by Larry Levin
Is housing headed for a double-dip that will lead the economy into a double-dip recession? Nobody knows for sure, but it sure looks like. Perhaps tomorrow's news will be better but I wouldn't bet on it because there seems to be, umm, a trend here.
Today's existing home sales report was much worse (again) than expected. Bloomberg put it this way...Existing home sales fell 2.2 percent to a much lower-than-expected annual sales rate of 5.66 million (April revised slightly higher to 5.79 million). A weak headline is not the only disappointment in this report as the drawdown in supply has slowed. Supply on the market fell only slightly in May and is very heavy at 8.3 months and compares with seven-month supply during the buying surge late last year, a surge that was fed by first-round stimulus.
This report tracks closings and is inflated to a significant degree by second-round stimulus in which contracts had to be signed by April 30. Closings can take quite a while and Democrats in Congress are talking about extending a June 30 deadline to prevent as many as 180,000 contracts from missing out on tax credits which are worth up to $8,000.
New home sales, data that track signings not closings, will get no lift at all from second-round stimulus and will offer a more certain picture of the post-stimulus housing market. New home sales, which will be posted tomorrow, are expected to plunge to a 400,000 rate from April's stimulus-fed 504,000 rate. The stock market is moving off opening highs following today's report.
With that news the market fell. Although it tried to hold on to the 200-day moving average, it failed. When that level failed, very large sell stops were triggered in the markets, thus causing further losses. Certainly Benron Bernanke and his merry crew of Keynesian morons will say whatever it takes to make the market reverse on Wednesday. "All is well. Pay no attention to that man behind the curtain."
“There’s fear of a double dip in housing,” said Jack Ablin, chief investment officer at Chicago-based Harris Private Bank, which oversees $55 billion. “We’re waiting for other economic figures and the Fed’s statement this week.”
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Below is the first journal entry from a new Trading Advantage Student who agreed to chronicle her losses, frustrations, anger and success as she learns to trade with Larry Levin and the Trading Advantage team. We believe she represents everything a new/ veteran/ struggling trader encounters as they attempt to find success and consistency in their trading. Our hope is that you can identify with her ongoing story, and learn from it…
I can’t believe I’m doing this; sharing a story about success, failure and redemption. Well as a new student I have not been redeemed yet. But now at least I’m heading in the right direction. I’m optimistic, refocused and relearning the ‘trade of trading’ because Larry Levin says I have to; a TA (Trading Advantage) program prerequisite!
And I think you, the reader, will help me achieve my goals in the process.
I feel like I’m entering a 12 step program and this is the point where I acknowledge my horrendous ‘compulsive’ trading errors to the rest of the world. Just as Bruce the Shark in Disney’s Finding Nemo finally acknowledged in group therapy he had a problem controlling his diet, I too stand before you naked as a jaybird ready to confess my sins.
In the movie, Bruce swims over to the pulpit, and the meeting is officially called to order. He begins to recite the group’s pledge, “I am a nice shark, not a mindless eating machine. If I am to change this image, I must first change myself. Fish are friends, not food.”
Really? Then maybe I should send a special gift to Goldman Sachs, Merrill Lynch and my former broker because they ate ME for lunch!
Larry says he’ll help me redeem myself. But once you’ve been burnt before, you get a little cynical. And I was burned a lot. To the tune of $$$$$.00. I still can’t say the actual numbers. I’ve never been in a 12 step program before, but I don’t think I can graduate until I actually announce the numbers in group session. So give me time please… I’ll get there eventually!
Anyway, all of these so called financial experts, advisors, brokesters, banksters and Fedsters with PHD’s starting with Hellicopter Ben Bernacke and Tax Cheatin’ Tim Geitner all the way down to the Ash Shoals who manage your 401k don’t have you on their list of daily priorities. You are a number and a food source; a buy and hold cash generating stream of income for them. Period!
Let’s face it; the media isn’t what it used to be, eh? HELLO! Nothing is as it seems. We are living in the Matrix.
I’m not a rocket scientist, but I’m fairly well endowed mentally. I thought to myself on several occasions, while I was sweating and getting my hands dirty, these guys are paying themselves 6 digit incomes and bonuses profiting on the backs of US taxpayers like ME! THERE’S SOMETHING WRONG WITH THIS PICTURE! So I said to myself, hell… if they can do it, so can I! I’ll start trading for a living.
What can be so damn difficult about scalping a few trades here or there off the backs of the Big Boys?
So while I’m building up my courage, I remind myself; I’m intelligent, I’ve never failed at anything I truly focused on before, I have grit and strength of character!
But I need some education first. For example, I had a business channel on in the kitchen, and they were talking about Footsie. I looked up with squinted eyes in wonderment as to why they would be discussing foreplay on national television during breakfast. OH FTSE! I get it now. I best get some educational materials quick. But where do I start?
I don’t need to remind you that there is SO much information out there today- it’s nearly impossible to know where to start.
So I started buying and signing up for every damn financial ezine, book, newspaper, lesson and trading system imaginable. The problem was they claimed their systems were designed to help you game the market while their ineffectual system games you! I spent a literal fortune. It was unfricken believable! Where do you start? Who do you trust? What’s right? What’s wrong? What’s real? And what’s Memorex?!
Finally, I felt I was ready to wing it on my own. But before we begin down my road to hell and back, you need a little context on Jaybirds. (Remember, I’m ‘as naked as a jaybird’). It’s symbolism derived from the brightly colored Blue Jay. They are one of the most brazen, talkative creatures, and their speech abilities are so advanced that they can mimic other birds and even humans. Literary symbolism today includes; loquaciousness, determination, assertiveness, intelligence, curiosity and amongst others…‘Advantage’.
You might say as a young novice trader, I Jaywalked! I didn’t know the rules. I crossed during heavy traffic, and I zigged when I should’ve zagged. I now offer you an advantage in beginning trading no one sincerely offered me by sharing my experience.
I opened a brokerage account. I started slowly. I did pretty well. Then one day my order wouldn’t go through. I called the brokerage house. They said the new rules require you to have a $25K balance in your account if you wanted to trade every day. Didn’t seem fair, but I was determined to be successful. So I padded the account with part of my emergency fund.
I started to make profitable $1,500 and $2,000 trades. This is sweet, I thought. I couldn’t believe how easy it was!
This was so great I thought, if I had more money to work with, I could double or triple these daily earnings. I put the remaining emergency fund into the brokerage account.
Then one day was having technical issues and I called in. The broker looked at my account and said, “Wow! You’re really doing well.” I proudly acknowledged my skill and shared my chart set ups.
He said with amazement, “They’re complete inverses!”
I smugly and arrogantly said, “I know. Isn’t that great? Look at this…check out the dollar index. See how it works inversely to the others?”
Cool.
I figured I was up about $30K from some earlier loses in just 4 weeks. This was a piece of cake, until it wasn’t. Suddenly things started to change. I called up the brokerage. What happened to the dollar index? I need it. I use it as a tool each day. The guy replies, “Oh, we didn’t have a license to use it.”
What?! It didn’t make any sense. And it didn’t come back either.
I had no rules. I was emotional once the losses appeared. I risked what I could not afford to risk. I was arrogant to think I could do it without professional guidance. I did everything wrong you could possibly imagine but….
I kept trading. Now I was taking some pretty big losses. My account started to slide. The patterns changed. I was shorting the financials one day. In early hours trading, the news light on my (short) stock lit up. I opened it. It said, para…. ‘it’s time to go long the financials’. I laughed. Too funny. I ignored it. I was slaughtered that day. I remain on crutches.
My account was seriously in trouble now. I couldn’t trade the huge volumes I once did before. I tried different strategies. It didn’t matter. I kept taking on losses. Then I read in a trading ezine ‘why’ it makes sense to ‘not’ use stop losses. I thought, that makes sense; if they can see the stops, then don’t use them. BIG mistake.
I was so frustrated by now, I talked to a broker who had been hounding me for his business. I explained what had happened. He said, “Honey, you’re being hunted!” Then (essentially) he said, “Give me all your remaining money before you lose it, and our firm will grow your account for you.”
I told him no. I’m still consistently making money in the mornings. I’m just losing it all in the afternoon. I told him I was intent on learning this trade no matter what it took. I told him I was looking into this Larry guy’s system because it sounded similar to the visual technique I was using before everything went south.
He said, “You mean Larry Levin?” Yes. “Oh, I know Larry. He’s a good guy but he’s pricey. I could refer you to him.”
I thought to myself; all these damn salespeople are alike! If he couldn’t sell me, at least he’d get a referral fee out of it.
I chose to do nothing at the time and continued on my own.
I slowed down on my trades and became more selective (I didn’t have a choice). But I couldn’t seem to win. By now I was getting angry. I started trading out of revenge. I’d short the financials every chance I could, but they’d short me instead. My account was decimated. The emergency fund was lost. Now instead of visualizing trading success, I had nightmares of my kid’s furniture being auctioned off along with the dogs and the roof over our heads.
A couple days later I saw Larry Levin on TV. I walked over to the TV, looked at him and said; this is it. You’re my last effort, Larry. Show me what you’ve got.
So here I am. You can call me, Joan. I need a little courage to do this right now, and when that need arises I rely on my favorite French Historical Heroine, Jeanne d’Arc. She claimed divine guidance as she led the French Army to unprecedented victories during the Hundred Years’ War. She is a legend. I want to be one too. I don’t want to be remembered as the woman who broke the house bank.
So come with me, put on your amour, raise your flag and get on your horse. Write your goal on your flag and I’ll lead you through the quagmire of training manuals, books, industry buzz words, charts, tapes and algorithms. You don’t have to be smarter than the average bear, but you need a little humility to be successful.
Remember this old Arabian Proverb; “Arrogance diminishes wisdom.”
Together, we will find victory in the trading room if you want to win, if you have a goal and if you have the courage and fortitude to succeed. I know I do.
Until next we meet again,
Jeanne d’Arc
Previous Day's Trading Room Results:
Trade Date: 6/22/10
E-Mini S&P Trades*
(before fees and commissions):
1) FT buy @ 10:57am at 1109.75 = +.75 & -.25 (2 lots)
2) Algorithm positions (16)
3) “Reading the Tape” positions (7) combined Secret’s, Algo, & “Reading the Tape” total… +11.50
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