Breaking Resistance

The DJIA broke above it's January 3, 2007 price on Friday. After spending the past month in 2006 territory the candles are pointing to indecision.

What time is it?

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Must Read

I wanted to share an exerpt from a book I'm currently reading by Mark Douglas titled "Trading In The Zone; Master The Market With Confidence, Discipline, And A Winning Attitude." The author is attempting to reprogram the reader so as to begin thinking in a way that will lead to successful trading. One excerpt that stands out for me deals with eliminating emotional risk.
"Remember, the market is always communicating in probabilities. A probabilistic mind-set pertaining to trading consists of five fundamental truths.

1. Anything can happen.
2. You don't need to know what is going to happen next in order to make money.
3. There is a random distribution between wins and losses for any given set of variables that define an edge.
   
4. An edge is nothing more than an indication of a higher probability of one thing happening over another.
5. Every moment in the market is unique.

What the author is trying to get across to us is that: "When we accept in advance of an event that we don't know how it will turn out, that acceptance has the effect of keeping our expectations neutral and open-ended...Any expectation about the market's behavior that is specific, well-defined, or rigid - instead of being neutral and open-ended - is unrealistic and potentially damaging. I define an unrealistic expectation as one that does not correspond with the possibilities available from the market's perspective. If each moment in the market is unique, and anything is possible, than any expectation that does not reflect these boundary-less characteristics is unrealistic."
There are some great points brought up and I highly recommend giving this book a read. Thanks to Mark Douglas for the pointers. Go check out "Trading in the Zone."

Waiting on News

The DJIA went nowhere all day waiting on the Fed meeting. As rates remained the same the financials sector had a greatful reaction. Not good news for the U.S.Dollar.

Great Post

Here's a great exerpt from a blog I visit on a daily basis. traderfeed.blogspot.com is an incredible wealth of information. Here's a keeper.

i...

Apple's stock is ramping up today on news of their AppleTV release. There was a bit of a delay in the release (a whopping 2 months since its announcement at the annual macworld trade show) for fine tuning purposes, but analysts are optimistic. Apple is looking to add to their arsenal of products this year with the TV component and the iphone (scheduled to release in june). More fodder for building up their cash reserves. Here's a review of the AppleTV component.

Gossip

There's seems to be a lot of chatter going around as to how much windows "sucks" these days. First this article out of BusinessWeek, and then this headline I came across on Google News. I can drag up some more, but these sum it up.

oofah

Wow. What a session. Looks to me like there were a lot of good lunches (and cocktails/bottles of Chateau Petrus) had amongst the money makers along Wall & Nassau streets today. Such a strong about face on the DJIA. Today's mid-afternoon rally put a 25% gain on the board from yesterday's bearish session. The candles are getting their feet wet under the 12k levels that were flirted with back in late November '06. Look out for a close below 12k to see the bearish technical traders come runnin' out of the woods.

Error Coins are Fun!

Can you believe it? We now have physical evidence of a Godless George W. Of course I'm talking about George Washington and the recently discovered "error" coins. The new U.S. Dollar coin featuring George Washington (the first in a series that will be in production until 2016) has been released into circulation. However, a number of them (some reports put the number at 50,000) passed inspection that didn't have the date, mint mark, or the words "E Pluribus Unum" and "In God We Trust" (hence the term "Godless") that is printed along the outside edge of the coin. The first reporting of the error led to a sale of the coin on ebay for $600!! Currently they're in the $40-$50 range. It all reminds me of the Wisconsin state quarter error a few years back that led to speculative prices up in the $400 range (all because of an extra husk on an ear of corn), until the crowd calmed down and prices settled into the $80 range. Still, a $45 premium for a Dollar coin and $80 for a 25 cent piece? It makes me check the change I give and take.

Gaps

I was pondering over the subject matter of how one would go about trading a gapping market. Or, rather, what criteria would warrant trading such an action? If a market opens higher than the previous day's close it either keeps going, consolidates, or fills the gap it created on the open. So, I found an interesting post written by Brett Steenbarger on his blog, TraderFeed.
In this posting Mr. Steenbarger takes a sample size of 897 trading days in the S&P500 index. He compares the day's gap to the previous day's range (high-low) in the form of a percentage, thereby measuring "the gap relative to the prior day's volatility." The example given is as follows: If the market opened up 2 points higher than the previous day's close, and the previous day had a 6 point range, the result is a 33% gap (2/6 x 100 = 33). By doing this he found a 27% average on opening gaps that provides "a benchmark for defining relatively large and relatively small gaps." His research found that about half of all large gaps (over 40%) don't end up filling and 80-90% of "relatively small gaps" (less than 40%) will fill in. Another conclusion he drew from his study was "large gaps in either direction tend to be bullish for the next day's price change."
So, what I've gained from his posting falls to having a keen eye on your technical analysis. Especially, when it comes to the large gaps. If one has a 50% chance of a large gap filling then you should be looking out for those reversal signals. At the same time, with the smaller gaps, the odds of a gap-fill are in your favor and anticipation is prevalent.

A Tradestation Newcomer

I have recently signed up with Tradestation as my trading platform. Currently I'm trying to get the feel for it and figure things out. There's a lot to learn to say the least. I'm going to be holding off on making any trades until I'm at least semi-comfortable with this platform. This is quite a humbling experience that makes me respect the veterans even more than I already do. I gotta tell ya, I'm so thankful for the learning resources that are provided by guys like TraderMike and MaoXian. thanks guys.

An Invaluable Book

This book is just an unending source of tutelage. Not only the simple, but omnipresent, concept of R-multiple usage (initial risk), but also the suggestions behind formulating a trading business plan make this book a must have in your trading book library. I'll be referring to this book often through the course of my trading internship.

(more) Damage Control

I seem to have come across a counter-point to the argument from the previous article I posted. I guess I can understand the opinion of Mr. Paulson saying "the $1 trillion of U.S. debt held by China and Japan amounts to just two days of trading in Treasuries." As well as the point made by Mr. Bernanke saying, "it wasn't in the interest of foreigners to dump their Treasuries. A sell-off would be disruptive in the debt markets in the short run. It would cause, for example, an increase in interest rates." Interesting. I find both of those arguments to be a little weak.

How Long Can The U.S. Count On Foreign Funding?

How Long Can The U.S. Count On Foreign Funding?
It makes me wonder (especially now that it seems the markets are in correction mode) what exactly might happen down the road in our burgeoning economy. It seems like we're just teetering on some sort of precipice.