Time to rest.

Limit losses, ride profits-regardless of all other rules.

This is the simplest, basic and the best rule you can follow. I'm always glad when I execute it efficiently. Do all you can to gain as much when you are right and to lose as little as possible when you are wrong-regardless of all other rules.

Today the market produced a positive price follow through from the breakout.

Trend following idea, not sexy but could be profitable. Today we had a buyable gap-up with defined fail-safe point at 15.67 or 16.10 whatever is better for your risk budget.

Above chart is showing an "all time high" idea from the shipping sector. Note, an idea is not the same as the plan, you need to know your risk point and your potential profit taking point and you need to risk enough to be meaningful to you if you profit but small enough that you can accept the loss if your edge doesn't work this time.

Remember: The market alternates between range expansion and range contraction. 

The information contained herein is for educational purposes only and is not, and should not be construed as an offer to hold, sell or an offer to buy any securities.

Up and down and all around.

Today we had a news that "Europe will be saved" and that helped bulls to take control again. Tomorrow is another day and anything can happen. We can break above Monday's high or we can go below today's low. More news from Europe, more earnings, GDP and jobless claims are all going to add the fuel to the move.
If you are bearish here remember that operation "Twist" or QE3 began on Oct. 4, 2011 and the market has gone up since with no or little pause. I'm going into tomorrow with neutral bias, and try to stay in the moment of opportunity flow, trading my patterns as they develop.

There is a way to play.....

Some of the S&P500 stocks to report earnings this week.

Tomorrow will probably be the biggest day of the week for earnings with Bank of America (BAC) and Goldman Sachs (GS) set to report in the morning and Apple (AAPL) and Intel (INTC) set to report after the close.  Morgan Stanley (MS) and United Technologies (UTX) will report Wednesday morning followed by eBay (EBAY) in the afternoon.  AT&T (T), Philip Morris (PM), Chipotle (CMG), Microsoft (MSFT) and Sandisk (SNDK) will report on Thursday, and General Electric (GE) and McDonald's (MCD) will wrap up the week on Friday.

Trading now.

I continue to position in agreement with the controlling price action, keeping risk in check, trading day by day, and I am prepared for just about anything.

"When you hit a wrong note it's the next note that makes it good or bad." - Miles Davis

Anything is possible.

Hmmm !

Contraction or a narrower range is usually followed by higher volatility move.

Next !

In a usual situation this kind of two day rally would be followed by a consolidation period, but we are in a very different juncture here and what typically works may not be all that helpful. Keep your mind objectively focused in the now moment opportunity flow and remember, price rules over everything else in trading.

Today we had a classic bear market type activity.

Now we need to watch price to find out if the turn around rally was mostly short covering or there is some new buying in it.

History, while it does not repeat, does often rhyme

The chart above shows the market from 1/19/1906 - 9/25/1911 and from 10/9/2007 - 9/20/2011.

For more insight you can check the chart/blog from August 4, 2011. Is the history repeating ?

Anything is possible in this environment and we have to be prepared and ready for the unexpected.

                              Sideways chop continues. Stay patient and take care of job #1 capital preservation.

It's a volatile world !

We are at the moment in no man's land, after the last hour sell off, and we can go ether way based upon the next headline. We need to get a tip from Mr. Market in which direction to go before we can get involved.

Stay alert and patient.

A trader's question:
 “How far can a market rally built on rumors, technicals, short-covering and quarter-end window dressing take us?”
Well, we are about to find out.

Short term swing trade.

I mentioned the possibility of a short term, swing higher, window dressing trade at the end of the month on last Thursday's blog. Today's price action confirmed that scenario and the probability that we will see a rally back to the 50 dma area this week increased significantly.
                               

                               

    

The information contained herein is for educational purposes only and is not, and should not be construed as an offer to hold, sell or an offer to buy any securities.

                           

Looking at the week ahead.

Clues are just the clues not the guaranties, they are just the indication to go one way or the other. 1120 SP area is the area that is "the line in the sand" for bulls. May be the most important area for months to come. Choppy 2011 continues and pattern failures are common in this kind of an environment. Capital preservation is the most important at this juncture.

                                 monthly view

Reflection.

Don Quixote, despite being delusional, saw in people more than they ever possessed. He meets Aldonnza, a farm girl (a woman of the “oldest profession”) and, either blinded by love or insanity (probably both), he sees only a lady in her, and starts treating her like one, calling her by another name, Ducinea. She knows that she doesn’t deserve this treatment, but she starts believing him, and this belief transforms her into a different person – she aspires to be the person Don Quixote sees in her. My grandmother was like Don Quixote: she always saw a much greater person in me, though I rarely deserved it (she really had a rich imagination); and I tried to rise to become what she saw. Now that I’m a father of two wonderful men, I do the same for them. The little things we say to our kids and others really do matter!

Markets now.

afterhours:  From here we can begin a swing higher short term window dressing, push-squeeze play trade OR a full-blown breakdown below the August lows.


Remember, the top three priorities in trading: First, is preservation of capital. Second, is consistency in executing your plan. Then pursue the third, which is superior performance

Bears in town.

                               premarket:  watching for downside follow through

Wisdom.

I see the younger generation [of hedge fund managers] hampered by the need to

understand and rationalize why something should go up or down. Usually, by the time that

information on fundamentals, and what little information one could get was largely imperfect. We 

becomes self-evident, the move is already over. When I got into the business, there was so little

learned just to go with the chart. Why work when Mr. Market can do it for you? These days, there

are many more deep intellectuals in the business, and that, coupled with the explosion of

information on the Internet, creates the illusion that there is an explanation for everything.. There

are young men and women graduating from college who have a tremendous work ethic, but they

get lost trying to understand the logic behind a whole variety of market moves. [At the end of a

bull market or bear market] there's typically no logic to it; irrationality reigns supreme, and no

class can teach you what to do during that brief, volatile, reign.

-Paul Tudor Jones

Capital preservation still remains the most important priority.

Tomorrow we'll see if today's action can be shaken off and we get end of quarter push up trade or we go down to test and potentially violate that lower flag line.