Hurst Cycles - 8/7/2011 - Backup from VFM

I was thinking for a long time about closing down this blog and restricting my posts to VFM only going forward due to various issues. But after thinking for a while and after seeing a good response to what I posting on VFM, I am bringing that here also. Basically taking a backup because VFM has got a notorious history of losing older posts. I think this is valuable stuff so I want to keep it here as well.

Will be posting actively from now on..both here and on VFM.

I think this is very valuable stuff..Please go through if you missed on VFM. And you can also see how I traded using cycles.

Best,
Lee

FROM VFM - Link : http://www.vfmdirect.com/forums/show.cgi?topicid=1312717195#1313194596
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Hurst Cycles - 8/7/2011

Posted by: princely.k.mathew on 07-AUG-2011 (11:39:55)

Hello All,
Several months back, I cam back to this forum and I was trying to post more actively, revive my blog again etc..but over time I have found that I have not been able to concentrate on my blog frequently enough..so I stopped posting there..Over here also, I havent been able to do much constructive..

But anyhow, I have made a decision not to update my blog going forward..But I will try to give a weekly or bi-weekly update here on a normal case and in case of some important low or high, I will try to post earlier on an adhoc basis..Need to see how it will work out.

Now, as I mentioned in another thread, I have been dabbling in Hurst cycles methodology for past several months..And I like what I see so far. This is an abstract kind of methodology and I find very very few people out there who can practice this successfully.

A writeup on who JM Hurst was and what he did : "In the late 1960's a small group of private investors in California rented time on a mainframe computer---the only kind that existed at that time---and asked an aerospace engineer, J.M. Hurst, to help them in their stock market research. The results of over 30,000 hours of computerized data analysis were distilled and revealed in Hurst's 1970 book, The Profit Magic of Stock Transaction Timing , which has become a classic work on cycle analysis.
In the early 1970's Hurst authored a full-length course on cyclical analysis and on how to apply it to actual trading. It was published by Cyclitech Services, and Hurst taught the principles of this course in a series of seminars for a year or two. The material in this course is considered by many to be the clearest and most thorough material ever made available for those interested in learning about cycles and how to trade profitably with them. There were only 250 copies of the course ever sold. It has been out of print for the past 25 years.
In the mid 1970'2, Hurst, an intensely private individual, disappeared and has not been heard from again. We have had many customers over the years who were tremendously interested in Hurst and his work and were extremely interested in contacting him. They wanted anything he had written or done beyond his The Profit Magic of Stock Transaction Timing , but until now, there has been nothing available. I had only heard about this course in rumor for years. Only recently did I actually locate a copy of it"

I finally managed to get a copy of the book..very damn expensive..and have been studying it for past few months..I have to say its been enlightening to say the least..

I have dabbled in elliot and classical TA but I have not anything like this capable of pinpointing cycles to this level..I mean major lows and tops only this one can do..And together in combination with other forms of TA, it forms a very powerful tool.

A little bit about it..Hurst said that cycles move in a nominal model with deviations..there is a 5 day cycle, 10 day, 20 day, 40, 10week, 20week, 40 week, 80 week and so on. There will be deviations and thats what we try to figure out using Hurst methods..There is so much of work involved in the background that it will be futile for me to try to explain here..I will however try to explain bit by bit in future posts...But for now it will suffice to say, that the Hurst Theory trys to identify major price lows and highs in time...Each of this low and high will have a certain degree based on the timeframe..80 week low, 40 week low etc.

Most people will remember from my posts in beginning of year when Nifty was around 6000 when I said we are going to get an important low toward end of this year..Oct end/Nov mid timeframe..We will fine tune when we get closer. This was based on Hurst methods and specifically the 80 week cycle. March 2009 was an 80 week low..so you can imagine the potential for a rally from end of year..we will see..



This is what I wrote last week -

For now, if you see the chart attached, the 40 week low was in Feb mid, we had a good bounce from there..then the 20 week low was in June mid..Another good rally from there..and now we are moving into the next 20, 40 and 80 week nest of lows toward end of Oct/Nov mid timeframe. Right now, a 10 week low is due in 3 week or so of August..So I also expect market to remain week till then and even after that, the bounce we get will be weak..Infact I see potential for 5200/5150 to be broken before that..I mean before we get a good bounce..Then again another big fall from Sept mid or so into Oct end/Nov mid..Before all this is over..
I hope I made some sense..Hurst is tough stuff..But I have been dabbling in this for some time now and I have to say, I am very happy using it..Its complex..so not for faint of heart..

Now in future posts, I will try to bring some more clarity to what I am trying to say...put up more info on longer and shorter cycles and so on..And what I expect going ahead..

I hope some people find this useful and I would appreciate comments and thoughts as always.

Best,
Lee


Posted by: princely.k.mathew on 07-AUG-2011 (12:00:54) [IP address: 197:253:94:----]




Ok now a look at the longer term cycles..see chart attached..the stacks of diamonds show major lows in the market..this is a weekly chart...so shows 80, 40, 20 week lows..And higher ones also like 4.5 year and 9 year lows..I dont pay too much attention to these but for me the 80 week cycle is very important..

As I mentioned earlier, the rows of diamonds or the semicircles indicate which cycle it is. The diamonds indicate the lows and on the extreme right you can see which low it represents..The semicircles help to visualize a bit more easier..Showing the rising and falling of each cycle...from the 9 yr down to the 10 week/80 day cycle.
You can see from my comments the important lows marked and the projection in time for the next important low. Complex spectral analysis is behind all this analysis..I will touch upon this more detail later.

Now shorter term, this is always more difficult to fine tune..but like I mentioned in my last post..We are close to another important low..I expect by 2nd week to 3rd week of August...This is the 10 week low from where we should get another pop up after which the decline should continue into another very very important low..the 80 week low around end of Oct or mid of Nov. This is what I have been saying since beginning of year and still reiterate the same..I will be looking to recommit long term fund around that time which I had exited earlier this year.

I hope I have been able to make some sense..Watch out for future posts. I will be focussing bit more on shorter term cycles in next post..probably tomorrow.

Comments are what will encourage me and make me go ahead..so I would always appreciate the same.

Best,
Lee

Posted by: princely.k.mathew on 08-AUG-2011 (08:43:29) [IP address: 197:253:94:----]

Hi Guys,
Thanks for your comments and interest...much appreciated!

Nikhil, from the other thread -
Yes complex..but maybe its for me alone since I just started couple of months back..Already I can see some differences in my approach and its a good thing so far. Account balance speaks!
And the good thing is over time, this might come also simple and natural to me..I hope so..Atleast I know a few Hurst Technicians doing a an awesome job out there consistently..It amazes me how they do that..

The difference b/w elliot and this is great..Elliot is too subjective..This is also subjective but there are some good guidelines to help us be on right side of trade..

I will try to post regularly on Hurst here..I hope it benefits folks.

I use this with some common sense, other market TA and its giving benefits..

Gera, you are right..Its very very useful for investor types..For traders, as you become experienced, you will be able to trade smaller cycles..And this is what a trader needs..However smaller cycles become tougher always..I find the 80, 40 and 20 week cycle best for trading or investing..Sometimes the 10 week and 5 week also work out..But need to be very careful when using these..

Lets try to figure this out together with live cases in real-time.

Now coming to the book, yes this is the first book that JM Hurst wrote..BUT I would caution against reading this because this was his initial work and later after long long years of research, he did a complete course for Hurst students..This is what I have bought and am studying now..This is what I said is expensive..comes to around 500$..

Link - http://www.traderspress.com/detail.php?PKey=99

Some history around JMH can be read there..

Hurst experts advised me not to read the first book but get the course and study that..So I will say the same also..But you cannot get the course online for 'free' anywhere..have to buy..it includes 10 audio cds and 2 extensive manuals..Once I study this fully, if anyone is really really interested, I can pass it on..but this takes time..Dont go for it unless you really are ready to spend some real effort.

One thing I'll say..this is one of the best market methods out there I have seen..But its difficult so most people give up on it..Here in US also there are very very few who use it successfully. I dont know of anyone in India who does..

I had thought of putting up a shorter term market cycles post today before market opens but its almost open..so later..let me focus on my open positions..I want to close all shorts today..I know my projected lows can still be a few days into future but there are few uncertainties here and I want to take my profits.

Later.

Best,
Lee


Posted by: princely.k.mathew on 09-AUG-2011 (09:32:43) [IP address: 197:253:94:----]
Well it looks like I was early in covering my shorts..hehe..but in a ultra fast market as this, I think I should be happy with the profits even though missed some..

And today's initial morning strength is surprising..I think we are seeing the initial signs of a cycle low forming..I am still confused about the degree..I thought it might be a 10 week one but I feel that is unlikely now..So that leaves the possibility that its a 5 week low..We will need more data to confirm what it is..Meaning few more trading days...Whatever it is,looks like it might give a decent bounce.

Trading this wont be easy..But keeping your size small and stops very close, you should do fine..

So if the low is coming in today or tomorrow, we should see a rally for the next 2 weeks or so..August last week/Sept first week next top?

Let me stress again - We are seeing unprecendented conditions in the market now;;; Take my comments with some salt;;; Do your on research before doing anything.

Bala, Nikhil, will definitely try to do more work on this here..Feel free to ask questions in the meantime..

Btw GANN is too much for me..I have only seen one person use GANN to some success and that he used to combine with HURST as well..SO..

I will try to come back with a chart later..maybe tomorrow when things clear up a bit more.

Best,
Lee

Posted by: princely.k.mathew on 10-AUG-2011 (21:18:23) [IP address: 10:219:161:----]
Ok so far, so good..we did get the low..what next? Well, most likely we are right now in a wave 4 from the top with wave 5 still pending..so what we are seeing right now and over the next few days/weeks will be multiswing action and very fast markets..better to stay out if you arent nimble enough..I went long the day we had the huge gapdown, covered yesterday and even started few shorts..After a retrace, we should have one more pop high lasting few more days..maybe more to complete this wave 4 after which wave 5 down should start..This will likely be a longer affair going down into the 20, 40 and 80 week lows I had mentioned before coming in toward Oct end to Nov mid timeframe..It can extend into December also so we will fine tune as we go along...

Best,
Lee


Posted by: princely.k.mathew on 12-AUG-2011 (09:58:18) [IP address: 197:253:94:----]

I was holding some longs awaiting one more burst higher but I am not happy with what I am seeing so I am dumping the longs and going small short..5230-5250 range has to be cleared for next upmove else downward pressure will be on..

Too tired to respond to other posts or to post chart..so seeya all on the weekend!

Best,
Lee

Posted by: princely.k.mathew on 13-AUG-2011 (00:16:36) [IP address: 10:219:161:----]

So short was the correct move after all.I should have added prices in above post to make sense..but never mind..Short from around 5160 for now..wait and watch what next week brings. My gut still thinks that there is one more small upmove left but the market seems to think otherwise so I will go with the market :)

Bala, not surprised with the correlation. The 80week or 1.5 year cycle is an important one..I will try to describe more below.

Ranga sir, thanks..I dont like to read much into so called experts views..And I mean those who come on TV and those who send out emails..Not unless I know who those folks are.

Anyhow..

So I have some time right now..Thought I will explain a bit more around cycles and how it works. Might be a little deep, so anyone not interested to understand more around how this works, please excuse.

First of all..around cycles - I have taken some excerpts from online to write this up..So..

Cycles are extremely important because they help us frame the market within the dimension of time.

The first thing we should do is ask what cycles are - cycles are the observable tendency of prices from go from top to bottom to top to bottom at regular intervals. The price index will move upward from one trough until it reaches a crest (top), then the price index arcs downward into the next trough, or cycle low, as we sometimes refer to it. We can see the evenly spaced bottoms on the price chart that give evidence of the existence of cycles, but what causes this to happen? What is the cyclical force behind the price movement?

A stock market chart is a picture of human emotions expressed in the form of price movement. Fundamental events don't directly move stock prices, it is the emotional reaction to those events that moves prices. In a much broader context there are recurring events in nature and in the business cycle that affect human emotions. In other words, natural and fundamental events do affect the market, but only through the filter of human emotions. This is why it is so difficult to design economic or market forecasting models based on fundamentals -- humans can react quite differently to the same fundamental circumstances at different times.




There are two 10-Week Cycles within one 20-Week Cycle, two 20-Week Cycles within one 9-Month(40week) Cycle, and 2 40 week cycles within and 80 week cycle(18 month cycle) and so on. Where cycles of different lengths make their lows at the same time, they are said to be "nesting". This is a very important concept..Because higher cycles tend to make the lows at the same time together, its called nesting..This is why LOWS are very important and easier to identify..But tops tend to be spread out - called topping formation. This is also the reason why if you are bearish on the market, shorting is very difficult and you need to be very nimble. See the attached diagram too see what I explained above about cycles..Also my earlier charts should help illustrate what I am explaining here.

The most compelling thing about this picture is the impression of power associated with major nesting points -- where all cycles are making lows at the same time at the 10-Week, 20-Week, 9-Month, 18-Month, and 4.5 Year Cycle lows. Visually we can sense that price declines into these major lows will be quite severe, while rallies off those lows will be explosive and powerful. Conversely, there other areas in the cycle structure where the cycle forces are mixed, with some cycles moving up while others are moving down, and it is hard to get a sense of exactly which direction a composite of these cycles would be pushing the market.

You will often hear reference to a cycle's "translation". This refers to the fact that cycles rarely crest in the exact center between troughs. More often they will crest to the right of center, called a "right translation" cycle, or to the left of center, called a "left translation" cycle.

In a bull market the market spends more time going up than down, so we will normally expect major cycles to crest toward the end of the cycle, with the crest being followed by the down phase of the cycle -- a right translation. (this is what we saw after March of 2009)

In a bear market we would expect to see left translation cycles with cycle patterns exactly the opposite of those in a bull market. (this is what we are seeing now)

Check the earlier uploaded charts for a more visual feel of what I have explained so far. Read read and read this again...These are fundamental concepts in cyclic analysis.

I will explain more later..this is just basics! :)

I will post charts with latest views either later today or early tomorrow.

Questions and comments are welcome.

Best,
Lee

Quick Update

Update - March 31st

Been meaning to post some charts for some time..Here are a couple with comments which show what I am seeing and my thought process here.






Careful out there!

Lee

30th March

I wanted to post some charts here..but dont have time to..

So..Bottom line is..yes very bullish..but I think trend is turning or might soon.

Book profits on longs and wait to see what will happen.

The TURN is coming...

OR else we go all DAMN bullish very soon.

Will post charts tomorrow.

Best.

Confusion

Will be very frank here..

Confusion reigns supreme.

Its anyones guess here what will happen.

5800 is the bull bear line as I said before.

I got out of longs today with decent gains.

Shorts..I am going to start building them today with stop of 5820.

Be cautious. If you are confused or not confident, pls dont do anything.

I will post some charts tomorrow which might clear some stuff...some more
views..more thoughts etc etc

Best

Week Ahead - 28/03/2011

In last update I mentioned above 5540 we can see a good rally and we did that above and beyond what I thought might happen.

There is no doubt - things are looking quite bullish now. I have tried to give some views in the charts below on possibilities. This week after an initial pop, we should see some pullback - Use that to exit shorts and try some longs. I got out of all shorts on Monday and took a bucketload of calls to cover the loss - I will close those today and wait to get some good long entries.

Longer term chart looks still bearish however I see potential of a change coming up.
Chart gives more idea. I will be moving focus to stocks going forward and wait to see what Nifty does.



Another look at the chart from far



Best of luck and trade safe. Do your own due diligence and do not follow anything written in this blog blindly.

Cheers.

Market - 25/03/2011

Quick update. Market at the cusp of the triangle today. Can go on upward to test 5600 today assuming we can sustain above 5540 area. 5600 is the higher end of the trading range - will it break out? A little bit of selloff is due for a reset soon because market participants are bullish now. However OI data is quite bullish and continues to suggest higher prices in the very short term.

More detailed analysis and charts over the weekend.

Best.

Market - 23/03/2011

Intra Thoughts

Interesting is all I can say. I am still bearish over medium term but short term is bullish no doubt. Lets see if we can test 5600-5650 levels. I am shorting at 50 point intervals for now. Scaling in. I dont think we will be able to sustain above 5610..but let us see if it will work out over time.

My current positions -

Short 1 lot at 5450
Short 1 more lot at 5500
Will short 1 more at 5550 and 5600 and then wait and watch.

Even though I say 'lots' above its a ratio of what I am doing. Meaning 1 lot can mean 10 also depending on the size if you know what I mean.

Let us see. I am a positional trader not an intraday one. Some folks seem to think I am over analysing and I can see what they are seeing from their perspective. Its all about timeframe. I mean an intraday trader cannot come here an make sense of what I am doing. That wont happen. My timeframe is 1 to 3 weeks. Remember that.

If it does not work out for you then please quit this blog. I will take a little bit of drawdown to make bigger gains. If you cannot stomach it then this is not for you.

Best.

Some Macro thoughts, Nifty shorter term and a look at a couple of stocks

Macro thoughts...Ofcourse this is only speculation. I think we are going to put in a very important low longer term toward end of this year - this will be a great opportunity for us in India to some some real good stock picking for longer term portfolios. I will be awaiting the next buy on my weekly chart. Shorting like I said before is always a game for the professional in my view. I feel retail guys should always be on the lookout for cash opportunities and focus on picking good stocks when there is doom and gloom in the markets.

I will show a great example in my next post on this and what I mean..What my plan is etc etc.

I think we are going to do a lot of volatile moves over next several months until we get a sustainable bottom.

Remember in 2009/2008, US market bottomed in March..We had our ultimate bottom in Oct and a secondary in March. What I mean to say is we are leading the US market by around 4-5 months. This time also we hit a top before them. Too early to say for sure if it was the ultimate top or not though I think it is for now.

Emerging markets are an excellent barometer for what the hot money is doing. And it does look like the 2009 March situation is playing in reverse. Just my take on this.

My very limited cycles knowledge also points toward an important low later this year. We will have to see how it works out over time.

At this moment I dont see any chance of 3500 on Nifty being breached. I think we might get to around 4200-3800 and stabilize over time.

Reposting my comment from earlier post here so ppl dont miss it -
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Stop losses are a real ART Yoda. I have kind of given up on them and instead am focusing on my signals.

Sujatha - tough question. For me this is where a bit of discretion comes in - mean to say more of feel kind of trading. Also simple supports and resistances.

I know the larger picture. Then I take a top down approach from there. For example 5650 broke, I was already building shorts from 5700 odd (gut feel) and when 5500 hit, I covered up, reshorted higher etc etc..I dont know - these kind of things just come my experience over time..And managing trades means I keep risk lower nowadays.

Leverage - I almost keep it at 100%..Mean to say if I have 5 lakhs - I will just short 2 lots = correct value more or less. To add 1 more lot, I need 2.5 more lakhs.

Trading hours big challenge - But I try to manage for a few hours. If I feel some important move will come, I will sit out the full trading day.

Thanks Bee..Read your mail also.

Thanks Prashant..

Ashish, you have asked a very difficult question. I will be completely honest here. Every trader will go bust several times in the stock market. No way out of it. I too have gone bust atleast 2 times. But I always made sure I dont lose more money than I can actually afford to lose.

I remember within first 2 yrs, I went bust once.

I studied lots and came back. Things went well for 3 years or so. Very extremely well for the next 1 year - got very overconfident and starting playing with huge amounts..started playing without SLs etc etc. Ofcourse I dont need to tell you what happened.

I have come to find that money management is the most important thing in trading. Understanding your risk and playing accordingly.

I would say right now, I play with less or NO leverage. Sure profits are smaller but need to keep greed under control. I am net on net okay now. Net profitable I mean. So yes it is possible and you can do it also. First thing needed is belief in yourself.

Lets continue this discussion.

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Now heres a look at a random stock just to show my methodology and how I trade with a top down kind of approach. This is for the long side only. Short side I just focus on Nifty. Lot of comments in chart - open in new window to read.



A look at nifty shorter term. Comments in the chart.



Range contraction is what it is. Today would be interesting for a variety of reasons. One thing I have noticed is the correlation b/w the Indian and US markets has diminished greatly over past few months. So todays strong US move - would be interesting to see how we are going to react.

The FIIs have been using this as a excuse to liquidate nowadays. I think that is when they get the volume to do what they want to do. Means good gap up on world markets; then sell off. It will be interesting to see if the same trend continues today.

5600 remains decisive for the medium term timeframe. IF and thats a BIG IF we manage to get over and sustain 5600 over next few days, then we can go above to test 5800. I would put this as a low probability for now and instead watch how we react at 5500-5550 range. I will be looking to put back on the shorts at this area and then see if we can get to 5600 or if we get back down to test 5300 area again - my money will be on this. Let us see.

Bottom line is this - Trend is down. Rallies should be used to short or exit from longs. How exactly you do this depends on your trade management and personality.

We will focus on EW counts next post.

Later.

More later.

Back Again

Okay guys..after a break of almost 2 years, I am back. I hope I will be able to consistently post here for a while.

What I have been doing for the past couple of years..a bit of soul searching..trying to improve my trading methods. More importantly trying to improve my money management techniques - this is by far the most important thing any retail investor/trader should do - But it is the one thats ignored by everyone..More on that later.

I have found that the best way to do things is to focus on the bigger picture..Keep leverage down to a bare minimum. Have a clear idea on the RR ratio..Most folks dont try to determine the risk but instead focus on the reward alone and in the end get bombed.

Another thing guys - Option trading is NOT investing. I saw someone say on a forum some time back that they had 'invested' in 5700 calls. What the hell!...Thats not investing..its speculation lol.

Anyhow coming to the chart. I have posted something similar some time back. This is the weekly nifty chart with KPL's 20 period swing on it. So its a 20week swing. I have found this is the best way to catch the longer term trend and swings with a fantastic accuracy rate. You can see the buy and sell arrows for yourself. This tool is great for a longer term investor and trader.

As I mentioned before, when 5650 broke, I think our market has entered into a longer term bear. This will be negated only on trading above 6181. Over time the swing will come down and we have to keep monitoring this to determine buy point.

I think we are looking at a possible bad year in 2011 and if we get a good low toward end of this year, then I will start looking for possible longs toward then. It might turn out to be the buys of a decade if it plays out the way I am thinking it will...Speculation at this point but lets see. I will say more about this later.

More comments on the chart. Count the points from arrow to arrow. Only price as I have found that that is the only thing can be trusted. Most folks will focus on thousand different indicators which only muddies up the picture. Focus on price alone.



I have been trading on the long side last year until the swing turned down as shown in the chart.

Bear markets are tough to trade for the retail investor. Its a game best left to professionals. Still I am trying to do something on the short side - atleast trying to capture some of the down swing. Lets watch and see how this plays out. Patience will be of great importance here.

More later.

Amazing!

Well the bulls continue to amaze. Every little pullback is being bought..and yesterday it looked like some big money really came in..I only wonder why they are this late to the game but who am I to judge. Anyhow, on the log scale on the daily, Nifty looks to have broken out and next logical target is 3800 area. But keep in mind, market defies logic...Lets see how far this goes. I tried some shorts yesterday..monster moves stopped me out ofcourse..so nothing doing now...wait and watch...

Been thinking again about this blog for a while..And due to various reasons, personal and otherwise, I am taking a rather longish break from blogging..Not sure how long.
I have lots of personal changes coming up...will be moving to India in while and so on so I wouldnt have much time to continue this blog at the same level that I am doing now...Besides I am finding the whole thing stressful at the moment.

So I am going to step back a bit from blogging..And see how I can manage it..If I feel comfortable, I will be back with weekly or bi-weekly updates...For now, bye, take it easy in trading and always keep a watch out for the unexpected.

Best.

Da Wedge

Looks like we broke down from the wedge pattern and now backtesting it..Shorting with a tight stop has good risk-reward here.



Best.

The Week Ahead

EDIT: Intraday at 12:15PM - Interesting action on intraday charts...Here 15min..Looks like a break. I shorted the break..small size only. I missed shorting the open even though my gut told me to..Nevertheless shorted at the break shown in the chart.



Lets see.

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Another shortened week ahead..I have found that these kind of weeks throw me off a bit..I mean timing wise it can make things a bit 'OFF' but well we got to live with it I guess.

Market this week - I am again expecting we see a pullback. It could be very fast and could also be a sidewise shallow correction. Buying the pullback could be profitable..I think for this time. But dont be in a hurry to buy - In my very humble opinion. Lets look at some levels on the charts.

NIFTY HOURLY



NIFTY DAILY



NIFTY WEEKLY



TWO POSSIBLE COUNTS IN RED AND BLUE



As you know I am totally flat right now..I am not sure what I will do next. In 2 minds..I.E to let the market settle down a bit before going long again..OR try a quick and small short for 2 days? Tough call. We will see as it goes. Will update if I see something interesting or do take a position today.

Best.

OUT

Out of longs...from 3166 to 3374 odd..

Not doing anything now..

200+ pts..I will take that.

I will post some charts and thoughts later if I can.

Best.

Some Mumbo Jumbo

Some more mumbo jumbo from my side..more of an extension to the post below this..

Often I've wondered why we go through good patches and then bad patches..Is it luck or is it all in our head? I think its the latter..Even a gambler has good streaks...but again is it chance? is it luck? Or is it something else?

I have had some stupendous periods of gains and good trades .. I have wondered what made me do that..What created that? And why does it not continue ad infinitum? I believe its all about being in the 'zone' .. Now what is being in the zone..simple..I am sure we all would have played some kind of sport in our life and during some point of time, we would have been playing at the top of our game in a particular game..and NOTHING you do...NO MATTER what you do, it always goes right..Thats the ZONE.

Now traders also have this zone...I have found myself somehow stumbling into this ZONE sometimes..Its mostly by accident but sometimes by design as well..And once we are there, usually something stops the streak and reality snaps back..I think a lot of it depends on having the right amount of confidence and also the right amount of common sense...Most expert traders remain in the ZONE permanently and trading for them is like a second nature..Traders like me..well not quite there even though we'd like to be there...Its a tough game this trading..No matter what you do in life..what all you do successfully, nothing can prepare you for trading successfully except for trading itself.

Its a tough road..Most give up..

But heres to sticking on the road..And getting into that permanent 'ZONE'!

Thoughts on the market later.

Best.

WOW

..I mean just wow...Been a long time since I've seen something like this...Market digested the big gap down and just powered ahead like its a new bull market..My decision to cover and go long in the morning paid off nicely..Position size was not as big as I would have liked but lol, I'll take it...Beer money :)

The markets are getting a bit ridiculous now..I still have a bad feeling this wont end well..but well thats just me..We shall go by what the market does...200pts in one day from low to high!!...well I wont complain as I caught all of this move...Still its amazing how this is going now...Looks like no one wants to miss the bull bus.

As you might have observed(lol, right), I havent been in good form lately and whenever this happens, it pays to step back a little and regroup before trading again...Bad streaks good streaks call it what you will but I believe its all in the mind...I guess I might be finding my groove again..Keeping fingers crossed.

Trading in the Zone is a good book by Mark Douglas on psychology in trading...I recommend this to everyone..More than often the enemy is within us..I want to also sincerely thank SS(Timamo) for encouraging and helping me during this time. Thanks!!! :)

Footnote: I would be very careful in the market now..Its close to euphoria now..You know what comes next..It can run some more but the last 5-10% of the rally is dangerous to catch - use extreme caution folks.

More later.

Best.

Getting Interesting...

Back into the grooove... :)

Getting interesting in here...down to first support..taking a stab at some small longs...Not sure of timeframe yet.



PS: Dont get into this trade unless you have balls of steel! :)

Best.

Pullback and then...

So we are going to get the pullback..And what next? Dont know..lets look at the charts.

HOURLY


DAILY


Looks like after this pullback, we might make one more attempt at the highs..Maybe a bit higher as well before a more serious pullback..As of now, the megabearish scenario is on hold...After a rally with this much momentum, we need to look to buy the dips..For NOW...Not to say this cannot change quickly as well...

For NOW, the hourly is on an uptrend and the 20hr swing is on a buy..until this changes, it pays to buy the dips...Overall(1month-2months), I believe we shall top out and have a downmove but its not possible now to say how far this goes, so lets not try to predict and instead play the hourlies.

I might look to go long today on the pullback..small amounts only..As you might know, Lee needs to get his GROOVE back :)

In other news - Cramer calls the bottom again :D

Visit msnbc.com for Breaking News, World News, and News about the Economy

LAST TIME WHAT HAPPENED -


Best.

Pullback due this week....

Lots of discussion regarding following the trend..I agree that we need to follow the trend..But tell me? - How do you define the trend? Hourly? Daily? Weekly? What I mean to say is where do you decide that the trend changed?

The market over the past several months have been rangebound...A large range but still rangebound...Anyone trying to trend trade on the daily would have been burnt...Maybe it is changing now..Do not know..Since the daily was burning me, I decided to move to the hourly. Since then the market has not given a meaningful pullback..just surging ahead on top of gap ups and new found optimism.

I am open to a new mini bull starting but this action is not healthy in my very humble opinion..Up on gaps..Same can happen in reverse.

We should see some sort of pullback atleast..this week and then maybe power up higher..The 3240-3260 area is of obvious importance as I have pointed out in previous charts. We are this close to taking it out...So lets watch that...If long and market goes above that, setting stop a little under that might be prudent.

For shorts, I am still waiting for the hourly to set up a sell so that I can go in short in bigger size. Unfortunately its not happening...Maybe that is the plan..Power ahead like this till 6300 without any pullbacks? :)

Best.

NUTS

This thing is just too strong...

What a rally...feel disappointed to have missed out..The hourly buy alone would have netted 600 points so far..damn!

The worst part was..no substantial retrace and most of the gains came on gap ups..

Frustrating to say the least...

I really dont have substantial positions in the markets now...Some shorts only as I said before. I will likely get out next week sometime...

And then, will just wait and watch...And will post if I get a signal on the hourly.
Trading that and ignoring everything else seems best.

Lot of news, the G20 etc next few days..Our market is on long holiday..Will be interesting to see what comes out of all of this...

Have a good weekend all - and take your mind off of the markets :)

Best.

Bull Over or Just a Retrace?

@ 11:09AM - HEADS UP: Market is just chopping around..But 20hr swing is now at 2962.75. Below this and we have an hourly sell. I would respect this signal just looking at the earlier track record. Chart below -

Also see the red line I have drawn below. Below this, we can see a strong selloff.



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

Bull Over or Just a Retrace?
===========================
Ah the billion dollar question..No I dont have an answer now but just some clues...

I was not able to post yesterday as I was moving house..Been damn busy over the weekend...Hopefully things can get back to normal soon :)

The market..All the baby bulls got their heads handed to them...Had some idea this might happen but did not expect it to be so dramatic. Well now the big question is are we starting a new bear move or it this just a retracement in this so called 'new bull market'? I dont know...

I mentioned a few days back that I had some interesting stuff to share. Chart with comments below. Now note this is just a scenario. I dont trade based off of this..Just looking at the bigger picture.



AGAIN just want to stress..Dont pay too much attention to above..Using EWT for trading can be fatal for those who take it at face value..Just use it as a guide.

Looking at the hourly...My main trading system for now.



All in all a bit of a confusing picture...But we should get more clarity in coming days.

Personally, I do think the bears are back though. If I do get another rally, I will use it to reposition myself better.

Will post intraday updates if something interesting comes up.

Best.

Keeping things small..

Sorry folks for the late update...not much to say...the bull juggernaut continues...Just watching how long it goes..

I am short but in smaller size..and hedged..so not going to worry about all these silly upmoves...Its too late to go long so definitely not doing that..

If we do get some kind of pullback soon, we shall see then.

For now, short and watching...I will take off the hedge if I get an hourly sell..till then maintaining status quo.

Charts later..Bit busy today. I have some interesting thoughts to share but not now.

Best.

What am I doing?

PS: DONT IGNORE this one either...



=====================================================================================
12:00 NOON UPDATE: Could this be a flag? If so, breakout above will make market run up quick. Not sure for now..But if it does, its good for an intraday trade.


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

Okay guys...You saw I shorted a bit yesterday...I added some more today...And I hedged this with 3000 April calls. I am not sure at this juncture what we are going to do next...I see at minimum a pullback and then a move higher...It is actually too late to go long which is why I am not doing this...

For the bullish case, we need to have some sort of pullback here..else I am sorry to say, we are going into bubble mode and we will have a fast crash-like move...I am not raving bearish anymore..more like neutral..so remember my positions reflect that...

I mentioned earlier that I am looking more at swing signals(thanks to kpl) for trading signals going forward..So that I keep out of trouble going forward.

See the 20hr swing below.



Coming to sentiment...Its turned very bullish now..I would be cautious on longs..If we get a decent pullback I shall look to go long..Ofcourse will reevaluate at that point...Frankly this is a very confusing juncture..tough trading.

EW structures...I have some interesting ideas..One bullish(the obvious one) and the bearish one...Now since the obvious is more often incorrect, I would be cautious. I am thinking STILL along the bearish lines...For those familiar with the EW lingo, I think its a bearish wave4 flat or a wave4 triangle still..with w5 down still to come..However we need to respect momentum here and wait for some confirmation on downside...tough to say right now...But I will post these scenarios with charts later..maybe tomorrow....If anyone else has thoughts on this, please comment.

Intraday setups - I dont have anything at the moment but I shall post if I do see something interesting...note that these setups and patterns dont come often but when they do, we can bank some good coin and low risk.

Best.

Trying a small short...

...not going nuts on this short...very small compared to my normal short...And I have a hard stop at yesterdays highs...above that and I'm out...else I am playing for a pullback to 2860 odd...maybe a bit lower also...but let us see...

I will share some charts in a little while.

Best.

Just a small break

Read all the comments...Just wanted to say some stuff..which I also posted in the comments section of previous post -

Everyone..really...No defeat and all...I will come back with more analysis..And will come back stronger...

Why did I say I am taking a break?

Just regrouping..rethinking..evaluating what went wrong and so on..

When a big loser happens, we need to do that, else emotional trades will happen.

For the record -

My last short trade - From 2600 odd till 2800 I shorted...My AVG price was around 2720...I had several signals to cut and run in between which I ignored...This was my first mistake. Adding a lot to a losing position was the second...

However breakout above 2840 was my last point as I must have mentioned several times in previous posts..Market gapped up above and never looked back...

To be totally clear...From 2720 to 2860 around 140 pts loss...If you take all the earlier gains, this is not so BAD....BUT thats a traders folly and false justification..For me this was the biggest loser trade so far..So I needed to step back and see what went wrong..For me it was more of mindset that anything else...I need to clear that and come back fresh..

I will do so soon.

Best and Thanks to everyone for their comments..I know a lot of bears lost money...You can see how much I lost above...

Dont worry too much..Its all part and parcel of the game.

I WILL BE BACK LATER WITH MY CHARTS AND MORE ON OUTLOOK.

I am trying some new stuff..i.e using the 20period swing system on different timescales to see which one is better. I might post some trial entries later today with this..The only thing confusing me for now is which timeframe to use...1hour or 30 min swing...Trying to evaluate which is better.

Regd outlook - This rally has gone too far..We should get some kind of pullback and consolidation after which we will make an attempt to take out the highs...So it looks like we have to put bearishness on the back burner and try to trade on the longer side and buy dips...

But this will come later...I dont think the pullback is done yet..I will use the swing indicators to show where to go long or where to go short.

More later.

Best.

Intraday Thoughts

EDIT: Just wanted to make things clear..I am totally flat now..Not trading for a little while..Generally after some losers, its better to regroup and come back..So thats what I will do..Frankly I am surprised all the bullishness..But generally market defies logic...So maybe a new bull is starting..Who knows...More thoughts later...trade safe out there...And dont trust anything..bye.

====================================================================================
EDIT: Dont know..Dont know..I am capitulating fully and going flat..Will decide on future positions later...Now just going to chill a bit...Better to let things sink in and not trade emotionally...Things look very bullish for now...Atleast for today.

====================================================================================
Okay guys...The US market futures has done bears in...I am capitulating a bit over here...Covering all option position shorts in loss...Also rolling the future shorts to April...Also hedging ALL of them with 2900 calls. Dont know how this turns out...But I cannot see any reason to be bullish now..Maybe I am wrong and will be bankrupt soon...Feel FREE to fade me.. :)

Below is what I wrote few hours back...I still feel the same...But US futs gapping up has obviously thrown a spanner in all bears works...Let us see how this works out..
Tough trading..

=====================================================================================
Past several hours, I've been reviewing market data and charts..I've also been reading several blogs and forums...And overall, what I read is scaring me and making me question my earlier views in past few posts where I was toning down on my bearishness...

I see that everywhere, the bulls have started hoping against hope again...And on
what basis? That things cannot be TOO bad...HOW did they reach such a conclusion?
Price has done absolutely NOTHING on a medium term basis...So WHY bullish? I am pretty surprised...At best I expected some neutral sentiment..Price has not moved anywhere over past 3-4 months..So because of this one would expect more neutral sentiment...The bulls are back though...Last week pushed sentiment to the more bullish side...Maybe they will be right and we will push higher up...I continue to be skeptical But lets play point to point...

Best.

Weekend Thoughts

A more objective look at things that transpired last week and also a look at possibilities for next week -

As I alluded to in the previous post, the last week in US was QUAD EXPO week - Basically everything expired..We had a lot of games played by the market makers...A lot of manipulation...Yeah I know lot of you dont believe it...But the markets are manipulated! So big rally in US = Big rally for our markets...Nothing else...Did something good come from our side of things? Nope...Okay instead of looking for reasons, lets see what can happen next -

CHARTS - See those posted in the posts below this and the next.

So what I see is - as I think I explained last week, a move to 2700 area is almost surely on the cards...After that, it gets fuzzy...We could make one more move back up to 2820 area at which we have to see what happens...OR we break 2700, 2660 and continue lower. At this point since there has been a lot of base building at 2500, we might not break it any time soon...Maybe never...

So taking it one step at a time...Maybe the bulls are right and we pullback a little and mount a huge rally..But I dont see it yet...I will see how we react after our pullback and expiry before making these decisions..

I am an intermediate term trader...Still I do try to identify very short term opportunities which I do post here..You'll remember the wedge, the flag pattern etc..All of these made for excellent intraday trades....I do trade them also when I see some good stuff like that...Doesnt come all the time but when they do, its worth trading them...

Which brings me to my next point...There has been some debate on anticipation vs. reactionary trading...And Sajal raised some good points to counter..

Really you think about the wedge I posted earlier or the flag breakdown..Both of them worked perfectly...It was anticipation...correct? The point is, when will you react to them? 20 points lower? :)

Okay another example, in the charts in below post, we have 2820 area as strong resistance to overcome right NOW because of the falling DT line...NOW, IF I short here with stops above...Tell me - Reaction or Anticipation? :) Hope you are getting my point...And this is not TA? Think about it.

There are different methods to make money in markets...Do your own thang..But dont be so quick to dismiss others...

Most traders lose money some time or other..The main problem I have is that whenever I do this, I do so in front of a large audience in real time :)

Think about this also a bit...

Best.

Do ya feel LUCKY PUNK?

WELL DO YA?




:D

Bulls get off this train with what you got so far...Thats ALL I have to say...Sure you might get some more upside...But dont fall in LOVE with the UPSIDE..

What you got already is way more that what you should have....

AND Thats all I have to say...

I read all the comments in the chatbox...I am happy with what I read here and elsewhere...People are ready for a new bullmarket..Already...That itself tells me you all are wrong...way wrong...

And when I look at my charts, its like the icing on the CAKE.. :)

For those that did not know this last week wast QUAD Witching week in US where pretty much all derivatives expire this week..Its a very rare occurance and so lots of manipulation comes up...DO you guys think Indian markets went up on their own accord? If so, GOD bless you guys...

Cheers to All...And have a GOOD weekend.

I will most my more sane thoughts later when I am NOT this inebriated... LOL :)

Ok you guys, understand this post is more of weekend fun that anything else..I dont mean offense to anyone...Its just not my style...Just thought its a funny post to do....I will do a very sane post tomorrow...with all my thoughts..I have to give this past week to the bulls...But I think next week belongs to da bears..

GO BEARS!! :D

Best.

What's the Beef?

Okay guys..Whats going on...I have been really really busy the past several days...Still I am trying to come here and make some kind of update...I obviously missed to do this yesterday...Tried to say something in chatbox..And invited the IRE of some 'guy' there...

Also some folks on comments also are saying some stuff..See guy and those on comments, I dont disagree with you...I use TA too...What I use might be different from what you use...The only thing I see wrong in what I did - I missed the last 100-150 points on the upside...Now you leeches hold me to that..yeah..I know..You guys will do that...See there are different methods of TA and trading...Respect other methods too...I might be using a contrarian approach..But I do that coz thats what I am comfy with...

So okay...Have your laughs..I am wrong for now..And I am feeling the pain..BUT...

Overall I see very little reason for the market to continue up from here..If it does, I will abandon my bearishness...

Well what can I say..When I go right, lots of folks come out and praise...Some bugs wait for things to go wrong, then they come out...they however disappear when things go right again...I have been seeing this for the past several months...

You guys think I dont use money management or some kind of risk management? That was the aim of my post yesterday..Unfortunately it seems to have been too much to comprehend for most folks...Nothing I can do here...

Coming to the markets...I been wrong..No doubt...But looking at stuff today, I dont see any reason for bullishness to continue..In fact I see a good amount of downside..Very closeby...

2 scenarios I am looking at -

1. Bear Scenario - We decline fast from here, break 2770 first, 2700 second, 2660-2600 third and then touch 2500 strong support. Breaking 2500, while not impossible, seems unlikely for now...But if we do, we shall test 2200-2000 range very quick.

2. Bull Scenario - This one also portends a drop from here...We need to see where we can take supports...Will it be 2700 or 2660 I dont know...One of those areas, should support..And then we should mount another much stronger rally...

Seriously I do not know which one of above will play out...Its a toss up right now...Play level by level..Thats all we can do...There is some very bullish signals coming out...But the best thing for the bulls would have been to go down and set some really good divergences..But you know bulls..CHARGE..Yeah..This is going to be some tough trading...

I am however becoming more medium term and long term bullish..This I will give to the bulls...

Short term however...No cigar!

What I did over past few days..Reduced shorts considerably at around 2750 as I said in earlier posts...I added back some yesterday...Overall not so great of trades but lets see this to completion. See the charts below for what I am looking at.

Charts -





And as Tom Hanks said in Forrest Gump,

Thats ALL I have to SAY about THAT... :)

Best.

Words of Wisdom

"The market can remain irrational longer than you can stay solvent"

As always, it is vital that you size your positions appropriately and not focus on earning back losses, but rather only focus on the market now and going forward. Maybe you'll get lucky and the market will move your direction next time, but over time a lack of risk control will ruin everyone.

Best.

Wednesday

The wedge worked very well yesterday for a short term trade...Hope some of you banked some coin...

Today also the US market pushed up..I like the action because it made people more bullish...Sentiment is important..I think its very very close to topping out..

Our market..Tricky..Today we should retest the area of the highs again..Dont know if it will go above...Yesterday I reduced on my short exposure toward the end of day..I think I mentioned earlier that I would do this..Still short but not so much that I cannot add more..

So thats the plan..The top of the falling channel is at 2830-2840 range..So that should remain stoploss for shorts for now..Please note I never put in a hard stop..Instead will have a mental stop..

As for the market moves, there are few different possibilities...Infact the more bullish one was to drop to 2660 range over next couple of days and mount one more rally upward. Dont know if we get it but overall I would say we are in a topping mode right now...Lets see how it plays out.

If I see something worthwhile intraday, I will post.

Best.

Intraday Chart

Looks like a wedge but not very confident -




Breakdown of 2750 might get it to 2700 first, 2660 second and last 2600 strong support.Obviously will not happen in one line or in one day.

Best.

Bank Nifty, Reliance and the Broader Market

Some requests from viewers:

Heres Bank Nifty -



Heres Reliance -




Lastly here is a look at Nifty again.
Nifty -



I have to admit I have been wrong this time in shorting the rally too early..I have to give kudos to Ilango for calling this correctly i.e an ending diagonal...

Maybe a move down from 2780-2840 range to tag 2500-2450 range again. After which we shall see a much more sustainable and bigger rally.

For now, I am in damage control mode regarding short positions held. I still think 2500 will be seen again. But I am considerably less bearish than before..So will look to reduce risk and trade lighter. I would recommend same to everyone.

Best.

What I see.....

12:30PM: I said we'd test 2730, and here we are testing it...May sell off from here..Infact I think good odds for it..Above it and we can run very fast to 2750 and maybe even 2780..Low probability for now..

====================================================================================
11:00AM: Okay so initial upmove over..And a pullback..It looks like its taking support around here..So it will try again 2730 range...Need to see how it reacts there before determining what can happen next..I added bit more to shorts in the am..As I said earlier, I was 50% short earlier...added bit more today...Not yet at 100%...I will reserve that for IF we trade at around 2820.

====================================================================================
Before I get into the charts and forecasting...Let me say some stuff...Most of you guys think that when I come out and make a statement like market is going to rally and test so and so a figure or market is going to fall and test so and so a figure, I look into my crystal ball and dole that out to you..OR that I am an operator moving the markets :D ..OR well that I am bullshitting you...But well that is NOT the case...Absolutely NOT...There is a lot of study that goes into this forecast..LOTS..That most of the normal folks wont be able to wrap their head around it!..LOL..I am delusional..A little bit crazy...A little bit paranoid...And very dedicated to the market that probably Mrs. Lee will soon drive me out of the house! LOL :D ..Thats probably why :) Not trying to be coy..But just trying to say - Dont take this stuff for granted..There is a lot of effort going into this..I am not God..I am wrong more often than right..But thats what we have exit plans or Stops in place for..But when I am right, I WILL rock and roll...And thats when most naysayers come out I notice...like last week and before :) So today, I will try and show some of the stuff I am looking at..

Its a very very interesting juncture...Infact I'd call it the most interesting and confusing juncture since the BIG BAD BEAR began in Jan of 08. So lets get into it...Guys you can comment, you can criticize, do whatever you want. I love reading comments..I love reading thoughts from others...Whether its FOR or AGAINST..so pls post..With reasons ofcourse.. :)

The only thing I cannot tolerate is -
1. Blatant criticism about positions without ANY reasons.
2. Questioning about positions AS IF I am your financial advisor..Which I am NOT!.

Anything other than above, please guys, I urge you to post..Post charts thru stuff like imageshack or jing..I will comment..I will help if you guys are looking for help...Anything...

Ok lets start then, we shall look at some charts first with my comments annotated on them...And then we shall go into my thoughts on what market shall do this coming week -












Okay...now what do I think...I feel..that we have 2 possibilities..Test 2760-80 odd and move down for the finale capitulation...I dont know what the reasons will be but in TA we dont search for reasons :)

The 2nd possibility is that we go down from around 2720-2740 odd to test 2660-2600 range before pushing higher up into the 2810-20 range...before again the finale capitulation move..

The last possibility - I give low probability to this but as traders we need to have this always in back of mind - Is that we go above 2820 and 2850 and sustain there..This will mean a move to around 3250 first and then above than 3600 and 4200..LOL...Look at the charts objectively and you will see what I mean...

For now, I do remain bearish but I will be ready to change on a dime as we might be near to a MORPH point....More than Ever!

Comments welcome as always.

Best.

Wrap Up

So I did absolutely nothing today..Which is also why I did not post in case anyone was wondering. If I dont post, assume I did nothing.. Its either that I am also confused and thinking what to do. Or that I do see anything tradeable in there.

For me yesterday was a day I could do nothing or very little...No pattern reliable enough to trade. I actually have some more leeway to add shorts as I am only 50% short now.

Its basically what we call a narrow range day even though it was a huge gap up..atleast what I would call an NR tradable day..Almost for 3 hrs or so, the market just stayed in a very narrow range...Absorbed all buying and selling and then moved up - short covering or buying I do not know..But I would guess a lot of shorts may have covered.

I wanted to hedge if possible, but market did not pullback enough to do that. I wanted to also add shorts if possible, but market did not rally enough for me to do that...

So next week, I will be looking at 2740 first and then 2780/90 next to add in some shorts...If market does look like it will close above 2780/90 any day, I will take my lumps and close this in a loss.

We could move straight up to the target and fall. OR we could pull back a bit to 2660 range and then try to rally up to 2780 again. Essentially the possibilities I have drawn down in below post. So its all different possibilities.

Its a moving target - Will watch next week for more clues. We all trade as per what we see. Please do not question others trades - this will not be entertained in this blog. After all I have to assume everyone reading this is intelligent enough to know when they are wrong - by themselves. I do know this and I make my own decisions - Just a cautionary request to all. I saw some challenging and questioning on cbox lately - Its not good. Trade your own stuff - If you are MAN enough, then post your trades. If you get it right, well and good..If wrong, well another trade will come - Take your lumps and move on.

Best.

Another Squeeze on the Cards?

Looks like it based on the huge strength in all markets. And maybe this one will actually stick. As of now I dont have a clear trading plan even though I do want to hedge all my shorts with options - This rally may have some legs - I do not know at this point...Whenever the trend changes, its tough to get on board. At this moment I do not see anything to suggest a trend change - But I guess thats how something new starts always.

If market breaks back into the triangle, it will invalidate it and the bearish case will weaken considerably. So thats my line in the sand right now. Either case I will look to hedge today on a pullback.

Chart -


Best.

ITS WAR - Pure and Simple

Everyday I prepare for trading in the markets. During the US market hours, I watch the waves, try to understand where its going. During the time in between the US and our markets, I study different views, blogs, boards to get more ideas and thoughts..Not that I follow anyone but its to get different perspectives on things..Mostly I plan the trade and trade the plan. Before entering a trade, I have a plan - Meaning what will I do IF market does this? What is my exit point? What is my add-on point? At which point will market prove me wrong? How do I manage this trade? And a very important question - What is my RISK on this trade?

Most newbies ask me - what do you do to become successful in the markets. I dont have an easy answer to this. Markets are dynamic. There is no holy grail out there to making money in the markets. Its all a matter of experience. A matter of having a strong mind to weather out minor bad phases. A matter of understanding money management and risk management. Above all, you need real time experience trading - Its no easy feat - Hours and hours of effort is needed. One thing new traders always think about is WHAT is the profit potential of a trade? They never think or understand the concept of - WHAT is the risk potential of a trade? See trading is not about charts or TA alone. There are many factors which I have tried to explain above..

I always say - 3 things - Mental frame of mind, Money/Risk management and finally TA/Charting/Some kind of trading method or system. All 3 need to be there, all 3 need to gel together. Its a process...And each trader needs to evolve himself or herself into such a state. Its not easy but can be done.

When I trade, I feel like its a WAR. There is no concept of investment when you are trading in and out. In fact, I find it hilarious when some folks say they invested in calls and puts..LOL..Do you know what investment is? Where is the wealth creation? Trading short term or in FNO is a zero sum game. I take your money, someone else will take my money...You need to be ahead of the game to make a mark. The sharks are out there to take your money. Its WAR - pure and simple! :)

Maybe putting cash into stocks Buffet style so as to earn dividends - Yeah this is investment...Not what most people do or can do.

So when you go out to trade each day. Prepare for WAR...Bulls and Bears make money..Pigs get slaughtered :)

Charts and Views later.

Best.

THE GAPPER

12:30PM: Okay..Anyone shorted the pop to 2620? I added to shorts...Now hold and wait..Let us see..Good night all..Will try to post some charts tomorrow.
EDIT: Well on looking at intra charts some more, looks like we good have one more good push higher upto 2640 but not sure...More tomorrow!
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11:40AM: I dont see any intraday patterns worth trading today...So no charts. I am also not sure what will happen later today...If we do infact stretch up into the 2620-2640 area, I will look to add some more shorts.
=====================================================================================
10:40AM: Hmmnn...Looks like shorting the open would have been a good trade..Nuts..Well I expected more strength today :) No trades yet today.

Something of interest and what I like for the BEAR case - Sentiment turned visibly more bullish over the 2 holidays we had...Based off a number of forums and blogs I visit..Pay attention here...I have been saying for a while we have to have one more low...Where exactly I do not know :)...Trade from point to point for now..
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After the Open: Well not that big of a bounce as I expected..But there is still time..Done nothing so far. I see 2620 as first point we need to get above on on a hourly candle. Then 2660 - This is for the bullish case..For bears exact opposite today...I am just looking for spots to short at now...

How far do you think current bounce goes up to today? Comments please..
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Uploaded the Zurich Axioms again -

The Axioms

Anyone missed reading this last time, please do. Its an awesome book necessary for everyone trading in the market..
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So looks like its a big gap up today for us after the 2 day holiday. Well got to take it as it comes. I will wait to see how market opens and trades today before making a decision. I see a few possibilities but would like to watch a bit before making any decisions.

Hedging against shorts is one thing I am thinking of. The other is to closing the shorts at loss and trying again higher. The last one is ofcourse add on to shorts at higher levels and so get to full short position size.

A decision has to be made :) More thoughts later.

Best.

US Bounce

Big bounce in the US markets...Will this one stick or fade like everyone else? My view - MAX upto 742-750 SPX is possible after maybe a pullback tomorrow..So pullback from 720 to around 700/690, then again one more move up after a little into the 740 area max..It may not even get that far...This is how I see it happening. Another classic ABC pattern before next move down - Also this should be the FINAL move down.

Now this kind of puts a quandary on the shorts I am holding now. Maybe the US market will be weak tomorrow and bail me out but I am not sure. But I am not too worried about this..Either way, I see this wonder bounce failing soon. And since I am at something like 50% of my planned short size, I can always add more if we bounce higher...But its a moving target - will see more on Thursday morning.

Also lets see how tomorrow in US markets plays though.

Best.

Week Ahead

After the close - So as expected the 2560 gave support which is why I said below, intraday guys can take profits...So this sets up a creek, break below 2560 will mean a quick decline to 2500 where we might bounce a bit again...Next 2 days US market action is key here but I expect we break it sooner than later unless something really unexpected happens on the news front..
Cheers...Have a good couple of days off front the market!
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12:10PM Update - Sometimes TA (and my calls :P) even amazes me :) Again I called this in realtime below...You guys owe me big time...j.k :)..If you are a day trader, take some profits now...I am planning to hold these shorts through the holidays..Good Night to All!...


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11:40AM Update - And THERE you have it....Breakdown baby...Breakdown :)
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11:00AM Update - A look at the charts...Added bit more to shorts...


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10:15AM Update - Entering first small tranche of shorts at around 2583..Just 30% for now...Watching for now...If we get a good bounce to 2660, I will add to these so that I get at 60% short...Probably wont do more than that today as its risky.

Risk averse folks - Dont follow me on these shorts..As I said before, the 2 holidays are a problem here...More later.
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Before the market Open - Most of my thoughts are on the charts.

Trade plan is to start shorting asap. Looks like we have a lower open in store today even though I am not sure why exactly...So looks like I might have to chase short entries today...But whatever...I will try to get short in small amounts today. Remember the next 2 days are holidays..So dont over commit to anything.

Also remember - We are building/or very close to building a very important bottom...Timewise as I have been saying, March end - April mid we shall get an important low.

Intraday comments will follow later.

Best.