Confused Market

The last two days the market has had big days. Wednesday was a big move up and then Thursday was a big move back down. Yikes! Unfortunately I've been expecting a really big move down and am long Nov 38 Puts (QQQWL) and have missed out on playing the range. The RSI (5) system would have allowed me to really scalp some great returns, but I have backed away from that method shortly. Yesterday the Q's opened around $38.70 and then dropped to $38.24. As of right now (6:20 am PST) the Q pre-market trading is $38.50. Today will be interesting.

Tuesday Oct 18

The market has done the predicted bounce up over the last 3 trading days, but on light volume. This would seem to validate the indication that this is simply a bounce and not a bull move. I'm betting on it being a bounce before we head down, and head down quick. Also, the RSI(5) system triggered a short signal yesterday. I bought the Nov 38 Puts right when the Q's were trading around $38.05. The Q's meandered around the $38 level yesterday, reaching a low near $37.80 and then closed the day above $38 to $38.15.

This morning the pre-market showed a significant upmove as I saw QQQQ trading above $38.22 but in the last 30 mins they have settled closer to $38.07. I'm not sure what this says for the trading day ahead. But if the SPX can't break the 1200 mark, I see a down move coming sooner rather than later.

Closed out the Oct 39 Puts

Today the market rallied in my favor, which was basically a day of all red on my computer screen. The Q's dropped around $0.80 today to hit a low of $37.92 only to make a decent pop back up to close at $38.32...only $0.44 down. However, this move gave me some nice profits that I finally did cash in on. I sold my puts for $0.90 for a $0.45 gain overall. I tried to get out when the Q's were tanking and QQQVM was $1.15/$1.20 but as usual I waited to long and then lost another 20 cents or so. However, it's a good gain and as previously noted I was down big earlier this week. Nice comeback and perhaps a lesson learned. STOP OUT instead of hanging on.


Tomorrow should be interesting and I may just hang by the sidelines. Good trading!

401k a bad thing?

Mr. Robert Kiyosaki in his article "Work Hard, Earn Less?" puts forward some interesting thoughts on taxes and your 401k. Something I haven't thought about before, that is.

Mr. Kiyosaki points out the following:

Today, workers who save money and invest in a 401(k) plan are the highest taxed people in America. Now, I can hear some of you asking, "Isn't saving money and investing in a 401(k) having your money work for you?"No -- at least not according to the IRS. A worker's pay is taxed at the highest tax rate possible. So are your savings and income from your 401(k). In most cases, money goes into a 401(k) tax-deferred but comes out as highly taxed ordinary income.One of the reasons the rich are getting richer is because they have more control over our number one expense: Taxes.

The safety net the 401k provides is nice and the upfront tax break from contributions is also a plus. But it may not be the best bet in the long run.

Current trading position

Okay....I am totally breaking the mechanical trading method and am looking to recoup my losses. Therefore I didn't close my short positions (long Oct puts) and I didn't switch to going long as the RSI(5) method dictates. I am looking at a new method for entering a trade and will post on it shortly with a detailed chart. The Q's and the market went down fairly well yesterday with heavy volume.

This Man Has Studied Program Trading For 23 Years

Tradingmarkets.com has a great interview with Hank Camp of HL Camp and Company. Mr. Camp discusses arbitrage through program trading and his extensive studies of the market Since 1982. One particular note of interest is the breakdown of how the OEX options are manipulated during options expiriation. Manipulation may seem like a conspiracy type mindset, but once you read the breakdown it doesn't seem odd at all.