A Day Trader's Market

Well, that cold wind came and went with a chill blast.....We still have the Fed Funds Target Rate decision tomorrow, and it could be a doozy. By the way, I will answer some of your comment questions here. The first is that the Fed lowered the Discount Rate yesterday, not the Fed Funds Target Rate. Here is a link to a brief explanation on the Discount Rate:

http://www.federalreserve.gov/monetarypolicy/discountrate.htm

Here is a link to a brief explanation on the Fed Funds Target Rate, you may also find this useful because it gives all the rate cut and rate hike history since 1990:

http://www.federalreserve.gov/fomc/fundsrate.htm

The Fed Funds Futures were predicting a 100% chance of a 100bp cut tomorrow and a 26% chance of a 125bp cut!!!!!!! Like I said, it could be a doozy.

I think some of the worst acid rain has already hit the market - with an 85 year old company that survived the great depression, 5 wars, stagflation, inflation, huge bubbles, and several recessions, only to have a foolish CEO and management team go upside down on their lending after their CDO Hedge Funds collapsed, and then go right down the toilet. The company was once worth over 20 billion dollars and is now worth 236 million (although it wouldn't surprise me if someone else bid $4-$5 per share for the stock in the next couple of days). I've been saying this over and over again the last 2-3 months, the gamesmanship in the Financial Sector can be breathtaking. Especially after the BSC CEO had the audacity to say the stock was worth $85 (book value) four days before it disintegrated.
Now for the next question. Are we at an intermediate term bottom? I don't know, but a 100bp cut and less bad news from the Financials would do it. Here is a nice article on LEH and the other brokers and how they may not be in the same condition as BSC:

http://finance.yahoo.com/tech-ticker/article/7226/Lehman:-Were-Not-Bear,-and-Were-Not-Screwed

Here is what I will say about the market and how to trade it. Buried in the Financial headlines was more recessionary news in the NY Empire State Index reading today. Manufacturing is definitely slowing down. We may see Energy, Commodity, and Agricultural stocks sell off a bit if recession fears grow stronger, although we will have to see how that crosscurrents with the Fed and a potential 100bp cut tomorrow. Now, if those three sectors sell off, then market leadership is gone, and the market sells off a bit as well. If that happens, I will be looking at the 50% Retracement of the Bull Market as the next support, but we will cross that bridge when we get to it. As for right now, we are in a Day Trader's Market. By that I mean, I am trading mostly the 60m swings and using the 15m swings as well, and not holding much overnight. So it is not a true scalping strategy, it just means I am tightened down to the Intra-Day Swings, or Day Swings as I call them (as opposed to the Daily Chart Swings).

I have been beating this drum for over a month now, we are grinding and chopping in a neutral to bearish market. Swings in a trending market are 3-7 days, in a neutral market they drop to 1-3 days and you use the 60m chart swings to guide you. Now we are in a Day Trader's Market. Remember the Accounting Scandal following 9-11 which followed the Tech Bubble Bursting? We got to where you never knew when the next bad news was going to hit, you get ready for bed and BAM! You wake up in the morning and BAM! No one wanted to hold positions very long, and NO ONE WANTED TO HOLD OVER THE WEEKEND. You saw a lot of Friday sell-offs in those days while the scandals worked their way through the market. OK, so now we have the Broker and Lender Liquidity Crisis following the CDO Meltdown which followed the Real Estate Bubble Bursting. Sound familiar? Do you want to be short overnight ahead of the Fed? Do you want to be long after the Fed? Do you think anyone is going to want to hold long positions on Thursday ahead of the Holiday Weekend, especially since the last bit of bad news hit on a Sunday Night?!? So, here's how it might go, barring any news bogeys out of Financials tomorrow morning, look for a bump into the Fed, then if the Fed give us 100, look for a possible bump continuation on Wednesday, but then watch your tail because a lot of traders may sell it into the long weekend on Thursday afternoon, and so on and so on and so on.....As a directional trader I can still trade this, and I did today. I am trading the 60m swings and scaling out on the 15m swings, and I'm not holding a ton of stuff overnight. I will stay in this mode until the mud cleans up a bit.

This morning, when things looked fairly uncertain, I blew out all my calls at the market on the open. I would rather take little .40 and .50 cent hits on several positions then get blasted. As it was, I took small hits on FCX, CRM, and TEX (which was a half size trade). I locked in a big profit on EOG, and I took a 1.94 hit on the SPY (my only bigger hit). I kept the DIA because I thought it would hold and bounce, and I was planning on another Day Swing. I hit the Day Swing on the 60m chart Hammer (on the Dow), although it gave another Morning Star at the same support. Either one was good, I bought the April 119 call and pulled in .84 cents and locked down half the trade, which I will finish on a bump in the morning if I get it. Here is a copy of those recent paper trades:

(click on image to enlarge)

Here is the 60m chart on the Dow, which guided me on the DIA:
(click on image to enlarge)

One quick note on a question, it is OK to let others know about this Family Page when you're at Events, in Groups, talking to others, etc.

For now, the Grinder Market Continues. I will keep to my Day Swings on any directional trades until further clarity. Someday we will trend again, for now, I'll keep hitting the market my way.