Updates

Just a Taste

Next week the Almanac gives four readings.  A bullish Monday and Tuesday and a bearish Thursday and Friday.  I rather like this set up as we are sitting on the right side of a consummated head and shoulder pattern in the main indices.  The bounce we have seen over the last couple days has been choppy, and could last another couple days.  The longer it lasts, the harsher the down move will be following it, assuming that this head and shoulders fulfills itself.  Most of the stocks and ETFs that I look at are going through a bit of a resting/transitional period where newbies get themselves chopped to bits.  Oil is down over the last few weeks, but the long term inflation scenario is little changed.  Long term bonds are up over the last few weeks, but again the long term scenario is the same.  Throw gold in with oil, and the list goes on.  So don’t get yourself killed out there chasing a dream eh?

I am working on the next article to be posted as static content, ill try and get it out by next weekend.  I thought I would give you a taste though of its contents in this update.  It will be called “Mastery” and will deal with many aspects of the trading journey, as well as the life journey.  While I was in Chicago last week I was chatting with some people and I heard a saying that stuck with me: “Human suffering can largely be attributed to a constant state of becoming instead of a state of being.”  For myself, this state of “becoming” has been a big part of my trading journey.  Most of the time, the thoughts running through my head were all about how to become a great trader, what a great trader did and thought like, and what life would be like after money was no issue.

This focus led to losses and suffering in my trading journey.  See if you are always “becoming,” your mind needs something constantly: EVIDENCE.  There are times in trading, sometimes long periods of time, where nothing happens and small draw downs occur.  Depending on your trading style, a single day can make your whole year, or several years: there is little consistency in profit and loss.  So a focus on p/l, and a constant need of evidence can lead you (as it did me) to put trades on that are not in your best interests, consistent, or have any real edge to them.

What I learned was to shift my focus to being instead of becoming, to accepting the kind of trader I was at this moment.  Your mind gets out of the game of looking for the market to give you something that it cannot give you.  It was only relatively recently that things started clicking into place for me.  I used to think that 3 years experience was quite a bit, and gosh darn-it I should be a high roller by now!  This attitude is gone, and replacing it is a vision that sees an extra 2 miles for every 1 that is passed.  We are all in this life for Mastery, in whatever area that pulls you.  I will leave you with a funny picture and a quote about the market Holy Grail: “The Holy Grail of the market is nothing esoteric or secretive, its that nothing the market does has anything to do with you. As a trader, going home at the end of the day and not blaming yourself for the day’s events is The Holy Grail. When you possess the Knowledge of the Grail, you will also have the humility to accept that your successes carry the same stigma as your losses: None.”

Love,

Lucas

Posted on July 1 , 2009 In Weekly Updates

Brief Update

I will be going to Chicago tomorrow, so I will not be able to do twitter updates tomorrow or Monday and Tuesday.  Wanted to update you guys on the Almanac though so that you would be prepared for next week.  Next week we have a bullish Tuesday, Wednesday, and Friday.  The Almanac also warns that one should watch out for huge market gyrations both up and down after July 4th.

Right now we are in a pure chop phase, which would provide an excellent area to break out from.  Best of luck to everyone trading next week

Posted on June 28 , 2009 In Weekly Updates

Market Plans!

The market chopped up quite a few traders this week. I have thankfully been relatively on the sidelines as through May and June, the market has moved very little in absolute terms(I think the market is within spitting distance of the first trading day of May). Shadow Trader did a good work up of the market internals this week, and they release a nice free video each week that covers that well (http://www.redoption.com/shadow_video.php).

This next week has a few almanac readings. Monday and Wednesday are Bullish, and Tuesday is Bearish. Cannot get much more choppy then that! Friday is a holiday, and as always with holidays, expect more chop and sharp moves that take stops out right from underneath you. This week had a fantastic break of a trendline that had some sharp follow through with a gap down Monday. Yet the market just went right back up breaking through its down trend line, invalidating the breakdown.

This week I am going to briefly touch on “market plans” and their uses. When I say market plans, I mean that the market has set up in a certain way that you have witnessed in the past, and you trade with that past plan in place. This sounds a bit vague, so let me give the example of this last week. This last week the Almanac had a nice set up where the middle three days of the week were bearish right after options expiry and a break of a down trend line. That is definitely a powerful set up that, if it works out according to “plan,” gives a great opportunity. However I am here to tell you that the plans that you create that say “the market did this in the past, so now that this is repeating, the same conclusion could be drawn,” is plain hooey. Understand that any statement like the one I just made is very flawed, in life, as well as in the market. Our brains love to associate and find patterns, so any chance it can get where it feels more certain then it normally does, it JUMPS on!

These “market plans” though are not totally worthless so long as you do not take them as deterministic. The market does repeat, or as Mark Twain said about history: “it does not repeat, it rhymes.” So patterns can repeat themselves, and sometimes your “market plans” work out perfectly. However as soon as you attach to them and think “A causes B,” you are in trouble. The truth is “B sometimes follows A,” is much more accurate. So this last week, when Monday gaped down and the internals turned very bearish after a short period of time, there were red flags going off in my head on the “market plan” I detailed in the last blog post. There is only so much energy out there at anytime for bullish moves and bearish moves. The market can do anything at anytime, and it is always possible for very large bearish or bullish moves to occur (like last September and October). However, there is always a limited amount of energy on any side of the market, and when it is the summer and the market has been chopping around, you must be willing to throw away your plan. The plan I had in my mind had Monday as bullish, which would have set up well for selling off in the rest of the week, with a small bounce on Friday. Instead, the market plummeted on Monday, using up a lot of the bearish energy out there (you could also call “bearish energy” weak hands, stopped out traders, etc). That is why I came out and said on Monday that the next few days would be choppy, and to expect to be wrong!

So the moral of the story, have plans, they can be fun! Let them change if the environment says that they will change, because change is the only constant. You can have a bunch of fun if you are relaxed and dispassionate enough to allow the market to surprise you with what cards it plays.

I may be going out of town to Chicago on Thursday with family. Not sure yet if it will happen or not, but if it does do not expect twitter updates for the next few market sessions after Thursday. If I do I will put out a fast post on the Almanac updates for the next week. Have a great trading day ahead!

Love,

Lucas

P.S. Gas prices rise into the funny zone:

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