Sunday, October 31, 2010

Week 44 Analysis

Another week packed full of news including FOMC Minutes Wednesday. Looking to finally break out of the range we have been in for the past few weeks.

As the month of October comes to a close, we see a market that has been very resilient of a pullback. Since we put in highs in the S&P futures at 1193 we have seen a market that has been quite choppy. With targets at 1201 which should be reached this week, don’t be surprised to see somewhat of a breather or pullback in this market. A pullback and possibly of a trend change could produce some exciting moves for new trader setups in November.

The bulls have defended many crucial pullbacks this month, especially the 1170 level. When looking at the SPY we see a max pain level of 117, which is the most amount of pain or "heat" option traders are willing to take before a trend change. This 117 level also lines up with a failure of a 61.8% line of our last bullish setup, in the /ES, 1169's. Look for a break or failure of this level for a possibly trend change.

Thursday, October 28, 2010

Discipline is a 24-7-365 Job

Discipline is not something you do 9 out of 10 times or only when you feel like it. In trading, breaking your rules “just this once” is a recipe for disaster. Don’t kid yourself, if you want to be consistent trading the markets you must remain disciplined every single day both in the trades you take and in your afterhour’s analysis. The more diligent and thorough your attitude towards the markets, the faster you will progress. In the markets you are paid based on your level of discipline. Remain disciplined 100% of the time, all the time.

Monday, October 25, 2010

The Mayonnaise Jar and 2 Beers

When things in your life seem almost too much to handle, when 24 hours in a day are not enough, remember the mayonnaise jar and the 2 Beers.

A professor stood before his philosophy class and had some items in front of him. When the class began, he wordlessly picked up a very large and empty mayonnaise jar and proceeded to fill it with golf balls. He then asked the students if the jar was full.

They agreed that it was.

The professor then picked up a box of pebbles and poured them into the jar He shook the jar lightly. The pebbles rolled into the open areas between the golf balls. He then asked the students again if the jar was full. They agreed it was.

The professor next picked up a box of sand and poured it into the jar. Of course, the sand filled up everything else. He asked once more if the jar was full. The students responded with an unanimous ‘yes.

The professor then produced two Beers from under the table and poured the entire contents into the jar effectively filling the empty space between the sand. The students laughed.

‘Now,’ said the professor as the laughter subsided, ‘I want you to recognize that this jar represents your life. The golf balls are the important things—your family, your children, your health, your friends and your favorite passions—and if everything else was lost and only they remained, your life would still be full.

The pebbles are the other things that matter like your job, your house and your car. The sand is everything else—the small stuff. ‘If you put the sand into the jar first,’ he continued, ‘there is no room for the pebbles or the golf balls. The same goes for life.

If you spend all your time and energy on the small stuff you will never have room for the things that are important to you.

‘Pay attention to the things that are critical to your happiness. Spend time with your children and grandchildren. Spend time with your parents. Visit with grandparents. Take time to get medical checkups. Take your spouse out to dinner.

Play another 18. There will always be time to clean the house and fix the disposal. Take care of the golf balls first—the things that really matter. Set your priorities. The rest is just sand.’
One of the students raised her hand and inquired what the Beer represented. The professor smiled and said, ‘I’m glad you asked.’

The Beer just shows you that no matter how full your life may seem, there’s always room for a couple of Beers with a friend.

Sunday, October 24, 2010

Week 43 Analysis

We have seen a lot of chop around the S&P 500 $1180 level. This can be expected as we are in the midst of earnings season. We should see a break one way or another this week especially with GDP on Friday.

As a clue to the direction of this break we look to the VIX and as of late, it has been on the decline, holding in the upper teens. In order to sustain new highs we would need the VIX to break $17.90 and hold it.

Saturday, October 23, 2010

2011 - Stock Market Holidays

Martin Luther King, Jr. Day
January 17, 2011

Washington's Birthday (Presidents' Day)
February 21, 2011

Good Friday
April 22, 2011

Memorial Day
May 30, 2011

Independence Day
July 4, 2011

Labor Day
September 5, 2011

Thanksgiving Day
November 24, 2011

Christmas Day (observed)
December 26, 2011

2010 - Stock Market Holidays

New Year's Day
January 1, 2010

Martin Luther King, Jr. Day
January 18, 2010

Washington's Birthday (Presidents' Day)
February 15, 2010

Good Friday
April 2, 2010

Memorial Day
May 31, 2010

Independence Day (observed)
July 5, 2010

Labor Day
September 6, 2010

Thanksgiving Day
November 25, 2010

Christmas Day (observed)
December 24, 2010

Friday, October 22, 2010

E-mini Futures Tick Sizes

Tick Size is the minimum fluctuation on a futures contract. Rather than trade in penny increments like stocks, futures contracts trade in ticks. This value is denoted in various dollar amounts per contract. For euro futures a tick and pip is essentially the same thing.

E-mini S&P
• Ticker Symbol: ES
• Value of 1 Tick: $12.50
• Ticks per Point: 4

E-mini Dow
• Ticker Symbol: YM
• Value of 1 Tick: $5.00
• Ticks per Point: 1

• Ticker Symbol: NQ
• Value of 1 Tick: $5.00
• Ticks per Point: 4

E-mini Russell
• Ticker Symbol: TF
• Value of 1 Tick: $10.00
• Ticks per Point: 10

E-mini Euro
• Ticker Symbol: 6E
• Value of 1 pip: $12.50
• Ticks per Point: n/a

An additional note, the S&P 500 aka. the “big” trades in $0.10 increments. Often times pit traders will buy contracts in the S&P pit @ a dime and using a headset flip them on the e-mini Globex exchange, this is known as big/mini arbitrage (arb).

Thursday, October 21, 2010

Futures Contract Months Explained

For those who trade or are interested in trading e-mini Futures, you may be wondering what the symbols mean (eg: /ESZ0). The four e-mini index futures are S&P (ES), Dow (YM), NASDAQ (NQ), and Russell (TF). The e-mini Euro Future contract is 6E.

All platforms have their own form, but the basic letters and contract months are the same. For the thinkorswim platform, simply typing /ES will pull up the front month e-mini S&P contract.

The second half of the symbol relates to the contract month or the year. Futures contracts every four months as follows, March (H), June (M), September (U), December (Z) followed by the year 2010, or in the case of thinkorswim, the last digit of the year (2010 = 0).

So as of October 21, 2010 the front month contracts on TOS are as follows…
E-mini S&P - ESZ0
E-mini Dow - YMZ0
E-mini Nasdaq - NQZ0
E-mini Russell - TFZ0
E-mini Euro - 6EZ0

Wednesday, October 20, 2010

Sunday, October 17, 2010

Week 42 Analysis

News for the week…

Earnings announcements for the week...

Thursday, October 14, 2010

Market Theory

• The market is simple, supply versus demand,
   the balance of greed and fear is how price is determined
• The market is ALWAYS right
• Trade with the market momentum
• The market continually retraces
• Old support acts as new resistance & old resistance acts as new support
• Always sell what shows you a loss and keep what shows you a profit
• One trade won’t make you, but can surely break you
• There will ALWAYS be another trade
• The prepared trader has the greatest chance for success in the markets
• Everything needs to be accounted for once the trade is placed
• There is always more to be learned in the markets
• No one can predict market moves
• Fear your loss might turn into a bigger loss,
   hope your profit may turn into a bigger profit
• Know thyself and thy personality
• Be patient with profits, quick with losses
• A man may beat a stock or certain commodity,
   but no man can beat the stock market

Tuesday, October 12, 2010

What does NASDAQ stand for?

Run by the National Association of Securities Dealers now acquired by the AMEX, the National Association of Security Dealers Automated Quotations (Nasdaq) began trading on February 9, 1971, as the world’s first electronic stock market. Today it is the largest electronic stock market with more than 3,000 companies listed.

The Nasdaq, National Association of Securities Dealers Automated Quotations has the largest trading volume than any other US exchange, trading approximately 1.8 billion shares per day. The exchange trades a variety of companies, but is most well known for being a high-tech exchange, trading many new, high growth and volatile stocks.

Because it is an electronic exchange, it has no physical trading floor, instead making all its trades through a computer and telecommunication systems. Rather than buying and selling from each other, brokers buy and sell through a market maker. A market maker is a person or firm who quotes both a buy and sell price for the stock underlying or commodity. The market maker is obligated to buy when there is an excess of sell orders and sell when here is an excess of buy orders. Their profits result on the turn, or the difference between the bid and ask, known as the spread.

Since there is no trading floor, the exchange built the Nasdaq MarketSite in New York’s Time Square thus giving it a physical presence. The tower’s large outdoor electronic display gives current financial information 24-hours a day.

The Nasdaq listing fees are significantly lower than those for the NYSE and contains lower listing requirements, allowing newer, smaller companies to become listed. The requirements are as follows.
• 400 stockholders owning at least 100 shares
• $1.1 million shares outstanding in the marketplace
• $1.0 million in operating income
• Initial market value of $8 million

The Nasdaq is a publicly owned company, trading its shares on its own exchange under the ticker symbol NDAQ.


Monday, October 11, 2010

Week 41 Analysis

News for the week…

Alcoa (AA) kicked off earnings season last Thursday so expect a moving market over the next few weeks. Nothing on the news docket for the first three days of the week so we are expecting a continuation of the current trend.

The VIX dropped significantly today breaking into the teens. As the saying goes, when the VIX is low lookout below. This also makes it a good time for option buyers as premiums decline. As always, we never like to be positioned 100% in one direction so adding some put positions as well as calls will dramatically help balance the portfolio through this earnings season.

As for intraday trading, we are seeing an incredibly technical market even on lower volume days. This great trading environment should remain until the holidays when things will slow down.

Sunday, October 3, 2010

Week 40 Analysis

News for the week…

Pending Home Sales to kick off this week’s news announcements should provide a great environment for intraday trading. What we will be watching for this week is a break and close outside of this past week’s consolidation.

Here are some things to keep in mind in your trading.
- More is better than less
- Sooner is better than later
- Always take a little bit less sooner

When you have a profit, you CANNOT, let that trade turn into a loser. Have everything in place before the trade is placed because once you are in the trade your objectivity becomes skewed.