The market action after the FOMC announcement would have normally shot to the downside (classic N pattern), instead all of that move jumped on into the close (bearish sign).   During our team meeting last night I saw several charts showing little conviction to the upside and many more charts breaking down at 5 min, 15 min, and 60 min bars.

Once we get some confirming closes on the 60 min bars we will see a good bit of draft to the downside.  Take a look at this chart on the Diamonds (DIA):

We got a gap up yesterday that didn’t quite get closed.  If we get a gap up today then that will only add fuel to the fire for a quicker downside move.  As such I would expect to see us hit our first target early.  I’m going to use this as an opportunity to BTC (buy to close) some short Nov puts.  If we hit the second target I would expect to see a little bounce.

All in all I’m not expecting a huge range today but I would watch out for some burst of violence.

Mojo

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Trade Like a Fund Manager

Its written by a guy who tracks the performance of investment advisor newsletters and he does a good job of explaining the potential mindset of fund managers going into the end of 2009.

Anyway, take a few minutes and take a look….

Mojo

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1) Its the last day of the month in October.  Mutual funds typically report their holdings for the quarter / year on this day so they are going to wanna look really smart.  In order to do that they will be selling their losers (Sprint), selling their winners that are only moderately performing (CMG last week) , and buying anything with recent breakouts and good press press (Google, Amazon, Verizon).

2) We had a pretty violent sell off on Wednesday.  Thursday (reacting to ‘good’ news in the bipolar way that the market does) we recovered more than 50% and finished strong in the late afternoon session.

3) Having a gap down at the open will give us momentum to the upside to close this gap and possibly carry us forward.

4) We have penetrated and bounced off of the 21 day EMA.

Don’t get me wrong.  I’m still bearish (for what that’s worth!  ) but I think we will see some upside today.

Mojo

PS – If anyone is interested I’ve been working at a charity haunted house.  Come out and see me at the Unlucky Inn!

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NDX- I put on a double calendar Nov/Dec 1700 and 1800. It’s currently centered on my graph and I will again look to adjust if NDX slides toward one of my breakeven points or if I hit my 7% loss mark.

I’ll keep you posted. Good luck and have a GREAT weekend!

-Gekko

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I watched the futures charts (/YMZ9 on TOS Charts on “Charts” tab) as I planned my exit on RUT. I saw that we had just hit the low for the day at 9884 at 10:42 down from the closest previous high at 9922 at 10:21 am to the LOD (low of day). I drew my Fibonacci retracement and knew that it would approach the 50%-61.8% lines within this range then come back down most likely for a short jaunt. In futures trading this is called the “ambush” play. It’s a great way to fake out the amateur traders and follow along with the pros. Most amateurs would have seen the low of day (LOD) hit then would have gone bullish, not factoring in the ambush zone.

So I placed my whole order exit on the iron condor and lowered the limit amount by an extra 2 cents to the debit order so I could squeeze out just a little more on the exit.

This is just another way you can exit your trade, especially when you can’t watch it intensely due to work, schedules, etc. This is a much safer way than legging out if you’re not an experienced trader (yet).

If you’re in this trade with me, good luck on your exit!
-Gekko

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It has taken a lot longer than I ever suspected.  Whew!

Mojo

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How to Display Images in Forum Posts

HTH,

Mojo

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After a week of recovering from getting 3 wisdom teeth removed (OUCH) I am back on the saddle and ready to trade again. Luckily, I went to all cash before my surgery because I knew I’d be out of it for several days and not quite mentally present enough to manage any trades. This is always a good rule of thumb if you have an upcoming event, vacation, trial hearing for your prison sentence, or whatever you’re dealing with! It’s always better to be in all cash during those times then to sit in the hospital bed wondering if you’ve hit your loss mark on your trades!

Here’s what I will be trying to get filled on this morning. I will keep you posted as I get filled on them…

DE- John Deere has been on my watchlist for a few years and I had successfully done calendars on it back in the day, so as I was perusing my list, I saw another entry point. It’s been channeling for quite a while with recent low but rising volatility. We have until 11/25/09 earnings to get in and out. I will most likely ride this up to a few days before earnings to capture as much volatility increase as possible.
I will enter the Nov/Dec 43 call calendar and go full size upon entry, then scale out half of the contracts to adjust to a double calendar if needed. I am going full-in in case this stock doesn’t move much in price but increases in volatility.

RIG- Our trade team member, Marlin72, brought up his vertical trade on RIG, so I will look at doing a Nov/Jan 85 put & 90 call double calendar. I am choosing Jan to see if we can practice rolling this calendar for 2 months (Nov & Dec). As you can see from the chart, it’s been channeling since June with low to rising volatility. Earnings is on 11/4/09 but that still gives me 4 weeks of potential volatility increase.

RUT- Typically I do RUT iron condors every month for monthly cash-flow but the last few months I stepped out and switched to large calendars on NDX to be on the right side of the volatility move (iron condors= high to dropping volatility where calendars are the opposite). We are seeing a potential opportunity now with RUT as it recently shot up in volatility and is starting to turn back down. Also, chartwise, it is right in the middle zone of the Fibonacci retracement lines drawn (on 2 year chart) from 9/22/08 when the market crashed to 3/9/09 when it reached it’s most recent bottom. In futures trading, this middle region of Fibonaccis (between 50% and 61.8% lines) is called the “ambush” zone. This typically signifies a reversal, however sometimes there will be channeling in this region until the bulls and bears duke it out. It is more bullish to neutral but there is still uncertainty.

I will be legging into my Nov 670/680 (bear call spread side) and 510/500 (bull put spread side) to make the iron condor. If you’re a beginner we recommend you enter the whole I.C. as 1 order for at least $1.61 so you remain delta neutral from the beginning. Per my rules, I shoot for $1.60+ on my total credit on this $10 wide spread iron condor. If you’re more advanced, I will be probably legging in to the bear call spread side first since the pre-market activity is pretty bullish, then legging into the bull put side once it’s bottomed and starting to turn upward. I will post my IC trading rules in the Model Portfolio forum for you.

As with any trade, expect to adjust, don’t place and forget the trade. So I will post the adjustments as we move along.
Good luck and Happy Trading!

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AMZN Snake Bite Cure

Mojo

PS – In the video I said I was down 13% but that was wrong.  I’m down 4.6%.

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Getting Naked in the Amazon

Mojo

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