Here's something new, Lehman is in the news.....Seems as though the company is seeking capital from overseas investors, and the company is buying back its own shares. Normally a share buyback program is bullish, but this one has damage control written all over it. Continuing the Broker theme, Morgan Stanley got an upgrade from Wachovia, which pushed the stock up a little pre-market. Nothing quite as pure as one Financial upgrading another, hmmmm.....
Well, I'm not looking for MS puts anymore, even if it might end up being a good play. I still have some GS puts, and one Broker is enough for now. That sector continues to be violently "newsy."
The ADP Private Employment Payrolls report came in much stronger than expected, but the report has been spotty and unreliable. Productivity also came in stronger than expected, which seems at odds with the ADP report, because employers have a tendency to lay off some employees in our type of economic conditions, and then squeeze the same productivity out of whoever is left - hence the probable reason for the higher Productivity report. We still have ISM Services and the Oil Inventory Report due out at 8:00 am MT and 8:30 am MT respectively. So far, the reaction to the Economic Reports has been muted. I still think the Jobs Report on Friday will be the next big economic driver in the near-term, and the market will continue its current technical move until then.
I am looking to continue scaling out of my puts this morning, and probably be fairly flat the market by the end of the day. The Oil Inventory Report might change that, but we shall see.....
7:40 am MT: I sold a small amount of my SPY puts into the gap at the open for an 8% gain so far. I also picked up some puts on AKAM for a quick, perhaps intra-day, swing trade. In addition, I stopped the KSS puts for a .68 cent loss, I just don't like the look of the chart, it's getting too choppy. The stock didn't quite go 1% above the high of yesterday, so it may be a little premature on my part.
8:00 am MT: I stopped the GS puts that I entered at the end of the day yesterday for a 1.25 loss on a half-sized position. The whole Broker area is getting a little too goofy and newsy for me right now. In addition, AXP just guided 2008 earnings expectations above forecasts, which is adding to the volatility in Financials.
8:10 am MT: that's an interesting Evening Star/Shooting Star on MS (here we go again with the Brokers) on the 15m charts.
The ISM Services report came in slightly better than expected, and slightly expansionary (not recessionary). The report underscores what I've been saying since January, which is that the economy is not in a recession. The economy isn't hot or cold, it's just churning along, sort of grinding. I'm not bullish, but I'm only modestly bearish, not fantastically bearish like so many "experts" have been. So far, the data is proving my point, all year long. As for the market, I am probably going to sell most of the rest of my puts and go flat.
8:30 am MT: I sold all the rest of my positions: the DIA puts were a .49 cent gain, or 12% profit. The SPY puts (the new puts from the end of yesterday) were breakeven. The QQQQ puts were a .12 cent gain, or 5%. And the AKAM puts were a .45 cent loss, or 13%.
I'm all out of everything, or "flat" the market. Today has been a choppy day for me so far. I can smell a strategy shift coming. I think the market is about to go tight. If we don't see a drop today or tomorrow to the technical levels, it will be an indication that we are going tight. If we go tight, I have to get tighter. I always want to trade inside the time frame of market. So if the market shortens from the Dailies to the Hourlies, then I'll be trading the 15m - 30m swings. We shall see.....
The Oil Inventory Report numbers showed a big drawdown (correction from earlier), compared to an expected increase in inventory. The numbers seem a little odd, and traders are still selling Energy stocks a little, so something still needs to be sorted out there.
11:45 am MT: I played some JOYG calls for a gain of .20 cents and then just decided to get out. I think the market has too much ambivalence right now. I don't want to be long or short anything. There are some interesting movers here and there, and Big Tech is leading the way, but it's too quiet. I'm going to wait until just before the close to see if I want to add any more trades.
My favorite Upgrade of the Day is from Merrill Lynch: "we are upgrading LEH from Underperform to Buy." Which, of course, not only boosts Lehman's stock, but also Merrill's.....
I think we need a little more news about LEH, we seem to have a news vacuum there.....I want LEH to get more attention, LEH is not being talked about enough.....
On a positive note, my TOS Papermoney account is now profitable by about 65.5k on the year, after starting with the equivalent of about a 50k trading account in January. So I have made about a 130% gain in my Papermoney account in 5 months, which is about a 26% gain per month. I would have liked to make considerably more than that, but given the market conditions since January, it's excellent.
3:45 pm MT: Market Wrap: I've had a chance to walk around outside and clear my head and think about this a little. Here's what I think is most likely to happen the next few days. First of all, the market is going tighter. With Energy and Commodity stocks consolidating on attenuating demand and slowing spending, that leaves Big Tech as the only real momentum sector right now. There's a smattering of stuff here and there but, nothing spectacular. I think that price action is going to be intra-day tomorrow, I'm not looking for some kind of big move on the daily charts. I think traders are going to sit on the Jobs Report coming Friday. And I think the Jobs Report is going to have to be either a big hit or a big miss in order to loosen up the market. Otherwise, I am looking for a continuation of the tighter, neutral price action, where the market goes 1-2 days in one direction and then flips the other way, hence the tightening. I could be wrong, but I think it's going to play out that way. I went up and down my universe of stocks all day and I saw a lot of jumping and fading. I didn't see a lot of momentum. So, unless we break the 2 day lows on the market, don't look to play something much above the 60m swings.
If I see some clean setups intra-day tomorrow, I may do some shorter Intra-Day Swings on the 30-60m charts, using the 15m charts for entries. But I'm not going to be getting all jiggy about this, I'll probably focus on just a couple of stocks or the index ETF's. If I see a momentum play early in the day I'll look to trade it, but I'll be out of most of the position by the end of the day if I can.
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Hey Dwight,
ReplyDeleteI'm a bit more settled concentrating on the education and learning the technical side of the option instruments. I want to learn why a option value changes to develop the confidence to act less emotionally.
I'm paper trading smaller positions. I appreciate your feedback and the support of the blog. I like DO to run off of diagonal support.
Rick: DO might hold the diagonal support. You'll probably know in about 15 minutes when the Oil Inventory Report comes out.
ReplyDeleteDwight,
ReplyDeleteWhat do you think of GILD? I happened to check out the news and apparently they obtained a patent for a new medicine.
Thanks,
Denise
Krystal, I have listened to Jeff for a long time as well and if you go to his site, on the left hand side, look at his trading video then go to day trading and watch that video. He says to use the rsi and the mcclellan ocilator for volume. He also trades big spread low volume options wich are a little scary but yes, I do agree, he goes with price as well generally.
ReplyDeleteSteveC,
ReplyDeleteAh, yes. I remember when he made that video... I think you and I are on the same page, then.
Thanks for your response!
Dwight,
ReplyDeleteJust stopped out of JOYG @ 83.70. Going to follow you to a "T" to try and bring my 'paper account" back up. Did you ever lower the stop to 83.10?
Thanks
Gary
Denise: GILD is probably more than half-way through its current upswing, but you might get a quick 1-2 day trade there.
ReplyDeleteSteve and Krystal: some day, in the future, I will give you a response about why it seems sometimes Jeff is using indicators, and sometimes he is not. I will say for right now that I learned how to trade from a "Wizard" who took a 5k account to 10 million in 5 years swing trading options. He continued to make millions of dollars a year even in the Bear Market. He continues to make millions of dollars today. He taught me how to use Moving Averages, and why. I use them successfully as one of my support/resistance indicators all the time. I'm not focused exclusively on Moving Averages, but I don't agree with Jeff that they are "useless." In fact, no indicator is really "useless", it's just a matter of knowing when to use them, and when to not. I agree with Jeff that technical traders should focus on Price and Volume, so he is correct.
Here is the last thing that I will say, and I'm not being a jerk when I say this, so don't take it wrong. I am actually trying to bring clarity to your educational focus. So here goes.....If you follow anyone who teaches you about trading the stock market, ask them to demonstrate their trading for you in a live format. Then ask them to keep doing that over an extended time, and through ever-changing market conditions. Then judge if you are learning from someone who really knows how to trade.
There are approximately (and this is actually an understatement) 9,999 trading educators for every 1 real trader.
Gary: see my 11:45 am MT post today for the exit on JOYG. I took a small profit and walked because I don't like the conditions out there right now. I'm all out of everything. I made sure I got the post up in enough time that other traders could get out at a profit or breakeven. I wish that I had a paging service for you, I have even thought about an alert service that goes to cell phones. But for now, I get the info up as quick as I can.
ReplyDeleteDwight,
ReplyDeleteYou have always been upfront with your trading AND your account speaks for itself. Not to disrespect Jeff or his site, but I don't want to see a bunch of "cry babies" (and there are a lot of them) who don't know how to professionally trade start comparing coaches and trading styles-HERE! Besides isn't that what we're this is all about, to learn a trading style? I'm sure if you put ten traders in a room you would have several different styles. So I pose the question to all: Which one will be yours? I know which train I'm riding! Sorry if this sounded crass.
Gary
Thanks Dwight,
ReplyDeleteSorry I missed the post but if you want, you can call me anytime @ ......just kiddin-AGAIN!
DWIGHT
ReplyDeletei want to make sure that I understand correctly because I kind of got the "price is King" trading menmtality from my 3 day life . Looking at price abd volume is a lot less confusing then usng all these indicators. I steered away from the MA"'s but not sure if that was a good thing. How exactly do you use them, other than using them to confirm your support and resistance areas ?
H all
ReplyDeleteany thoughts on OMG for put entry?
Dwight, you know, I have heard others say that about indicators: you have to have an edge in knowing how to use them. Also, when you say "wizard," are you talking about one of the wizards in Jack Schwager's books?!?!?! Oooh, I'd love to know who it was so I can read (or reread) their profile in the book!!! How cool! (giggle)
ReplyDeleteAnd I don't think any of your comments are jerk-ish, Dwight. :)
Gary, I was not at ALL trying to COMPARE Dwight and Jeff. I was just trying to get clarification on what someone was saying about what he teaches, that's all. Sorry to rock the boat, you guys.
Gary, I dont know who you are talking about being a "crybaby", and why you would insinuate that there was a comparison of coaches. The simple question was to Dwight,if he believes indicators were useful, because other people do, or to trust price alone. Besides Dwight asked who I was talking about directly. For me I trust Dwight completely or else I wouldn't be putting my $$$ on line everyday based on what I have learned from him. Are you suggesting we dont ask questions and just watch and listen? No thanx. If I have a question I will ask it.
ReplyDeleteThank you Dwight for answering my questions and laying on the line with such detail every day.
Dwight, what do think of hes bouncing off its 30 day ma and horizontal support at 118.00 or do you think oil is dead for a while?
Dwight, when you mentioned going tighter, I closed out 80% of my 1-3 day swing positions and started playing the 15 and 30 minute bars. Lost small on HOG, SBUX, but won on SPY, DIA, MER. I played each of 3 winners twice for small gains.
ReplyDeleteAlso bought GES 10 minutes from the close. Hope to fill somebody's market order on the open.
Regarding indicators vs less or none. All I can say is my trading turned around, when I cleared up my screen and after hours of coaching w/Dwight. Linda Raschke (Market Wizard) who uses minimal indicators says all traders need to learn to read the tape, which in today's world, I think means price action.
Steve and Gary: don't get caught up too deeply in what I've been saying today. You two, and myself, and all the rest of us are on the same team. I am being careful not to be cruel towards any other "educator" because you can always learn something new, and useful, from someone else. Just keep it all in perspective, and apply the best information about real trading to your own trading. I want everyone to keep posting comments, and keep working together, and I realize there will be tougher moments where things can get a little warmer than usual. That's ok, we are all still working together on this. I'll get to the other answers in the next hour or so.
ReplyDeleteClaudia: I use some specific indicators occasionally for very specific setups that I've developed over the years. I use Moving Averages as a backup to my diagonal support lines, and I use Fibs as a backup to my horizontal support lines. If I were to break it down, I would guess that 90% of what I look at is price, 5% is volume, 3% is indicators, and 2% is news. That's pretty rough, but you get the idea. Also, OMG is a very nice put setup, great job seeing this one. The only caution is that the spreads are a little wide on the options.
ReplyDeleteDwight, I understand completely and I enjoy the team camaraderie that is here on this site. I am sorry if I stirred the sh.. that wasnt my intention at all. As usual I will be here every day and watching every wed., thurs., and fri.
ReplyDeleteThanx again
Krystal (and Steve): neither of you rocked the boat talking about Jeff or his blog. I try to find the best, most benign ways to explain the "trading education" process, and what to watch for. Any of you following this blog can learn a lot from any other source on trading. And there is a lot of good education out there, even from those who are more "educators" rather than "professional traders." But I would be doing all of you a disservice if I didn't make you aware that there are certain, critical elements to your trading education that you will most likely only find when you learn from real traders. That's why Market Wizards is a good read. That's why you can learn more applicable and professional information from real traders like Larry Williams, Linda Raschke, Toni Turner, Ed Seykota, Dan Zanger, and others like them. That was one of the first things my own mentor taught me and DRILLED into me over and over. If I strayed a little, he put me back on course. (By the way, he isn't in Market Wizards). He taught me to always look for real traders, read anything I could about them, study them, and search for anything they had written, as well as attend events that they taught, and so on. We have had many a LONG, LONG conversation about staying focused on what's real. I respect, and even learn occasionally from other "educators" out there, and I have many, many books written by "educators." But I've never lost focus on what I needed to do to cross the last mile, the last bridge, the last canyon, to get to real trading success.
ReplyDeleteSteve: regarding Energy stocks, I'm sticking by what I posted yesterday, and that is that Energy stocks are still consolidating, and probably headed towards a more intermediate term consolidation. It will be interesting to see what this does to the market, because it's NOT a supply increase situation, it's a demand decrease situation, which is technically an attenuating consumer spending situation. I think the market will stay Neutral for the foreseeable future. A very interesting development - and clue, from the past 2 days in Energy stocks, especially in the face of the Inventory Report today.
ReplyDeleteBob: EXCELLENT JOB applying what I warned of, and that is that the market is going tighter, VERY WELL DONE! Also, a great comment by Linda Raschke. She used to use a lot of indicators in the early 90's, and by the early 00's she had culled most of that out and focused mainly on price setups with some indicator backup (she likes the 20 period moving average as a guide).
ReplyDeleteGary: I figured you were referring to the other site, but you're like me, when you type your fingers don't keep up with your mind. I chuckle at some of the things I've posted on this site, because I'll read it afterwards and realize that most of you won't know what the heck I'm saying because my brain was buzzing at 9200 RPM when my fingers were typing at 30 WPM. I have to go back and re-type it with the missing info that my brain assumed I had typed, when my fingers couldn't keep up before I was on to the next thought.
ReplyDeleteGary, get the cooler!
ReplyDeleteI'll have a bottled water... I only drink the hard stuff, ya know! :)
Group hug people, group hug!
Dwight, I'll have to do what you said: find anything written by the people you mentioned and others in the Wiz books, and study them. That'll be my homework for the summer...
Tomorrow is a new day, all... we'll kick it off right!
Krystal,
ReplyDeleteGroup hug is in order... it's been a rough day! I'm a Red Wing's fan, so I've already opened the cooler.
Group hug, and yes friends! Hopefully tomorow's market will be a little easier to play and hopefully no more "news bogeys".
ReplyDeleteWell all this is good reading this week (and every week), thanks to Dwight and everyone else.
ReplyDeleteDwight, the whole thing using tech indicators that Steve brought up stemmed from myself. We were talking / debating about them being used in daytrading so he said "let's ask Dwight". It kinda ran it's course a different way so I read.
Anyways ... What I was saying that "at times" they can be useful.
Example - in combination with support, resitance, candles and trend. This morning for example, when the ES's were hitting their highs the RSI and STO were into the overbought zone. I felt this was helpful to see before deciding to hop on the wagon and go long. I decided to wait and watch and am glad I did. Maybe tomorrow online you can touch the subjest a little bit and let us know when and how you use tech indicators for swing trading or if you do not. Thanks !!!
Dear Dwight,
ReplyDeletethis is something I've been meaning to ask you for a while but have you ever traded futures and currencies? Are futures something important that we need to know to be successful traders? Oh yes and can you explain what TRIN is and do you use it? thank you, thank you!!
Also, this past week I felt so bad that I posted that I was "mad" that the spy chart was looking like a head fake. Approx 2 hours after I remembered writing that, I was like oh my gosh I didn't!!
I was on the wrong side of several trades this week and it was strange too b/c I am usually VERY short term and this ONE time, I hung on to 4 trades in this market craziness. Dwight - yesterday, you explained how to exit trades in the chat section and that was really helpful. I need to be consistent and do that moving forward.
I was so darn disappointed in myself because there for a while I was having such an awesome little winning streak that it is amazing how rule #1 is so important to not let emotions get in the way of chart reading!!
Gary: I had to laugh when I saw your comment on Red Wings fan because I live "somewhere" in PA. It's going to be good!!
Thank you for the blog it's been a real educational experience. Denise
Dwight,
ReplyDeleteCouple of quick questions. Do you follow a rule, such as the never use 10% of your capital in one trade and never lose more than 2% of your captial in one trade. Also, what percent of your capital would you say you use on average in (all trades included).
Joe
Denise,
ReplyDeleteMy mother was from Dixon City, PA. and it's (was?) beautiful there. I think it's (game)fixed anyhow.
I've been getting whopperjacked over the last week or so. My calls go down and my puts go up. I think my entries are good but just not working out. I need the the next "Wizard" to show me the way. I can't be on during the day as much as I was a couple of months ago, so I can't read your comments throughout the day and it really stinks.
ReplyDeleteWhy does if keep deleting my name when I post? Let's try it again. I don't want to my anon.
ReplyDeleteGary,
ReplyDeleteYour mother was from Dixon City, PA? See!! there's a VERY good reason to be rooting for the PENS!! HAHA My son got to skate on the ice with Sidney Crosby one time!! How cool is that?Denise
Dwight,
ReplyDeleteWanted you to know that you market wrap is great every night. At the end of the day, I feel lost a lot of the time. (What happened in the market and what do I expect to happen next).
It's easy just reading your wrap and saying that makes sense.
I would like to get to a point where I determine my wrap and compare it to yours.
How were you mentored in determining your posture every night. Do you have a check list of things you look at to determine your posture?
I know you look at the indices but you have a way of incorporating news,sectors, what's moving the market, etc when you finish your wrap.
Fading yesterday - tightening today
How do you do it? I always seem a couple steps behind.
Chic
Dwight,
ReplyDeleteDid RIG break a triple top with a target of 128?
I have been going thru my watch lists. You right not much to play. Talking about watch lists, I have heard you mention a list of 200 stocks. Do you pretty much just stick to that list or do searches also?
Chic
Ken: you're right about using indicators in specific setups. I have some high probability setups with #1 Price (trend, s/r, patterns, and momentum), and #2 one type of indicator (any ONE of the following: MACD line or histogram, Stochastics on various settings, RSI on a 9 period, Bollinger Bands, ADX, CCI, and some personal Market Breadth indicators). The Double Top with a Bearish Divergence on a Stochastics 14,3,1 is one that I have taught all of you. I have a lot more up my sleeve that I haven't taught, especially personal setups that I came up with myself. In addition I use moving averages and fibs for backup s/r. Now, even after all that, I still focus mainly on Price because I learned a long time ago that I miss too many trades if I focus on indicators before price. I look at price first, and then if I see some type of pattern developing that goes along with one of my indicator setups, I check it out. Otherwise it's all price.
ReplyDeleteD.A. - thanks for your response, chat w/you tomorrow after noon.
ReplyDeleteDenise: I don't trade Currencies or Commodities, although I have explored it a little. I did force myself to learn about all four of the major markets so I would be better at intermarket analysis. Also, ask me about the TRIN, and how to use it intra-day on VC, it will be much easier for me to show you rather than type it up.
ReplyDeleteJoe: I run my portfolio risk up and down according to the clarity of market conditions and the probability of the trade setup. Typically I don't ever go with more than 50% - 60% of my total account in trades. New option traders should be much lower than that. I also rarely use more than 10% - 15% of my total account in any one trade, and my stops are intended to keep the actual risk on any one trade at about 1% - 3%.
ReplyDeleteChic: Market Wrap is a lot of experience and years of studying the market, stocks, and the economy, even after the solid mentoring. I check price action, volume, market indexes, sectors, stocks, news, and calendars to name a few. I always have my eyes open looking for ideas. It takes time and experience, but the nice thing is that you can learn while also getting a good Market Wrap handed to you every day. One last thing, you can tell if you're getting a real market wrap instead of "elevator analysis" (the market was up today because.....the market was down today because.....) when someone is not only talking about what was BUT ALSO how they traded it, AND also what they speculate will be coming in the future, AND how they intend to trade it. As for RIG, it's not a pure Triple Top, but it's close. When RIG broke the diagonal support line 3 days ago it was headed for 145, when it broke that yesterday it now looks headed towards 142. If RIG drops through 142, then it may follow through on the Triple Top-like pattern and drop down into the 130 area. On the subject of searching, I search and sort in a Universe of 150 - 350 stocks every day.
ReplyDelete