Lull before the Storm?

EDIT: Wednesday morning after market open...Got out of my calls from yesterday...Thats it for me on the LONG side...Now slowly scaling into shorts...Dont getting me wrong...I will short slowly up to 2860...Cheers to all!
====================================================================================
Well how was my timing yesterday? :)
I for one was very happy with it...Covered shorts near the low and took some very low risk longs in calls...In a notional profit right now. I will likely look to cover it very soon - even before expiry - I am obviously not very comfortable holding longs at this juncture...Markets can reverse back down at any point of time...2850 would be the most aggressive target.

Now why did I cover? Below chart explains it...And I did point this out yesterday also...And we got a doji...Seems to be playing out according to plan...We should also get a big up day very soon if its playing according to the plan.



The other interesting thing - If you pull up the intraday chart from yesterday, we seem to have formed an intraday inverse H&S which projects a target to 2800 if we move above yesterdays highs...So worth watching. (pull up a yahoo 5 day chart and see what I am referring to)

Okay so thats my short term outlook and my trading plan...

Now coming to the bigger picture...MVP asked a very interesting and important question in the chat box...Something I have also been wondering for some time...Simply put...why is there a disconnect b/w our markets and the dow or spx...We have broken the lows in DOW or SPX and nifty is still strong...Why? Well I do not have answers but I can speculate...

Something else worthy of note here is that Nasdaq has not broken the lows and looks more strong...It looks more like Nifty so we can compare ourselves to that index...

But...coming to the discrepancy...There are 2 possibilities...

1. If you remember in Oct of 2007, US already started the bear..Much earlier than us...We waited till January to put in the big move down...Market might be held up right now and stealth distribution might be going on...Before the final capitulation move to a bottom...This is one possibility.

2. The second one is a more fundamental one...I.E India is more stronger and is preparing itself for the next bull market...Hence the relative strength.

I think its a mix of above 2. I expect we will tag the bottom of this chart eventually as I have been calling for a while. It may happen sometime within the March-April timeframe. Sensex Monthly attached below.



And I think this will be a very important bottom for our markets...And we might not breach this in the coming months...You can see we have been in a structural long term bull market...Recent bear market non-withstanding...A tag of 6400 on sensex and moving up from there will have me very bullish. We can expect several tests of the channel bottom before the next bull market begins...Ofcourse all this will take a lot of time...Its not a 1 or 2 day event.

But during this time SPX might might just form another term bottom at 650-600 odd and then mount another rally only to break it later...India on the other hand will become more stronger as time goes by...And as the fundamentals regain strength.

This is my longer term view and should be taken with large fists full of salt :)

Earnings wise, I am here in US, I see it, its bad...SPX might have negative earnings very soon...Do you see that for India? No...Sure we are in a slowdown...even recession...But we will recover within 2 yrs or so...US on the other hand if lucky will recover in 5-6 yrs...If NOT, worst case US of A is going into a depression.

Speaking more on the fundamentals, I am appalled at the way policy is moving here right now...Its not good...US of A is moving more toward socialism when we are trying to move more to capitalism...They are worsening the situation with every new policy step they take...If they had done nothing, market and economy might have recovered sooner...This is why I think USA has peaked...New Policy is making it worse...Sure it will stabilize somewhere but I think the boom here in US of A is over...

The next few decades belong to China and India.

Comments welcome.

Best.

Some more thoughts

ONE MORE EDIT: I took a gamble on some 2750 FEB CALLS...Pure gamble...If I lose it, I lose just the premium... :) Worth the risk here in my opinion.
=====================================================================================
EDIT: A little after the market open...Out of my shorts...Flat for now...Now the market can crash without me...LOL :)
=====================================================================================
We seem to be close to an inflection point right here. I would think that we are very close to a bounce point. Could come from the 2660 area...But if this fails, we could have a quick trip down to 2525-2550. So its a risky area for sure. Either case I am considering taking all my shorts off today and just going flat. I dont want to go long here because of the 'crash' possibility..And believe me, after the US market today, its a very strong possibility. We got to bounce right here on the SPX and DOW, else its crash time. But gotta take that risk I think as a trader..So I will take my shorts off and wait for a bounce to reshort again. Dont want to risk any longs in this market.

Chart below.



Comments welcome.

Best,
Lee

Week Ahead - Quick Post

EDIT: Well looks like today was a holiday that I was not aware of until a few minutes back....LOL...Well it happens...Anyways nothing changes in views...We shall see more detail tomorrow sometime....I promise a more detailed and indepth look at things and how I see the next few weeks - intermediate timeframe - playing out...Short term, well a bounce is on the cards...Not that it matters much for the intermediate/medium term.

====================================================================================

Meant to do a much more detailed post over the weekend...But a friend of mine visited and right now watching the Oscars....So no cigar...Still a few words and a chart...A more detailed update will follow tomorrow.

Right now, we are at a bounce point...Which is why I reduced shorts on Friday as you could see from my earlier post. I intended to reduce more today but the US futures has screwed up this for me...Now let me clear...I wanted to cut some shorts and then add it back after a bounce...Not that I am turning bullish...

Levels...2730 was obviously very important as I said before...below this 2660 is most important. So from here a bounce into 2820-2860 area was expected...Which is why my plan of cutting and adding came into the picture...Sometimes we have to think on the run...And adjust our plans...More thoughts later...After this bounce, downmove should continue. Chart with important lines and points below - Its self explanatory.



Best.

Covered Few

I covered few shorts near lows today....Just taking profits...No change in outlook.
I think some bounces are possible...But I dont think it can sustain the gains.

Cheers,
Lee

Outlook

Unfortunately did not get time to make a more detailed post...But a few words on my outlook. I still think there is ATLEAST one more significant down wave no matter what the count is...

So if you look at the triangle we have been in for past several weeks, yesterday we tagged the bottom of it and bounced back....2730 odd....so for the bearish case to gain strength, we do need to break that and close below that...For the bullish case we obviously need to hold above that as much as possible...

Now you already know my bias. I dont like to post 2 sides of the coin...Very clearly, I expect we shall break 2730 soon and go on to test 2660, breaking which we shall touch 2550-2525 where I think I will cover my shorts for this round. All this should happen very soon as the down waves look impulsive to me...

2860 on upside is key for da bulls...And above 2920, I would say bearish case is dead for now.

This is my outlook. Should not be construed as investment advice and usual disclaimers apply :)

Best.

THE JINX

Yeah I know I know....I promised I wouldnt post for a while :)

But when the bear finally wakes up, shouldnt I be there for it? :)

Anyways all jokes aside...I am wondering if we are finally getting the big move. Or atleast the start of it...The move that has been so elusive for so damn long. Even shook me out of a few of my short positions. Yeah I have to say its not been easy being a bear for the past few weeks. Maybe the tide is turning?

Charts with comments below.






Hope I dont JINX it this time also :)

Best.

Walk the line!

Not going to talk about the markets here even though I have commented in the previous post...If you missed that, please read since there are a lot of valuable insights in there from different people.

I watched a movie...Walk the line...A few days back...And I loved this movie. Amazing stuff...The movie story line is a bit sad to say the least but overall a wonderful movie..More than anything the actors performances are superb and should not be missed..Since I loved the movie so much specially the songs, I thought I'd try the title song...An attempt below...

Now this song really needs 2 guitars with a lead for sure, I am not very happy with it but well it is what it is....He sings the whole thing so low..almost rock bottom base...But anyways, heres my take on it...enjoy :)



Best,
Lee

Sabbatical

Okay guys...its been a tough week...very tough for me...One day the bear case presents itself and the next day, the bull case presents itself...We are in a range...Period. And I have been wearing myself out trying to trade it positionally instead of scalping.

The fractal called for a down day yesterday which we did not get. Maybe because of the last minute stick save in the US markets but whatever it is, we did not get it....I thinned down a lot on my option positions yesterday only because the time decay was killing and ofcourse took a loss in them. Going to avoid option trading from now on...

Overall a disappointing week for me...We may have topped as I said before but as each day goes by, I am becoming more and more skeptical...Maybe we just stay in a range for some more time....Just frustrating everyone...The budget next week might provide more direction...Maybe.

I am still holding my core short position but I will likely bail if market makes more of a push higher...And again maybe try at higher levels.

Overall not happy with my trading over past couple of weeks...I see that some emotion also entered in lately.. So I am taking a break from blogging...
Definitely for a few days...Maybe even a bit longer.

In the meantime, best of trading to everyone.

Wishing everyone and good weekend and happy valentine's. :)

Cheers

Round and Round we GO

Update to the same fractal call I been posting here for a while.

EDIT: Damn - 'I AM' on the chart should read 'AM I' :)
Man last minute stick save on the US markets...Can you believe it..lolz



If this is right, Friday should also be a decent down day.

Cheers.

The Playing Field

EDIT: Forgot to mention something. See how they killed all the bears yesterday. See how they closed the gap - Exactly what I said might happen in previous post. Now what this achieved - bullish sentiment is stronger now...I find this very interesting. I think we are building CAUSE here. But I still have to say bottom line is we have to get out of the triangle below..

Simple and self explanatory chart. Thats the field...How high up will we go? Not sure at this point. But whenever we break 2850, it will be game over for bulls.



Notice also above how stochastics is close to tipping point.

2960 is a potential topping point...Above that it will be 3050 and above this 3120. Quite unlikely we run that far. I will be looking forward to adding more shorts today/tomorrow depending on the levels - whatever I had thinned down few days back.

Best.

Whats New?

Before I start, here is a GYAN -

What is the definition of insanity?
Doing the same thing over and over and expecting different outcomes! :)

A very smart guy...genius in fact said this...not not me :D....Yeah Albert Einstein.

My last 2 posts were just in jest in case you did not realize...Still some amount of seriousness is there lol...

Okay pure market views. Looks like we get gapper down today...And the usual attempts to fill that gap. It seems to me like we are being conditioned to a Pavlovian Dog instinct. One day a gap will come which will not fill...That day we will see real panic and maybe a bottom..Today is not that day.

Charts with comments.





Points to watch are 2860-50 on downside. I am not saying that the bull case is dead until a close below this point. In fact I think we shall close the gap the today or atleast try to. So its not like all is clear for the bear. Its just one more chip in our favour.

Even though I was mostly joking in last 2 posts, do not miss them since there is matter in them as well as the comments.

Best.

Damn! Somebody Woke HIM and HE aint happy :)

See this is what you get for taunting bears! :D (refer post below this)

All in jest of course - Just having some light fun....While the bear case
has been strengthened today by the US market action, its too early to
say if we can have one more marginal high - But less chance.

Thanks to all who commented in earlier post. I have posted my thoughts
and conclusion also there in case anyone wants to read it.

A more serious update later today.

Best.

There he sleeps...Somebody please wake him!! :)

:)

EDIT - WOW looks like the US Bear just woke up...be looking for a fakeout/trap :-|
Someone please wake the Indian Bear too :)

On a different note - Would you prefer my usual written updates or the videos? I noted that not many people download the video compared to those that visit here.

Markets - The beat goes on. 20day swing SL taken out. Now its on a buy...Likely this will also fail - stop is at 2660 odd I think. We are in the RANGE from HELL for now.

I still believe we are setting an important top right here. My beliefs should ofcourse be taken for entertainment purposes only! :)

Will post a more serious update later.

Cheers

Video Update - Feb 9th 2009

Latest Video update from my side...Video quality is good...But could only put the full file on another server...Go and download from there to watch -

LINK

Best.

Important Week Ahead

Meant to put out another video today...Unfortunately did not get time but still want to do this quick update since I think this week is a very important week.



The most important chart development I think is that the SL for the 20d swing has come down to 2930 - meaning that shorts should exit if market closes above 2930 any of these days. Will it happen? Well let the market tell us. I am going to review market action for next few days to decide how to manage my trades.

Something I have noticed recently is that few readers are turning aggressive, downright critical, mostly senseless comments that I cant even understand what they are trying to say. Come'on guys if you want to offer counter points, I welcome that since I can see the other side of the coin...But aggressive and taunting posts will get you nowhere. If it continues, I will be forced to take some additional steps like no comments allowed at all...Or even take this blog private so you can read by invite only....But we shall see. I dont like it when people come out taunting esp when I take a lot of effort to this analysis and updates...Its very frustrating to say the least.

The good thing though is that whenever these guys come out like this, market flips in my favour. So we shall see.

Okay enough of my rant.

Some interesting things I see on public sentiment also. Suddenly forums, news, blogs etc have turned bullish - They were bearish till Thursday. For me this is damn interesting. Market has not done much in this period to warrant this much bullishness...Is it the news? The stimulus plans? Well we all know how the last few stimulating plans helped the markets :D
Bottom line is this market should be allowed to heal by itself...sure it will be slow..but it is the only way. The more money you throw at it, you are only worsening the process.

There are a few things I am watching and also some cycles that say we are going to put in a real top within Monday-Wednesday timeframe this week. Whether this will happen or not I do not know but I am watching this week closely. I admit time is fast running out for the bearish case and the earlier fractal we were following can fail if the bullishness continues this week. I will be looking for an important top this week beginning.

I will post the video update tomorrow.

Best.

Reflexivity and Inverse Reflexivity

I meant to post earlier today but some work came up....Still here are my thoughts as promised...No charts today...Just typing some random thoughts and ideas.

Now the topic -
For those who don’t know about this concept, its very useful -

Reflexivity basically equals ‘a self forefilling prophecy’ - traders expect a gap and big decline, so they sell causing a big decline. This is actually a pretty widely followed concept. You can google for more information.

Inverse Reflexivity is a different idea - its an ‘unforefilling prophecy’ - its the contrarian flip side, where in this example, if too many traders go short anticipating the decline, the market makers aka operators can’t resist picking their pocket - coz believe me my friends, they know two very important things -

1. They can see how many short positions are out there and where hard stops are.

2. They know all the methodologies we use, what triggers setups, what triggers stops

If this is the case here, then likely it will roll over again down once the shorts are cleared, maybe by the close today or maybe by Monday.

Now above is what I think of the market now...As I said before I am just a trader...I am not a market GOD...You need to make your own decisions....I dont want you to lose money and then come back and post over here as that ANONYMOUS LOSER...I am sure that big loser lost so much money and he is totally pissed off at the world. Well my friend, no one but you is responsible for your own losses....Same thing I have to say to all....

Having said that, I thinned on some of my shorts yesterday...Still heavy so was looking to thin down some more today...If I get a good setup...But overall planning to hold shorts into next week. If you are risk averse, do not simulate my positions or my views :P

A wise guy once said about TRADING - The HARDEST WORK in TRADING is the WAITING ;)

Best.

Chill Out!

Another attempt...This time Bryan Adam's 'Back to you'

Comments appreciated.

One More Thought - EDIT*

EDIT: Sorry I had to delete earlier post and repost here...One idiota loser who probably has not even made a single cent in the market in his life has started posting anonymous comments that I will soon fail and commit suicide...LOLZ. I feel for you my friend - I think you have lost a lot in this bear and are just venting your frustration out...I guess you are also the same guy who commented a while back that 2250 is not the short term bottom but it would be 1860...Hows that working out for you?

Sorry could not resist...

I have changed settings...No more anonymous comments...

So that the latest post and comments do not get lost, I have pasted them below.

Latest read on markets - Well I dont know...I am still seeing possibility of a big down day...Or even cumulative down...Either way I have to start seeing sub 2700 in next 2-3 days. Else have to start thinning down on shorts....Already I managed a few, took profits on some and so on....But probably will think about really cutting them down soon.

Cheers.


OLDER POST AND COMMENTS
=======================
I have a pretty good feeling that we can have a very big down day today or on Friday. Be very careful out there if you are trying to bottom pick. For the down day to trigger, 2750 should break first..Then 2700. If so, then I think the goose is cooked and we head to 2525 first stop.

I will put up a new analysis video over the weekend.

Cheers!


COMMENTS
========

Yoda said...
Something about this fall isn't right. Can't put my finger on it.

Most stocks by this point are uniformly poised to drop - that syncing hasn't happened yet.

I'd advice caution since yesterday's fall was so controlled.

February 4, 2009 6:36 PM


Lee said...
Yoda, I agree with you to some extent...Something is not in sync...I can feel it also...Which is why if you see my last 2 posts, I am advocating lots of caution in case the whole premise is wrong...lol...I cant put a finger on it either but STILL...I have to play the odds...And short still seems the way to go...If we dont drop in next 3-4 days, I have to rethink this whole fractal...

Cheers

Thoughts

Hope you all enjoyed the video in the post before...The quality in the video posted in the post was really bad which is why I uploaded the video in full quality. If you download those, you will be able to see it in full resolution. The blog embedded one sucks...

If anyone has a more effective solution on how to put the video IN the post itself, I would really appreciate it...Suggestions welcome.

Some folks had problems with actually playing the downloaded file. If you are having problems...Go to this link -
http://www.videolan.org/vlc/download-windows.html

Download VLC media player...Superb player and will play pretty much every video file under the sun..Few it will not but thats fine...

Do this, and I am sure your problems with actually playing the file will be solved...

Regd the earlier posted poll, majority was bearish..But I think this is because you guys are reading my views and are influenced by it. Mainstream as I see is not so bearish...Sure there are bears but there seem to be a lot of baby bulls. Scary.
The other thing I feel is this...We are probably in the terminal end of this decline phase..So this means lots of people are bearish...But still the decline will come to wipe out the last smidge of bullishness so that the new baby bull market can start.
This is my feeling and interpretation. I can be wrong also. :)

Okay now coming to the markets...

So far, the market has been driving both bulls and bears crazy...Rangebound moves...And very volatile both ways and taking out both bulls and bears. I expect we will continue to be in a wide range of maybe 2500-2900 for atleast few more weeks...And the interesting part is we might test BOTH ends of THIS RANGE very soon. Get ready for some fireworks! :)

Be careful though playing in these conditions. What we have in some serious volatility compression...And we are building cause for a move in a certain direction. I am still looking for down as per my fractal map but still will be playing things cautiously...For example day before, I got out of some of my puts which I will likely enter today...Only thing I am not sure is whether to go for Reliance or Nifty but will see...Either case, I believe in next 4-5 days we have to start the big move down...2525-2600 first stop.

Charts and Commentary below -

NIFTY


RELIANCE


SENSEX


Okay...now something important...Even though I am raving bearish here and I am sure many of my readers are...Its important to play safe...We never know what can happen in these environments..SO...Play Safe!

Best.

Market Analysis and Views - New medium :)

Video I made with my latest analysis...Just trying something new. Enjoy...and comments welcome!

EDIT: Sorry guys I know the quality is bad..But I tried so many things and couldnt fix it...most free services do not maintain that quality of the initial file...So I am putting links for the direct files...Anyone who does not like the quality below, can download the files...Split into 2...

PART 1

PART 2

Poll..Please VOTE based on what you think..But also dont miss important post below!

Market Outlook Do you think market has bottomed or where do you think market will bottom? Bottom is in...BIG rally comin! Maybe little down but bottom is in or very close to in..I am buying dips No way..I am selling rallies big time!!! In trading range for long time Markets? I dont give a damn! View Result free web polls

pay sites

The Setup

Those who dont know about fractals or if you missed my earlier call on the same, please go and read the fractal call I made in September before the big plunge -> GO

Okay now coming to situation now...I have posted the chart with the fractal outline below. Its self explanatory and it should be fairly easy to see if the moves are playing out as forecasted. Till date I was looking at the fractal but still the moves were not clear enough but with recent price action, I think we are close. 

 

The other thing I find worth to mention here is when we hit the recent bottom last week, I would have covered but I was looking for lower since the fractal suggested the same...Unfortunately market always acts the way that is least expected. So shorts are now squeezed and retail and TV analysts seem to have gotten bullish again. I think we are very close to another short term top right here. I will be watching today's and tomorrow's action closely.

The Bottom Line - Until we go above 3150, I will remain bearish.

Best.

Amateur Guitar!

:-) 

Here is a song by Green Day...Good Riddance...Played by Moi...

I am a beginner so bear with me!

Comments welcome.

Best.

Introspection

When I started this performance and trade tracking business a couple of weeks back, I said it was going to be more of an experiment than anything else...And I also mentioned my intentions with this...i.e...not to start any kind of stupid trading calls service...But instead to serve as a performance tracker in case I do eventually get to do my dream job - be a fund manager.

Now after 2 weeks in this, I have to say, this thing is affecting my judgement, leading to unwanted stress and overall is hampering my performance. I say this comparing recent performance to that from a few months back. I think more than anything ego and stress is coming into play and these are things that should be avoided for sure in trading...

I know of several people who did something similar to this over here in the US..And I saw similar things happen to them also...They were outstanding at first but then just tapered off as more people began to follow them...Granted its too early to say for sure for me...But I think it is wise for me as a trader to make a call to shut this thing down.

I have had this nagging thought in the back of my mind for long...I have also thought about this for a long time yesterday and today....And have made my decision.

Trade sheet is updated with all the latest...I will leave this here for a day before taking it down.

Overall since I started, booked shows 11% and unbooked+booked will show around 6% profit.

For records purpose, let it be 6% and assume that all positions are closed and I am flat when I take this down.

I am sorry guys...to those who liked this new thing....but I have to think of my trades, my performance...and in the end, if my performance is getting affected, then what is the point?

Regd the market, I still think we are in a topping process and retail seems to be bulled up again...I think all rallies should be shorted from now on...FWIW.

Best.

More Adjustments

Okay here is what I did...Closed 3000 Calls(hedge) at approx 50.5

Entered 2900 Calls(as a hedge) size 2000 at approx 85...

Enter 2700 Puts size 1000 at approx 98...

As always all updated in sheet above..I saw some Qs asking about the trades..I dont see what is

so difficult to understand here..Whatever trades I take goes to 'open' and whatever I close, goes to 'closed'...Whats so difficult to understand? Comeon guys do some research on your own.

I know I know..Their is a good chance this trade will be a loser eventually..But as always I have to play the odds...I have to play my system and my gut feel..

Best.

20/20

No not a cricket match :) ... I am talking about hindsight here...Its funny how that works...Hindsight is always 20/20...What does that mean? It means looking back, we always know the exact points in time where we should have done something...And looking back now, I realize I should have covered shorts and probably sat out this current upmove.

Some of you readers might think I am a fool for letting this profit go by...But again the hindsight thing comes into mind...

I do not have much concern over here as I think this is just an oversold bounce in a very badly damaged market. In the bigger scheme of things, its not a big deal. I know I was in decent profits last Friday and after today's close overall position is in a small loss...I admit this is psychologically draining to see what was a profit go into a loss...But I follow the Jesse Livermore maxim...Sometimes in a trade, you just have to sit tight and wait for the BIG ONE...And that is what I am waiting for here...Might have to take some more pain but the payoff could be big.

The other thing I am feeling now is...after starting this new position updates thing on the blog, it has increased the pressure on me several times over...The pressure to not get into bad trades...The pressure to keep on winning...I guess this is why almost no one will do something like this...I am however going to tough it out and see how it goes...If I feel my performance is getting impacted, I will decide to stop the same...After all that is more important to me. Right now its quite too early to say for sure...But I am keeping a close eye on it.

Coming to the markets...Ok we got a good rally...Next area is 2805-2860 resistance bundle or wall...It would be very tough for the market to go over this...But if it does, we will challenge 2920-2950 range....As of now I dont have a clear plan on this trade if this happens...But I will see when we get there...Break 2720 on the downside and I think the downmove will continue in earnest to 2500 odd. Right now its a toss up and cant say for sure what the short term move will be...Intermediate term..i.e over next 2-3 months, I am very confident we shall see 2200 area and lower again. In the meantime, some pain is bound to be there.

If I get some time later, I will post charts with the counts I think we are in now.

Comments welcome.

Best.

Took OFF some of the Hedge

Just repositioning...You can see the details above.

Best.

Weekly Update - Chop Chop

My thoughts for the week...It will be short as there is nothing much to report. Expect the chop to continue...I think we shall get a good chance to cover shorts someday this week. Based on global markets, it looks like we bounce today...Shorting at around 2860 might be a good strategy.

See below chart...red and blue lines show possibilities short term. I think we are still finishing off wave 4 before wave 5 opens down.

Very simply speaking, we should see 2525-2550 area first (after going up today)...Then we should see around 2860-2960 range....Then the final move down. I will post these counts later...

For today I might do nothing in my trades...Short term taking some pain but we will see how it plays out.

Best.

10000 Hours

Funny title? Well that is the amount of time it takes anyone to become a master in any particular thing...Be it trading....or be it singing..or be it playing the guitar...Thats what it takes to be an expert in any field.

I read a blog article a few days back and cant find a link anymore but basically what it says is...For anyone to become a master in something, he or she needs to spend 10000hrs in that particular thing...

So lets look at trading...lets say you spend on average 5 hrs a day....so it will take you approximately 2000 days or 6-8 years to become a professional...This is assuming ofcourse you are fully dedicated and do spend 5 hrs a day...

Now statistics say that out of all traders maybe only 3-5% at a best guesstimate actually make profits consistently and over the long run...Why? Because most people give up after a year or 2...They either get frustrated or disillusioned or the market kicks them out...the great bear market of 2008 would have done that to a lot of people...If you remember, I once wrote about this...How I started out with few of my friends in this business and in the end only I am left...Not that I am very successful..Only that I do realize that I need to put in effort and lots of effort...I realize there is no free lunch...And we need to work for it..Now more than ever..Which is why I find it laughable that people tune in for tips and free calls...

I occasionally dab a little bit in guitar and music...Maybe I would have spent around 1000 hrs on and off...I can play a bit but I got fed up in between and stopped...Now I started this up again...I think I shall persist this time until I can play good enough...Maybe I will post some of my songs here some day..But my point again is that NO PAIN...NO GAIN...

Do your due diligence folks...Work toward those 10000 hrs...

Will post some thoughts for the week a little later.

Best.

Adding some more

Adding a little bit more...Now I am in full position...

500 NF added at 2685

2000 NF full position avg of 2777

EDIT: Setup I am watching says there is a good chance we break the 2680 support and start a waterfall decline....We can tag lower support area of 2540-2600 range and start an upward rally from there :) 

However its all speculation and usual disclaimers apply...we shall see how it turns out..I am remaining short for now.

Best.

Status Quo

After watching the tape for the past 1hr or so, I am making a decision here not to do anything on the positions. I still think we shall bounce but still there are times when a trader has to make a decision on a position on whether to take profits on a position or let it run in the hope of getting a bigger profit...In other words letting profits run...Ofcourse downside here is that a decent profit can turn to a small profit..or worse a small loss...But thats the game....

If you are a risk averse trader, take profits now and try to reshort higher...I remain short for now.

If we go higher over next few days, I will increase short allocation and reduce the calls allocation.

We shall see. As always its a game of odds and I need to trust my instincts.

Best.

Possibilities Possibilities....

So US market finally makes a spectacular rally from a very oversold condition. In the bigger scheme of things, I see this as a bounce or short term rally....short covering rally or scorch...as I call them...So what happens to us?

I think we shall maybe whip around a bit today, form a base and also do a rally attempt for next few days. 

So whats my plan? Likely I will cover today at best prices I can get...And go flat...Not going long for this swing...My mind is saying not to... :) Let it rally...I shall short higher if situation is right.

A Note here - A warning to all late to the party bears - be careful...scorches like what we had here in US markets can happen in India too...I saw comments and questions on late shorts..let me say...timing is damn important...My thought process and entry points are all chronicled in this blog on a real time basis...Please dont ask me for more information on trades or when you can take trades etc etc...I am not an advisor...I dont want that on my head...If you simply follow my trades, thats up to you...However I am sorry...I cannot and will not offer any person specific advice on trading positions..(let me give an example - lee, can i short at 2720....or lee, i shorted at 2700 level, when should i cover...)..It is just too stressful and dangerous for me to offer any advice of this kind and I will not do so...If you see my position and deem it wise to do something, then go ahead...You are on your own...Sorry to be harsh...But I have to say this before things get out of hand.

However - If you need any help on technicals, fundamentals or anything else related to the market( or anything else! :) ), let me know as always...I will be glad to help as I have been helping others over past weeks and months...

Cheers 

Adding....

...to shorts here...Feb NF 500 more at 2756

Hedge Options Feb 2900 Calls....1000 at 103

I am not very confident on this one...But trying it out...

Increasing hedge ratio, as bounce possibility is higher over next few days.

I will update the trade sheet above shortly.

Trade safe.

Cheers,

Lee

Tough Call

Tough call on the market direction next. I see different possibilities out there but lets take it one day at a time. See the reliance chart below with comments. You can see my thought process on this one.

Broader market...Well...2750 and then 2700 area remain most important on downside and 2860 on upside. There are so many other resistances on upside...it will be tough for market to move up...I want to see a wash out in the market but I am not seeing that...They still continue to buy the dips! Amazing is what I call it...Give up already...Well I just see more pain ahead but enough of my rant...Lets see how it plays out...There is a significant rally coming soon but from which level is the big big question? .. So well..lets just play it as we see it.

Trade update - My positions and latest prices are updated above as usual. Yesterday I had an urge to close and reshort higher...also to add more shorts at a higher level...but in the end just decided to maintain status quo. The reliance chart posted above should be studied closely. Its looks very important to me. 

Best

Lee

Zurich Axioms

Here is a link for another book I think every trader should read - GO

Its a fantastic book for any trader....Rules...Understanding risk etc...Enjoy!

I will post something on market views a little later.

Best,

Lee

Who were the Turtles?

In mid-1983 famous commodities trader Richard Dennis was having an ongoing dispute with his long-time friend Bill Eckhardt about whether great traders were born or made. Dennis believed that he could teach people to become great traders. Eckhardt thought genetics were the determining factor.

In order to settle the matter, Dennis suggested that they recruit and train some traders and give them actual accounts to trade to see which one of them was correct.

They took out a large ad advertising positions for trading apprentices in Barron's, the Wall Street Journal and the New York Times. The ad stated that after a brief training session, the trainees would be supplied with an account to trade.

This group was invited to Chicago and trained for two weeks at the end of December, 1983. They began trading small accounts at the beginning of January. After they proved themselves, Dennis funded most of the trainees with $1 million in February.

"The students were called the 'Turtles.' (Mr. Dennis, who says he had just returned from Asia when he started the program, explains that he described it to someone by saying, 'We are going to grow traders just like they grow turtles in Singapore.')" - Stanley W. Angrist, Wall Street Journal 09/05/1989

The Turtles became the most famous experiment in trading history because over the next four years, they earned an aggregate sum of over $100 million dollars.

Richard Dennis proved that with a simple set of rules, he could take people with little or no trading experience and make them excellent traders.

==================================================================================

To download and read this book go here - Link

Kpls 20day swing is a variation of the Turtles base system. Worth a study.

Best.

Short NF 2833

Shorting NF(Feb) 2833...Size 1000...Starting position. Will add later.

Hedge with 3000 Calls(Feb)...Size 1500...

As I said before, if market goes up, I will roll up the options to 

higher strikes and also add onto shorts. We shall see how 

much energy this market has and decide accordingly.

EDIT - Let me just say here, even in the bearish case, there is a 

very good possibility for Nifty to rally upto the 2960-3040 area

and still remain bearish. For me, if this happens, I will continue

to add shorts. So far so good.

The 20day swing will be reversed only above 3150..So as you

can see, its quite a tough trade but lets not overthink this

and trade each day as it comes.

-> Short term is bullish but can turn very quickly.

-> Medium term and long term are bearish.

Best.

The Coming Week and My Thoughts

Dont miss my earlier post on the past week and the trades I did...What went wrong and what went right...Will be a good read for all traders novices and experts alike.... :)

In this post, I will touch upon the week ahead, we will look at some charts, try to find some possible setups and also try to formulate a trading plan.

First coming to the sensex weekly. Comments on chart.

 

Nifty Daily. Agains comments on the chart.

Those who want to read more on Kpls 20d swing - Go to these links:

http://www.vfmdirect.com/forums/show.cgi?topicid=1231450596

http://vfmdirect.com/kplswing/

Its a very simple yet very elegant and effective trade system. I dont think many traders will have the mental fortitude(guts) and patience to use this system.  But it is something worth paying attention to. Its a variation of the Turtle Trading System...I will touch upon this in some other post in the future.

Okay coming back to market, either case I am inclined to start shorting...From Monday with hedges and then see how it goes...I will likely add up all the way to 3050 area provided we get there...And while I am adding I will keep rolling the hedge strike higher up. Its a plan but we shall see how I execute it tonight. I think there is good chance market will continue upward for next 5-7 trading days but eventual resolution should be down. So we are at 2828 now...2860 is resistance. And above this the 2920-2960 band is strong resistance. 3040-3080 even stronger resistance. I will be surprised if market goes that high...But then market always has a tendency to surprise us...So we shall see...I will update trades and entries if I do any today.

Again - Dont miss the post below this! :)

Comments and thoughts welcome.

Cheers.

Trades and the Week that passed - Post Mortem

I promised a post looking into the week that just passed us by and the trades that I did..What went right and what went wrong...

First the trade - Going into the week, I was short...From approx 2920 area and covered almost perfectly at the 2700 area. Watched for a bit and went long - It was almost a near to perfect entry and sure the market went on to rally 130 points from there...But still the trade turned out to be a dud. Why? Because the trade was over hedged. 

Now dont get me wrong..I had an inkling this might happen but still I allowed myself to be over hedged...Why? Because I was scared to take the long - And so in the end what COULD have been a nice short term trade bombed. I realized my mistake early in the day on Friday and wanted to get out...I tried to time it so that I could minimize the loss and VOILA market throws me a curveball..All minor corrections started running upward :D And to add insult to injury, my stupid trading platform went down...haha...all in all a frustrating trading day...Not really because the trades went wrong but because it was my own mentality that caused it...And ofcourse Murphys Law came true for me then...What CAN go WRONG...WILL go WRONG :)

All in all...I learnt some lessons...

- First thing...Never overhedge...If not confident, dont take the trade. Better setups will come.

- For a short term scalp, its better to keep the hedges very small.

- Watch the IV closely when taking the hedge. Also the discount vs. premium on the futures. Overall 3 reasons played against me...Overall it resulted in a bad trade. But still just small loss.

- Heavy hedges come into play only if its a trade lasting 2-3 weeks where the power to roll over to a higher strike comes into play. Its tricky figuring this out but well as I said before, I am also learning this...So bear with me!

Now, next, why did I cover at 2706 and go long. First, this area was tested 2 times and held, so it looked to me like a good place to get long....Second, daily and hourly was terribly oversold...So some sort of bounce was expected. Third, fade the gap...Its a profitable strategy more than often. Last and not least my any means, Sentiment...I could see on message boards, CNBS(cn bc is the correct term...cnbs coz its just bs(bullsh*t)) that everyone had turned bearish...Operators love turning these kind of situations into SCORCHES(=short covering rally). Simply said, odds were in favour of a good rally.

Now looking at the comment I got from Prashant in the earlier post...Where he really hit the nail on the head and my comment after that -

 Prashanth said...

Consider the following,

Your Delta (for Hedge) was 1.10 (which means you over-hedged)

IV was around 57 at time of initiation which dropped down yesterday.

Yesterday, we also saw discount btw Futures and Spot getting reduced.

I feel that for extreme short term, market is still up. If you had held onto position, loss may have been minimized since your Delta for hedge was not 0.70 and a 50 move on Nifty may have given you break-even or small profit.

TI :)

January 16, 2009 7:36 PM

 Lee said...

Hey Prashanth...

You are 100% correct!(Almost 3 different reasons played against me at the same time..I saw it happening realtime and just wanted to cut and run on my trades)...I realized this early yesterday even though I did not quantify it as you have over here...And in an effort to correct the mistake, I made some other small mistakes and probably worsened the situation(but small mistakes and so small fees - we gotta pay our dues to MISS MARKET lol)..but again I am not too worried about that...maybe 2 yrs back I would have been very upset...but in the effort to become more professional, I have tried to distance myself from the trades...hmmnn..donno if thats good or bad thing...lol...but you would know more about that! :)

Okay, I do intend to do some post mortem of the markets and mainly my trades over weekend...but in meantime if you have some links I can maybe read on the hedging dilemma(to HEDGE or NOT to HEDGE?) and Deltas, I would really appreciate it..I do know the idea and basic concept from my trading and experience..but I do not know the theory if you know what I mean...

Thanks Prashanth for you comments and time..I appreciate it.

Others also, I would appreciate it if you can offer comments on similar situations you might have faced..or any thoughts at all...

More thoughts and debates tomorrow.

Cheers and have a good weekend all!
Lee

So there you have it..For those who dont know...Prashant is a very astute and clear headed trader/analyst from the Technical Investor Yahoo group...

Next post will be for the coming week and my trade plan.

Cheers All

Lee

Closed NF and HEDGE

EDIT: DUMPED HEDGE ALSO. Going to sleep and dont want to keep this open. What makes me feel bad about this trade is that the futures buy was almost a perfect entry yesterday but the trade got messed up due to the hedge..I learnt a lesson but will share more over weekend.

Overall a bad trade. Oh well still a good week. The hedges were not properly done on this trade. I know why now but will post this and more thoughts over the weekend. Going flat for the weekend...We will see more next week.... 

Sheet also updated above. Have a good weekend all...

===================================================================

Close Nifty Futures at 2755. Hedge(PUTS) are still open. The way I hedged this was all wrong..Even though the trade entry was really good, the hedge was too large to make the trade effective. I will try to rebalance this trade today....Watch here for updates.

Later tomorrow I will write more on the hedge and what went wrong. I am also learning and experimenting in this.

Best.

Trade Updates

Closed short from 2963 at 2704

Close Hedge from 102 at 31

Opened Long at 2706

Opened Hedge at 102

All positions updated in sheet above.

This 'long' trade is a short term trade. Please avoid if risk averse!

Edit: The reason being I am not very confident on this trade since daily trend is firmly down.

Cheers.

Market Updates

Well got the bounce...On quite weak volumes...But globals are in deep red now...So looks like we can retest the lows and maybe slightly lower. If so, I will likely take profits on short positions and go flat. And look to reshort higher. Will update positions if I do this.

Chart and comments below.

Dont miss the couple of posts below this explaining the new position update feature on the blog.

Best.

Trade Methodology

Got some questions on the trades so thought I will outline some stuff here...

First of all the PE option mentioned above was actually CE being a hedge. I have fixed that - It was my mistake. I have also updated all the figures with latest values. I will do this every end of day or if I do take a new position.

Now about the positions - I am not the kind of trader who trades daily. Only positional. Now I might 'manage' the position and the hedges some days but mostly will let them be. Coming to above positions, it was a double short position before but I covered half of it at 2740 which is what you can see above the open trades - did this since I was expecting a nice bounce which we did get. The other half is still running - I will decide when to close this based on market moves. Whenever I do this, I will update the sheet and also post a blog entry mentioning the exit. Once this is done, overall profit figure will be updated and the trade will move to closed trades.

Then regarding the hedge, why do I have double the futures position? Well most of the time, I try to make it delta neutral especially if I am not fully confident and then I will manage the hedge positions depending on my assessment of the risk in the trade. See the simple idea is that futures will move much faster than options...So if I profit, I am cutting down on profit with the hedge but it will be a profit...On the other hand, if position moves against me, I have protection against account blowup. I have written a good deal on this a few posts below this one - And why exactly I follow this method of risk management vs. hard stops.

Now coming to following these trades. Since these are already open, I would not recommend trading them. If I do new ones, you can try but remember its totally your decision and your risk..In fact, I would feel much more comfortable if people inclined to trade this first paper trade and then follow if at all you need to...Best always is to trade using your own analysis and use mine for confirmation!

I will post market thoughts and updates a little later today.

Best.

Some Updates

Well faithful readers on this blog....You would have noticed that I have added a spreadsheet on top which essentially shows my trade performance since the beginning of this year...

Some notes: 

- The detail on the left shows details on the actual trades I have taken. I think the tabs are self explanatory.

- On the right hand side, you can see the details of the profits/losses which I booked so far and the positions still open and unrealized P&L. It also shows the performance record till date since beginning of year.

Some thoughts here:

- Why am I doing this? - 2 reasons. One is to act as a trading journal for me. I was already doing this - Now its public for all to see...Thats all.

2nd reason...Well this one is a bit more entrepreneurial in nature in that I want my performance to be recorded in case I ever become a money manager...Now I must confess..This is one of my ambitions...Well whether it comes true or not...I want to do this...

Okay...So how can you use this?...Well whenever I trade, I have already made clear before, I take hedges to protect myself...You can see this for yourself in above trades. Be very careful IF you try to follow my trades...usual disclaimers apply.

I would like to hear comments on my new venture and ideas..So dont be shy...let the comments flow...I am willing to consider any changes if valid and needed.

And also, if any one of you have ideas on what it will take to be a money/fund manager, please let me know or get in contact with me at my email id. 

EDIT:

Now you can see all the details on the sheet..I have adjusted a bit..Please do note that options are just a hedge for my main position... Also dont take any positions until I take new positions..I will update when I do this and also do a blog update.

If you want to, you can click on the right hand side icon of the spreadsheet to open in a new window and see everything in detail.

Again I stress..Do not take positions based off this just like that. Follow strict money management rules as I do...And as always disclaimers apply.

Best.

Position Update

No charts. Just a quick update on trades and the market. 

Some bounce is possible to relieve the oversold levels...So I took off some more of my short positions but still holding core position with hedges. If market rallies to 2900-2950 area, I will add back to shorts and also close my hedges - we will see when we get there. The caveat is that the daily trend is now firmly down...So any rallies might be weak...Which is exactly why I am not playing this long but keeping core short position. 

As always its a game of odds. Trade Safe.

Best.

Update - Some charts and quick thoughts

Charts on top...Some market thoughts and comments below all charts. Also comments added in each chart.

SENSEX WEEKLY WITH COMMENTS

NIFTY WEEKLY WITH COMMENTS
NIFTY DAILY WITH COMMENTS
NIFTY FRACTAL UPDATE

Some things here...When you trade, what determines your success above all is some sort of money and risk management. This you will need to develop on your own...I have explained my method already above...It can be stops, it can be hedges..can be a combination of this and position sizing management...

This past trade I am in now was in my opinion a very bad trade because of the area I started adding shorts from...The only reason my account did not blow up was due to proper risk management. 

Trade Update...I covered 30% of my shorts yesterday at 2800-2830 area and holding the rest. I also hedged the shorts at 2840 with 2900 calls...If market bounces next week/or crashes below 2800, I will likely close them off. But need to reevaluate that. Either way my thoughts and preferred paths are outlined in charts and posts above.

Probably no update for some time until I see some change in the scenario.

Have a good weekend all! Cheers :)

Best.

India's Enron

Thats what CNBC is calling this whole debacle and a very apt name too. Well not much of a surprise to me and I stand vindicated on my positions in the market. Not to thump my chest or anything like that...And I truly feel sad and sorry that this is what the corporate world has become. But it was only a matter of time in my opinion.

First we will look at charts and then I will write some other thoughts mostly in answer to some of the questions in earlier comments. I admit this was one of the toughest trading positions I have held getting whipsawed in different directions...But still held on and it paid off...I will touch on some of my thoughts and ideas after we go through the charts.

First the sensex setup chart I have been posting in the past few posts...You can see my comments on the chart. Setup still very much valid.

Next the Nifty daily...Comments on the chart. Nothing more to say except it looks to me we are going to new lows...within 5-7 weeks....Below or around 2000 and I will start looking at longer term cash positions again - IF we do get there.

This was the post I made a while back calling for a fractal move...It would be a good idea to go through this again and refresh :)

http://theindianmarketblog.blogspot.com/2008/12/range-and-some-very-interesting-charts.html

The Nifty weekly...Again comments on chart.

Now coming to actual trading. I understand and agree that this was one of the toughest trades ever if anyone did stay through. I am very sure all the weak hands in the market were first wiped out by the end of day short covering rallies...And once all the shorts are out, the market goes down...

I got questions on how to avoid this...Or how to even trade this...Well there is no easy answer but I feel there are 2 rough ways to actually trade this...For example the recent move up....we know 3080 was the ideal postion to cover shorts...or should have been a good stop loss for any short positions. So once price went above this, we should have covered and then shorted again when price broke 3080 again yesterday. I think looking at yesterdays price action, it was not too difficult to actually do this...Why was 3080 important? Well see the nifty daily chart above and you can see why. Charts are the only way to trade like this...Identify support and resistance points and trade accordingly...Now the caveat here is that to trade like this, you need to be IN the market...closely monitoring all the time....In other words it should be your full time job...If not, forget about it....

The 2nd way...What I do...This is probably not as efficient but I do this because I cannot be IN the market all the time....I am hardly there for 3 hrs of actual market time and that too sacrificing on some of my sleep...So what I do is enter a position and take a hedge in the opposite direction...What this does is I never blow up my account...And also sleep fine :)

Some experience in needed in this also to determine how much to hedge...Which strike to use...etc  etc...For example...Short Nifty 3000...And Long Nifty Calls strike 3100...Now the ratio of the call options should be higher compared to the futures...Then only will it be efficient...As options will not move like futures...

The advantage of this kind of trading is...It give more leeway to me...And I can use my exit plans and I can trade over a larger timeframe...Which brings us to another important point...Timeframe...What is the timeframe you trade?...Decide that...A day trader cannot trade off the weekly charts...I use the weekly to trade...And dailys to fine tune and the hourlies to do even more finer tuning....So I trade positions on a weekly scale...bigger stops...bigger targets and much more leeway...Also it suits my style and the amount of time I can spend in the markets..

Trading is a tough business...Agreed...Experience is the most important thing that we should build in the market...Dont feel bad if you missed out on a move...More moves will come...Markets will still be around...Protection of capital should be the focus of any trader. Profits will follow.

One site you can look at for good support and resistance levels is Ilango's blog :

http://tradeinniftyonly.blogspot.com/

Also I would recommend reading this again - A post I made early last year on my thoughts on TA and trading and what is actually important to a trader. A good read for all traders...Dont miss it.

http://theindianmarketblog.blogspot.com/2008/05/how-important-is-ta-in-your-trading-or.html

Next Possible Moves & Trade Setup

Coming to the market and the next trade setup...I think we will continue down for some more time...And a bounce should hopefully materialize from 2800-2850 area....If we get this bounce from here into 2920-2960-3000, then a good short trade can be done with stop as earlier high...Again watch the lines in the nifty daily and enter accordingly. 

Best.

The Setup - Followup

Main setup I am watching now...Chart is same as posted before...Watch next 2 days closely...Short with tight stops or hedged with calls looks like a good risk-reward play..

Market did not go down as far as 2650 but still the direction of this fractal remains the same as outlined in earlier posts...But we are very close to invalidating this...So a close watch looks to be prudent.

Best.

2008 - What A Year!

Its the end of the year and looking back on this year, I am sure that no one would have expected what played out. Not to this extent. I expected some kind of top at 5800 and sold out on all my long positions and went flat....Market continued upward without me but I was content since we can never expect to catch the last 10% of any big move...Not unless you are very nimble. 

The end of the bull run was marked by the famous Reliance Power IPO...Retail went crazy at the time this one came out and even though I warned all my friends not to put any money in this they still went ahead...loosing most of their money in the process. The day the IPO came out marked the bull market top and never looked back. Has retail learned their lesson? I think not. They still listen to the CNBC clowns - even now. Folks its not a bottom. Their is no such thing as a V bottom. It will take time.

So what do I expect 2009 to bring? It will be bittersweet for sure. The first half is bound to be bad..I expect we shall see new lows...Then after this one super bear market rally. Again pundits will come out calling a new bull market....Will it be? Maybe...But lets take it one step at a time...We will surely go through a basing process over the next 12-18 months...Ups and downs...But there will be super rallies to play...Lets be a trader for some more time and try to catch these big moves before turning on our investment mentality again. 2010-2011 may be the time another bull market starts. Now this is all speculation...But this is my expectation.

Okay enough of raving...Lets go the charts and more closer stuff...Chart with comments attached below. In the post below this one, I mentioned it was good to short at those levels since we were close to the upper area of the channel. Its in good profits right now...What next? My expectations and comments are on the chart. Enjoy.

Once we set this important low in Feb-Mar 2009 timeframe, I expect we shall get a huge rally from the lows...which may be around 1800-2000 on Nifty...this rally should happen into late 2009...maybe a 100% rally also...But let us see that when we get there.

Best and Wish you all a very Happy and Prosperous New Year!

Range and some very interesting charts

Well folks...I got some free time now...so did some analysis and am putting up some charts here with comments...This is very interesting stuff...Dont miss to go through the comments and the studies...If this call plays out, it will be quite an amazing move...!

First the sensex chart I posted in earlier post updated now.

Nifty log...Is this a wedge? Not clear enough to call.

Now the main chart...All comments here...Study closely and leave comments if you like it! :)

Cheers and All the Best!