Today

Today was the down day in what I believe will be a rally towards and beyong 14000. I made the most of today by taking positions in FCX and held AA and some AAPL. I did sell half of the AAPL position due to the reversal at even for the day around 2:30pm. It was a good move. I think FCX goes to 95 in the next week or so, and I believe AA has the potential to hit 40. I will probably halve the position around 38, with stops engaged at 36. There was no scalp trading today, although I did trade GS and X during the day, with an even result. The volatility has come down nicely over the past few days, with the VIX slighly higher today hovering around 22. I predict we will see a continuing decline in the VIX, and will test the 50 day support at 19.80 in the next day or so. A push through this support will support my theory of 14000 and beyond by Christmas, but if we get a bounce off the support, we may see another retest of the 12700 within the next month.

Snap!

Today turned out exactly the way I predicted, although the technical indicatiors definitely had their help in determining the direction of the market. At around 8:15am this morning, the FED announced they were cutting the discount rate by 0.5%, from 6.25 to 5.75%. The market rallied and opened up over 300 points. I was actually booting up the computer when the announcement was made on CNBC so we missed the first run-up but caught a good chunk of it on AAPL before the market opened. The market then relaxed thorughout the day and rallied into the close. We held AA long into the close, I think it should be going to 40 within the next couple of months. It was quite a hard day to trade, because of the dip and bounce, but we worked it out. RIMM had a whopper of a day, and we caught some of it, but not all. I tend to scalp the real winners which I have to get over. Let them run.

Tomorrow...

Tomorrow may be the biggest day in a long time past and for a long time to come. Today we had the classic capitulation. Oscillators hit record lows, buy signals were buzzing off the page and the market dropped and gained over 350 points. Just by looking at the daily candlestick chart for the DOW, a classic Dragonfly Doji can be seen. Buy, buy, buy. This Dragonfly Doji is also the case in a wide range of stocks throughout the market.

Tomorrow may be a dart board again. But this time, click BUY.

The Uptick Rule

The up-tick rule was instituted in 1938 and aimed at preventing such as crash as the one in 1929. Its goal was to prevent short sellers from bringing down the market rapidly and worked by only enabling a short sale if the previous sale was lower, hence the short sale would have to be on an uptick in price.

If I had written this previous paragraph at the end of June, it wouldn't be in the past tense.

On July 6th 2007, the uptick rule was abolished, rendering the ability of short sellers to sell on downticks. On July 19th, when bad news seemed ridiculous to contemplate the DOW closed avove 14000 for the first time ever. After the reality of the mrtgage woes hit home and only 19 days later, the DOW closed at 12861, 8.3% off its high. Dramatic volatility, huge volumes and a plunging market - could this have anything to do with the abolishment of the uptick rule. I do not know.

What I do know is that many fellow traders, who like me, prefer to trade short, are raking in the profits. The past few days have been a dartboard in the market. Shoot and short. The goal this past week has been to find any kind of upward momentum in the market - then short it, and keep shorting it. Short Apple, short RIM, short Financials, short Nike for heavens sake. Just short it.

Joe Investor has most likely never even heard of the uptick rule, and probably has little care for it. But could it be possible that the abolishment of this rule has magnified the dramatic pullback of the market over the past few weeks? It's definitely something worth pondering as we go forward. Will the SEC even go as far as to reverse its decision to abolish the rule? Not likely, but possible. It may be some time until we see a bottom in the mortgage mess that has tormented the market of late. Until then, all we can do is short.

Down-tick.

Goodbye Joe.

Friday 3rd August 2007

I'm in Ocean City, MD for the weekend and won't be trading today.

Thursday 2nd August 2007

Dreadful day today. Finished -$660 for the day and basically got killed when BSC reversed, the complete opposite of the day before. Someone is going to get fired off the roof.

Wednesday 1st August 2007

Today was another crazy day in the market, with the Dow ranging over 200 points. The volatility made scalping the order of the day. No swing positions, neither long nor short were added. After almost a perfect trading day, the last hour proved costly, due to the reversal of BSC, and the lack of a stop loss which cost the fund $1000 in a single trade. Before that we were +$1270 and ended the day +$875 after some scalping in after-hours, most noteably SBUX.

Click below to see the performance graph: