Back To The Grind

I remember spending one hour each way in L.A. traffic commuting to and from my job as an engineer. That was about a decade ago or so shortly before I decided to ‘retire’ from the software industry and dedicate myself exclusively to my passion, which of course was trading. It’s been a very turbulent time since that day but as I’m sitting here now in my beautiful Valencia apartment overlooking two gorgeous 15th century buildings I don’t know how I survived that traffic ordeal back then.

I think one of the most important benefits of trading for a living is (relative) location independence. The European time zone (+ 6 hours from NY) serves my lifestyle pretty well and while most of you guys in the U.S. are still hitting the snooze button I’m already running on five cylinders. Another benefit is being able to structure your own working hours as I never was the nine to five type – I mean, who really is?

And finally not hating your job and dreading going back after a long weekend is usually a good sign that you are pursuing your true passion. Which is why one of the first questions I always ask anyone considering to trade for a living is: Are you prepared to work 50 hours plus, take few vacations, and work through holiday weekends? Because if that thought doesn’t appeal to you then I suggest you stick with your day job as you most likely are vastly underestimating the personal sacrifices and commitment it takes to do this for a living.

No Rest For The Wicked

Given the above you’re probably not surprised to hear that I spent most of the long weekend studying an extensive tutorial series on how to calculate the Kalman filter in a matrix. The Kalman filter, created by the brilliant Rudolf Kálmán, is over 50 years old but is still one of the most important and common data fusion algorithms in use today. Originally it found wide adoption for tracking of objects and industrial systems requiring the correlation of a computed state versus the actual measured state. So it is not surprising that it recently has gained popularity among quant traders who use it for things like portfolio optimization or pair trading. It’s a fascinating subject and the further I immerse myself into the subject matter the more excited I have become.

Murphy’s Law

Then of course late last night it turns out that my VPS hosting provider blew up one of my virtual machines and I had to copy several services to a backup. Since it was the 4th of July client support was rudimentary. And that’s how it goes, the fun never really stops and a week without something blowing up in your face is celebrated as a rare occurrence.

Alright, back to work, steel-rats! The E-Mini has been coiling up over the past few sessions and we’ll need to see what happens in the first two hours or so to get a better read on the situation. Right now I see nothing but a sideways mess. Which of course is leading to a gradual contraction of the BBs on the daily panel.

The YM is still leading the pack and is the main reason why I’m not considering a short position on the E-Mini. Until I see weakness on all three indices I have a hard time justifying trading against the trend, even if it’s just a tiny position.

The NQ has descended to my 100-day SMA which has absolutely zero meaning as that one hasn’t been touched for a long time. So again we’ll have to see if price for some reason actually concedes to using that one as a reason to build a floor.

Crude has my attention right now, given that fast drop overnight. However I’m not trusting this at all and at minimum I need to see a more pronounced retest of the 100-hour SMA, which in this case accumulated at least some context on the way down.

Campaign Updates

Precious metals got slapped big time over the past few sessions and fortunately I was able to eek out 0.7R in profits on the silver front.

I wasn’t as lucky on gold but at least got out at break even. The current price action suggests we may see more downside. What’s even worse is the fact that the 100-day BBs on both gold and silver are now starting to point down. Could get very very ugly here.

The USD/JPY campaign however has continued its climb and I’m now tightening my stop to a few pips below 112.8.

More goodies below the fold, please join me in the lair:

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