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    Tuesday, July 29, 2008

    Too soon

    It's premature to start buying stocks for a bounce, in my opinion. It appears I also covered my shorts too soon, although I've had a decent run lately. The "press" keeps reminding us that the $USD is oversold and about to strengthen, but sentiment cannot be quantified usefully, so I choose to ignore it. As traders, it's always best to bet with the current trend. Investors might be more inclined to look for value, but our concern is direction.

    Specific ideas on the horizon are in the context of our recent overall themes. I'm looking for a long entry in Gold, the JPY (yen), and agriculture futures (including Corn, Wheat, and the DBA etf. Gold can be traded via futures or the GLD etf. As a side note, I will no longer trade the DAG etf, as I'm unable to get "size" easily. Because of poor liquidity, the transaction costs are too high (the spread), so this etf might only be good for smaller accounts. The DBA etf works well enough. I'm also patiently awaiting a signal to short Treasury bond futures and possibly buy the TBT etf, but this could be days away.

    With regard to stocks and other paper assets, the long side feels dangerous. I'll continue to pick spots and "take a shot", but only in very oversold conditions. As I've repeatedly mentioned, this is not the type of market to chase stocks higher. With the slightest bad luck, you could be sitting on a loser close to stopping out, with the position never having been close to a winner. Likewise, since the odds of strength in stocks reversing is very high, I will liquidate into market rallies, rather than "buy and hold".

    Today could present a good day trading opportunity with the Consumer Confidence # providing a catalyst. This will only be a short side trade, if any signal at all, and my focus will be on the TWM etf and Russell 2000 futures (short).

    Check out borrowing levels at the Fed.

    2 Comments:

    Blogger speedtheplow said...

    OK, I'm new here. But judging by the positions you planned to take yesterday, I assume, because of the up day, that you lost money. Is that correct?

    July 30, 2008 12:20 AM  
    Blogger itrade4real said...

    Thanks for stopping by. Although I try not to focus on P+L, I believe if we checked the "current positions" from yesterday I was up slighlty. At any time, I have several vehicles with potential to enter a trade, but most do not. It's better to focus on what I actually take positions in (yesterday I was still long Corn futures and DBA etf), of which both were up yesterday. I encourage traders not to foucs too much on each day's results, but on how they acted according to their plan...that's where the profits are.

    I didn't get the signal I wanted in SRS yet (see ticker for yesterday time stamps), so am not short stocks again, yet. I am confident I'll get a sell signal in the future!

    July 30, 2008 8:42 AM  

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