#19 JUNE 28, 2012 SHORT DESPITE SHARP NEWS SPIKE RALLY

Situation–Went short S&P on limit order near top of flag forming near low end of trading range, looking for downside breakout. Used 4-cent stop. This was reasonable trade. Noticed there was sudden sharp rally, which turned out related to news of decision to support Spanish banks. Market stalled near entry. Considered lowering stop sharply or getting out but stayed with original stop and was stopped out as rally carried much further. Mistake—Sharp rally occurred between US close and Europe open on big news item. At a minimum would have needed to allow for news to impact the next...

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#18 MARCH 2012 THE MONSTER MISTAKE: THE INADVERTENT TRADE

Situation: I had initially gotten long when market lower by buying FXI calls. As market rallied, I hedged by scale-up selling in NQ, QQQ, XRT outright and long puts, anticipating a potential high in those markets. I thought I was approximately neutral. But then in March, equity starting evaporating as FXI weakened at same time Nasdaq and XRT stayed firm and even moved higher. Although I had not intended to place a ratio spread trade (or even generated this chart until damage was done), that is the trade I had inadvertently backed into. As losses accelerated with losses virtually every day,...

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#17 MARCH 22, 2012 COUNTER-TO-EXPECTED PRICE ACTION AS SIGNAL

The VXX was trading down more than 1%, not far from previous long-term lows, even though S&P was down early in day and nearly 2% lower than it had been at the VXX low a couple of days earlier. I had expected to see the VXX up a few percent and was shocked to see it was down. I was two-thirds positioned on a measured move based buy. The extremely poor action was a strong warning signal. I should have gotten out. I didn’t do anything and the market fell more than 5% more during rest of day. Mistake—I ignored that market I was long was down significantly when it should have been up...

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#16 MARCH 2, 2012 SHALLOW SLOPE UPTREND CHANNEL AS SIGN OF WEAK MARKET ACTION

  I had large call position in DBA leaps. I was already concerned because of extended period with no follow-through after weak bounce following long slide. The extended, narrow, shallow uptrend shown in chart seemed like weak action vulnerable to downside breakout. I was almost tempted to go short so covered entire deep in-the-money long leap call position, even though I had to liquidate with zero time value for options given B/A spread. How it Turned Out The market traded lower for the next three months and was able to replace same position in one year later leaps (2014) about $3...

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#15A MARCH 1, 2012 WEAK ACTION DESPITE CORRELATED MARKET STRENGTH

The Euro had been strongly correlated to stock market (e.g., NQ). Then market witnessed a downswing and consolidation, even though NQ had moved to new high for upmove. This seemed like extremely weak action and went short. Trade worked. Liquidated less than two weeks later on lowered stop at 131.39. #15B MARCH 9, 2012 WEAK ACTION DESPITE CORRELATED MARKET STRENGTH  Very similar to trade above: market witnessed a downswing and tight flag consolidation near recent lows despite NQ moving to near highs of upmove. The market stayed in very tight flag, even as NQ moved higher through the day. The...

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#14 SEPTEMBER 5, 2011 SHALLOW, EXTENDED UPTREND AFTER A DOWNSWING

  The market witnessed a very low-sloping, narrow, extended uptrend channel (highlighted oval) following a downswing. This very week uptrend seemed vulnerable to another downswing. Overnight, the market collapsed by 1100 points due to a sudden, forceful intervention by the Swiss National Bank. In terms of Return/risk and time duration, this was the most profitable trade I ever made or presumably will ever make. A $400 stop loss point generated an open profit of over $12,000 in less than one day. I lowered the stop by nearly 1000 points the next morning. Lesson: Following a downswing,...

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