Friday, September 30, 2011

No Balls to the wall here

We’re trading shy thanks to the amount of confusing information that we are seeing.  The most confusing of all is why the hell are we still above August 05 lows?   Commodities/China started this sell-off and normally we’d want them to bottom first yet US markets are holding firm while they keep grinding lower.   We’d prefer to see the opposite:  US markets make new lows, get panicky, while commodities firm up and show strength — that would get us interested in long trades.
There’s obviously two issues at hands, Europe and China, and they are making the lines somewhat hazy.    On one hand it looks like the S&P is pricing in Europe, while commodities are pricing in China.

We were waiting this week to short the 50SMA — we didn’t even make it there as the 20SMA on the $SPY  served as enough resistance.   The range is now tightening short term.
Copper ($HG_F)  still above the crazy Sunday commodity night but threatening it every day it seems
$CLF used to be one of our favorite trading stocks.  Now it trades like a dead internet stock from the bubble days.  Amazing.
$WLT was another super-star, one of our most loved trading stocks.  Again, trades dead.  Bid-less.    We want these to come back to the realm of living again before we start feeling the urge to go long.
We’ve noted our frustration this week on our stream.  Every night we send out our plan for the next day to our subscribers.  The plan has worked well (early in the week buy commodity to gap fills which all filled, later in week, short to support targets, which again worked) — basic range-bound reversion to mean strategy.  But our execution has been anything but stellar.  The gap between the plan and the execution is the hardest part of trading — when trading is bad the gap is wide. When you are in the Zone, then there is no gap.  Right now we’re in the gap area.  Why?  Because of all the mixed signals we can’t feel conviction about anything, thus we trade nervously.   We’re going for singles.  But maybe that’s not a bad thing.
Remember this chart we posted a few weeks ago under the title “How not to trade” — well update it at your own pleasure.  We’re still stuck to the range.    Peter L Brandt has an excellent post out today which covers this (lesson #3).   Don’t miss it.
Tough tape and people are getting impatient to see the range resolve.  It might happen next week or it might not happen for months.    If there ever was a time to be zen-like in your approach to the market and accept whatever the market brings, it’s now.