Line In The Sand
Rule #548 for Traders
“Never get too opinionated.”
Sure we have all heard it before, but every once in a while we do get
opinionated about trading and let that influence our actions. For me, that
happened yesterday. If you read my
column, you will know I made the case for establishing some short positions
intraday and longer term. At first it looked like a good call. Naturally with
more bad news on the economic front and a break of some key technical levels, a
lower market seemed reasonable. However, the market rallied, confounding
many people, myself included. Yes, the market reversed midday and finished
lower, but not before I was stopped out of some of the positions.
The lesson was important on two fronts:
- Avoid making bold claims. While they may be correct in the long run, do
not draw a line in the sand. - Let your stop losses take you out of the market, not your emotions and
feeling that you are smarter than the market.
Luckily, I was batting .500 yesterday. I stuck to Rule 2, got beat up a
little on some of the positions, but never let those opinions affect my ability
to HVT, which paid nice dividends yesterday.
The beautiful thing about HVT is that it
requires no opinion and little prep work in advance.
Even from an HVT standpoint, the market
is slow. Sure the net changes on the indices look dramatic each day, but the
price action throughout the day leaves little to be desired. As a result, I am
doing very few HVT trades in the morning
session, cherry picking essentially, and have not traded in the afternoon
session since last Thursday.
That being said, sure, there are some good short opportunities as we go
forward, unfortunately it will not be a straight shot lower, rather it will be a
process. So keep your stops in place and be prepared. One thing is an absolute,
the trend is down, and eventually, the shorts will play out, both long term and
intraday.
Going into today’s session, it looks as though the jobs report has rescued
the market from a move to the downside, at least as of 5:35 AM PST. It will be
interesting to see how this plays out once the market opens. However, in order
for the market to really get some steam behind it, it needs to hold the 892
level on the S&P futures, that would begin to break us out of the current
trading range, while a move above 916 would be very encouraging. So, play
defensively until there is clear evidence that the indices are moving with
decisiveness.
Key Technical
Numbers (futures):
S&Ps |
Nasdaq |
| *916* | 951 |
| 902 | 933-35 |
| 898 | 923 |
| 893 | 914 |
| *891* | 898-903 (choppy in here) |
| 881 | 878 |
| 870-871 | 861 |
| *868* | |
| 860 |
* indicates a more significant level
As always, feel free to send me your comments and
questions. See you in TradersWire.
Also, I will be on Bloomberg TV today
at 3:20 PM EST.
Have a great weekend.