Closed Out My Puts and Shorts

Today, around 3:20, I realized that the market had an incredibly strong bid developing. I thought to myself that the bulls would probably press the shorts into the close, and that if they were successful, it might set up for some follow-through tomorrow. On Monday I had purchased some SPY and DIA puts, so I closed those out, in addition to my QQQQ puts. I had already covered my EMN and GES shorts this morning.

I also shorted TUP and JOYG when the market reversed. When it reversed again I covered those shorts, ending up with a small profit.

So that leaves me completely in cash except for MVIS.

I am still bearish, but it seems that the bulls are still not ready to capitulate. I want to wait for a bounce and then decide what the next step should be.

My trading over the last couple of days has been more calm and patient, but I am still trading too much. MY GES and EMN shorts are some of the first decent profits I've made in weeks, so maybe things are turning around for me.

iBankCoin.com Down?

Was it a revolt of the peanuts?

Did Danny and Woodshedder join the ranks of the writer's strike?

Did Fly attempt to fire Bilderburg, only to have the rich dude offer him a MRSA laden caviar cracker?

Did an errant laser beam bounce back and effectively destroy the one known as Fly?

The internets want to know...

Long Overdue Update

Well, as you know, MVIS took off without me. Luckily though I had set a buy-stop at $4.15 for 2K shares. Those filled, and I picked up another 1K at 4.22. The fact that it started moving the day after I sold out is just uncanny. The market really can make one question his own existence. Sometimes I think there is a super-computer at Scottrade that sends my trades to others so that they can trade directly against me. Of course, I know that is silly. But sometimes it certainly feels that every move I make is the exact opposite of what I should do.

I have managed to shake off my earlier blues, and have returned to a semi-calm and collected state of mind. What I have realized is that I cannot shake my belief that we are in a period of correction that will likely last for several months. I hesitate to call it a bear market. I feel I must be positioned for it. If I am to be a trader, I have to be able to profit in times when the market is not trending up. Granted, there is nothing wrong with going to cash, sitting on one's hands, etc. But for me, there has to be a marriage between all those elements.

For right now, realizing that I feel strongly that the market is in a downtrend, I must not take on any additional longs. Sure, I bought MVIS. I've also bought ALDN and OXPS. For the latter two trades, I have stops set well below the average daily range, and I will ride these out for better or worse. Consider them a long hedge against my belief that the market will continue correcting.

I have also begun buying puts. I bought 10 Jan 52s for the Qs. I will also be looking for puts on the SPX and the DOW.

I have also shorted GES and EMN. I will continue trolling daily for shorts.

Again, I want to thank everyone that leaves me comments here as they help more than you can imagine. Even contrary opinions are very valuable. Ticonderoga left an opinion that this is a bull market, and he begged me to quit shorting the market. On face value, what he says makes a lot of sense. It forced me to really think about what my knowledge and experience up to this point has prepared me for. After much deliberation, I have to realize that often I am right, but early, and that often I am right, but lose conviction before the trade becomes profitable. If my belief is that the market will trend down for a bit, then I must act and hold to that conviction.

This weekend I hope to dispense with all the ruminations and get back to some charts. Specifically, I want to chart out what the indexes are doing, focusing on my plan for the coming months.

Oh yeah, I'll have Stockalicious updated at some point today with all my recent trades and latest positions.

Sold Out of MVIS Today

I sold my other half right at the close. My reasoning? Well, my account is at breakeven for the year. It has been a year of colossal blunders and bad luck. The slow drip of MVIS, amidst the realization that I will probably not have a profitable year, became like the slow drip of a leaky showerhead. You can live with it for so long, but then in the middle of the night, you wake up to the dlop, dlop, dlop, and you jump out of bed and rip the whole contraption out of the wall.

But before all that, I decided to buy some QID. Then I bought some more. And then some more. You see, I had written that the Nasdaq would likely bounce today, for several reasons. So I was not shocked to see the futures in the a.m. and then the gap-up. Why I didn't buy some QLD at that moment, I'll never know. See, I've been buying a block of QLD near the low of the day, almost everyday for the past four, and then getting stopped out when it surpasses the low. I definitely wanted to be long it for this bounce. So the day the bounce comes, I don't buy it. What the hell? And then, to load up on QID?

One thing that I feel confident about is that there is always another leg down. Look at any correction. There is always another leg. Now, the second leg may not make new lows, but it generally heads back towards the previous low. I know this, so I wanted to get some QID. Actually, I want to have a lot of QID for the second leg. Anyway, where my patience went, I'll never know. It would have been good to get a block of it at the close. However, I bought some near the open. Again, WTF?

Yes, I'm bearish here. Therefore, I've been looking for weak stocks to short. On the strength today I shorted EMN and GES. I've also got a small short in GT. Due to the tech strength, I had the good sense to cover my AKAM short this a.m.

Whatever. This has been a terrible year, and If I continue to screw things up, then I am going to quit trading for some time, re-group, and start over.

iBankCoin.Com

Behold --

Fly On Wall Street Farewell

Be sure to be at Fly On Wall Street at 10:00a.m. ish EST Monday for his farewell post.

As Danny's killer video shows, I am a part of this new site. That fact, and the preparation required, and the fact that everyone in my family has been sick for almost a week with a horrible stomach bug has meant I haven't had much time to update this blog. Things will get back to normal here soon.

Even Hedged, I Lost

I need to make this short, although I have a lot to say, as I need to be doing some research tonight.

The biggest news is that I sold half my MVIS. Of course it closed above where I sold it.

I closed out all of my inverse ETFs just before the market decided to run back up, this afternoon. All night last I kept thinking that I should have had double the size. I was right. I played the short side conservatively due to my long streak of losing trades. Had I put on decent sized positions, I would have done really well today. As it stands, the shorts just helped mitigate the MVIS pain.

All day long I was thinking the S&P seemed relatively strong. As it rallied into the close, I bought 100 SPY for a trade.

I also started a small short position in CAT, as it could not hold the 200 day average. I also started a small position in BZH. The chart for BZH is hard to argue with. It sure looks like it wants to trend up for a bit. And it held up very well today. I'm not sure what else can happen over the near term to push it below its recent range. I know, short CAT, long BZH seems to be an assinine move. I'm aware of the contradiction.

The Ugly Stick

That is what I'll call today's candle on the chart above.

Recently, following a big down day, the index has rallied. I would enjoy another 50 point down day. This up / down / up / down stuff will drive a man to drink.

Bear Rally Just Getting Started?

The fear-meter here is showing no signs of letting up. If one were to add a 10 and 20 day moving average to this chart, it would become evident that both are trying to cross over the 50 day average. Typically this is signal used to indicate the start of a new trend.

If this were the chart of decent equity, I'm sure many bulls would find it bullish. Too bad it is bearish. Keep that in mind as you position yourself over the coming days. If the VIX retests its August highs, it is safe to assume the indexes will be near the August lows.

I've included some Fib numbers here to suggest areas of resistance. It should be noted that the 50% retracement coincides nicely with previous resistance. We might expect the indexes to put in a few bullish days if the VIX pauses or reverses at that level. However, the question every trader should be asking himself or herself is if they believe the VIX will push through that resistance, and what will that mean for their positions.

Finally, bottoms are found quickly, while tops can take a long time to carve out, and are often coupled with grueling whipsaws and volatility as the bulls fight the good fight until they finally conquer, or capitulate. As the markets keep catching a bid in the afternoons, I'd say the bulls still have some fight left in them.

RSI(2) < 2 Screen

Last night the screen showed lots of results. My two favorites are TMX and FLR. I purchased TMX this morning, but am waiting on FLR due to its gap up.

***Update***
Covered my GIGM short @ $22.30. May have let some profits on the table as it is really getting hit. However, it has been strong, and $22.30 is the 20 day moving average.

I Hate Being a Bear

I was watching my profits gather steam this afternoon as the indexes headed into fresh lows. As you might know, I'm short the indexes, so this was fun to watch. As expected, the indexes paused in areas which have provided support over the past 1.5 months. No big deal. I expected the pause. I considered covering my shorts. Nah, as it looked as if the indexes might close near the LOD, I decided to just let things ride, and hope for a bigger shake out in the morning.

Then, somebody with deep pockets came to the rescue. Was it Bernake? Goldman Sachs? Who knows. Whoever it was loaded up. I want to be on record saying I'm not a conspiracy theorist and I don't really believe that the Plunge Protection Team would come to work on a boring day like today. However, this type of action sure does leave me wondering if Helicopter Ben did not drop some cash on the markets this afternoon, and it definitely makes it hard to be a bear.



Above we have the S&P 500 represented by the SPY. At exactly 3:05, somebody began buying roughly 5.25 million shares, which cost approximately $7.9 billion.



Next we have the Dow, represented by the DIA. Again, right at 3:05, a large buyer steps in and picks up roughly 473K shares, costing them $63.8 million.



Here we have the Nasdaq Composite (QQQQ). At 3:05, a large order begins filling for roughly 3.2 million shares. This cost the buyer about $1.7 billion.

To sum this up, someone or a group of someones stepped up and placed a buy order across the indexes equating to almost $10 billion.

Thoughts?

One Step Forward, Three Steps Back

This year, and especially this month, has been very difficult for me. A run of bad luck coupled with some poor trading has resulted in my account being up only a few percent for the year. This is after being up almost 20%, twice.

In short, I feel much like this guy looks. Hat tip to Michelle Malkin for the image.

The run of bad luck started a few weeks ago with SLB closing down 10+ points after earnings. Then came TRAK, which gapped down 10 points, but managed to recover half of the loss. BLUD came along with its FCC investigation and cost me another 5 points. And who can forget BWLD, which cost me another 10 points? That's roughly 30 points lost, in positions which were worth almost 1/2 of my capital.

So when Friday comes, and the market looks like it might be gearing up for another leg down, my emotions got the better of me, and I liquidated most of my positions. This was pretty ridiculous, considering that I had charted out where I thought the Nasdaq might bounce, and the index conformed perfectly to the scenario I had charted.

But I didn't let the pain and frustration stop after liquidation. I then added index shorts. I should add that I did liquidate on bounces--it wasn't a free for all, and I did get some relatively decent prices on the double inverse shorts. However, this adding of index shorts likely just added another level of complexity for this coming week's trading. Complexity is not good right now.

As I consider where I am going wrong, I keep coming back to the emotional trading. In fact, the traders that I follow who are systems-oriented are all doing well for the year. I feel even more strongly now than I did earlier in the year that I have to decide on a system and stick with it. I could probably allocate capital to several different profitable systems and do okay. The fact is, I have to become more mechanical, and less emotional.

I definitely do not want to get back in negative territory on the year, so what I will be doing over the next several weeks needs to be done well, and done without emotion. To that end, I've polished off some old filters and screens I used to use. One in particular has backtested very well. I may start taking some of those signals again, as it has 74% win rate, and I really need some high probability trades to undo all the major gap downs and sell-offs I've endured.



The chart shows a perfectly executed pull-back on the Nasdaq. Most indicators are in neutral territory, with the Stochs showing overbought/sell signal. I still have the distinct feeling that the market is topping. However, the indexes may move too far against my shorts in the nearterm for me to hold them long enough to see any gains.

Selling Out

I have sold out of, or gotten stopped out of every position except my GLD, SLW, MVIS, and MSFT.

I have purchased QID, DXD, SDS, and TWM.

ADP Employment Report

The report was released Wednesday at 8:15 a.m. This indicator is better than any other indicator in effectively predicting the BLS's own monthly estimates on private, non-farm hiring. In other words, if you want a heads-up on what tomorrow's labor data may be, take a close look at the ADP report. Although I think it is going to take a much stronger employment situation than what the ADP is suggesting will be reported tomorrow to juice the market.

You can read the ADP Employment Report here.

If you are into chart-chomping, the report provides some nifty charts for your consideration.

Gunning It

Picked 100 SWHC and 100 RGR as they both were screened on the RSI(2)<2.

Both sold off this morning, but found some quick support.

***Update***

Stopped out of both trades for small losses. Note to self: This strategy is bound to work better when overall market conditions are more stable than they are today. Also, I may add a component to the screen which requires the RSI(2)<2 and then a bounce before entering.