FOMC Rate Hike AND Google Misses Earnings

WOW! I got tore up today as far as trading goes, but it's fare to say the relevance of news was made obvious today. Here's a break down of how the market reacted to certain news:

Greenspan raised rates a quarter point, big wuhp, but what really mattered was that potential rate hikes were still coming in the future. The bond market (prices) tanked, then the 10 and 30 rallied backed to where they started and the 2 stayed. In the indices, volatility was the highest i've seen in months. I actually played the market well in the indices, but got massacred in the bonds. I figured they would've already taken into account the Fed's hike what I didn't expect was their little freak out session on the future hikes.

Google. Well I have seen armageddon, well no I haven't, but when google missed earnings I was long in the market, with no stop (seriously somebody should slap me). Immediately the Dow went down 100 points, and the Nasdaq probably 40 to 50. I didn't catch the final P&L, but trust me, it was big and red.

In any case, I need to pay attention to those after market earnings reports. I used to think they didn't matter much in the long run....boy...I was wrong today.

EIA Study Paid Off

Today was a wild day as far as the market was concerned. Big news was coming out in the morning and the whole day was flooded with earning reports. The first number out was the existing home sales. They were down way way way more than expected. The expectation was for them to drop 1% but they dropped over 5%. I quickly took this to be positive for the 2 year and 5 year prices. I went long but they stagnated and I stopped out for a one tick loss. Not bad though, it's good to know how the bonds act in such a critical time (January FOMC is coming in 6 days). The second number was the EIA. I knew that the market didn't act on Crude as much as it did Gasoline. When the numbers came out Crude inventories dropped WAY below expectations. My first thought used to be, "GO SHORT GO SHORT AAAH" but then I kept reading the numbers. There was a huge build in gas stocks! I decided not to do anything at all. That was smart because after crude spiked for about half a second it continued going down because of the gasoline news, and thus the market was unaffected. I'm pretty happy about that as you can tell.

Final day's P/L $2500, because I played the bonds short expecting them to continue trending that way after analyzing some technical analysis. But I look at the days success because I didn't freak out about the crude numbers.

One of those days...

Nothing really of interest to note today. I got in and was very optimistic about the direction of the market. I was going to go long, and I felt really good about that. When I saw that the futures were already up a great deal (Nasdaq 9, Dow 30), I thought, "maybe my optimism has already been priced into the futures. I should short the market because it will close the gap from the night before most likely. I went short and the market went through the roof. I hit my stops and (this is where I made my mistake) thought, man this could keep going up, I should go long....well...we all know the rest of the story. I went long and the market closed the gap I wanted, hitting my stops again taking me down a horrid 10,000. Luckily I made a final play in the bonds and got back 2 grand decreasing my loss. But in the first hour of trading I managed to muff it all up.

New Rule: Upon stopping out, wait at least 2 WHOLE minutes before entering into another trade. The stress involved with stopping out is so great that it will completely blind you from what is most likely the correct solution. If after 2 minutes you are STILL convinced that you need to do something then wait 1 MORE minute. Continue this until you are not convinced of anything, then you'll be right back where you started mentally and you can continue trading again.

In Case of Panic...Go Short

Originally I didn't plan on trading much Friday. I came in planning on turning on my autotrader and watching the blinking lights to see just what the little black box could do. We also had a speaker from LIM so I wasn't exactly paying attention. At some point Ryan pokes me in the side and points at his Reuter's and says check that out. The news caption said, "FED not done raising rates." I flipped over to my P/L to see that I was very quickly 10,000 dollars down thanks to autotrader's unfailing ability to step in front of quickly moving trains. I didn't really care though considering I didn't put much effort in so I closed out my position and went short on everything, put in some stops and left the computer for several hours.

As I sat down to lunch I noticed that the Nasdaq was down almost 50 points! I though, man, I really oughta go see how much money that made me. I turned on my machine and saw I had made a cool 27,000. From 10,000 down, that's quite a substantial move.

I'd say I was smart but then I'd be lying. This was a lucky day, and I didn't put in much effort. I had been losing so much the last few days though it was really good for my confidence to get a big number like that. It's funny though, as I trade more and more I actually see that my "luck" or "ability" as some might call it, waxes and wanes. I need to remember that there will be times that I can't seem to turn a dollar into 4 quarters, but in time I'll do better. Also while you are in those little "funks" minimize losses!

So, new records of 16,000 in the e-mini S&P and 14,000 in the Nasdaq 100. Definitely a hard number to beat. I would like to think though that if we had another crash like in '29 that I'd of been smart enough to go short and take everyone's money. Trading is a brutal game.

How the Bonds Act To Phil Fed Business Index

Due, to technical difficulties I was not able to track my trading today, but I did want to remark on how the bonds reacted to certain news today. Housing starts were down, as were jobless claims. Both further down than expected. This did not really effect the bonds though. The US Philly Fed business index came out at 12:00 with at 3.3 with an expected increase from 10.9 to 12.6. I am still trying to figure out the meaning of the Philly Fed business index but this significant drop caused an initial spike in bond prices followed by a quick fall off. In the future, the best course of action would be to close out all positions before this number comes out because it does effect bond price volatility greatly.

During the trading I was able to do, I was proud of my ability to keep tight stops, but because of the leverage in the 30 year bond, it was really easy to lose a lot of money within that tight stop range. I am going to consider a different entry strategy for the 30 than the 2, 5 and 10. I need to find a way to enter into a position and keep a tight stop that will not cause such great losses.

This has been a difficult couple of days as far as analyzing bonds movements. I'm interested to see if things get easier after the January FOMC meeting.

Welcome Back To Risk Management

After one month of break from trading, I wasn't used to dealing with seeeing big numbers and I had a major brain fart. I started to lose money guessing on inflation and instead of putting in my stops I pulled an Ingersol and doubled down. Stupid....Stupid...Stupid. Anyways, lost 7 grand, and my pride...

There are 250 trading days in a year. As a beginning trader if you can just average 1,000 dollars a day you can earn 75,000 in bonus, which is awesome for a first year out. This is a very do-able goal. Although it is glorious to make those 30-50 thousand dollar days, the key to this game is keeping your losses to MINIMUM!!! Let your winners run, but if you go up to your goal, get out and take a long relaxing lunch break.

Tommorow I start my regimine of extreme risk managment discipline. If I don't make money that's fine, BUT I will not let my losers run like I did today.

After one last play for the day I managed to get back positive and make $4800.63 on 856 contracts. Still no excuse for the poor performance early.

Capacity Utilization and Industrial Output

Today the Capacity utilization % and the Industrial output for December come out at 9:15. If they are lower than expected short term rates should drop, which would suggest going long on the bonds. Apparently the Fed's next rate hike will be highly data dependent, which means movement on news will be greatly exaggerated.

The numbers came in higher than expected. 80.7 for Cap utilization and +.6% for the Industrial output. On this news I shorted the bonds, expecting rates to rise. After 15 minutes the bonds have drifted very slowly downward, possibly because this news was not as bad as it seemed. I have stops in place and will be patient with the play. I really believe this will have a day long impact on the bonds.

Indices gapped down this morning and look like they will continue to drop. Once volume drops down I'll try and scalp the indices.

Something to note, the 2-year futures reacted the way I hoped they would, but the 5, 10 and 30 did not react as much. This makes sense, because on short term news related to rate hikes and cuts, the 2-year is the key indicator.

After stopping out on the 5, 10 and 30 and making only 1109.38 in the two year. I stopped trading at $(5,468.13). Overall I'm happy though because the theory that short term fed speculation is really only usefull on the 2-year contract. Good job also keeping losses to a minimum.