Utilization…Playing the lotto with Tgt’s…the more the merrier.
Early yesterday we were focused on the Equity/Bond spreads both here and in Europe. In the first half hour of NYSE trading we saw tgt levels get hit in the SPU,30 Yr Bond and GS stopped just shy of the 112 tgt we were expecting there.
TOP GUN SCHOOL 101…Implementation…Get Tone ( Trade location) take the shot!
If you’re day trading you should be all over the tgt’s, taking your money directionally and looking to reverse for a contra-trend trade. Why, 1st the general condition of the market..overbought Equities… oversold Bonds..distances traveled. 2nd…the more markets that you have matches in, stopping at or trading at major levels, within minutes…leads to an inordinately high success rate for a contra-trend trade.
Since I’m recommending trades for the less nimble, I waited until closer to London’s close to see if there would be any price over run of the tgt’s as well as waiting for that current capital flow to abate. “Whitewave 101…Time Frame Trading! We waited an extra hour…Hamsters ( very nimble day traders) should be all over the #’s as they are hit.
Notwithstanding, a quick check of the spreads, SPU/Bonds encroaching on the 200 day, a level we haven’t seen in eons made the decision a slam dunk!
Why take the trade? Big technical levels combined with a hard out made it a must. This will be a year of risk mitigation. You need to try the trades when you can define your risk that have a high probability for a big reaction.
I’ve already let a couple whales slip by the wayside over the past couple of weeks. Platinum for one, sticks in my craw!
If we have tone, we’re taking the shot!
“Follow through and instant gratification”….we all love it, however sometimes good things come to those who wait. Markets can take a couple of days to turn direction. The entry levels were good enough to use very tight stops to see what can develop.
Scalpers were in the money within minutes off those levels. The rest of us will just use a new high in the SPU and a lower low from yesterday in the 30 Yr. to manage our risk.
This is what I call a free look at a level to see what develops…plus it was painless…no heat on the trade!
If you recall we tried this with a Gold short last week and scratched the trade after it went 20 dollars in our favor. We never got the price separation we had hoped for. We were looking to make a 100 dollars, not 20 so we just left a break even stop to see if it would develop.
Sometimes they don’t, but if your location is correct you can wait it out to see if it will work with little or no risk. Remember, you can always give it another go ( get back in).
Methodology…The trade execution is the constant for all investor types, while the goals ( how much a particular trader or investor is looking to make) can vary widely.
The Today Show….1/24/12
30 Yr. Bonds….we expect to see a 141.25 print. This # should also act as an upside pivot to the Fib level of 142.12-15 Bonds Up…Stocks Down. If you’re in the group that played the spread and are long either the 30 yr. or the TLT, against short S&P, book some money at this level.
Spu’s…1300-02 is minor support today, then the mid 90’s… A good retrace and pressure release would be in the low 1280’s. This is where we’d like to ideally get out of at least 1/2 our shorts.
Leave all remaining stops as is. The stock ( sector rotation) has been prolific. Once again, we can’t get hurt on the trades, due to our great entry level. Now it’s a waiting game into the Fed meeting to see how the trades play out.
Model Trading Portfolio…Current Holdings
Long Moo
Long XLE
Long X
Long SDS/Short S&P 500 Futures
Short Term View…
Location,Location,Location…if you have a good trad able pattern ” Good Risk Reward” You just have to seize the opportunity and see what develops!
“Carpe diem” is the new watchword.
Trade to Make Money!
Medium Term View…
The 1160-70 SPU’s area “S&P 500 Futures” would provide an area for good risk reward for the Bulls early in the qtr. The first time down has the potential to be a great Bear trap.
We’ll be using 1220 ish for our new pivot area going into the first qtr. We’re looking to buy the hard breaks in the equities and sell the 30 Yr. Bonds when the opportunity presents itself early in the 1st qtr.
It is our view that the political and economic risks are still skewed to a largely cash portfolio over the medium term.
This upcoming Quarter will be one of patiently waiting for strategic opportunities. In other words, another year of limiting your downside risk and taking your money on your winners. Only trade ,either Long or short, when you can codify your risk.
We don’t believe the market volatility is going away anytime soon. This year should shape up to be another Trader’s Market. We’re particularly focused on opportunity in individual Commodities as well as the Commodity currencies in the first Qtr. It’s all about trade location!
30 Yr. Bonds …147 is the all time high in the front month futures. We will watch price action off this level for any potential surrogate moves in the Currencies or Stock Indices. 144.20 ish now becomes our macro pivot. All new closing strength over 145.20 would have us looking for more upside in the Bonds. Closing above this level would be short term positive the Bonds and negative the Equities.
Australian Dollar ( AUD/USD)…100-100.30 is the cash level we are using to match up with general Risk On bias in the overall market. Closing below this level, should mirror short term weakness in the stock indices. Remaining above, should have the opposite effect. “It will be a big macro pivot this qtr”. 102.33 & 102.08 AUD/USD are the past 2 yearly closes.
The big fly in the ointment this year will be Oil risk. Oil has become the risk commodity/ surrogate currency Du Jour, replacing the precious metals late last year. How high will Oil go before imploding the equities as in 2008?
This will Not be our our strategy…We are going to do exactly what we did last year…Be patient! Take trades on our terms with limited risk… then take the money!
Our view is that the beginning of this this year will be a High Volatility, Highly Technical, Rumor Driven, Time Frame, Lemming Effect Day Trade, on very thin volume just like most of 2011. The question is who’s day? Right now it’s still Europe’s.