May 2012 be a Better Year

Sometimes I lay under the moon
And I thank God I'm breathin'
Then I pray don't take me soon
'Cause I am here for a reason

Sometimes in my tears I drown
But I never let it get me down
So when negativity surrounds
I know someday it'll all turn around because

Market Predictions for 2012

Top 5 2012 New Year's Trading Resolutions

1. HOLD LONGER to TARGET(S): "Plan your trade. Trade your plan." Like most traders this is one hurdle that continues to remain my greatest challenge. I especially struggle with this when I'm on a hot winning streak and my emotions move into "no loss" mode and I begin hyper-scalping leading to discipline erosion.

2. NO MORE BIG GAMBLES by not doubling, tripling or quadrupling + down to try to get bailed out of positions:

3. 20-30%+ ROC goal: Keep the consistency going by stabilizing the stats (avg return on winners v. losers, % of winning v. losing trades, avg $ down v. up day, etc...)

4. More balanced WORK(TRADING)/PERSONAL life: There are a ton of subset personal goals under this general comprehensive professional one like traveling more, adopting a pet, volunteering at the food bank or animal shelter, etc... I plan on continuing to incorporate relaxation, breathing and meditation into my daily routines. I'm dedicating a large portion of the return budget to travel. Ideally I'd like to continue visiting family and friends domestically with 1-2 international trip annually.

5. TWEET/FB less BLOG more: For those who follow me on twitter you know I'm over-active on the twittersphere and during downtime I'm like most employed people addicted to the bad habit that is constantly checking facebook so starting this new year I won't be posting as many live but delayed entries and exits.

Market Read for Week for 121911-122311

Market Read

Bias: no clue "neutral" 

Finviz US econ calendar: http://finviz.com/calendar.ashx

Bullish case:

- Seasonal bias: Ho Ho rally

- Slightly oversold

- AAPL above 200SMA 

Bearish case:

- under 200SMA

- Dollar above 80

- VIX is dropping toward 20 but this is probably primarily due to seasonality

- Crude appears to be forming a potential IHS but will need to touch 90 to form right shoulder

SPY

30 min

QQQ

IWM

Dollar

VIX

McClellan Oscillator

Crude

Gold

Silver

JNK v. LQD

AAPL

The Secret Sauce to Successful Trading is...

Recently I've received a few emails from twitter followers who have asked me questions regarding how to make it as a successful trader.

My best advice for beginning traders besides being well capitalized and absolutely committed is the following:

a) There is no secret ingredient/sauce

b) You must "believe"

*Special thanks to "Kung Fu Panda". I often replay these clips while trading to re-center myself.

Market Read for Week 091911-092311

Market Read

Looks like I was dead wrong about last week's read as the market staged an almost vertical 5 day rally. You could have faded the read and I'm starting to believe that you could look to fade the strength in this week's read. Shorts got ran over again and again and again.

Whether the news out of the Europe is for real and the bailouts/money printing/can kicking continue the market still has not convinced me that risk is all clear through year end. This next few weeks should be very interesting and telling where we go from here.


Right now I am more "neutral" biased  for the foreseeable future. Global macro indicators continue to deteriorate while conversely we're getting more Central Bank action and speculation. As an intraday trader I need to constantly recite the mantra "trade what you see not what you think".

Finviz US econ calendar: http://finviz.com/calendar.ashx
Weekend update on European situation: http://www.calculatedriskblog.com/2011/09/europe-update-little-progress.html
Fed "Twist and Shout" action by John Mauldin: http://www.businessinsider.com/operation-twist-and-the-feds-latest-bailout-of-european-banks-2011-9
ECRI continues to point to a US recession (how can you be in something that isn't really defined): http://www.businessinsider.com/ecri-index-leading-economic-indicators-negative-2011-9

Bullish case:

- Markets are above their 20SMA

- Volume during this week's rally was strong

- Tech continues to lead
- Too many shorts in the frying pan

- AAPL above 400

Bearish case:

- Bear flags still around

- EURUSD lost the 200SMA, high volume sell-off and has Greece default news weighing on it
- Dollar bull flagging

- Crude bear flagging looks like its going to be sub 85 before 90+

- Copper breaking down out of bear flag

- Long bond continues to put in higher lows and highs

- VIX still bull flagging

- Gold (fear trade) is still strong 

- JNK v. LQD still weak

SPX

Weekly

Daily

30 min

QQQ

Daily

30 min

IWM

Daily

30 min

Dollar

Crude

Long Bond

Copper

Gold

VIX

McClellan Oscillator

JNK v. LQD

AAPL

Explained: Knightian uncertainty

The economic crisis has revived an old philosophical idea about risk and uncertainty. But what is it, exactly?

Peter Dizikes, MIT News Office

June 2, 2010

The global economic crisis of the last two years has stemmed, in part, from the inability of financial institutions to effectively judge the riskiness of their investments. For this reason, the crisis has cast new attention on an idea about risk from decades past: “Knightian uncertainty.”

Frank Knight was an idiosyncratic economist who formalized a distinction between risk and uncertainty in his 1921 book, Risk, Uncertainty, and Profit. As Knight saw it, an ever-changing world brings new opportunities for businesses to make profits, but also means we have imperfect knowledge of future events. Therefore, according to Knight, risk applies to situations where we do not know the outcome of a given situation, but can accurately measure the odds. Uncertainty, on the other hand, applies to situations where we cannot know all the information we need in order to set accurate odds in the first place.

“There is a fundamental distinction between the reward for taking a known risk and that for assuming a risk whose value itself is not known,” Knight wrote. A known risk is “easily converted into an effective certainty,” while “true uncertainty,” as Knight called it, is “not susceptible to measurement.” An airline might forecast that the risk of an accident involving one of its planes is exactly one per 20 million takeoffs. But the economic outlook for airlines 30 years from now involves so many unknown factors as to be incalculable.

Some economists have argued that this distinction is overblown. In the real business world, this objection goes, all events are so complex that forecasting is always a matter of grappling with “true uncertainty,” not risk; past data used to forecast risk may not reflect current conditions, anyway. In this view, “risk” would be best applied to a highly controlled environment, like a pure game of chance in a casino, and “uncertainty” would apply to nearly everything else.

Even so, Knight’s distinction about risk and uncertainty may still help us analyze the recent behavior of, say, financial firms and other investors. Investment banks that in recent years regarded their own apparently precise risk assessments as trustworthy may have thought they were operating in conditions of Knightian risk, where they could judge the odds of future outcomes. Once the banks recognized those assessments were inadequate, however, they understood that they were operating in conditions of Knightian uncertainty — and may have held back from making trades or providing capital, further slowing the economy as a result.

Ricardo Caballero, chair of MIT’s Department of Economics and the Ford International Professor of Economics, Macroeconomics, and International Finance, is among those who have recently invoked Knightian uncertainty to explain the behavior of investors in times of financial panic. As Caballero stated in a lecture at the International Monetary Fund’s research conference last November: When investors realize that their assumptions about risk are no longer valid and that conditions of Knightian uncertainty apply, markets can witness “destructive flights to quality” in which participants rid their portfolios of everything but the safest of investments, such as U.S. Treasury bonds.

One solution offered by Caballero to stem these moments of panic is government-issued investment insurance for large financial institutions. In this sense, the existence of Knightian uncertainty is not just a quasi-philosophical dispute; the subjective perception of Knightian uncertainty among businesses is a pressing practical problem.


http://web.mit.edu/newsoffice/2010/explained-knightian-0602.html

Why Obama's new jobs proposal won't work & will continue to fail

Dylan Ratigan's "extraction" rant by everyone from politicians to businesses to China to Wall Street using the US national credit card without limit.




The problem with Obama's pro-business proposal(s) is that he assumes if A then B. If he gives business what they want (he's basically on his hands & knees now) they will give him what he wants "jobs" (or 4 more years). So far businesses  continue to take government stimulus, hoard it, bonus themselves out and re-invest abroad. They've learned that as long as this economy stays stuck in the mud from a labor/economic standpoint the government will continue to print money and give it to them. "Extraction" seems like a pretty good word to describe this on-going process. This relationship sounds more parasitic than symbiotic. The silent killing bi-product of all these bailouts will be the thing everyone talks about but no one takes seriously "morale hazzard" which is the ultimate structural cancer.

Market Read for Week 091211-091611

Market Read

Overall I'm still short biased (for the foreseeable future). While we have seen strong short squeezes via seller's revolts there has not been sustained buying indicative of true risk ON appetite. I don't see any evidence of an "all clear" signal or clarity appearing on the horizon and only risk increasing as the Western world appears to be heading into a protracted recession and low growth phase just when they need the increased revenues to out-grow their out of control debt-load. But there are many joker wild cards being deployed all the time now from central banks around the world.

Finviz US econ calendar: http://finviz.com/calendar.ashx

Bullish case:

- AAPL still above 50SMA

Bearish case:

- Bear flags everywhere

- EURUSD lost the 200SMA, high volume sell-off and has Greece default news weighing on it
- Dollar finally broke out of it's consolidation base (above 80 & crude sub 80 you can start QE3 chatter)

- Crude looks like its going to be sub 85 before 90+

- Copper breaking down out of bear flag

- Long bond continues to put in higher lows and highs

- VIX looks ripe to break it's bull flag

- Gold (fear trade) is still strong and silver still sticking to it's 45+ target

- JNK v. LQD broke bear bag indicating continued waning for risk

SPY

30 min

QQQ

30 min

IWM

30 min

Dollar

Crude

Long Bond

Gold

Copper

VIX

McClellan Oscillator

JNK v. LQD

AAPL