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Friday, April 7, 2017


“Every day, an adventure in riding the big one down.”

I go to bed early last night cuz I was really tired; I wake up this morning and the world is on fire in more ways than one. “Can’t a guy get some sleep”?

Ok, let’s count the bombs; 1) Senate “nukes” the filibuster, 2) Chalky Soetero regime spies on political opponents, 3) no health care and/or tax bill anytime soon, 4) President Trump bombs Syria, 5) stock indices “tank”, and 6) “most important jobs number evahhhhhh is disappointing.” EXIT QUESTION: “How can the known universe survive”? [To ask the question is to answer it.]

Through it all, financial markets on a roller coaster from hell … up, down, all over the place as money chases money in one direction and then collectively changes its mind and rushes the other way … conditions and parameter metrics for trading changing so fast there is no way to keep up with it except minute to minute … investing is only speculation gone bad and decided to be held.

Turning to today’s Dow30 trade … first, when you get very heavy action overnight, regardless of where it comes from and what caused it, it tends to “rob” action later in the New York day; today is no exception even with NFP … second, this whipsaw action we have seen the last couple of days around the New York open [± 30 minutes], where the market races up only to get clobbered minutes later, and then everybody looks around and says, “WTF was that”? … third, VIX has finally awoken [good thing] which means better ranges, although I would like to see less overnight and more in New York … and fourth, notwithstanding the daily candlesticks in both the Dow30 & SP500 look “not so hot” from a bullish technical standpoint, the Dow30 for its part has spent the last 9 days [including today] mostly trading inside about a 150 point range; there for sure have been moves outside the 12600 – 12750, but they have come back into that range quickly, whether from the upside coming down or the downside coming back up.

And while the entire investment universe is looking for a crash [see Zero Hedge for proof every day] of epic proportions, I’m here to tell you that over the 35 years [this month the anniversary of stock indices trading 1982] indices have been trading, roughly 80% of the time indices prices go higher and about 20% of the time they go lower; in 1987 it was the October crash; in 1998 it was the LTCM Thai currency “bust up”; in 2003 it was the Enron & Worldcom bankruptcies; and of course in 2008 it was the housing bubble that burst along with Bear Stearns & Lehman going room temperature. In all of these events, there was a lingering “story” that kept prices moving lower; without it, “stock indices prices ain’t going significantly lower no matter what you think or how bad the world is … there simply needs to be some kind of event that shakes the foundations of stock ownership and makes people ‘uncertain’ about the future … in other words, a STORY … and right now there isn’t one. Bombing Assad isn’t going to shake people up; it’s viewed as a BTFD opportunity”.

Since the open, one trade today; ended up scalping it off of a bullish engulfing pattern. Once I was up on the trade, and it cleared some resistance and looked like it could have the opportunity to vault higher, it stalled and immediately started to come back. As I stated the other day, in the stock indices I am much more willing to hang on to winners and let them “work”, and see how far they can go into some kind of spike, but in this case the market just simply said, “I don’t think so”. Chart directly below.

Here we are about an hour and a half into trading for the New York day, and the Dow30 is only a handful of index points from its opening bid level; it’s been a very volatile last 48 hours, and coupled with the events that have transpired in the political & financial arenas, it’s not surprising most traders are calling it a day and a week somewhat early. If you’ve lost money on last night’s panic sell & then lost more getting long right after the open when the Dow30 made a new high for the day, you aren’t making it back today, and if you’re up money why do you want to hang around this slop on a Friday when things appear to be slowing down? Cuz the way the market “feels” right now is that it’s “drifting” and doesn’t have any firepower left to do much of anything.

Now, usually when things die down in the stock indices, shorts most often will always panic first, especially on a Friday, and so what happens is you get very quick spikes up on short covering, but there isn’t any buying behind it and prices then slowly fade away until the process repeats an hour or two later in the day. From where I’m sittin’ this looks to be the case, although anything can obviously happen given what we’ve seen over the last 48 hours.

Since the New York open, trading has been a complete “nothing burger”, with a little action up, a little action down, and a whole lot of chop. Unlike gold and the horrendous slippage that market is famous for, the Dow30 with a 2 point spread and an LP that so far has been “right on the money” with my fills, it doesn’t take much to get the Dow to move ± 2 points even when nothing is happening.

And while I’ve had better weeks for sure, it feels good to be back in the stock indices; a market [SP500 specifically] where I have been since the literal inception of its trading. Ever since online trading began back around 2001 – 2003, and MT4 trading took over from the “pits”, I’ve been searching [mostly hoping] for a brokerage house that offers CFD trading with razor thin spreads and favorable RT commissions; and literally with a few minor exceptions along the way [Assets FX a couple of times, but it only lasted a few weeks and they took it away], it has been a journey of complete frustration. We’re talking sky high spreads and commensurate commissions to match, and therefore quite “unfriendly” to trade; nobody minds having them make a buck, but paying a full index point to trade the SP500 and/or 6 Dow30 points is totally ridiculous and ruinous.

Our “net” cost at Turnkey is about 2.4 index points, which on an equivalent basis is less than the 0.25 spread in the SP500 futures, so for me this is a “no brainer” cuz they both move in the same way most days. Ultimately, it’s like trading futures with no cost and no need for their large standardized contracts; all the benefits are with us. But in addition to that, while we do have the HFT’s to deal with [as does every market now], the dealer games & slippage are for the most part not nearly as bad as in gold & USDJPY; from that vantage point we have a very definite advantage in either the Dow30 or the SP500. Right now, there is a slight advantage to trading the Dow30 over the SP500, both from a cost perspective [not much] and it’s easier getting “outside” the spread with the Dow30 than the SP500.

Notwithstanding the cruise missile “wake up” call given to Assad, Putin, & Xi, I’m not sure the NFP report would have done much to trading action today anyway; maybe a little more position squaring going into the weekend providing a hair better action since the New York open, but I have my doubts. It’s simply a Friday; traders have had a “full plate” of price action Wednesday, Thursday, and today. Next week we probably only have 2 decent days to trade before the world goes into “full metal Easter Holiday vacation mode” and takes the proverbial 5 day weekend; only Monday & Tuesday will be worth anything; traders will be thinning out starting Wednesday morning, and won’t be back until the following Tuesday. By 10 AM Wednesday, you’ll be lucky to see anything move, and Thursday will be comatose going into Friday & Monday close for anything and everything that’s traded.

I have no idea if Monday & Tuesday will yield any action of significance; of course, I’ll be here to capture it if it does, but looking back, most years Easter week is “dead”. Over the years, many traders take the entire week off for vacation because they can squeeze a whole week with 2 weekends and a Monday [that’s 12 days] and miss only 2 trading days; I did it numerous times. My point is, if it’s “dead” all we can do is wait for Easter and Easter Monday to be over and then capture the trading as it comes and action picks up from the Holiday; the Dow30 isn’t gonna sit here and do nothing going forward. Volatility is picking up steam, and the last 2 weeks look and feel promising in that regard.

The technical issues in stock indices are also much better; while small reversals from the open do happen, double and triple reversals of any significance [Dow30 points > 75 index points] are very rare, and if they do come it is because of specific breaking news; as I stated earlier, today the Dow30 LP filled my market order right at the “offer” on my screen when I bought, and when I liquidated [sold] filled my sell order right at the “bid” on my screen; so, absolutely no complaints here in that regard unlike gold where I don’t think I ever got the bid or offer on my screen.

We only got one legit algo buy signal today, and it’s the one I traded; there was another “iffy” buy signal at 14:00 which was a bottom reversal, and if I had taken that signal it would have yielded a good trade; however, in my mind at the time it was “iffy”, so I left it alone. Really, since the New York open ± 30 minutes, not a lot to do today, and the one algorithm signal I got I did exactly what I should have done; so, while I only made a few bucks on the trade [$25 … big whoop], it feels better than the “ass mauling” I got handed by gold earlier in the week, and we simply move on to next week and see what the Dow30 gives us.

As we move to the New York close, I’m pulling the plug on this thing a tad early; no volumes and no movement the big reasons, and more importantly if you get in and it reverses you got no place to hide. While it may sneak up and hit a new high and run some late day stops, trust me when I tell you Friday afternoon is no time to be initiating new positions and wondering where they are gonna go … and after the “ass mauling” I took earlier in gold, while not the least leery or “gun shy” at all in the stock indices, they are best left alone late in the day in New York. I simply do not want to get caught in something where I have no time left to do anything and am forced to liquidate in less than favorable conditions. It is what it is, but as time goes on and I trade these indices, you will see the wisdom of this approach time and again.

Updated PAMM/MAM spreadsheet will be up later tonight right here in this space.

Beach beckons … I’m outta here … until Monday.

Have a great weekend everybody!

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