Macro Momentum Pattern Recognition Trading Journal

[formikatrading]

This trading journal will cover the following markets using multiple time frame analysis of my custom momentum and oscillator indicators (Monthly to Intraday):

Stock Market:

S&P 500
Nasdaq 100
Russell 2000
DJIA

Commodities:

Gold
Gold Miners

Crude Oil


Bonds:

30-Year Government Bonds / TLT

Forex (may look at additional pairs from time to time but these are the ones I follow most often):

EURUSD
USDJPY
USDCAD
USDMXN
AUDJPY

Positions may be in futures, options, leveraged ETFs or currency pairs and are typically established near the NY close (although there is one other time period that I may enter intraday). The primary focus of this journal will be to develop more consistency in the analysis portion of my trading (so I may post less details about actual trades and will likely concentrate on the analysis to make sure I'm properly doing that aspect). I am not a full-time trader so due to time constraints, I may not address every market each time I post. While I am not looking to day trade, to the extent I have an outlook for a particular day, I will note that as my approach may have a view for a particular day (mainly for overnight trades or opportunities that may present themselves the next day). Volatility, Breadth, Sentiment / Seasonality, and COT data may also be part of the analysis.

In conclusion, this is all about developing more consistency in my habits and process.

 

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Market View for Week of 11/18/2018:

Stock Market:

Monthly Momentum: Negative
Monthly Oscillator Reversal Signals: No - currently suggesting weakness for December

Weekly Momentum: Negative
Weekly Trend: Down
Weekly Oscillator Reversals Signals: No

Daily Momentum: Mixed
Volatility Momentum: Down since 11/15 so could see some more upside in indexes
Breadth: Summation Index Up but momentum declining

Conclusion: Market is not overbought on daily / intraday and given the VIX and summation index we could see a little more upside in the market. However, in light of the monthly and weekly charts, I would expect the market to find difficulty progressing too much higher from here without a little more time. Will continue to monitor for low-risk opportunities.

Positions: None

 

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11/20/2018:

Market opened down today. Because of this and some oscillator set-ups on my daily charts, I traded long S&P futures (as my indicators suggested the potential for intraday reversals in the morning) using fib-based price targets for entry and loss of momentum for exit. Spent more time looking at the market than usual but felt I had a pretty good read and was done around noon. For other traders, I could see today being better on the short side -- shorting rallies -- but it was how the market set-up in the a.m. for me. I could sense I was mentally done after the last trade and backed away from the market, walked the dog, ate lunch, took a quick nap and then attended to other matters.

Trade 1:
Entry: 2652 (9:13)
Exit: 2653.25 (9:49; auto stopped out)

Trade 2:
Entry: 2638 (10:09)
Exit: 2664.75 (11:02)

Trade 3:
Entry: 2652 (11:29)
Exit: 2662 (12:10)


Oil got crushed today -- something I was looking for but was a bit reluctant to try and trade due to a fear of a short squeeze. In hindsight, it had become overbought on a daily basis so there was a potential entry in past couple of days to get short.

Based on my daily oscillator signals, weakness tomorrow in the stock market may get bought so I will be on the lookout for reversal opportunities that may actually stick.

 

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11/21/2018 (Pre-Market):

Stock market futures are up nicely pre-market. I expected an up day but thought was a little too cautious given the downward momentum and didn't enter at the close, thinking we could open down first. Nasdaq 100 had the best oscillator pattern going into today and a more bullish candlestick pattern and some oscillator divergences. The VIX also provided some additional insights with some oscillator divergences as well. Seasonality-wise, the market is more favorable until next Friday (Nov. 30). One other thing to note is that while I didn't have any oscillator reversal signals on my weekly charts going into this week, once this week started they started flashing so that should have given me a little more comfort for getting into the market at the close yesterday. Also, yesterday I noticed that bonds barely budged during the sell-off. Combine that with bonds being overbought on the daily in the context of a bigger downtrend suggested lower bond prices today. Given some other obligations today, I may not be able to participate in the market today but will look for any pullback continuations if time permits.

Happy Thanksgiving to whoever may be reading this!

 

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11/21/2018 (additional insights):

Attaching the weekly NDX chart as of 11/20/2018 close showing the oscillator divergences which had started forming at the beginning of the week.

 

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11/21/2018 (intraday update):

Bias is long for today so made 2 futures trades. Entries / exits were not ideal but somewhat limited by my time limitations:

Trade 1:
Entry: 2658.75 (10:00)
Exit: 2660.75 (10:02)

Trade 2:
Entry: 2663.25 (10:06)
Exit: 2665.00 (10:25)

Trade 2 was not one I'm proud off but my indicators and tape reading indicated that the market would make a run at the high (which it did). Trade went against me too much initially but ended up selling into the high.

Probably done trading for the day but purchased some UPRO for the IRA account which has been in cash.

 

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11/21/2018 (last 1/2 hour of trading day update)

S&P found resistance at its 20-period MA on the hourly chart / also the 100-period MA on the 30-minute ES. No follow-through on the earlier market strength. As indicated, we're getting into a more bullish seasonal weekly cycle so continuing to look more on the long side in the near term.

GDX had a really nice run today (up 2.5%). I missed that one - not as obvious but it fits with the continuation of the weekly up cycle in GDX. That is one of those where I have to look at the weekly chart for a little more guidance.

Happy Thanksgiving!

 

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11/22/2018:

Took an overnight long trade in EURUSD. Due to some time constraints I entered the trade later than the 5:00 p.m. market close. Analysis was correct but I put in too tight of a stop and got stopped out. This was a case of self-protective instincts being a factor and trading not to lose. I must continue to be aware of those tendencies so that I can override them using positive self-talk. With Forex, I must remember that price-based stops are usually not helpful unless I need to lock in a nice gain. There are many more whip-saw moves in Forex. I just need to stick to holding trades in the designated "window." However, it's probably a trade I should have passed on given that I could not get the entry I wanted and it may not have been the best set-up either. I didn't lose much but I feel a bit disappointed given my good run trading this week. On the positive side, this reinforces that I'm reading the market well given my strategy and analysis tools that I have developed.

One trade I missed (a couple of times this week) was shorting oil (see attached chart). The momentum across all time frames has been really weak so the minor rally into Monday's close and the rally mid-day on Wednesday were both short opportunities.

As I was reading Tony Dungy's "One Year Uncommon Life" devotional for today (Nov. 22), he talked about "Little Things" and how the outcome of a football game can come down to a few big plays which are the result of little things. Every play could be game changing. "The little things we fail to do can make us come up short of where we wanted to be . . . How many victories in our lives are we missing because we fail to do the little things or we pull up just a couple of yards short? How many victories in our lives are just around the next corner, but we stop walking and never get to that corner?"

This definitely applies to my trading -- need to continue to do all the little things -- and do them well.

Lastly, my daily Stocism reading talked about "The glass is already broken." This is the concept of accepting the possibility of a bad outcome in a situation at the outset -- and by doing so you lose attachment and also your fear subsides. That being said, you don't expect the bad outcome but you realize that it could happen. As a result, you stop worrying and fear no longer controls you. This is a really helpful way to look at trades -- by accepting the loss in advance.

Happy Thanksgiving!

 

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11/22/2018:

Listening to a podcast with Linda Raschke. She reinforces the idea of multiple time frames and higher time frames control.

As a discretionary, pattern-based / indicator trader, I believe it's important to combine certain indicators in a systematic way -- something I call "syntax." Attaching a chart combining two indicators that seem to work well together.

 

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11/23/2018:

Today is a lighter volume day in the markets. Seasonality-wise, there is typically an upward bias.

I am listening to a podcast on "Limit Up" where they are interviewing Rich Friesen. He is talking about avoiding using language like "I need to do ____." Rather, you need to restructure / reframe your language to say "When I do this, I perform much better or it feels so much better" or something like that.