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My trading plan right now


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#1 lawdog

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Posted 15 January 2017 - 09:33 AM

for six weeks there has been no money to make on trending moves because there has been no trend, at least speaking of spx. i still hold a 50% long position, was lucky enough to not get spooked on thursday's plunge, actually picked up a few dollars from it, but cut back from 80% long to 50% long on Friday's strength. but that was more luck and nerve than skill.

 

I still think we have a shot at spx 2300, but to get there, we need to get momentum started from a 1%-1.5% decline which holds to the end of the day and then has follow-thru the next morning. that will give traders confidence they aren't buying at the very top, and that will allow for the momentum to reach spx 2300, sucking in more late money that is afraid of missing the advance to spx 2500.

 

if we get that 1% downward day, i will try to reduce my long position to 20% during the drop, then get back in, in part at the close and then the rest on the day after the 1% declining day that has held the decline, picking up some profits by selling low and buying lower. if i do this, i will risk the market getting away from me, but a cleansing drop that holds to the close and has a little follow-thru is needed.

 

highly unlikely for me to get beyond 80% long here (180% w/leverage). the market needs a more thorough cleansing for me to believe it can sustain a trend for more than a few weeks. but a 3-5% decline somewhere might be all it needs.

 

if i don't get that decline, then i will likely stay content with my 50% long until a short opportunity shows up. but after the advance to 2300, whether from here at 2270 or from 2245, i don't see much chance of getting beyond spx 2300 without at least a 3% correction to set up another trending upward move. but that is way too far ahead to matter much for now.

 

if we happen to gap higher on tuesday, however, i will probably reduce my position even more and may even look for a small short position. 

 

going long vix is probably too easy here, other than a quick one from a quick drop in the market.



#2 lawdog

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Posted 16 January 2017 - 10:19 AM

 

 

 

 

going long vix is probably too easy here, other than a quick one from a quick drop in the market.

 

 

 

 

http://www.marketwat...oof2&yptr=yahoo

 

 

And this is just why that "easy" buy on the vix is not going to work out right now, other than a one or two day wonder.



#3 lawdog

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Posted 16 January 2017 - 10:53 AM

What could go wrong ? That 1% decline could turn into a 3% decline from here. How do I protect against it? Since I expect a small decline, by getting out on the way down, I will cut back my position to no more than 20% and then will try to stay at 20% until the decline ends, might even hedge with some shorts. The trick is being reasonably accurate in recognizing the bottom of the expected decline, whether it be down 1% or down 3%. Seriously doubt a decline from here would carry much more than 3% before bouncing strongly.



#4 lawdog

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Posted 17 January 2017 - 09:39 AM

got the lower opening i was hoping for; cut back to 20% long; will add some shorts in the spx if we get a failed bounce. looking for quick move to 2245 on spx, setting up advance to 2300 by end of January.



#5 lawdog

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Posted 17 January 2017 - 11:02 AM

So far I don't see an opening to short. Holding a small long position which I intend to retain until we get the next advance/overbought condition; who knows when that will come; still hoping for a drop to spx 2245 to go long again, but right now I give the odds to the bulls. Will keep you posted if I put on a short position. Will not go long any more than my retained 20% until the risk/reward improves. I'm sure there must be at least one person out there interested enough to check back. I must admit, I really do this for myself to maintain discipline.



#6 rramslan

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Posted 17 January 2017 - 11:10 AM

I'm checking back. Appreciate your posts. Would like to see you post more.

#7 lawdog

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Posted 17 January 2017 - 06:29 PM

I'm checking back. Appreciate your posts. Would like to see you post more.

 

Thanks for the kind words.

 

Still biding my time. Hold a small long position. For my trading methodology, I feel like we are in no man's land, with a market that is near an intermediate top but likely has one more run, but where that run is best started off a short and quick decline, setting up the run to spx 2300 and Dow 20k. If we were to get a bounce in the morning, there is a very good chance I will at least cover my 20% long with an equivalent short. That may sound silly, but the 20% long position is harder to move quickly, so since I expect that once the drop happens it will be too quick to allow a turnaround in that account. I am now flat in all my trading accounts and today did nothing to change my opinion of the market  other than to support my belief that a small decline to spx 2245-2250 is in the offing before we run to spx 2300.

 

I will post when/if I add a short position. I don't see much chance of taking on any long positions tomorrow. My other problem is the coming option expiration, which seems to throw some additional randomness into the markets. I still think this market is going to punish the shorts, so I do not want to get wedded to a short position, but only a short position that is working out of the gate and where the decline has the feel of a modest panic (if there is such a thing). I expect if such a decline occurs, the bears will come out in force, will make some nice money, but if they are not nimble, they will get burned quickly and give back all their gains and get stopped out as the market marches to 20k and spx 2300.

 

I intend to post here, under this topic, until there is a fundamental change in my near-term expectations for the stock market.



#8 lawdog

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Posted 18 January 2017 - 12:01 AM

After further review, I am wasting little time tomorrow, Weds, in starting to short the spx, using sds, double the index, inverse. I plan to fully hedge my 20% long position early, and then become net short if the spx begins showing real weakness. I would not be surprised to see an opening rally fail around 12 pm est. if weakness hits and breadth is bad, it could be precipitous, but wait to make sure it is really a weak day. as long as the averages are positive and the breadth is positive, be wary of going short. we might still see some bounce remaining, so be patient. keep a short fuse on any long positions/ trailing stops on longs might work if the market shows persistent strength on weds. in any event, I think a strongly down day could turn into a rout by the end of whatever day the selling starts; and i think we have a good shot at that rout by Friday. i will post here my positions taken tomorrow. i hope the futures hold up into the opening.



#9 lawdog

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Posted 18 January 2017 - 01:37 AM

i know blustar has not made any great calls lately, but i read him today and he noted the similarity of this Friday the 20th and 9-9-16. using completely different analysis, i'm sure, i noted the this evening the similarity of our condition now with 9-8-16. 9-9-16 was a more than 2% drop. this is what i am looking for. my fear of shorting here is the chance for some euphoria on friday when trump is sworn in. so i will be vewwy, vewwy careful initiating short positions here. lots of crosscurrents to navigate the rest of this week. best guess now: market holds up into friday, then short the trump inauguration rally. as a rothschild said, "sell to the sound of trumpets." i do not want to give back my 2017 gains by getting short too early and suffering while all the bulls are celebrating new highs on friday, even if those highs don't hold. don't you hate being out of the market when it's advancing without you and everyone else seems to be 200% long? i can see that happening to me this friday, at least in the early going. so be patient and don't get too much of a short position before seeing significant selling and poor breadth. if weds and thurs were to be down, then i would look to be long going into inauguration day.



#10 lawdog

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Posted 18 January 2017 - 09:38 AM

took a small opening position in sds at the open; market has now reversed down; my hope is some rebound to add a bit more short at a lower price.