Markets are all pushing higher with the Dow staging another impressive rally, FTSE ending higher and Oil pushing higher, yes even oil is in on the action. The only thing that fell was gold. At this point you will find me musing over the daily charts, my smoking jacket adorned with a slightly raised monocle hinting at vague concern. No, the truth is I’m perplexed, deeply perplexed. Yesterday the FTSE 100 waddled along like a drunken duck neither pushing too high nor falling too low. Today enter stage left drunken duck part two.

I don’t know where to best enter under these conditions. Even though I’m 5.50 short I want a decent push higher followed by a good fall lower. My last trade was at around 5400 and hasn’t gone too far either way. With oil making a push higher yesterday will this put a dampener on a rally or will we see this as a turning point lower. I’m inclined to believe we are heading lower. All we need now is bad employment figures on Friday. The ADP report yesterday was the curve ball the market wasn’t expecting and as we know the government’s figures and the ADP rarely tally.

For my part I will be sitting on my hands till a move past 5450 allows me another short entry. Till then I will just have to hope the little drunken duck starts on shots.

The Irish Economy
On a more regional note NCB stockbrokers say the Irish economy is in an extremely weakened position and predicts a recession. How far behind the curve do you have to be? Yesterday the live register figure jumped 17,429 for June to 238,240 the second largest increase on record. From my perspective we are six months away from the messiest period in recent Irish economic history. The Celtic tiger seems to have teamed up with the drunken duck and is downing tequila slammers. From a ground level the Irish and Spanish economies are in serious trouble. Spain has the advantage of being a few months ahead but over here we are accelerating towards an economic correction equal to our vulgar excesses.

Industrial production falls by 2% for a second consecutive quarter in Japan leading to a technical recession confirmed by deputy governor, Kiyohiko Nishimura. Australia isn’t fairing too well either and our hopes of Asia dampening the western economic pain are quickly diminishing. Wage inflation in China and Vietnam will also put additional pressures on soaring inflation which is seeping into American and western imports. All in all this poses some interesting problems going ahead for struggling bear markets.

I on the plus side am short 5.50 Euro on two separate positions and am quite happy to leave them alone for a while. Merrill Lynch has come out with more write downs and the market seems deliriously delighted and rallies over 200 points. Is this not the third time the banks have raised their collective hands in the air and said “yes, it was me but I’m sorry” with their doe eyes how could they be lying. So off we go and load up on shares. Well apologies if I fail to believe them with my cynical pessimism. There is more to come, a lot more to come.

For the moment I’m looking at selling up and cashing in at around 5050. My previous statement of a new low of 4500 may be hard to reach with oil reaching lower lows. This takes the pressure of the steamer for a while.

Annoyingly I set a stop loss on my current position and was stopped out this morning for 20 Euro rather that the 140 Euro it was looking at last night. Merrill last night shocked the markets and re-enforced the distance between fabricated statement and the truth. Trust in bank statements is now at an all time low.

For my part I was short and brought my stop to break even in spite of my conviction of lower lows. Of course as soon as I altered my stop the markets rallied knocked me out and are now flying lower at hi speed. Previously I either used wide stops or mental stops (yes they seem to work for me but they aren’t for everyone). The Dow Jones in currently -33 and not looking too healthy. I’m expecting a pop rally at some stage today purely because the sell off was so savage yesterday. With no positions open I’m missing out on the drop but don’t want to rush in for the sake of it. I think I will wait and see how the US opens and reassess then.

So in the end my FTSE trades have been stopped out for a 227 profit and a 265 loss, resulting in a small loss. At one stage I was 100 Euro in profit, decided to leave it play out but moved my stop losses way to close. Stopped out and FTSE is now in freefall again which would have left me 150 Euro in profit.

The thing about this trade is that I didn’t trade well. I escaped unharmed but it was a bad trade. My conviction was to the downside and I should have trusted my own judgement rather than second guessing myself. This is the ultimate fear and greed battle that goes on inside the split personality of a trader. On the one side I wanted my losses to return profits (Greed) but didn’t want the losses to increase should the market continue to rally (Fear). So in the end no one won and my indecisiveness caused a bad trade. Again this isn’t because of the financial outcome but because of bad decisions. The positive is that I can learn from this.

On the plus side I have no trades open and missed my entry this morning at 5350 but I think a dead cat bounce is in order for the open of US stocks due to the heavy sell off yesterday (285 points on the DOW). If this is the case I will try and get back in around 5350. One last note about the previous trade, I should not have sold below 5338 the last resistance point. Physiologically this was a low that was going to be hard to make anything of.

Going forward I will be taking a grimmer outlook and need to start thinking of longer term sell trades for maximum profits. I’m looking for new lows on the FTSE and a breach of the 5000 level soon with a new low of 4500 before year end with year end rally to 5300.

Interesting Article: National Australia Bank Sends Shock Waves

Here we go again an equities resurgence based on what? Oil dropping and money flowing happily back into equities and financials. So I was stopped out of two positions for an 80 Euro profit but one position still open is now flashing 400 Euro into the red. This may take a few weeks to correct and I will be selling all the way. My next entry is above 5450 for a 2.50 sell.

Last night I was watching the close of the US markets and I heard to my astonishment that AMEX profits had dropped 38% and could take further losses and are upping provisions by 300%. This to me is the biggest news in a long time. I immediately placed a 2.50 sell on September FTSE contracts which is doing quite nicely.

If we were waiting for the second shoe to drop I think this is the size 99 boot crashing to earth. We have all expected the consumer to be hit at some stage but no analyst predicted this. AMEX also said they did not expect to return to profit till this whole nasty recession was over. That in itself deserves kudos for its stark reality.

Apple also came out with below par results and today we have Washington Mutual and Wachovia reporting before the open. They could take the sting out of this but I think traders will eventually realise that the consumer will over stretched and in trouble as is the whole economy. If you thought we had the perfect storm (Not Dolly) then wait till you get a load of this.

Happy Shorting!

The new laws come into effect today regarding naked shorting (well they aren’t really new naked shorting was always illegal but not policed heavily). This essentially means you have to take possession of the stock when shorting. This may have some limited short term effect but longer term I think the bears are here to stay, naked or not.

As for this bear I’m still firmly maintaining my sell conviction. The last rally we had which I sold into caused me quite a bit of pain dragging on far longer than anticipated but yielded great rewards with just under 3K in profit. And again I’m selling into any strength by increments of 100, that is increments on the FTSE and not my monetary position. I’m looking to sell all the way up to 5800 where I see heavy resistance. The last time the rally went on for about 5-6 weeks, this time I think it will die down quicker. Well I hope.

This is another reason I’m more comfortable trading December contracts as I have time on my side should the rebound drag on longer. Why I’m not buying the trend is a personal choice and I seem to be happier shorting. If I was a more eager and learned trader I would be making money on the way up and following it all the way down. However I’m not, I’m a newbie and know enough to know when to tread lightly. A bounce now could potentially fade very fast, much faster than I could act. Shorting seems more natural in the current state of economic malaise.

On Friday the markets bounced again and at the end of the session I sold another 2.50 bringing my short to 5 Euro. My next shot is at 5500 and 5600. My expected time frame is 4 weeks till the positions start making it back into the black.

Happy Trading.

P.S. Congratulations to IG Index with their stellar growth and 40% rise in full-year profits. I’m happy to say I have played my part in this and hopefully their service and products increase with their returns. Disclaimer: I haven’t lost money yet, I may have had something else to say if I had.

Just opened a -2.50 (the usual amount) spread bet on FTSE December futures. I sold at 5300 (5250 in normal trading) and whilst I’m happy enough with this there is the little twinge of nerves. Selling at these levels is not for the faint hearted and I will be monitoring it closely. The risk of a stupid rally on any good news because traders are sick of loosing is quite strong.

We shall wait and see.