Monday, August 15, 2011

Without conviction, we're nothing

We felt edge-less today.  We didn’t like longs as there are no good set-ups within our strategy parameters (need more base, moves are too Vish from 1077 $ES_F) and yet we were hesitant to short into a good-breadth trend-day (we did try a few scalps but only managed to churn).    The close we thought was silly and spontaneously decided to put on a decent sized short right into the highs for a  swing into tomorrow.  Then we started second guessing and thinking well, next resistance is at 1219 and maybe we’ll get there.    We hesitated, second-guessed ourselves, and ended up just taking 1 point profit on a very good entry on decent size (  currently ES_F is 5 6 points more in the money).
For our type of trading we need full conviction.    Our whole strategy is built around very clear patterns.  Basically, if it’s not a lay-up, we don’t trade it.  And when we do get into a trade that we’re not sure about, like today, we don’t execute well.

For further reading on the subject see

Now the hard work begins

The panic last week took us straight to the 200SMA on the monthly chart of $SPX.   The resulting bounce took us back up to close the week off back to the 50SMA:

Today we stopped dead on at 1200 resistance:
And to end the symphony even the intraday set up today at resistance at R2:
We’re now up 10% from the $ES_F 1077 bottom in a very short time.    Our best case for the bulls is to start basing near the upper side of the range (without giving up too much) and  thus a) negate the bear flag pattern  and b) set up longs that are much too V-ish to work right now.    
The more we rally from here in an extended form the higher the chance of failure.       The bounce from extremely oversold levels is always the easiest bounce.  What comes after in a completely broken market, the slow healing,  is the difficult part.
Follow us on StockTwits and Twitter