Top Day Recommendations
12.19.11
Welcome to Christmas week known for its
incremental days of reduced liquidity. In other words,
as we draw closer and closer to the end of the week we
have fewer and fewer participants focused on markets.
Over the weekend, the world may have become a safer
place for the passing of Kim Jong II, then again…
Spanish bonds rise for a seventh day in a row as the
expansion of acceptable collateral makes sales of these
bonds a bit easier.
Week of December 19 - December 23
Briefing.com
Briefing.com
Revised
Date
ET
Release
For
Actual
Prior
Forecast
Consensus
From
Dec
NAHB Housing
10:00
Dec
19
19
20
19
Market Index
Dec
08:30
Nov
600K
627K
628K
20
Dec
08:30
Nov
625K
633K
653K
20
Dec
07:00
MBA Mortgage Index
12/17
NA
NA
4.1%
21
Dec
10:00
Nov
5.20M
5.03M
4.97M
21
Dec
-
10:30
Crude Inventories
12/17
NA
NA
21
1.932M
Dec
08:30
12/17
380K
380K
366K
22
Dec
08:30
12/10
3650K
3650K
3603K
22
Dec
08:30
GDP - Third Estimate
Q3
2.0%
2.0%
2.0%
22
Dec
GDP Deflator - Third
08:30
Q3
2.5%
2.5%
2.5%
22
Estimate
Briefing.com
Briefing.com
Revised
Date
ET
Release
For
Actual
Prior
Forecast
Consensus
From
Dec
09:55
Dec
68.0
68.0
67.7
22
Dec
10:00
Nov
0.3%
0.3%
0.9%
22
Dec
FHFA Housing Price
10:00
Oct
NA
NA
-0.1%
22
Index
Dec
08:30
Nov
3.2%
2.0%
-0.5%
-0.7%
23
Dec
08:30
Dec
-0.2%
0.3%
1.1%
0.7%
23
Dec
08:30
Nov
0.0%
0.2%
0.4%
23
Dec
08:30
Nov
0.4%
0.3%
0.1%
23
Dec
08:30
Nov
0.1%
0.1%
0.1%
23
Dec
10:00
Nov
315K
313K
307K
23
Numbers are good up until the close of business today. These are
strictly technical in nature, not fundamentally based or biased.
Legend
U is Up
D is Down
PRD is Potential Reversal Day
S2 is Weekly strong support
S1 is Weekly good support
DS is Daily Support
DR is Daily Resistance
R1 is Weekly Good Resistance
R2 is Weekly Strong Resistance
Levels are for the most active futures contract
Daily Support and Resistance
WS2
WS1
DS
DR
WR1
WR2
Trend
1164
1187
1204.50
1212.50
1244
1277
Mar
D
ES
2149
2191
2215
2257
2298
2363
Mar
D
Nasdaq
127.76
128.62
128.46
129.03
129.18
129.66
Mar
PRD
Yen
(U)
Mar
PRD(
127.08
128.72
129.96
130.86
132.93
135.50
EC
U)
129.01
130.31
130.22
131.15
131.25
132. 13
Mar 10
U
Year
Mar 30
U
139.02
142.06
144.06
146
146.31
148.22
Year
10.92
11.16
11.27
11.52
11.51
11.63
Mar
U
Soybea
ns
March
D
5.61
5.72
5.77
5.92
5.85
6.12
Corn
1471
1536
1578
1610
1692
1783
Feb
D
Gold
25.87
27.80
28.76
30.02
31.98
34.23
Mar
D
Silver
304
319
321
338
353
372
Mar
D
Copper
8730
90.65
92.64
94.91
99.40
Wow
Feb
U
4.80
Crude
N.B.: if you initiate a trade using ANY of these
numbers use a STOP at least equivalent to 2 ½%.
Repeat: use Stops. Don’t think about using Stops.
Use Stops. Some find it appropriate to look at the
margin requirement and use that as a Stop or if
it’s a steep initial requirement, use half. But
whatever you do, stop thinking about any other
alternative and use Stops.
********************************************
Futures trading entails considerable risk and is not for
everyone. An account can lose more than its initial
investment.
Stops are not necessarily filled at the stop level. Past
performance is not a guarantee of future results.
Aphorisms from a Trading Life
Copyright 2011 Charles Kespert
In order to accumulate you must speculate.
Trading isn’t about winning or losing, it’s about self-discovery.
You only learn from losing trades.
Stay away from big losses. Stay away from big losses. At all costs,
stay away from big losses.
Along with the probability that your trade will be profitable,
there's probably a greater probability that it won't be. Think
about the trade you'll make if things don't work out.
Don’t be afraid to go where the market wants to take you.
It doesn’t matter where you get in. The only thing that maters
is where you get out.
Moving averages seem to be important. The steeper the slope,
the better the trade.
Markets tend to overshoot. The high will be higher than “your
high.” The low will be lower than…
Never meet a margin call. Liquidate. The margin clerk is your
best friend.
Welcome to the learning curve. A trader is always, somewhere,
within the learning curve. As long as the curve isn’t circular,
you’re making progress.
Your belief system will determine if you make or lose money so just
as you should be careful what you wish for, you should be just as
careful when selecting what you believe in.
When someone says “Believe me, it’s different this time” make
the choice not to believe it. Markets are the cyclic expression of
hope, fear and greed, in other words, human nature. Human
nature doesn’t change. The fact that human nature doesn’t
change is why Shakespeare is relevant, we read Plato and are
in awe of Sophocles. Technology changes, human nature
doesn’t.
In trading, he who has the best rules wins. Your innate,
intuitive brilliance only talks to you occasionally.
Never double down. Consider adding, pressing an advantage but
never double down.
Don’t be impatient but be on time. If you are trading bars (3,5,7 for
example)
Execute your initiating trade at the opening of the bar, not at the
end.
Markets roughly spend 85% of the time range trading and 15% of
the
time running to a new level to restart range trading again. Just
figure
out where you are in the scheme of things to implement the correct
style of trading to mimic the current market action.
To panic is human.
As a trader, your job is separate the signal from the noise.
Markets don’t suffer fools. They just take their money.
Don’t let your desire to “do something, do anything” prevent
you from doing the right thing. Patience means watching your
keys, waiting for your setup and executing. More than one
train leaves the station. The trains leave continuously; the
station stays in place.
Hubris is built on a foundation of success.
It can be very profitable to trade with blood in the water as long as
it’s not yours.
How to know when you are wrong is an essential to successful
trading. Have a metric in place that objectively tells you that
you should be out.
The road to ruin never needs repair.
Risk small but often.
Be intolerant of loss and learn to relax more with profits.
If you fail enough the only thing left is success.
The market will all too soon locate, expose and exploit your
weaknesses. All strategies have a weakness. Know yours.
Life is at least a study in perspective.
The wonderful opportunities awaiting you in the future are
dependent on your ability to intelligently delimit your
opportunities in the present.
Trade from side of trend. Trade from side of trend. Trade
from side of trend. Even if your entry level is abysmal, the
trend may reassert itself and bail you out.
Your current beliefs may be obscuring the truth.
When you put a trade on, it should work almost immediately.
If it doesn’t, seriously consider bagging the idea and look for a
new setup.
The trend is your friend till the bend at the end.
Use stops but don’t use break even stops.
A long term investor in the futures market is often a day trader with
a bad position held overnight, after night, after night.
There’s no such thing as “trading with house money.” It’s
either your money and you’re ahead, or it’s your money and
you’re behind. Just don’t let your money become their money.
At the same time, take trades. The only way you are going to
make money is by taking trades.
Don’t worry about winning or losing on a particular trade.
There’s only one concern: does the trade help to grow your
bottom line. Taking losses is a strategic necessity.
Hope is not an action.
The first step to success is failure.
If you have a bad position, all too often no amount of elegant day
trading is capable of offsetting the loss.
The futures market is the greatest wealth transfer mechanism
ever invented.
No matter how many times you shuffle the deck the cards
remain the same.
The more efficient a market is, the more random it is. If a
market is inefficient, the more that market will trend. The
efficiency of a market is inversely correlated to its liquidity.
Do you look at your positions as assets or liabilities? Liquidate
the liabilities with extreme prejudice.
Life is full of breaks that don’t break evenly.
If you are in a position and you are losing more in that position
than you can reasonably expect to make, get out.
It is far easier to lose money trading than to make it. It is far
easier to make money trading than to keep it.
A margin call argues for your continuing status as an amateur.
If the market prints your price and doesn’t fill you, go to the
market.
If you don’t have an exit strategy, the market will figure out
one for you.
If your trading begins to resemble an exercise in madness, at
least take a break for a day.
A market trades to try and fill all orders: limits, buy stops, sell
stops, everything. If there aren’t any orders, there’s no reason
for the market to move.
If your indicators are lagging but your data is high frequency,
you should be okay. If your data is low frequency, your indicators
are useless.
Your ability to discriminate, to successfully think critically, is
inversely proportionate to the profitability of your positions.
You can go broke taking profits, very small profits. This type
of trading behavior will also convince you that you're
performing better at the buy/sell game than you really are.
When the pundits start talking about a barrel of crude oil and
a bushel of wheat as not really a barrel of oil or a bushel of
wheat but an asset class and you are long, get nervous.
Just give it time; the market will trade at previously
incomprehensible levels, regularly.
There are more black swans waiting in the weeds than you
think there are.
Most indicators are worthless; the “price” of something
motivates buyers and sellers. Learn to read “price action.”
Your next trade could be your last trade for a very long time.
Be aware of this and don’t let it happen. Use stops.
Markets are challenging: when illiquidity meets volatility
parallel lines converge, divergences converge, convergences
diverge and mathematical certainty is forced to embrace new
theorems.
If you are down a certain, predetermined percentage of your
equity (for some this could be as little as 2% and for others this
could be as much as 15%) and you have open positions,
liquidate and go to cash. You and the market aren’t on the
same schedule. (Few ever do this). Hitting the reset button is a
psychological palliative.
In other words, not to change the subject, when your positions
have little relevance to the current market, liquidate and reset.
When all your trades are going incredibly well, when you’re
seeing the market as if you’ve already read tomorrow’s papers
and you’re just about ready to thicken the callous that resides
just below your left shoulder with your right hand, get out
Webster’s and reread the definition of coincidence.
Markets are thematic. In fact, those flashing numbers are
always trying to tell or sell a story. Become a better reader.
Don’t think of the market as an opponent to be bulled,
bloodied, battered and beaten. Its resources are far greater
than yours. It’s better to concede the conceit of market as
ocean in all its obvious metaphoric diversity.
The Myth of Sisyphus resonates in the experience of
trading.
Remember that irony is alive, well and constantly at work in
the universe; irony, the cornerstone to the construct of the
Divine Comedy.
Trading isn’t about winning or losing, it’s about building
equity. Taking strategic losses is a key to building equity.
Winning or losing on any one particular trade is meaningless.
A market is a market. It can do anything it wants. It doesn’t
have to make sense. A market is only obliged to itself. In fact,
exploiting this fact will lead to your best profits.
One aspect of a period of successful trading is to convince you
into believing that you actually know what you’re doing.
Just as persistence allows mediocrity to soar, a persistent, rule
driven trading approach seasoned with just the right touch of
intuition can turn your sow’s ear into a silk purse.
What you want to have happen in a market often prevents you
from doing what you should be doing in a market.
That which is true, never changes. A market, a dynamic
revaluating, discounting mechanism, always changes. There’s
very little that’s true about a market.
Beware of the new paradigm; it may not be wearing any
clothes.
Beware the talking heads; they are only talking their positions
and aren’t seeking the truth; they are far more interested in
acquiring your money.
If you don’t crave profit, profit may be attracted to you. If you
don’t fear loss, loss may not be attracted to you.
If you want to be condemned, keep doing what you’ve always
done.
Worst positions leave last.
To capitulate isn’t easy.
Trading is like procreation; if you’re nervous it just isn’t going
to work that well.
The market is an imperfect game. Chess is a perfect game. All
information is transparent. Either you are a smart player and
can see the board or you are a challenged player. There is no
luck. Poker is an imperfect game. You don’t know all variables
and bluff by itself can win the day.
You only learn from losing trades. A winning trade is simply a
confirmation of your current infallibility.
Do everything you can to keep a losing trade an annoyance
rather than a memorable event.
If you are in a winning position, remain aware that just as the
sea reclaims land, the market wants its money back.
Never disrespect the possible (especially option expirations).
A trade is a trade. It is a financial event. It is not a justification
or repudiation of your current geopolitical or eco-political
model.
Don’t convince yourself that you’ve figured out the puzzle. The
puzzle keeps changing. Eventually the puzzle just disappears.
You have to be willing to give back, to fold, to square your
position to cash. If you don’t give something back the market will
end
up taking it back on its terms, not yours.
Markets spend as much time going up as they do going down,
the only difference is amplitude.
As the futures market is a zero sum game and the instruments
of trade expire continually, regression to the mean should be a
frequent event. The stock market is totally different; for every
buyer there doesn’t have to be a seller and the life of a stock is
theoretically, potentially, infinite. Regression to the mean
should be a “less frequent” event at Wall and Broad.
Good trades are often counter intuitive.
There’s far greater skill in trading well when you’re behind
than in trading well when you’re ahead.
Ascertaining the correct value for 6 variables before making a
trading decision is not better than ascertaining the correct
value for 3 variables. When it comes to heuristics, kiss.
All your answers have questions. (In remembrance of Katy).
Markets are mechanisms that foster irrational behavior.
Don’t let your trading be held hostage to the need for
discernment.
As soon as market action can be explained and generally
understood, expect the market to change.
Before entering a trade, mentally understand and accept all
potential loses.
If you have to win you’ll lose.
If you have to lose, you will.
The seeds of doubt are self sown.
The market doesn’t care about your positions. No one but you
cares about your positions.
On initial order placement, never be impetuous. Wait for your
price.
Look for ways to take action. Idle brilliance addles.
Good trades usually set up with a sense of inevitability and
unfold in slow motion.
Remembrance may be the inability to let go.
In trading, feeling comfortable should be an uncomfortable
feeling.
Great windfall profits tend to remain paper profits.
You can’t continue to court disaster without eventually landing
a date.
You’re only as young as your last winning trade.
People feel more comfortable with losing positions and more
nervous with winning positions.
When do you place a stop? When you put the trade on in the
first place. It’s at that exact moment when you are most
capable of managing risk.
If you have a position in a market and the average true range
of that market is 128 points and the market has only had a
range of 28 points so far, start figuring out which side of the
market is going to deliver the next 100 points.
When asked to play a game, then stopped mid game and asked
how they are doing, people invariably state that they are
performing at better levels than they actually are.
Work on four things: fear, anger, frustration and judgment;
it’s all derived from fear (in memory of Bill).
Anger is the clash of desires.
Whatever you believe is undoubtedly correct until the passage
of time offers another suggestion.
Simplify. If you are using 4 indicators to trade, use three. If
you are trading 5 markets, trade 4, then reexamine the number
of indicators you’re using.
Never trade out of boredom.
Markets generally lack conviction, especially post 9/11. That’s
why trend traders have a low incidence of winning. Take
advantage of that.
9/11 taught traders that anything is possible.
What funds buy, they sell. Few funds are ever going to take
delivery of a barrel of oil or a bag of coffee. Take advantage of
that.
You manifest the world through interpretation.
Life is, at least, the non-annihilating coexistence of opposites.
Ultimate sorrow is to love as gravity is to mass.
Don’t be so eager to burn today in the hopes of a better
tomorrow. Death hides in the folds of the future.
There is no failure, only feedback. (NLP supposition).
Trying is being in a state of failure.
The fool only seems unenlightened to the unenlightened.
Charles Kespert
***********************
HYPOTHETICAL PERFORMANCE RESULTS HAVE
MANY INHERENT LIMITATIONS, SOME OF WHICH
ARE DESCRIBED BELOW. NO REPRESENTATION IS
BEING MADE THAT ANY ACCOUNT WILL OR IS
LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR
TO THOSE SHOWN. IN FACT, THERE ARE
FREQUENTLY SHARP DIFFERENCES BETWEEN
HYPOTHETICAL PERFORMANCE RESULTS AND THE
ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY
ANY PARTICULAR TRADING PROGRAM.
ONE OF THE LIMITATIONS OF HYPOTHETICAL
PERFORMANCE RESULTS IS THAT THEY ARE
GENERALLY PREPARED WITH THE BENEFIT OF
HINDSIGHT. IN ADDITION, AL TRADING DOES NOT
INVOLVE FINANCIAL RISK, AND NO
HYPOTHETIOTHETICAL TRADING RECORD CAN
COMPLETELY ACCOUNT FOR THE IMPACT OF
FINANCIAL RISK IN ACTUAL TRADING. FOR
EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR
TO ADHERE TO A PARTICULAR TRADING PROGRAM
IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS
WHICH CAN ALSO ADVERSELY AFFECT ACTUAL
TRADING RESULTS. THERE ARE NUMEROUS OTHER
FACTORS RELATED TO THE MARKETS IN GENERAL
OR TO THE IMPLEMENTATION OF ANY SPECIFIC
TRADING PROGRAM WHICH CANNOT BE FULLY
ACCOUNTED FOR IN THE PREPARATION OF
HYPOTHETICAL PERFORMANCE RESULTS AND ALL
OF WHICH CAN ADVERSELY AFFECT ACTUAL
TRADING RESULTS.