Do You Have A Genuine Business Plan?
Stock index futures opened
Tuesday’s session with small gaps to the upside after good earnings reports and
raised outlooks from Dow and SP 500 components MO and GM, however, the real
focus on the session was on the start of the week’s overload of Fedspeak with
Fed Chair Greenspan’s testimony to the Senate Banking Committee. Two rally
attempts fizzled out in the first 90 minutes and both the ES and YM settled into
narrow ranges ahead of the speech release. Although Greenspan kept the guessing
game alive by not commenting directly on the near-term outlook for rates, he
pulled a fast one by contending that the U.S. Banking system was prepared for a
rate hike when it happened. The reaction to the news was one of confusion until
market players realized that the man had finally admitted that a hike was
definitely coming, and began selling with both hands.Â
The June SP
500 futures closed Tuesday’s session with a loss of -19.25 points, and finished
just off the lows of the session. Volume in the ES was estimated at 681,000
contracts, lighter than Thursday’s heavy pace and just below the daily average.Â
Looking at the daily chart, the ES posted a huge key reversal as it blew through
last week’s low, its 100-day MA, and its 50% Fib retracement of the March-April
up move at 1118. The size of the daily “flag pole” gives a target to the 62%
retracement at 1110. On an intraday basis, 30-min and 13-min bullish
Butterflies had their wings torn off after Greenspan’s comments.
June bonds
(ZB) were trapped in a tight range ahead of Greenspan’s speech, but managed to
hold last week’s low at 107.01 despite the 10-yr yield closing at a 5-month high
at 4.415%.Â
The U.S.
Dollar ended its 3-day correction to break its bull flag and close at a 5-month
high, but now faces its 2-year weekly downtrend line. The Banking Index (BKX)
posted a key reversal down and looks ready to test last week’s low at 95.46 and
its head-and-shoulders target at 95 . The Semiconductor Index (SOX) also posted
a key reversal down and closed below its 200-day MA at 475 for only the 2nd time
in the past year.
Wednesday
morning gives us earnings from Dow components KO, HON, and F and the next round
of Greenspeak at 10 am ET as Mr. Greenjeans faces the Joint Economic Committee.Â
With the intensity of the sell-off on his mere Banking System comments, it
should be interesting when he actually has to talk about Monetary Policy. The
weak closing PREM points to a continuation day, but it’s best to treat it like a
Fed day and be flat ahead of the news. Breadth also ended dismal and the 3rd
distribution day out of the past 7 is going to make it tough to get anyone
excited about buying and holding.
Do You Have a Plan- a Serious, Genuine Business Plan?
Imagine you have a rich uncle willing to grubstake you 500K if you can provide
him a solid outline of your methodology and why that methodology will be
profitable. He’s a skeptical hard-ass but willing to read what you’ve written
down. Would you be able to convince him with what you’ve got now?
Even if you are totally discretionary, you should be able to articulate and
justify, in clear words on paper, the reasoning behind every action you
take. Discretionary traders are ultimately systematic too because they
just trade conceptual patterns instead of mechanical ones.
When do you enter and why? When do you add? When do you exit and why? What is
your planned risk per trade? What is your typical R:R target per trade? What is
your survivability quotient (i.e. how many losses in a row would it take to kill
you?). How feasible is your planned risk in regards to matching up with real
world volatility risk (i.e. what would a five point jump do to your half point
stop?). Are your range captures realistic or too close to random? Are you using
viable software or trying to get by with a cheap piece of crap? On and on it
goes.
Please feel free to email me with any questions
you might have and have a great trading day tomorrow!