10/26/2009 12:40 pm update: NQ, ES end of year swing high targets

• lots of volatility...
• short term negatives kicking in...
• though i am not that happy about exiting too quickly this am for small gains on the long NQZ09, i am happy to have gotten out of that swing position, and have started another swing long...
• this time, i am actually being a bit more conservative...
• went long 1 contract at 1763.50 and 1 contract at 1746.25...
• now long 2 contracts at avg 1754.88...
• bidding for another contract at 1726.50...
• offering out 1 contract at 1767.50 and 1776.50...
• the more experienced traders/commentartors i follow are on the whole, a little bearish on this dip down, while the less experienced traders/commentartors are more bearish on this dip down...the less experienced are also tending to refer to the ES 1100 peak as 'the top' for the move up from this past march...
• i could not disagree more with this view of ES 1100 being the swing peak from the march low...
• i remain bullish on the NQ and the ES into at the least the end of 2009, and probably longer...i will re-evaluate in january 2010...
• markets rarely peak in october, with 10/07 being the rare example...the october 2007 and the october 2009 backdrops are significantly different from each other....
• the end of october thru the end of december, tends to be the most bullish time of year...
• by the end of the year, i am targeting the ES to have hit 1170 and the NQ to have hit 1900, both of which are about 10% higher from here...i am not saying the 12/31/2009 close will be at these levels, i am saying these levels will be reached by 12/31/2009...
• of course i could be wrong...if i start to believe the market is in fact putting in a longer term peak, i will change my longer term directional bias from long to neutral or even to short....i put this as a low odds scenario though...
• if my bullish thesis plays out, i expect to see ES 1170ish and the NQ 1900ish by the end of the year...
  

Disclosure: Long NQZ09.

***remember this is an illustration of what i am trading and my thinking...it is not a recommendation for you or anyone else to buy or sell this or any other security...trade at your own risk ***

9/30/2009 noon update

• lowered my offer on the NQZ09 from 1713.50 to 1709.50 and was filled at 1709.50...
• for the swing trade: +7.25 NQ points/contract, 1 contract closed (based on an average entry price of 1702.25)...
• for the day: +7.59 NQ points/contract, 2 contracts closed: 15.18 total NQ points booked...
• bidding 1702.50 for 1 NQZ09...
• changed the offer from 1723.50 to 1716.50 on the remaining NQZ09 contract...
• i am happy to have booked some gains today...
• however, this is the third time today i have changed the level of the entry or the exit order...part of it is based on analytics, another part is based on fear...
• i was afraid of not getting out: 1) 1726.50 to market (1722.00); 2) 1713.50 to 1709.50...
• i was afraid of not getting in: 3) 1693.50 to market (1696.00)...
• 1) worked out well: the exit was at 8:45 am...the NQ then traded as high as 1725.50 shortly after the open of the day session, then dropped nearly 2% to 1688.75...holding this contract, would have led to another drawdown, and i would not have added the contract at 1708.50...
• 2) did not work out...1693.50 was hit less than 1 minute after 1696 was hit...
• 3) remains to be seen...the high for the move up was 1710.25...
• on another note, the NQ appears to be showing a bit of rs compared to the ES...of the few sectors that i monitor, only the SMH is in the green...this also suggests NQ leadership...i prefer rallies where the NQ shows rs to the ES...rallies that are led by the SMH are even better, in my view...

Disclosure: Long NQZ09, Long ESZ09.

***remember this is an illustration of what i am trading and my thinking...my trading plan may change without notice...this is not a recommendation for you or anyone else, to buy or sell this or any other security...trade at your own risk***

Odds and Ends

• a very big shout out to Eric and Becky for hosting a great BBQ on sunday for VCM traders and all the other traders Eric is connected with...it was great to meet/see Eric, Becky, Dave, Ralph, Jackie, Jed, Tom, Brian, Eden, Bill and Joey...
• the July 2009 edition of Technical Analysis of Stock & Commodities (TASC) has a very good interview with Ernest P. Chan regarding how to construct System based Trading Models...
• took my own advice, and this past thursday instead of watching my 'SPY Gopher' (http://stbsmb.blogspot.com/2009/06/spy-gopher-generated-entry-signal-for.html) position minute by minute, i went out and had lunch with my wife and son...we had a great time...even shopping at Target was a refreshing change of pace from my usual midday activity of screen staring...
• 150 years for Bernie Madoff is not enough...
• Texas Holdem is a very interesting poker game...just started playing

'NB #2 SPY' Generated an Exit Signal for Wednesday's Close

'NB #2 SPY' Generated an Exit Signal for Wednesday's Close. The position was held for 1 Day as is directed by the model. The Money Managment Stop was not hit. The position generated a profit of about 0.8%, very close to the average trade return of 0.7%.

The position had been up nearly 2% by late morning but then pulled back prior to the FOMC announcement at 215pm. Market participants found things to dislike about the announcement and the SPY continued to drop and just about filled its opening gap up. A rally during the last 45 minutes brought the SPY back up to close about 0.8% higher than yesterday.

A bit of a roller coaster but with System Trading this is par for the course. Once the model has been built, the 'plan the trade' portion is complete and I can put my IQ on the shelf. Once an entry signal is generated and the position is put on, I have to pull my EQ off the shelf and 'trade the plan'. Now, no matter what kind of ride the market goes on and no matter what my emotions may go through, I have to follow the rules of the plan.

I was not happy to give back the near 2% intraday gain, but there was nothing I could do about it except to 'trade the plan'. Needless to say, I was happy to see the EOD bounce back to decent profitability. Interesting how my 'happiness' was strongly corelated to how this position played out. I bet my 'happiness curve' would have been higher and steeper if I was not monitoring this position minute by minute today, but rather playing with my son and/or hanging out with my wife. I think one of the skills I need to continue to develop is to emotionally detach myself more and more from the outcome of any individual trade, knowing that if my overall System Trading Portfolio is full of robust trading models, then the profitability will come over following 12 months. Currently, I would give my System Trading Portfolio a B+ for robustness. Emotionally digesting the Portfolio's robustness and profitablity is a work in progress.

However, I did greatly enjoy the telephone conversation I had with my trading friend JE (over at http://myestradingjournal.blogspot.com/). He found a unique way of using the ATR Volatility Bands that I developed and have written about. It just goes to show that the creative process knows no bounds, and what one has not concieved of, another has already put into motion. Nice job JE!