Guns and Butter

I had a fascinating discussion last weekend with a relative who is from Germany and remembers the hyperinflation of the Weimar Republic. She was a young girl then , and summed up what it felt like this way: “People would cash their checks in the morning and run to the store to buy bread, because by nightfall the price would be considerably higher. You needed wheelbarrows full of money to buy a loaf of bread.”

That frightens me. So do guns.

I took photos of her Marks… we laid them out on the table, neatly arranged from 10 to 5,000,000.

Everyone a multi-millionaire! How Lucky!

I don’t feel so bad about the penny any more, but since I am a trend trader, I am nervous.

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I am a technical trader, just trying to read the roadmap.  Days like Thursday don’t come along often enough to build a regular strategy around it, but the waterfall pattern is one of the hardest to “trade”. Jump into the flow, take the heat for a few minutes, then get swept downstream and peel some off as the day wears on. Expect a major target to be hit and MOC low.

Black Swans do exist, and they will destroy our confidence as well as our account if we cannot detach ourselves emotionally from trying to “scale into the move”.

Recognizing that dangerous pivots are just that-dangerous-we need to understand the mechanics of the trade so that we can see the possibility (not probability) of that event.

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Who would think you would need a wheelbarrow full of cash to buy a loaf of bread?

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Today was something, wasn’t it?

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Trading is not about lines on a chart; it’s about the emotions of the traders behind those lines.

Today is a classic example of the need for mental agility in this business.

As trend traders our preference is for trades in the direction of the trend. We read it correctly that it was range this morning, trying to stabilize. We also had a preference to make sure  we were hitting the short side, in the direction of the current trend.

I spotted what I thought was a descending triangle, and it broke nicely, tagging T1 at 43.5. We had no idea if the low at 40.75 was “low enough” for today, but we usually suspect late day plunges, especially on Friday.

38 support, and the Angel is forming at 44.75. ” I am not saying you have to take it.”

It is not easy to flip our mind around, and suddenly become a raging bull.

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I give away too much information, but I guess it’s just who I am.

If you stick around for 15 or so years, you will probably get all the info in my system for free…

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Key thoughts:

• We don’t have to play; if we do, risk small
• Whatever we do, don’t give back all of our profits from a great day and a great week
• Watch the Angel at 44.75, we’re not going lower if that doesn’t break
• 48 to 49 is the bounce target
• I think 52 to 54 is their target, but it can go to any high it wants now if it is squeezing
• Weekly Shorts are coming out, last one to leave the party loses
• Use 62 for resistance scalping only
• Now use day high (Demon) as resistance

Quick math computation, and 60.25, then 63 became the average pivot. It helps locate the regression target.

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Even if we cannot figure out the movement, or don’t want to take the risk, by studying patterns and timing, we can sense the change in rhythm, and stay on the right side of the trade more often than not.

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One of my mentors taught me this rhythm, I’m glad I listened.

We have  great sharing going on in our room; insights from many traders being passed around.

Traders that have been here longer have been helping the newbies. I expect that they realize they are helping themselves as well.

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An impromptu late day session evolved. After a number of charts were used to illustrate a few key ideas…an aha moment occurred.

I love it when that happens.

As JK said on twitter… “You love what you are doing.”

I sure do. Geez. On vacation in Naples, and spending way more time in the room than I expected. Golf game still suffering from a lack of attention.

Charts will be posted tomorrow.