Tuesday, December 8, 2009

Refusal to commit to a trade

Well, what a day, we had a nice gap down but after the GAP occurred the market yet again remained in a narrow range. As you can see I have been focusing a lot more on FX and even there I keep it small - in a way I am trading SPX through EURUSD.

So first point on FX - as you know I have been trading EURUSD quite a bit in the past 2 months with with my main focus on being positioned short, though I did not shy away from any long chances. However after we had tested the 1.51 range I have been looking for a good short position and I am a bit ashamed to admit that I missed the boat on this big move we have seen here. I had been too focused on the strong support at 1.48 that I really was not ready for a move lower. The EURUSD appears to be completing a proper 5 wave structure and I am kicking myself a bit for having missed this great move lower here - however, did not loose money overall so I am not too upset.

Keep in mind FX markets generally have a much larger 5th wave so we have to be ready for more downside, unfortunately downside that is not tradeable - so it will take a few days before we can find a great entry again on this - whether its long or short. We are currently at important daily support here so we have to see how this plays out.

Now SPX wise - what can I say, the only way to get a proper reward for a position is during overnight moves and I refuse to gamble here on SPX.

We are still in the chop zone here and today appeared to be a nice attempt to move out of this zone that again lacked the follow through from any bulls willing to take profits or a bear moving in. Yes I can see bears getting excited but look at this above, there is nothing to get excited about, there is no follow through and no real direction. Take a look at the previous declines, we had some proper follow through and all you see here is total whipsaw for both bulls and bears. As long as we remain in this range it will be very difficult to get a proper position that I dare hold longer then a few hours. Even a breakout on the upper ranges has to be approached with care as this rally is looking rather weak here to be quite honest and after 9 month of upside - who wants to be the last one on the ship?

Seasonality wise - its December and everyone expects December to remain neutral or bullish - again the contrarian would say thats exactly what they want you to believe - you all know what I think about the concept of market trying to inflict the most pain to most players - simply do not believe in it.

So what to do from here? I still feel the best position to maintain is small in size, with tight stops and minimal risk exposure. Why gamble for a 10-15 point move when during a normal trend 15 points are just a small fraction of what is tradable.

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