Bernanke

Dear Mr. Bernanke,
Why do you have to come out and tell us Fed's going to cut the rate? We all know you will at this month's FOMC meeting anyway. Gold and Euro shot up and I'm losing money on my investment club account. Low interest rate means basically printing more dollars. If there are more dollars, USD rate goes down and futures such as gold / grains go up.

I guess he wanted to lift the stock markets, but look at where we're now. It initially shot up, but now we're about where we were. I was looking to short at daily R2, but never got there. The daily R2 coincides with 8EAM on daily chart.

Bernanke, I know you need to clean up the mess that Boo-sh and Greenspan did, but will you just leave the market alone?

Update

I've never seen stock indexes continuously go down like this (Gee, 7 days in a row?) without any pullback. It's almost as if by the time stop-runs are done, new sellers step in and this cycles steadily. This is where I shouldn't do anything. Yesterday, I tried to catch a falling knife with an aggressive stop, but given today's action, I wouldn't jump in.

Updates on my current positions:

Although both spread and lumber trades are long term (minimum 6 months), it's painful to watch my P&L goes down. I'm willing to risk my entire portfolio. If I need to, I will not day-trade to maintrain these two. It was a great buy and it'll be a better buy if price comes down.

Although I was not in, I know a guy who was in Coffee or Silver trade for 2+ years before taking a real decent profit. This kind of opportunity doesn't come everyday. I'm prepared for futher down move, stagnation and spike up move.

Swing Long 1 YM at 12660

Catching a falling knife is definitely not a good idea, but I do have a protective stop. I see lots of fear in markets now, which means we're ready to bounce up.

Entry: Long YM at 12660
Stop: 12567
Target: Open (Will trail)

Result: +$10.74
Stopped out at 12663 or +3

Maybe I was too aggressive for a salmon trade. :(

Long 2 YM at 12690

Falling sharp here, but I faded it anyway. I don't know how to explain, but markets came down without any pull-back, so I found that it has a high probability.

Long at 12690
T1: 12700
T2: Open
Stop: 12670

Result: +$71.52
T1: 12702 or +12
T2: 12694 or +4 (trailed to b/e)

My b/e stop got hit one tick shy, but oh well, that's the trading. Now it bounced off nicely at least 60 points. One thing to note is that if you bought 10pts 'in front of' pivots levels, you probably got stopped out. With this kind of action, you want to go behind pivot levels as markets tend to push and run stops before bouncing back.

Anyway, a very nice stop run on daily chart. I'm expecting we'll slowly head back to 13100 level as we sucked in lots of shorts. I'm looking into long at the close.

Stops 101

On Friday, we had a huge downday. Today as expected, we're consolidating so far. In the morning, we surged down quite a bit, but snapped back since. I bet some people bought at the close of Friday expecting for markets to bounce up based on maybe Trin or something. But this market is not setup that way.

If you look at daily chart of ES or YM, we're sitting on support level from Summer spike lows. If you're big institutions, what would you do? Or ask yourself this, if you're long now, where your stops would be? Below those support levels. What institutions do is to push markets lower until they 'wash' out stops on those levels before snapping back up. Have you ever felt that markets know where your stops are? You get stopped and price goes even beyond your target level? This is exactly what's happening.

Also take a look at October 2007 high, markets went just a little tiny bit higher than prior high and headed lower due to the exact same reason! There are markets where you can put stops around support/resistance level, but not certainly for stock indexes, which are 'fading' markets.

Now, pros are looking to short this market, but where? I would say around 13100 level, which is where I plan to enter, expecting to run stops from summer spike low. The ideal entry would be pivot levels after drilling down in 30 or 60 min chart. I probably need to give some room to breath due to volatility.

Wheat Long at 931.25

Long at 931.25
Exited at 931.75
Result: 0.50 or +$18.96 after commissions

Wheat was the weakest one among grains. Normally I would short the weakest, but with all the grains trending high, I thought it'll follow. However, if you buying a lagger, it'll likely be the first one that drops if all other markets go lower. Therefore, I used pretty tight money management. Sure enough, I was lucky to get out about at break even.

Sold Lumber Mar 240 Put for 6.10 or $671

Lumber (LBH08) is down 1.5% today and I was able to sell 240 put for 6.10 bringing $671 as a premium. This contract expires on 2/29/08, so I will be holding this quite a while. Here is my plan:

1. If LB closes above 240, the option expires worthless, I collect all the premium of $671. I will sell another put option on the following month.

2. If LB closes below 240, I will be assigned a long position from 240. I will try to sell it at 240 and roll-over to next month. If the price is significantly lower, I'll just roll-over. On the roll-over contract, I will sell 280 call or so against the underlying position craeting essentially a covered call case so that I can generate some income in case of stagnation.

You can look at the options price here.