Whoever made the decision to schedule Memorial Day here was on to something. The placement of this much needed rest is divine. I spent the weekend decorating the graves of my losing trades. Most trades receive a solemn salute for their service. For others, I stopped and observed for what seemed like hours, with deep introspective of the events that led to the loss.

I reviewed every trade taken in the S&P this month. If only ironically but perhaps like a little galactic wink, there have been 99 trades. A blanket of inpatients was strewn over the field. And from the review a glaring bit of clarity emerged. I must stick to my plan. I have two data sets, one with trades taken according to my plan and the rest.

Check check it out:

Pretty good numbers on the planned trades. Something to build on, no doubt. But the thing is, I really like my unplanned trades, even though the numbers suggest I should NEVER trade anything outside my plan. So I hardcoded a nuance into The Plan which lets me have my cake and eat it too. The rule is inspired by the feedback I received from you guys and I appreciate your thoughts. Kudos gentleman, behold! Literary logic to protect my ass:

I will only trade other pictures (like profile support/resistance) if I’ve earned risk capital and with a ‘one round elimination’ format meaning trades can only continue to be taken if the prior trade was correct.

To break it down, I have to only trade my plan until I’ve earned profits. If at that point I really need to take an unplanned look, I have one shot to do so. Not two, or three like Friday. I always build risk into my trades and must be willing to forfeit 1/2 my daily gains if the unplanned trade is wrong. If it’s a winner, and I want to take another, the same rule applies.

Planned trades can be taken any time. Even after a failed unplanned trade. Make sense? If you hate it let me know.

I’ve gone over 100s of charts and screens and bloggers’ picks and have a few hot looks going into the week should the market bounce or even flatline. I’m a stalker long on MSPD, LSI, SNDK, NANO, and UTEK.

Get excited.

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I had a very strong trading session early on, first selling the pop in the market when the durable goods order came in better than expected and earning four handles.  Then I scalped a little bounce four 1.5 handles, then another short earning 1.5 handles.

Then there was a small loss trying long again.

Then another win on the short side, 1.5 handles.

Then three failed attempts at another short when I noted yesterday’s low holding.  The market lost its structure, buyers were holding their levels, yet I was pressing shorts.  I need to avoid this type of trading.  I gave back ¾ of my daily gains going from big ass titties to all that work for peanuts.

Any advice from the experts on how to break such trading habits is appreciated.  Otherwise I have to dig out these trading psychology books and do some introspective over the weekend.

I’m going for a short walk and then addressing these stocks.  It’s bounce mode there could be some long opportunities.

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Tip top of the morning, memorial weekend procrastinators!

The pre market has turned from moot to rather weak over the last hour, with sell flow pushing into the tape.  We’re currently trading at the value area low of our 24 hour profile which is also a high volume node at 1639.50.  We could see a bounce here, especially given the one direction nature of this most recent move.

Oddly enough, our profile yesterday took on the shape of a letter P which, in many cases, suggests we spent the session squeezing shorts.  That’s relatively uncharacteristic of a large gap down, but I know many long traders who were green come market close yesterday, so it makes sense.

The question now becomes, was yesterday a temporary phenomenon to the upside?  The attempt at filling the gap was impressive, so I give the buyers a pat on the back, but we are dealing with a heavy amount of sell flow in the globex hours.  It will be interesting to see how RTH handles this weakness today.

I’m keeping with the zoomed back profile to give us reference points to trade.

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We have two major price zones to use as guideposts if this market continues to put in large ranges.  The balance zone above (which coincides with a possible gap fill) from 1657.25 – 1653 is our barrier to the upside, and the lower zone, our major support, spans from 1628 – 1623.  It’s best to view these areas on the volume profile charts to see their significance.

In between, we have a low volume slip zone that the overnight session had some fun sliding down and up through.  I’m not going to inject much bias into this piece, I’m simply defining interesting reference points, and seeing how we behave today.

I want to see if they can form any semblance of a gap fill.  How well that goes (or doesn’t) will be telling.

 

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Guys, there must be down days.  And when we’re in the stratosphere, atop the treacherous K2, guided by our Sherpa—gentleman Ben—and a group of extorting Sherpa come and kick your pack mule down the mountain and demand monies…there’s going to be some casualties.  You may need to hunker down low and take some hits.  You need to be ready to sweep the leg.

As traders, we’re paid to take daily beatings from the market.  It hardens you.  HDGE was my worse loss of the year, trimming a cool three percent off my high water mark.  Guess what?  I crested my portfolio over that mark since then, and now I’m off my new peak by two percent.  It happens fast.   You have to keep your wits about you.

This may be the start of a peak-to-trough environment.  This can last weeks.  WEEKS!  Oh the humanity.  But before we can say that with any kind of confidence we need to see price acceptance below TWO, you heard me right TWO major areas of balance which are way above where this market could pull back and still be considered VERY constructive.

I’ll look at the primary and most actionable balance distribution in the morning.

These Stocks:

I booked some winners that were lingering, some losers that were fingering, and some scratches that were carrying curious implications.

YELP was cut early.  It was crowded, that’s how crowded flag breakdowns play out.

RGR was an early sale too.  I caught the swing low, it’s been dead fish forever, when that first crazy sell frenzy happened in the spooz this morning I booked it.

I sold JRCC as it butted up against resistance.  The Plan says I must sell logical price levels, even if it’s my last piece.  I can always buy it back at a better price, at least that’s my mentality.

I booked GS because the devil’s been shorting it, I had 6 percent plus gains, and the daily candle looked nasty.  Financials have been a big driver of this move, we could rotate out of them and still see the tape flat/higher.

I sold SCTY late afternoon, after adding to my position early.  Net-net I make over 10 percent playing this crack rock.  Awesome, except it was good for over 20 percent at one point.  A win is a win, I suppose.

I added to my CREE investment.  They’re a great company.  Remember, this is a multi-quarter hold after booking massive gains in the name trading style Q1.  I’m wearing my investor hat on this one.  That being said, it also printed a nasty daily candle.

I caught the breakout in IMMR early.  It’s this type of aggression that allows me to not experience much emotion when the breakout sputters out like this one did.  It has Fly power behind it, so I’m giving it room.

Bottom line: you’re surrounded by algorithms wielding meat cleavers, protect your neck with profit scales and stop losses.  My cash pushed way up into the bell, damn near 50 percent.  I don’t like lazy cash so I’ll be hunting tonight.

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These morning markets, I come to them every morning.  Much like The Zen Hunter alluded to about surfers, it’s an obsession—every day hunting waves to ride.

I put up these profiles, looking for where the waves can kick up.  Boy did a wave kick up today!  I have wins on both the long and the short side, easily my best day ever, earning 10 S&P points.  It was fun too.  And I stuck to the plan all but once.  My one deviation, an attempt to knife catch that free fall, was my only loss on the day.  So be it.  Stick to the plan or lose money.

Anyhow, that’s why we do all this work, for days like today.  They’re calling this the blow off top already.  I’ll hold my judgment for now, but I did cut my RGR and YELP longs in case the afternoon gets a little Nightmare on Elm Street.

Let’s look at these stocks and see what’s working.

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Yesterday was essentially a completion of Monday’s auction.  The charting software I’m currently using won’t allow me to merge these two profiles together, so we’ll have to visualize it for today.

Notice the very fragmented, low quality trade that occurred in the upper 1/3 of Monday’s profile.  Now notice how much of Tuesday was spent thoroughly auctioning those prices.  Interestingly enough, yesterday was also a neutral day, featuring range extension in both directions, signaling a lack of directional conviction and the possibility of a change in the market conditions.

We’re still above the large balance distribution from last week, the overnight session is balanced within our current profile, and we’re essentially waiting for the market to tip its hand.

Here’s the levels I’ll be monitoring to gauge which way the market is trying to go, and how good of a job it’s doing:

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Lots of movement today, as a result there were several trades in the $ES_F.  Ten contracts were traded in total, 6 winners, 4 losers. I want to get this more like 8 winners, 2 losers.

All the trades came on the short side today, with the best being a sale at 1669.25 and riding down to 1664.75.  The worse was a sale into the hole at 1661.50 which didn’t stop out until 1664.25.

The total activity netted a small gain of $100 dollars and a grey hair or two.

Repetition is key in the futures market.  I was talking to a friend of mine who works closely with Special Forces.  I asked what they do in their off time.  He said train.  He said they have layouts of the buildings they plan to raid and run through mock up copies in simulation over a 1000 times before the real deal.  That’s real deal awesome, and why they have high 90 percent win rate.

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The overnight session has seen sellers trying to gain a foothold.  Most of their overnight attempts have been thwarted but they appear to be gaining a bit of traction as I’m preparing this analysis.

We’re still above the major three day balance zone I highlighted yesterday morning.

The behavior of volume on the upper half of yesterday’s range is fragmented and signals a lack of trade facilitation.  It’s odd really, it wasn’t a sharp reaction from the sellers but more running out of buyers.  Either way 1666.75 was left behind as a near no volume node and is the primary resistance to the upside.

It’s looking like we may test the balance zone today, and along with it my expectation is for some choppiness.  Buckle up.

UPDATED NOTE: We put in a double bottom at 1661 overnight.  It’s close to yesterday’s low 1660.  A test of this area seems likely and important.  A break of 1661-60 should have us looking for swift trade back to the balance zone below.

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Stocks are strong right out the rip this morning, with the S&P tide pushing all these jet boats (momo stocks) higher.

In the futures, I’ve traded four contracts, all to the long side, earning 1.5 handles, 3 handles, 1.5 handles, and a runner.  UPDATE: Closed the runner, 3.25 handles.

I kicked out SAM after initially thinking I would make it an investment.  I don’t want to be invested in SAM.  I like Pabst if I’m going low end, New Castle if I’m being normal, BUD for sports drink, and anything brewed at the micro capacity from Michigan all the time.  So why own SAM?

I sold LOCK too because it had a chance to be great and it decided going sideways was cool.  What a wimpy stock.

The solar trade is complete madness.  I love it.  These ‘late stage” conditions give a huge edge to the small trader who can ferret in and out of the crazy names.  My wild boy is Scotty.  SCTY is the proverbial stone that kills two birds, giving me a piece of Elon’s sweet ass and solar exposure. With that in mind, I’ve taken two scales, and am down to a runner on SCTY. You guys are crazy so I want to see how far your crazy gets me.

Don’t sleep on JRCC, it’s way out of balance after we learned Friday that they bought a little more time in their debt structure. I want to see the imbalance push higher, obviously.

New longs are YELP, and CRZO and cash is low low low, 25 percent.

 

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