Intra-Day Update: Clarifications

UPDATE 10:12am EST: I think this is a good opportunity for some clarifications – some of it was already covered in my Friday evening rant. But for the ones who missed that one – it is worth repeating. I took some of the insults out since I feel less malevolent today:

You never want to optimize an indicator for whipsaw markets, and you also never optimize an indicator so that it works for all types of traders. Since many of you leeches seem to have no idea what trend trading means here are some salient points:

• Trend trading is not swing trading!
• Trend trading is not scalping!
• Trend trading does not occur on an hourly basis.
• Trend trading usually has a majority of failed trades and a minority of winning trades. If your system has an edge the winning trades make up for the failed trades and then some.
• Trend trading is not about being right most of the time – it’s about being right those few times when it counts (i.e. when a trend forms).
• Trend trading does not work in whipsaw markets.
• Trend trading can only work in trending markets.

We have been in pretty whippy markets in the past few trading days the only real move we got was on Thursday when we dropped 30 points in the SPX. The overnight slump to 835 in the ES futures didn’t even make it into the SPX the next morning, as the low of the day was 851.

Someone yesterday accused me of selling snake oil – I know this guy was a troll, but it bodes repeating that I’m not selling anything (yet), and that this is the perfect environment to test any new type of indicator. I mean, can you imagine a worse tape? Just look at the past 5 trading days and then tell me what your usual indicators kept telling you. So, what I’m saying is this – you can’t trade a volatile sideways market because the speed may be high but velocity (i.e. speed in a given direction) is low or flat. Rest assured that, once a real trend develops, Zero will tell us in due time and present us with entries. In the meantime I suggest we use this horrible tape analyze, and gather evidence to make improvements.

I don’t think that we’ll bank much coin before X-Mas unless something dramatic happens – most of the big guys are either arrested (LOL) or have skipped town to celebrate their measely holidays before 2009 happens. That’s what we all should focus on – to get ready for 2009. I think the Zero can be a great tool in our arsenal, but for it to give tradeable signals we need a trending markets.

UPDATE 10:49am EST: Not looking good for equities this morning. Yen action has oved over to the March 09 contract (@6JH9 or JYH9 might work on your platform) and from what I’m seeing it’s actually oversold on a short term basis. NQ is about to hit a pivot at 1172, if that breaches all hell will break loose because the NDX is leading the action and its short term stochastic is lower than any of the others.

UPDATE 11:08am EST: Now, this is a very interesting situation right now. The rules of the ZI made it trigger a short VTA but we were sitting right at a long retracement level. The strength of the signal was pretty weak (look at the white signal line) and thus far it has failed and the VTA is gone. I think this is something I will be working on in the coming days and through Christmas. In a perfect world the ZI would not even trigger in these conditions until the RL has been breached with confidence.

UPDATE 11:45am EST: Berk here… Mole and I were just checking out our precious metal friends, trying to determine if we should buy our women their gold necklaces now, or if we should wait until prices come back down some.  Short answer… I am still in front of my computer and not on the way to the jewelry store.  Anyway… Some of you had been eyeing GLD or SLV for a trade.  Let me tell you, now is the time to do it.  Either metal is VERY deffensable right here, meaning we have a great entry to go short.  Strong horizontal resistance around 10.50 – 10.70 range.  Anywhere above the 10.70 side of that and we could be looking higher.  There are a few ways to play this, SLV, DBS, PAAS, or GLD and DZZ if you prefer the yellow metal.  Mole and I picked up some PAAS (yes, January’s) with a tight leash here.  Enjoy…

UPDATE 2:21am EST: Berk and I are going long AMZN – stop at 47.5 – if it hits that we’re swapping it for puts as the diagonal would be considered broken.