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Market continues to range between 45.50 and 47. Price is in the middle of last week's range. Upper third of yesterday's range.
Price is drifting higher and making an attempt at this 46.70 barrier that's held all week. I'm not totally sure how to play this orderly push up within a downward channel into heavy resistance. The clearest entry for me would be after a break through one of these levels and then a neat pullback into prior resistance.. On the short side (counter trend) I'll be careful also, but could look short off a double top into one of these levels. Rule #1 - If I don't have clarity, don't pull the trigger. I don't have clarity yet so my first goal today is to wait for that, or just don't take any trades. Inventory report is in a bit so I need to adjust my expectations accordingly.
The open is very muted, pretty common for report days. Here's how it panned out.
I was cautious today, maybe a bit overly cautious, but it kept me out of trouble. I wasn't very trusting of the counter-trend entries that presented themselves. That did limit my gains as I bailed on a small winner, but in the end my caution was warranted. I thought better of fighting the trend in slow pre-report action. +1 tick for the day.
On a side note, I'm stalking a swing long in the 10-yr notes.
I feel like I missed the right entry spot already on that spike and recoil through 124'260, but I'll see if I can get a good R/R on a pullback here today. I drill down to the 15 minute and hourly to tune the entry. Here's the hourly. I'll probably try a limit order in around that little grey oval area.
PPI and a bunch of other news coming at 5:30am pacific / 8:30 eastern. The time is now 5:10am pacific.
Picture has changed. Pressing up against very significant level 48.25. Above that, the 49.25 level is heavy.
Price is over yesterday's range. Still firmly within last week's range, but the top of that range is now well with reach with a strong performance today and tomorrow. Most would not have expected this to come back all the way to 49+. The squeeze potential is high.
I'm going to try a different approach than yesterday. With price once again drifting upward into resistance, I'm going to keep an eye on the continuation of higher lows, and look for reasonable excuses to get cautiously long. I still may try to fade short at key levels, but ideally I'd like to start to see the higher lows break down first.
Here's how it panned out.
My head wasn't in the game today. The evidence was there for some solid opportunities, the long from 47.70, and the short right after the open. I had the levels and channels right, but my thought process was somewhere else. -20.
Side note, I did enter a long in the 20-yr bonds ETF yesterday, took some heat but still in it.
Overnight session was a consolidation between 47.62 and 48.07. Price is currently middle of yesterday's range, top third of last week's range. Prevailing energy is upward but we may be reaching an exhaustation as price tries to break through 48.10.
Although the prevailing energy is still upward on a daily basis, the current channel is a downward consolidation since the Y_High. Will be keeping a close eye on how this upper boundary plays out. I don't have an S/R level here at 47.85.. Hard for me, with current method, to justify a short at these levels based solely off that channel boundary. We have a big batch of consumer/retail news coming in a few minutes at 8:30 eastern. Don't want to make same mistake as yesterday, hoping for trending action when the picture indicates sideways. Standing by for now.
While I have some time to kill waiting for a clear opportunity, here's an update on my swing long in bonds. I erroneously stated in previous post that I was looking at 10-yr notes. Unfortunately there's no leveraged ETF with good liquidity tracking the 10-yr. The best available ETFs track the 20-yr, so I'll just take a look at TLT which I think is a good 1x representation of the 20-yr notes.
I entered on one bar back on wednesday. I entered at a price that corresponds to about 120.62 on TLT. However, I am using the 3x leveraged TMF. I have a first and second target drawn in here. We'll see, this could just range for a while or continue dropping. But we are getting some good action premarket in bonds this morning, and I expect the friday candle to open with a nice gap up. If this does turn into a winner, I will be evaluating as price continues higher whether I should take any off at target one, or just let it ride for a bit. First it has to show some strength and break out of this down channel. If the down channel holds and deflects again below my entry, I may bail early for a small loss.
OK, back to CL. We caught one today.
45 minute hold. I was early on the entry. Walked away. Played with my son the early riser and changed his diaper while the others slept. Checked back in every 5, 10 minutes. Got a little lucky on the open pushing it my way. Got VERY lucky on the fill at the bottom.
+15 today and the swing trade in 20-year treasuries is going green for now. Positive week, ending with +22 despite one off day yesterday.4 up days, 1 down day. That off day really hurt, but the mistakes reminded me how important it is to have CLARITY or just don't trade. Accomplished that today and with a little luck it did pay off.
Below is a graph of my daily PnL in ticks without factoring commission since returning to "real money" trading at the end of March.
In the first month I was trading a very tight style keeping losses very small and very quick to jump out of trades. This was generating some positive returns, but mostly eaten up by commissions. I was up 22 ticks on 29 trades, which obviously isn't going to cut it.
Rather than continue down that path, I decided to tweak my approach. In May, I revised my style to give trades more room to work, be more hands off on open trades, and go for slightly larger targets the majority of the time.
So far, I have definitely seen some of the benefits, getting better average MFE and larger winning days. However, it has also opened up the door to larger losing days, which have killed returns completely. Currently +5 ticks on 14 trades.
As always, I continue to brew new ideas for tweaking my approach in the back of my mind, but currently I don't foresee any drastic changes.
The biggest outstanding question for my trading right now is: Were those big red down days really caused by MISTAKES? If yes, then I need to just stop making mistakes. If no, then I need to re-evaluate completely.
I really do think they were mistakes, and I think that I can reduce them by being more disciplined. But I am also very cautious of my logic in determining that, which is where understanding survivorship bias becomes absolutely critical.
Losers aren't "bad trades" just because they were unprofitable. And winners aren't "good trades" just because they were profitable. In the past I have tried using grades or entry-checklist to help assess my entries. But forget about applying a grade afterward; that's inherently biased. And even running through a checklist / grading process BEFORE entering can be fraught with issues. After a while I end up mindlessly checking boxes, or figuring out gray-areas in between criteria to fit almost any entry in. And worse, after a trade turns out to be successfull or unsuccessful, going back to modify or "fix" those pre-grades.
On those big losing days, I felt like I was making mistakes because I had losses piling up. But I BELIEVE that there was also something else going on - a combination of lack of discipline, poor awareness of the market, trading hope vs reality, etc. Were these attributes that I pinned to those days simply because I had some uinprofitable trades, or was I really performing differently? On Friday, I entered early, and almost took a loss, but it turned around and went my way with a bit of luck. Was that a good trade because it was a winner? No, it was actually just an "OK" trade that I got lucky on.
But still, those big red down days felt like I went off the rails. How do I know? The closest measure I can think of is the "1 minute after the entry regret syndrome". On the large losers from those days, after I entered the trade, within a minute from entry I started seeing the counter evidence and started to wish I wasn't in the trade. For the rest of the month, I'm going to try to be very conscious of that feeling. I don't necessarily want to react to it . . . the minute right after an entry is often the most emotional part for a trader. But I want to be conscious of it, and I want to try to put myself in that moment before I enter the trade. Is this trade the kind of trade that, even if it goes 10 ticks against me exactly 1 minute after I enter, I'll still see it as a good entry? Those are the entries I want to take.
I'm currently long since Wednesday 3x 20-yr treasuries via TMF. Here's the TLT, a good proxy at 1x. My entry price in TMF at 18.83 is roughly equivalent to 120.62 on the TLT. I'll hold this for a bit to see if it can carry through to break the current down channel. If it fails and drops back to the support line, I'll re-evaluate and likely bail if it drops below the recent lows aroudn 120.
That's my only swing so far for May. Here's the other markets I review. First to the beast known as Crude. It seems like sellers are itching to get involved again. There's certainly a case for this running all the way to 52, but I can't help but think 50 will represent a formidable barrier. I'll keep one eye on this for a swing short.
Gold is complicated because I can't really invest directly in the commodity due to liquidity and risk parameters. So instead I'm looking at gold miners. They track OK with each other but there's definitely a lot of deviation. I'll show the gold chart first, followed by the miners. I missed the bounce off 1220 and I'm not going to chase it. If this rides higher, I'd expect a lot of sellers in the 1250 neighborhood.
GDX (miners) looks a bit different but I see the parallel structure with a selling opportunity coming up in the 24.75 area. There's an earlier spot at 23.50 but that is less significant. I'll keep an eye on gold and the miners for a short in the next week.
ES and YM are tracking not too far from each other, but the NQ is off in outerspace. I'll show the ES here for sake of simplicity. Man, I would not want to be short right now. The squeeze if (when?) this breaks higher should be serious business. I've learned not to listen to the news, nor consider the steadily growing tent-villages under every overpass in los angeles. So the question is, do I get long? I don't know, I'm finding it hard to plan that one out, but I'll definitely keep an eye on it. Notice the parallel between AUG - DEC and MAR - MAY. Last year's pattern took longer to play out, and had a 200 handle reach. The current pattern is about 60% the size so maybe it has about 120 handles in it. Am I calling 2520 from here? Maybe I am.
Did not take any trades yesterday as I had an early morning errand to run and just wasn't seeing anything clear cut pre-open. As the market pushed higher into thicker resistance, yesterday we revisited bnelow 49 and now tracking sideways overnight. We still sit comfortabely above last week's highs, but within yesterday's range.
At a lower timeframe, the overnight session has meandered north, bouncing and cutting from .75, .00, to .25 levels. The RTH session has often acted as a deflection from the overnight, so I'd say odds are for a deflection lower, and I'll be loking for shorts on a break down out of this channel. However, we absolutely could be in for a bounce to 49.60+ and I will want to get on board for that.
Two trades.
Came 1 tick from +11 target on the first trade. I pulled stop in (interfered with ATM) which turned out to be a good move. Out for -2. Second trade hit target +13. Done with +11 for the day.
The dip overnight took us right into last week's high before turning and spiking back up to yesterday's VWAP. We now sit once again comfortabely above last week's high, and in the middle of the prior day's range. With the inventory report in a few hours, as well as the July contract getting closer to rollover, I expect the early morning action to be choppy despite the strong momentum overnight, dancing around this 49 level. It's tempting to use the report day as an excuse not to trade, but I'm going to try to spot the edges and take any clear trades that come up using smaller targets if necessary.
I took one small long this morning pre open. It took a while to pan out and I actually pulled my target in from +10 to +8 to get out. I could have gotten the +10 and then some. NT8 was doing some weird things this morning not displaying my position on the chart, and also not showing the trade markers. It also was blanking out historical data when it first loaded, and required a reload-historical. None of this affected my abiulity to trade, but it aggravated me greatly and I restarted several times. The below chart markers only show up during the split second while historical data is loading... then they disappear. So weird. Had to grab this image very quickly.
I was very cautious today, only taking a trade that had multiple conditions lined up. I wanted to wait for the earlier low of .77 to break to see how it behaved. Sure enough, it spiked dipped and turned up, and that was enough for me to jump in for a long. I skipped the short from 49 after the open because I felt like the momentum from the open could carry it through. Turns out I probably could have still gotten a little short off in there, but I was right about the prevailing momentum. Now I'm looking at the market bounce back up off 49 as the equities open, but at this point with the report in an hour I think I'll just shut down. Odds are we chop around 49 for a while here.
EDIT: I figured out what the problem was with my NT8 setup. It was not the application per say, it was part of the way I have my instruments setup that makes NT8 behave oddly during the rollover days. Will need to fix this in my instrument lists.
TLT has hit the first target, and so my position in TMF is up about 1.7 R right now. The question is going to be if / when I should take some off. For now, I'm going to risk holding on to the full position. The old "let your winners run", let's see how it goes. This is an oppotunity for me to have a very strong month just off this trade and I don't want to play it weak.
Other markets are starting to look increasingly interesting. Gold miners are reaching territory ripe for a short, as Gold breaches the 1250 mark and should also run into resistance here. I don't think I'm ready to pounce on this yet, but will keep a close eye and let today pan out to see how strong the momentum is here.
Even ES is looking like it might give us a dip to buy. I'll be watching closely if we hit 1267 and how that level behaves.
Rolled over to July. 48.50 holding tough. Manufacturing numbers at 8:30 eastern. It's 8 eastern now.
We're above last week's high and that's the key level for bulls to hold. Currently in the lower half of yesterday's range. I'm going to favor the shorts as long as we stay below 49.25, but will still be looking at both sides for opportunities. Two potential channels drawn below, or we could pop up into a range or climb higher.
The slow melt up didn't satisfy my "clarity" rule until too late. No clarity, no action. Just as I was gettiong ready to walk away I caught a quick countertrend short for small target. +7. An OK finish, but I can do a better job of analyzing the action to gain that clarity earlier and seize more opportunities. Have to focus.
