Bond Trader 2007

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055 CST Pre-market commentary

I've been on a break from the journal which has been quite refreshing. As I mentioned on my last few posts I've been focusing on just 1 or 2 trades a day. The results for May were just as good as the results for April.

My reason for posting today is just to state for the record, I put 75% of my 401K in the UltraShort Dow 30 ProFund and 25% into the Short Real Estate ProFund.

I did this 2 days ago. Yeah I know, primarily luck but also an intuitive gut feel that something is seriously wrong. Yes, we could have another bounce just like we've had for every other dip since October 2006. I'm willing to take the chance.

For today, and specifically for the bond market, I can honestly say I am at a loss to predict anything for today. I will treat it like any other day and go with my 1 or 2 key times. My problem is that I don't recall a day in recent trading history, i.e. 6 months to 1 year where we are down 1 point plus in the 30 year prior to the market open. I'm sure it has happened, but I can't remember when.

In any event, just a brief update and a brief observation that I find today just as strange, if not stranger than the morning of 27 February 2007. What I mean by stranger is that at least on 27 Feb, you knew that the Asian markets had tanked, and that the US Bond market was seen as a safe haven. You could safely form a bias. Today, the Asian markets have tanked overnight, and the bond market is tanking as well. Obviously you should be biased to the downside anyway given the last several days of activity, but it is still puzzling.

I'm glad I close my trades at the end of the day.
 
john,

do you have anything better than gut feeling for shorting dow? personally i think that what you do is nuts - stocks are very cheap here and you should not succumb to short term correction. Maybe we go 2-4% lower from here but that's it.
I think it is time to add rather then sell. If you did that last May you would not be happy today...

by the way last June I switched all my pension to equities only...(and of course i was swearing that I did not do it earlier...)

I am posting a picture I posted already yesterday on another thread.
 

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Quote from dhpar:

john,

do you have anything better than gut feeling for shorting dow? personally i think that what you do is nuts - stocks are very cheap here and you should not succumb to short term correction. Maybe we go 2-4% lower from here but that's it.
I think it is time to add rather then sell. If you did that last May you would not be happy today...

by the way last June I switched all my pension to equities only...(and of course i was swearing that I did not do it earlier...)

I am posting a picture I posted already yesterday on another thread.
More...

Interesting graph. I appreciate the information. I'm not looking at this as a long-term hold. I'm always a buyer in my 401K and this is the first time I've bought a mutual fund that shorts. The real-estate short fund I could see holding for 3 months or even longer. The Dow short fund I'm only looking at for a few days to a few weeks.

My long term play with my 401K is the Ship builder / leasing sector: SFL, FRO, and TBSI. Incredible performance this year. I looked at SFL late last year via Smart Money magazine when they were trading at 19 and change. Didn't get in then as I was 100% in EEM (emerging markets). I'm looking to get in the ships ASAP, so this Dow short won't last long.
 
Quote from johnpinochet:

055 CST Pre-market commentary


[...] I will treat it like any other day and go with my 1 or 2 key times. My problem is that I don't recall a day in recent trading history, i.e. 6 months to 1 year where we are down 1 point plus in the 30 year prior to the market open. I'm sure it has happened, but I can't remember when.
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Now that that we are at afternoon in EST, which key times did you use for ZB?
-Bernard
 
Quote from Bernard111:

Now that that we are at afternoon in EST, which key times did you use for ZB?
-Bernard
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Since roughly 29 May 2007 to today, 08 June 2007 we've had a cycle low buy bias at 0700 CST and a cycle high sell bias at 0800 CST.

As I've stated before, just because it is there doesn't mean the trade is to be taken or that it will work out. Today for example the 0800 sell didn't work, however like any other trade, you had between 0824 and 0836 to see that you were wrong and exit.

The 0700 buy worked out very well. You could have exited before the 0730 report and gotten back in long on the first pullback.
 
When I first started noticing these cycles, and studying them, 10 CST was very important. Eventually I discovered 9 CST as being extraordinarily important, at least for the month of April and May.

The time appears to have moved back a bit for June, although (and I'm letting the cat out of the bag here) 9 CST is as important as ever.
 
Quote from johnpinochet:

When I first started noticing these cycles, and studying them, 10 CST was very important. Eventually I discovered 9 CST as being extraordinarily important, at least for the month of April and May.

The time appears to have moved back a bit for June, although (and I'm letting the cat out of the bag here) 9 CST is as important as ever.
More...

John,

if I understand correctly, you mention that there are fixed pivot times that are valid for every trading session?
 
Quote from MoveTimer:

John,

if I understand correctly, you mention that there are fixed pivot times that are valid for every trading session?
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MoveTimer,

Yes, sort of. Let me clarify. My studies are still in somewhat of a preliminary stage so there is actually a lot more work to do.

For now, I find an ideal sell time and an ideal buy time. These two times usually correspond with a cycle high and a cycle low, respectively. I initially limited my studies to between 0735 CST and 1200 CST. Now I've brought my starting time back to 0300 CST. This is primarily a result of the recent volatility.

The times that I discussed in the previous post (the most recent two posts) are observations I have made over 3 different time periods: 2 months ago, 1 month ago, and roughly 10 trading days. I always give greater precedence to the times generated by the 10 trading days calculation which is recalculated just prior to my trading day. This 10 trading days calculation may vary day to day. The other two, are fixed. This is what I mean by sort of. The short term varies, the longer term ones are fixed once the calendar month ends.

The observation about the 0900 CST time for now anyway, seems to meet your definition of fixed.

One caveat to anyone looking to trade this way is that the perfect time to sell (or buy) may one day be the worst possible time to sell (or buy). Will you be ready to exit?

In physics (if I recall my first year college physics correctly) I believe this is called phase-inversion.
 
Quote from johnpinochet:

When I first started noticing these cycles, and studying them, 10 CST was very important. Eventually I discovered 9 CST as being extraordinarily important, at least for the month of April and May.

The time appears to have moved back a bit for June, although (and I'm letting the cat out of the bag here) 9 CST is as important as ever.
More...

John,

Thank your for your time and clarification in this and previous posts.

Have a great trading week!
:p
 
Update on 401K position:

This is not 100% bond market related so ignore if you aren't interested.

A newsletter/hotline service I subscribe to based on the books I've purchased from him over the years is calling for some major difficulty next week Mon/Tues, however as long as we don't break below a certain number in the ES next week, there may be a rally to close out the month.

Between now and December he sees something bad happening, i.e a correction greater than 10%. In particular he feels that the sub-prime fiasco latest news re: major brokerages is just the tip of the iceberg.

I'm not going into a lot of detail because I don't think it would be fair. Suffice it to say he made a 100% cash suggestion if the market broke through a certain level. I can't give the exact level but let's just say we are fairly close as of today, and it looks like it might be made next week.

Real estate short is up 13.5% and the Dow short is up roughly 2.0%. I wish I had put everything in the short real estate fund as I felt more confident about that investment for the longer term, i.e. forget about it for 3 - 6 months. See post on page 107 for date and fund names.

Bond market trading goes the same, no different than I reported previously, other than the range of the movements being incredible on some days.
 
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