Back in the Saddle

I had to take a break from my recently started career... I was married and spent two weeks in Costa Rica!!!! The Lord has been very good to me as of late. Anyway, during the honeymoon I read Edwin Lefevre's "Reminiscences of a Stock Operator." It was the best possible choice for my break, allowing me to analyze my mistakes, to learn from a master, and to get a sense of what I needed to do to be successful as a Stock Speculator. And my first day back, trading, in the first week of June, my confidence was at an all-time high.

The next week I kept battling, going from negative $100 or $200 to even or slightly positive. I thought to myself, "When I left I was bleeding money, and now I'm not losing money!" Success around the corner? Not quite yet. I continued to suffer a couple of defeats, one or two successes, but I was beginning to worry that maybe I don't have what it takes to be a Day Trader. Then last Friday, it began to click. Yesterday, i was in a trade, and i decided to take my $30 dollar profit; i thought i might be able to get back in, but i just hadn't wanted to lose. The markets then went into an hour long sell-off which i could not get back in on. But I did not take this as a total loss, it was a lesson that finally got my brain to "click".

So today, not a whole lot going on in the markets. The previous sessions were slow build ups to afternoon sell offs. Now, the week before was more or less a consolidation, meaning they moved sideways with some intermittent moves. According to the Pundits, we've been bouncing around the 200-day moving average of the S&P. In the latter half of May the S&P500 fell below the 200 day average, and in June it has rallied up to the average. In Trading parlance, it is "testing the moving average;" this is important because it is now a major resistance level which must be overcome if a bull market rally is to follow. Of course, on the other hand, if the 50-day average drops below the 200, order flow may shift and its possible we could move lower. No one really knows right now, the incredible uncertainty in the market is making it pause until some of the issues are resolved. What issues are these?

Obviously Euro-Debt in the PIIGS, there is municipal debt and it is a major problem, and of course the massive oil disaster in the gulf. There are political problems the world over including: Iran, Afghanistan, and so on and so on. At home, the Financial Overhaul is certainly weighing on the markets, and it is my opinion that as soon as it is signed, a rally in Financials will follow. This exact same thing happened to healthcare stocks following passage of the Health Reform bill. But I believe there is much more to look forward to. For one commodities, particularly heavy metals, will be needed for growth in the BRIC areas (Brazil, Russia, India, China). Currently there is some debate about possible bubbles in China, such as housing, and there is concern about there efforts to contain that growth. Also recently, China has agreed to gradual strengthening of the Yuan, but it could be some time before that translates to real change. This particular tid-bit may influence the price of commodities, but surely the massive demand that country has for those very metals indicates that there will be substantial growth in a number of markets as China continues to industrialize. The funds for those materials will flow back into producer countries and multi-national corporations, and an influx of cash into the capital markets will mean that the markets may go very high despite looming employment issues.

My boss is a mad man. I was in one bad-ass set up, I finally learned to wait for the main movement, knowing it would take about an hour to fully develop. We were getting high energy, the mkt internals indicated order flow to the downside, i continued to scale in.... and then it was the end of the trading day and my position failed. That's just part of the business. But today was no loss, I learned more today than at any other point in my short career.