Trader Mom @ Home

The market had a strong rally in the AM and gave back half of the gains in the end. There was no apparent news that drove the market down near the market close.

Today’s strongest sector was Financials. The whole sector was once up 6% and finished at up 3% Technology and basic materials followed as you can see from the pictures below. I think the worst news have already been digested by the market. Gigantic drops should be rare. The market is going to chop, which is the trend followers’ worst nightmare. For short term traders like you and me, we can take advantage of it. My swing trading is designed for choppy moves. The flip side, of course, is that I can never catch big fish that could give you returns in excess of 50% or even more. But that is OK. Small fish add up.

Click the pictures to have a better view

As I indicated in my mailing list last night, I was going to go long for day trading. I took a long trade in ERX, a triple leveraged Oil ETF. I did not make much money from this trade. But here are a few things I can list about this trade

1: The entry was good.
2: The exit was OK.
3: Picked the wrong sector

I closed the trade because I found I picked the wrong sector. As you can see from the sector summary chart above, energy was very weak. I am still holding my GS and AMG short positions in my portfolio (http://www.momdaytrader.com/Portf/getPortf.html?showPortf). If you have been following my trades, you know that I was up good on these 2 positions on paper yesterday. But now I am negative on GS and all gains in AMG are gone. That is why the tag-line of my website is “Paper profits are not real and paper losses are!” I hope you did well today.

It was a brutal day for the bulls including me. The market gapped down big because of the following reasons

• Dismal economic data from Japan
• Possible downgrades for various Europe banks
• Possible bankruptcy of the Big 3 auto-makers

Day Trading: Down 1100

Swing Trading: Down 790

I was down around 1000 from shorting our beloved FAZ. My position size was a bit too big. Other than that, there was nothing particularly bad. Of course, I was on the wrong side of the game. The bears ruled all day long today. However, being on the wrong side of the game is very normal. It is just part of the business.

It was not really an easy day for day trading FAZ today. After its huge gap-up, there were not any meaningful moves in either direction. Because I am not good at scalping, I tend to lose in this kind of choppy market. The flip side is that I can catch big fish when it does move.

As for swing trading, my ERX is gone. It hit my stop loss. It was once up nice on paper and now I lost 700+. No big deal. I will try it again later.

Right now, I think I will stand on the sideline for swing trading. So should you. We have officially broken a very solid, multi-week support. If the low holds tomorrow, then we all can put on the bear hat.