Take A Look At This Trade – This Is One Of The Few Times You Can Get Away With This
You may recall my article on Friday where I mentioned the possibility of a
decent reversal setting up, well as we all know by now, that did not even
remotely come close to happening. Friday’s action all but mitigated the “signal”
that occurred after Thursday’s close. Never get in front of a freight train,
however, if the signal is triggered, you need to dip the oar in the water,
luckily, Thursday’s low was never breached, so a crisis was averted.
Nonetheless, it still begs the question…”Should you go long this
market?” Naturally, that depends on your risk tolerance. It is difficult for me
to pull the trigger in here until there is a pullback. Even then, I will only be
looking to make a trade to the long side, no long-term capital
commitments. Regardless of all the bullish talk going around the Street, I still
feel the risk/reward is not there. I will not bore you with the details. The
risk/reward is far better in other markets if one needs or chooses to be
long. The gains in Latin America, specifically Argentina and Brazil, have
dwarfed any total return in our markets in the last six months with far less
risk. The same is true in the currency markets, specifically Canada, New Zealand
and Australia.
I get asked the question, or even more specifically called a pessimist, by
readers and even by some friends of mine. I typically pause, then retort with:
“A pessimist is someone who is
negative on a particular situation, but has no argument or reasons behind
it. Secondly, a pessimist is someone who never accomplishes anything, simply
bitches and moans.”
Let me be clear, I am referring simply to investing in my
aversion to our markets. From a trading standpoint they continue to offer
decent trades day in and day out. I refuse to get caught up in the Wall
Street hype train. These morons’ jobs depend on a market that always goes up,
they do not have the stones to step up and say it is OK to do nothing or go
short. When will I turn bullish long-term? I dunno, show me some good earnings,
an improving job market, decent valuations and CNBC announcing they are going
off the air. In the meantime, I will trade and look elsewhere for my
investments.
Turning to the core of my article, let’s review what happened in
HVT land on Friday. Luckily the action was
surprisingly good in the first hour, albeit related to some economic numbers,
but heck, take it any way you can.
The most obvious HVT trade
was the long setup off the 10:00 AM ET Chicago PMI
number. The consensus was looking for a reading of 49, the number came in far
above estimates at 52. Given the rabid speculation in the market, you just had
to know they were going to bid the tape up on that news. I never missed a beat,
BUY 2000 JPM at 32.70…filled. Then the
markets, as expected, went on a rip (relative to the way they have been trading)
and allowed me to pocket a little over 20 cents when all was said and done.
I share this trade with you for one simple reason…it goes
against every rule I have ever preached. Take a look at the chart below, you
will see what I mean.
Notice anything? Yep, the stochastics are very overbought. So
why be a buyer? Boredom? Rebellion? No, it was one of the few times you can get
away with this. It is simply a function of the economic number. The emotional
reaction from these numbers outweighs any technical merits or lack of on a
trade. When unbridled buying/selling takes place, the chart is useless.
The other trade which took place, and I highlight because so few
have such excellent follow through with current market conditions was
Goldman Sachs
(
GS |
Quote |
Chart |
News |
PowerRating). This trade was a
variation of an HVT technical setup, just
taken off of a 15-minute chart vs. a one-minute. When the market gets quiet (and
even when it does not), I occasionally take slightly longer-term trades if, and
that is a big if, the S&Ps are at my back. Friday we had the ingredients for a
great trade, both a stock and the futures trending up for longer than two
minutes.
The only little twist on this trade was that I threw in a little
Elliot Wave analysis to assist in choosing this trade. I had a price target for
the day of 81.50, while I did not hang in until that price I got out in the low
81’s, after an initial entry on the opening at 79.85.
One last thing, focus gets a lot of lip service in the trading
community, but what exactly is focus? Well it depends on what you are doing. For
me, while doing HVT, it is focusing intently
on the quotes and trades taking place on the stock I am trading, not worrying
about what other trades I might be missing out on, what others are doing,
etc. The only things when I am completely focused are the price action and the
charts, the rest takes care of itself. For those of you who saw the third set of
the Agassi match at the French Open, you
will see what I consider to be the “picture” of focus and lack thereof. There
were a couple of instances where he lost his focus and let his opponent back
into the match. Suddenly, there was the blank stare, where I assume Agassi was
unaware of everything else except winning the next point. This is where we all
need to be when trading, it makes it effortless.
Tomorrow I will follow up on my article from a week or so ago
with some more thoughts on the state of the dollar.
| Support/Resistance Numbers for S&P and Nasdaq Futures |
||||||||||||||||
|
As always, feel free to send me your comments and
questions.
Â