WhipItAround.com

Another excellent analysis from Tyler Durden (see below).  However, I think there is a good chunk of delinquent borrowers that attempt to pay what they can each month even if they are behind.  Really makes you feel like a sucker for acting responsible. 

http://www.zerohedge.com/article/guest-post-americas-stealth-stimulus-plan-allowing-its-home-owners-be-deadbeats#comment-143660

I’m sure all the bears will be feasting on this recent financial crisis in the Middle East that produced nearly a 5% plunge on the German stock market and a 2.5% decline in S&P futures.  Tomorrow, the market could bounce off these levels, but please take this warning seriously: there is much more downside risk than upside risk in the market.  I’d much rather be out of the market than in at this point.  I’ve followed the market for a while and have realized that intelligent investors/traders must read between the lines.  For example, the Fed pleased the stock market by maintaining a 0% interest rate.  Yes, money is cheap, but things must still be pretty bad if the Fed is still giving money away for free at 0%.  If I was Helicopter Ben and thougt this recovery was sustainable, I’d raise rates to at least 1%.  Then again, that would create a rally in the dollar and hurt US exports.  The Fed has your savings rate set at 0% to suck you into the market and hence recapitalize the ponzi scheme.  Does anybody remember what happened after the Fed reduced rates in 2001?   

I am not saying we are headed into another Great Depression, but it is worth noting that sovereign debt exposure was one of the main reasons the global economy went into a depression in the 30s.  There could be a number of systemic black swan events in the future.  What if investors began to reconsider their risk appetite for U.S. treasuries?  What if investors began to doubt Japan’s ability to repay their debt which is 200% DEBT/GDP?  What if people began talking about the amount of exposure European banks have with E. Euro, Baltic and emerging markets?  What if unemployment continues to rise?  What if there is a geopolitical crisis that results in a dollar rally and commodity burst?  What if?

The moral of the story is that you can’t listen to Cramer, politicians, the president or anybody who would be fired or lose money if they told the truth. 

On Wednesday, I noticed some peculiarities in the market: financial stocks, the Russell and GS could not catch a bid and traded weak all day.  Normally, when GS pukes, so goes the market.  I think an inside group of people knew about the Dubai debt crisis and this is why the market traded so strange.

I completely redeemed myself going both ways today - long and short.  Almost a $3k day, bringing average daily profits up to approx $800/day. 

I am a short term trader, however, I advise caution on the bulls, as the mkt seems very heavy here and i see some bearish signals including weakness in financials, small caps and major resistance around 1100 on the S&P.  That being said, I wouldn’t be surprised to see the bulls wash out the shorts one more time.  I don’t think this market will give up until the earlier of (a) the shorts getting exhausted or (b) the beginning of the new year.

Enjoy the weekend.

I was in a bit of a slump with negative results on Friday and basically breakeven on Monday and Tuesday.  After trading yesterday I journaled all my positives and negatives and noted all the trades that shouldn’t have been executed.  It was remarkable because all the losing trades did not fit my trade criteria while all the winning trades did.  Often times, one bad day leads to hesitance which results in missed opportunities and higher anxiety.  I realized that after a negative day, I was hesitant to take trades that fit my criteria, I was too eager to get out of profitable trades and I didn’t use appropriate size for good trades.  This is why it is so crucial to have rules and trading criteria– it prevents you from missing opportunities and chasing trades that are not there.  Focusing on the process- not P&L- always leads to consistent juicy P&L.  Today, I followed my system and took all mandatory trades, however I did find myself taking a couple of trades that did not fit my criteria with small size, and you know what happened?  I got stopped out.

I am done trading for today and am happy to see that today’s trading profits exceeed all my losses from Friday and Wed.  I am now ready to bank some coin.

Developing…

Excellent trading day in terms of stats.  Traded quarter sized positions today and still made $625.  I’ll post an analysis of all my trades later.

I’m closing shop for the day.  Made over $1k on two trades: long just prior to the fed announcement, long at the intraday low and short the intraday high.  I’ll explain the trades later.  I didn’t have time to post yesterday’s p&l but I was up $320.  Not terribly pissed about that profit since it was a nasty range day.

Unfortunately, I traded very small size and didn’t catch the big move down, hence my measley P&L for the day.  Today is a perfect example of why news should be ignored.  The econ data was very good, however, the market turned over mid-day.  I suppose that’s why I did not milk the move down- I was expecting the dips to be bought.  It’s unfortunate because I love raping bulls, however, I was the bull today- shame on me.  The a.m. price action and the fact that there is a lot of short interest in the market led me to believe the market would squeeze higher and retrace much of its loss from Friday. 

Bottom line, I should have made a few thousand dollars today, as there were several “mandator trades” I should have taken, including a few triangle breakdowns. 

Below is my P&L for the day since I said I would post everyday.