Disclosure: Do not make any decision based on my opinions. Follow your plan. In many ways this post is about “talking my book” well talking my point of view because I do not hold any positions. My point of view is so vastly different than those that I read that I am starting to feel lonely. This post is about convincing myself, not you.
My steams have been lighting up with tweet like “how is todays move going to effect tomorrow” or “I am seeing some charts turn really bad”. I just do not see a connection right now. You have to have the memory of a goldfish right now. My ego tells me I could be an investor, as I believe is a more accurate description of the people who are tweeting those comments. I am not an investor I am a trader. Also, there is not much room for context in 140 characters and I did not seek it. Their responsibility is to themselves and their families, not me. Not everyone likes to be second guessed like I do.
I look to bigger picture charts because the short term charts I use to trade are a microcosm. I can’t always see the microcosms on a short term chart. It also gives clues into which participants are winning at the moment. That is important to me, who is winning right now. What is working right now. When/if the correlations come back I will look to them, right now it is crap shoot. Early in my career, I was naive to believe that oil effected the S&P 500. The price of oil is up, that is bad for the index because it is going to cost more for the companies. Then came, oil is up that is great for index because oil companies are part of the index. Thanks for insight.
How I view things right now.
A rally and winning heals everything. People have a tendency to look at an outcome and not why. You can do no wrong when you are winning. It takes a strong and sometimes foolish person to fix something that is not broke. If things are rallying, why does not matter for most people. We are eventually going to have to pay for it but that time is not right now. Don’t get me wrong, we are treating a tumor with Tylenol right now, if POMO does not work it will be devasting. The livelihood of many firms are dependent on a rally. Attracting money is their game, the feeling of missing an opportunity is their hook .
People think that the economy, stock market, and personal wealth are some how related. I do not want to stick up for any economist but I don’t believe a majority of them ever said they can predict the prices of the market. (This is by far my weakest point, if I have food on my face please tell me). I am certain that those three are not directly correlated.
I belong to the church of cash flows. I am a tape reader, yes it has its disadvantages, but at the end of the day it never lies to me. They are buying it. It is relatively cheap to move the markets. Volume YoY in the pit is still weak. Even with HFT, volume in the emini is down 1.7%. The density in the market is on the buy side. I am sure there is already a technical term for this but I define density as the number of contracts it takes to move the market. How many contracts it takes to move the bid or offer.
The bad numbers are being ignored right now and good numbers cause over exaggerated moves. Once again this goes back to my start as a trader. Number was good, things looking better, rally. Number was good, we would break, number was already priced in. I believe that institutions use those numbers to get things done. They wait till there is a move or initiate one and then ram it down everyones throat. They have the money to act and we only have the money to react. They need a rally.
Everyone is on their own. There is such mistrust of the financial industry right now, people are not acting like their normally sheepish selves. Everyone is an independent actor. It means it really is a zero sum game, it is harder to get someone to assume your risks. What has been so difficult for me is that in order to get paid for the risk I take I have to have conviction. Conviction is a slippery slope for a trader. It has eliminated my aggressiveness.
This post is getting long but I see the way bank failures happened is how the countries will fail. America is still the best place to invest, I am obviously biased. If you want to talk about this more leave a comment.
Once again, you have to follow your strategy and rules. From where I sit, everything has been disconnected. I am not sure if it is cyclical or technology has changed it forever. As blogging goes, Barry Ritholtz beat me to some of these points. You can read it here.
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