Par on this hole - May 24, 2007

The market traded exactly as planned. How rare, indeed!


I covered the first tranche when futures hit 1513. I missed out on the bounce to 1517. The market had broken all my technical levels, so I didn't want to be too greedy, but I wanted to ring the cash register.

I covered the final tranche near the close at 1508. My read of sentiment and the market was that it needed to close near the lows in order for us to get the S2.

We got it.

Now, the odds are that it will bounce. However, I want to trade it in paper. I had a good week. Why risk it?

SPRING SHOWERS - May 23, 2007

My bet paid off handsomely.

I was looking for this type of exhaustion trade.

The key feature of S1s: we hit new highs, but there are no stops.

Shorting new highs is an OK trade, and buying dips to sell the highs is OK, too.

The the longer-term trade is to raise cash of put out shorts.

Five Days of S1 - May 23, 2007

We hit our fifth day of S1 readings. Historically, this is a pretty long string, and the market is likely to exhaust itself.

I was waiting for a re-test of the highs to put out shorts. I chose to sell the June 1560 calls 3xs for 4.70, vs buying June 1495 puts 2xs for 6.25. I got a bad price on the skew 8.2% vs 13%. The market is really keeping the puts bid.

The market looks very strong on the back of buyout news on Alcan and stronger retail earnings by Target.

The market looks BULLET PROOF. Yes, I am not feeling too good about this trade right now. And I may have to take some pain on it.

If the market closes at the high today, I'll have to take a sentiment reading and reassess.

But I like the trade. I just wish RSI was higher.

You are Strong and I am Weak - May 22, 2007

Last week went well with the strangle. My original plan was to buy 1524 stop. It would've worked but I got freaked out by the price move. I have to be willing to take some risk. Instead, I covered my calls, and managed to only pay about 1 point. So I netted 5.5 pts on the trade.

Today, I expected a continued S1 trading. I thought it was a good risk reward trade to buy the market near the lows. I thought that the lows would hold, and that the highs were likely to be tested.

I bought 1527 bracketed with 1525 stop and 1532 limit.

As you can see on the chart, it would've went well, but I chickened out, and when it dipped below 1527, I sold out at 1526.50 rather than be stopped at 1525. The low was 1525.25.

It just goes to show that my original instincts are proving to be correct, but watching the market has hurt me.

The LORD is strong, and I am weak. Too many distractions in my life, and I have not been in prayer enough.

The system still works, but I am my own worst enemy.

LESSON: YOU HAVE NO EDGE IN WATCHING THE MARKETS AND TRADING!

Signal 1 Blahs - May 14, 2007

We are now in an S1 regime which is the hardest to trade. The market meanders poking higher with little follow through. There is an underlying bullishness to the market.

The basically strategy is to be short calls when the market rallies, and to short puts when the market dips.

Eventually, we'll switch to S2 but it could take a while. So shorting puts needs to be done with stops to prevent destruction when the winds shift.

I have shorted May 1525 calls, and the May 1495 puts. We are living dangerously! However, I have faith that my system will help me trade out of any problems.

May 2, 2007 - Bull Market Resumes

My outstanding sell orders were triggered in the overnight session, selling out my remaining 9 ems at 1497.

I thought that some caution would overtake the market at the 1500 level, but apparently it hasn't because its trading over it right now.

The singleton S2 reading followed by a bounce and back to S4 tells me that this market is VERY STRONG.

LESSON: HAVE FAITH IN YOUR SIGNALS!

NAV: $1,013,126
Adjustment for software settings blow-up was about $10,000, so I am well over 2% for the April to present period.

May 1, 2007 - Sell in May and Go Away

There are several seasonal memes that come and go, and right now the meme du jour is SELL IN MAY AND GO AWAY.

Memes have their season in the sun. So we have to contend with weakness.

I was expecting weakness down to the where it is trading now 1482-1488. I walked in this morning, and I was nervous that I wasn't filled on any of my bids overnight. So I started bidding at the open 1489 and established a position of 6 ems to start.

This was a mistake. My original idea based on sentiment was that we would have 2-3 days of weakness to start establishing a position. WHY WAS IN IN SUCH A RUSH?.

I have been conditioned like everyone else to be afraid of missing the upside.

I have wide stops now - 10 pts to be able to capture a decent rally once all this selling moves out of the way.

I have a 21 em position. Pretty large. A trade back to close to UNCH would be terrific. I will sell 1/2 of my position if it gets there.