Trembling Hand Trader

Volatility is a problem for day traders too.

Normally I love times like we have seen recently. The large volume on the SPI, the large moves, the gaps down and quick hits up against the open. I love it. But this time I have not really made much money out of the whole week. Friday was a good day for me but by the end of the day my head was in a mess although I made money. It took until late Saturday to unwind. After reading this article on TraderFeed I'm feeling a bit better about last weeks trading. The last month I have reduced my trades setups to just a couple of more high probability trades. Watching all the action last week and trying to stick with my new trading plan has bent my head, my new plan was obviously not suited to the volatile market, but at least I have not bent my account. This kind of thing happens so often, just as you change your plan to suit a certain type of market the market will frustrate you and also change!

If your head is a little out of whack at the moment you are not the only one, don't throw out you plan just dig deeper. Find what is good and what needs changing. Just like the market has gone through a change recently, whacking the highly leveraged and long and transferring money to the liquid and patient. Now is a time to work harder and refine your plan find what is good and what will work in a changed market. Now is not the time to give up. Speaking of Trader Feed if you want to know how great traders think and develop have a read of this Enhancing Trader Performance: Proven Strategies From the Cutting Edge of Trading Psychology (Wiley Trading) its a ripper.

Premarket open 31st July 07

So we bounced yesterday and so did every other stock market including the one everyone thinks is important, the Yanks. Commodities where mostly up last night and the YEN reversed to indicate that the carry trade unwinding is slowing if not stopped for now. The SPI is up some 30 points from yesterdays close. But I would be cautious of getting Bullish here, remember we predicted the rise yesterday a lot of that is baked in, the smart traders will be looking ahead and I would think that could be reloading shorts on strength. In fact we have not really had any covering of shorts. The open interest on the SPI is now higher than I have ever seen it at 353,519 contracts. I was sure that that would have dropped the last week as the Longs liquidated and the Shorts covered but it seems not. This started to go up aggressively during the middle of last week and its still going up. There is also nearly 3 puts out on the spi for every long when one week ago it was 1 to 1. So there is obvious still worry about further falls. My guess is that the SPI option traders are not your normal options punter mostly when the put to call ratio gets jumpy its close to the bottom, not so sure on this one. They are most likely hedges for those that are still long the SPI but if the "smart" money is hedging they are no longer 100% on getting back to where we were only 1 week ago.

Almost Green

The little Aussie market is showing some spine. We are not that far away from going green, a couple of sectors are already in positive territory but still every bounce is an invitation to short so I'm playing it very carefully the volatility is going to still stay high no matter which way we go.

Premarket open 30th June 07

Well it is getting scary out there especially for anyone who is long and leveraged. Today we have a good chance of some real panic selling, even more than Friday. The meltdown or crash has been a big story all weekend. The open should be ugly and expect the 2:00 to 3:00 O'Clock time to add to the pressure, the traditional margin call time. We will get a bounce some time soon but the chances that it recaptures the old range are slim. As I have said the game has changed for many. We have not broken down from a consolidation since the bull run started in March 03. A lot of traders will be hurting from the "surprise" of a downside break. The consolidate run again game was the game most people played since 03 and now while they are stunned into the realization that that game was to good to last we will take on a different game. One of more overhead resistance and many more failed attempts but really that could be said to have been happening since May. I have taken some heat from my call that the Aussie market was the first to meltdown if you were looking at the SPI last Thursday the action was nasty, selling into new lows without hardly an up tick until we lost 90 points. If you look at the open interest from that day it added 21,000 contracts the largest increase in a month or more, the market was getting short big time nearly 12 hours before the US opened and melted down, supposedly leading us!! Keep a close eye on what the YEN is doing, that is the driver of the bull market the carry trade if that keeps going down I think all markets, Commodities and Shares, will follow.

Idiot Media Monkey

If you have to say anything about the current meltdown read this monkey idiots.

We did not follow the US down today. Do not tell your readers that we followed the US down today. Do not stand in front of some smart graphic shots of last nights US falls and show our falls today as if that proves why we followed. Think about what happened. Pull up a chart if you know how to do that. Look at our action yesterday. This fall started at 10:45 our time, in our market. We entered a cascading sell off right at that time and didn't stop until we had lost 110 ticks on the SPI. Asia then opened for their afternoon session after we had closed and it was straight down for them. The UK followed and was down over 1% before the US opened. In fact the big falls in the US on Tuesday came from the UK cracking its uptrend and dropping 120 points before the US even opened. Traders are like a school of fish swimming in waters infested with danger, nothing matters until the head of the school moves then bang we all swing around to swim in a new direction. Most of the time you don't know which of the fish switched first but bloody hell do you idiot media monkeys always have to say it is the US?

Bloody Day

God only knows what its like to hold a long CFD account through this kind of mess. I imagine you would have nothing left if you were 50% in.

One for the must remember file. The UK was in a mess Three days ago before the US opened and then Aussie market was the first to crack yesterday, No doubt we will be reading how we followed the US into a hole from all the media monkeys.

Premarket open 27th July 07

Is this the end? Is the bull dead? Well it is certainly a major change to the game that started back in March 03. We have not had a down side break to a meaningful consolidation since then. That is 4 years of playing the same game, run up, pull back, consolidate run again. We will take out the lows of our three month consolidation. Last night the UK lost all of its gains going back to November 06. While the S&P 500 is now back to where it was in mid April. The SPI is down 158 from yesterdays already tardy close, that puts us back to mid February. So yes its going to hurt many, it will put a huge smile on the bears, they will be smugly playing the I told you line, if they are short well done. But the bull is not dead yet. Commodities have not broken down, although they have also been hit but their up trends are still holding. China is still going strong, I don't think the bull is dead but he well may be a little different. The thing to be watching is the Yen if that runs it will add to the panic and there could be more down side. On big sell offs like this there is high probability of bounces in the next couple of days but that will unlikely be the start of another higher run. Will be interesting to see what happens with the likes of Wesfarmers Coles bid, was that not linked to the share price holding up?

Today the consolidate, run again game is dead, not the bull market. We will need a new playbook until the highs are taken out convincingly and I can't see anyone thinking that will happen for some time.

Premarket open 26th July 07

Yesterday I posted a stat that when we have big gap down days we are very likely to be up by 98 points by three days later. It looks like we should get a bounce today but what would be better is if we can just hang around the current level and form a good base. The last two weeks a good uptrend had developed and yesterdays hit has not broken that. We have earnings season coming into full swing next week. I can see a situation playing out where the Materials, mainly BHP/RIO, blow the doors off with their results run hard for a couple of days and then roll over on some sell the news action. They have had a mighty run so far, some basing moves for the materials sector I think would be more welcome than a run up into earnings. And yes I would like the biggest cap sector, the Financials, to lead us higher not the miners. If you think yesterday was the start of the end of the world then keep a close eye on the AUD/YEN and USD/YEN, the last couple of melt-downs the future indices have been following every tick lower. It is the yen carry trade unwinding worries that really smokes the markets. There has just been some pretty good results out in the US after their close so what ever happens on the open I would think our afternoon will be up.

Big gaps down on the SPI

Just a quick stat on big gaps down on the Aussie market like today. Since January 05 it has gaped down from the previous day session more than 1% 25 times. If you take the close from the day it gaped down and looked ahead three days later it has closed higher 22 times. The average gain from the close on the first day to close three days later for the 22 positive times has been 98 points.

CPI

JUNE QTR 2007 KEY POINTS

THE ALL GROUPS CPI

• rose 1.2% in the June quarter 2007, compared with 0.1% in the March quarter.
• rose 2.1% through the year to June quarter 2007.
  
  OVERVIEW OF CPI MOVEMENTS
• The most significant price rises this quarter were for automotive fuel (+9.1%), hospital and medical services (+3.4%), fruit (+8.4%), vegetables (+6.1%), rents (+1.6%), furniture (+3.9%) and house purchase (+1.0%).
• Price falls for domestic holiday travel and accommodation (-3.5%) and audio, visual and computing equipment (-2.4%) provided some offset to the increases above.

OK CPI is out and no real damage in that. Looking ahead I can see a chance of inflation dropping the next quarter. Fruit and Veg because of the drought then floods have obviously a good chance of dropping if normal weather and supply resumes. The falls of travel and elec equipment you would think will continue falling as the high AUD kicks in to forward hotel bookings and travel plans from OS tourists as well as the new Elec equipment landing on shelves purchased with the higher AUD catches up.

Fuel is up a fair bit on the median price through the June quarter, I think it was somewhere around the $65 US a barrel for most of the quarter. Its has been between $70 and $75 the last three weeks so thats another 10 or more percent rise but still two months to go in this quarter. I see the real pressures coming from the housing figures, In Richmond where I live I see often 30 or more people lining up to look at a house for rent and then having to bid up the asking price just to have a chance at getting it, not much on the market for sale either. The rental prices are real creepers because of the 12 month leases, but they will continue to rise if employment stays low as it sucks people into the inner city areas as the economy booms. Keep an eye on the Health care sector, 3.4 % rise in a quarter is going to someones bottom line.