No More Waiting For Godot

Okay, this is what I do not see tonight:

I don’t see a complete 5 on the way down – but I also don’t see a real 3 (i.e. an a-b-c, indicating a correction). Yes, one could count the push down as a 5 somehow – but I’m not here to engage in intellectual exercise – I’m here to make some fucking money.

Now, what I also don’t see on the way up today is a three – this is not looking a bit like anything corrective to me. What I am seeing is a sharp motive in development – and it’s most likely subdividing. Considering the above I need to assume that the trend continues to be up – and yet again the bears were led to their slaughter.

Changes

I just had a long chat with Berk and we decided to make a few changes around here. We both think that EWT has its place but in this market environment trading options based on large degree EWT counts and the anticipation on whether or not a Primary degree market high has occurred has turned into an exercise in futility.

However – if anyone has been paying attention – what DOES seem to work very well for me is to sniff out short term market tops or bottoms, it must have been the fifth or sixth time this year now that I called a turning point almost on the mark. What usually blew up in my face was that I insisted on trading long term options which then had their vega (and of course premium) sucked out of them in the ensuing snap back rally a day or two later. So, why continue to do that? There simply is too much free gambling money out there and this market has become way too narrowly traded (i.e. dominated by a few major players). So we can either keep bitching and complaining or we can simply start trading what IS. I for one do not have a death wish and going forward the game will be played a bit differently:

• I will continue to look for major turning points (at overbought conditions) via my fibs and wave counts but then take profits immediately when a drop occurs. So, no more long term puts unless the current trend has been proven to have flipped to the downside, which means that important trend lines (i.e. scary for the bulls) are starting to be breached.
• An increased focus on trading individual symbols as opposed to index options. Even when damage occurs during a fast drive against your position a lot of it can be mitigated by betting on horses that have a natural and established bias to one direction – or have shown to be resilient to rapid market gyrations. In that context we’ll also be looking at index correlation – if it’s too high beta then we might reduce our our position size.
• Trend trading – not sure why I stopped doing that – there are tons of symbols out there with established trends and it’s time to resurrect that approach, which served both Berk and me well in the past. More on that in the coming days.
• Intermediate degree EWT trades – but only when the trend has been proven, and thus far the trend continues to the upside. When will P3 finally arrive? I have no clue – maybe we are in it already and today was nothing but a nasty second wave – or we might be days or weeks away. Obviously this market has shown an unprecedented capacity to shrug off any type of negative economic data and now feeds on vapor, sector rotation, and HFTs.
• Program trading – which at this point means mostly geronimo – we had a bad day yesterday but got some of that back today. As a whole this thing has kicked some major ass in the past four months, so I plan to increase my position sizing in my futures account. In that context – I ran through the code again today and found something that ‘might’ have been responsible for those empty alerts we keep seeing occasionally. I put in some logic that might fix this but I can’t really be sure unless I see at least a week without an empty – so, we shall see.

Of course I will continue my usual wave counts but I want to shift our focus a bit from mainly EWT and market analysis to more of a trading blog where symbols and entries/stops/targets account for most of the activity. So, more Anna/Keirsten – and also more of the Berk/Mole that most of you guys probably don’t remember, but who did very well last year.

No more waiting for Godot – let’s just trade and if the trend finally changes we’ll change gears soon enough.