Fading the opening gap seems to be the thing to do the past two days! The S&P eminis were a total chopfest during the morning. But then the bears took the reigns and bye-bye market. Volume was a bit heavier today than yesterday, but it wasn’t a panic. Yes we had a confirmation of yesterday’s bearish engulfing pattern, we lost the 200-day moving average, and we cussed up a storm all afternoon…What the $%@&*!
Many indicators have quickly gone from overbought to oversold. The TRIN closed at 3.82. The Arms Index says: TRIN close over 2.0 results in bounce next day 9 times out of 10. No bounce? Market in trouble. So I guess we have to wait until tomorrow to see how it goes.
Remember, after Monday and Tuesday even the calendar says W T F . . .
Now that June options and future contracts have all rolled over, time to move on.
Volume was very low for an options expiration Friday. That USA vs Slovenia soccer match really took a lot of traders out of the mix! 
Actually, the entire week was a low volume boring time for an opex week. 
This week should be a bit more news driven than last. A Fed rates decision is due on Wednesday. During the week we’ll see New Home sales, Durable goods orders, GDP and consumer sentiment…plus a rash of treasury bill auctions.
Futures are taking off Sunday evening!! Dow e-mini (YM) is already up +140, the S&P e-mini (ES) is up +17…if this holds up overnight we will get a big bang at the open! Oil is up almost 2 dollars and other commodities are following suit. Get ready for a rip roarin’ Monday! 
I had a fun and profitable morning of trading in equities and futures…and I should have quit with money in my pocket. But no! Encouraged by my success earlier in the day, I continued to trade futures. Expecting a nice rally into the close, I played it that way. The last half hour of the day wiped out my profits for the day and cut into my account….dammit!
Okay, the lesson learned? Trade what the market is doing, not what you think it will do. I know this, but it has happened before. How did I get sucked into this…again? Not paying attention, not taking the stop, convinced that I am right and the market is wrong. I let my rules slide right by me…idiot! Oh well, I made a mistake, I admit it and tomorrow is another day to start all over again.
Speaking of which…futures are in the midst of a crashette this evening…already down over 1%….and looking for a bottom. The US dollar looks like the culprit, up strong, or maybe the euro, getting weaker…it’s all about currencies. But there may be other distractions…like a lot of countries needing to issue bonds this week, oil dwindling down and gold spiking up. Like I just learned today, trade what the market presents to me. 
I better go over my rules again. Here’s an interesting dichotomy:
Goldman Sachs Says Sell-Off Consistent With Past Corrections, Sees S&P 500 at 1,300.
Why Stocks Are Going Lower Long Term.
Last year in March, the S&P dropped down to 666 and it started a great bull run. Well, today, the Russell 2000 hit 666 as well. How about it….the start of another bull run?
I was stutter clicking today, afraid to go long, but my best wins are when I’m afraid to buy. Today was one of the best days I’ve had trading the ES to the long side. I also added some UCO C GTF….yes, to the long side. Position sizes are not large, but I will add to them if….no, when, they take off.
Of course today’s heavy selling into the close gives me some trepidation, but I think we’re close to a bounce, if not a more sustained up move. While you’re waiting, here’s some notes to look over:
Commodities — the Crash You Didn’t Hear
Conspiracy of Banks Rigging States Came With Crash
Percent of Stocks Above 50 Day Moving Average Nearing February Lows
Jobless Claims tomorrow morning and optione expiration on Friday. Buckle up, time for a ride!
With oil so much in the news, I would think that it should be hitting bottom soon…say, $70 maybe? I don’t trade the crude oil futures, so like I said a couple days ago, I’ve added USO UCO into the watchlist….I even nibbled a bit on UCO already. It looks like $10 has been a resistance/support area before.
Here’s a note on USO: Is This Oil ETF Ready For a Bounce? USO
After doing my scans this evening I see a lot of “evening star” setups, which generally means those particular stocks are going down. On the other side, I also found a greater number of hammers, looking for a reversal up on those stocks. Of course, as in all candlesticks signals, we need confirmation in the next candle, no matter which direction you think they may go.
Futures this evening are looking tired with ES down 6 points and YM down 60 points, and oil futures just about where they closed Friday. I went into the weekend on the long side, but in very small positions of UCO SSO and C. Remember, for the past year a down Friday is followed by an up Monday.
I got some additional reading material for you today:
Impossible Wall Street Fixes
Fear of a Double Dip Could Cause One
The Huge Difference Between The “Flash Crash” And The Crash Of ’87
5 things we still don’t know about the market plunge
Happy trading and I’ll see you in the market!
This is one of those times, rare indeed, when I can say, “I told you so.” It started in the pre-market and the markets meandered in a fairly small range….until 3PM, and then the trap door opened and down we went. I was out most of the day so I didn’t get a chance to play any of the inverse ETFs I mentioned yesterday. But, on my return just about 3PM, I did have a chance to place an ES short for a few points…so it was a good day!
I’m thinking this downward pressure will stick around for a day or few, but we will be setting up for another bull run. I’m getting real interested in oil. If you’re not a futures trader with CL or QM, the oil e-mini, you may want to put the oil-related ETFS like: USO DBO DIG and UCO in your watchlist. Or maybe some of the oil service companies like VLO and OXY. Just watch oil and see if we get some support around the February low, say in the $72 – $70 range.
On another note, I finally made it to Facebook. So come and visit me and become a friend. I promise I’ll get this figured out and reciprocate!
All we’ve done is postpone the problems:
Even though one of the worst scenarios — a Greek default — has been avoided for now, in many ways solving the bigger problems have simply been postponed and new issues could emerge in places such as Portugal and Spain,
said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Morgan Stanley Securities. Read the whole story, Germany Backs Euro Package as Markets Sober Up.
Do any of you use Twitter or StockTwits to keep up with trader sentiment during the day? This morning these 3 tweets popped up all at the same moment this morning, all looking at the same ES S&P e-mini futures:
midget : $ES_F another CRASH coming along be cautious
Scalper68 : so, anyone buying this gap $ES_F
desifinance : $ES_F futures are deceivingly negative this am. I think we are in for a ride. Push down early followed by buying.
That pretty much covers the gamut of thinking….from crash to a move up! By the way, desifinance had the right prediction. 
And also, don’t forget to follow me, WhatTheTrading, at Twitter or StockTwits.
Some interesting stuff for your web surfing pleasure:
The forthcoming golden age of stock picking
Biggs Says U.S. Stocks May Rise 20% as Crisis Eases
European Bailout Is No TARP Deux
The markets are climbing the wall of worry…and there’s plenty to worry about….there’s Europe and Asia and the U.S. economies for just the first hundred things. But look at those futures climb this evening! And why is that? Maybe it’s all about the euro
today? Here’s a blurb from the Wall Street Journal,
The European Union agreed an audacious €750 billion bailout plan in an effort to stanch a burgeoning sovereign debt crisis that began in Greece but now threatens the stability of financial markets world-wide.
The S&P futures already have a 16 point range and are up 30 handles from Friday’s close….and the markets have only been open 4 hours on a Sunday evening. This may be an interesting Monday.
Here’s some good reading on what really happened in Thursday’s 10-minute crash:
Feds trace flash crash to Chicago
Market Fragmentation May Get Review After Stock Drop
And more general stuff….
Sudden Selloff Rattles Small Investors’ Faith in the Market
EU to Set Up Fund to Prevent Spread of Greek Crisis
It looks like the bears only have enough energy for one day. Every once in a while, like yesterday, the bears come up with enough energy to drive the market down. But they soon exhaust themselves and give the field back to the bulls, like today. I think it just may be a dance in this whole topping process, or part of the correction process, but these swings can make sausage out of your portfolio….so you better find a bun to put it into.
I tried to have another great ES trading day, but I traded 2 out of 3 losers…and my one winner could not make up for my 2 losers. I did clear out some of my short positions, but the way the indexes closed up strong, was to me a signal that it may be time to short again.
After hours today had some interesting mews. A Federal criminal probe opens into Goldman Sachs and staff over possible securities fraud in mortgage trading. That will not sit very well with the gang down on Wall Street. SEC sends Goldman case to prosecutors. Remember what happened two weeks ago when GS had some bad news? Uh oh.
Some strange happenings today…did you notice how the goveernment jobless claims every week raises the previous weeks numbers so that this weeks numbers look like they dropped a whole lot more than it should? Are we really that dumb? Did you notice that this is about the 10th time that Greece has had a report that it is being bailed out? And that the other Euro loser countries will need to help out…like Portugal, Spain and Italy? Did you notice how GOOG has been having a tough time lately? Did you notice the VIX is back to its lacksidasical self? Did you notice that these up moves continue to go up on lousy volume?
Ok, here’s a postscript: I’ve been working on explaining how I use different indicators and tools. It’s a work in progress, but I would appreciate any notes or comments you may have. Check out How?, or Moving Averages or Stochastics….and keep checking. Thanks.
The question was, “What are CDOs?” And Sen. Levin continued to use that word all afternoon talking about CDOs or the GS sales force or describing Goldman’s deals! As it turns out, Mr. ”Shitty” Levin doesn’t know a thing about what he’s asking! And here’s the best joke I saw today… from Lloyd_Blankfein: “The joke’s on Levin. I had my boys put the Senator Pension Plan in Portuguese bonds this morning.” heeheehee!
Here’s how the market reacted to the GS grilling: Financials (-3.4%), Materials (-3.2%), Consumer Discretionary (-2.9%), Energy (-2.8%). Of course there was more to that than just GS…we had the downgrading of Greece and Portugal debt. I’m sure that was worth a few points.
Personally, I had one of the best days of the year. The short positions via TZA, QQQQ puts and TWM calls were all golden, but I spent most of the day playing the S&P emini to the short side. The best position would have been just to short in the morning and cover in the afternoon, but I was in and out 4 different transactions….but all to the good.
Tomorrow is Fed Day with the rate announcement coming at about 2PM EDT. Before that we have today’s continuation…maybe a gap down with a bounce? A lot will depend on if we have any more downgrades like Greece and Portugal today. Play ‘em like they’re dealt!
My takeway after watching hours of Senate grilling of GS on TV: Throw away all email servers!
Never write when you can speak, never speak when you can nod, never nod when you can wink.
Sometimes, entranced by the screens, watching equities, options and futures change colors, charts moving in a wave, and indicators pointing in every direction, I just have to scream....
