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Thursday, July 3, 2008

Stock trading, stock market, NDX trading, Financial EFT, XLF, July 3, 2008

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Some observations:

1. Today Thursday is an abbreviated session. The bond market is scheduled at 2:00PM, and Stock markets at 1 p.m.

2. Euro interest rate has been increased.

My forecast:

1. Let us first start with EUR/USD: As I wrote before this pair is headed for a fall. Now that Trichet increased his rates which has been his repeated threat, raised it just a little, he showed his hand. Selling of this pair would come in force because they know EUR's rate will not be raised soon and they know that euro central bank takes a long time to change interest rates.

Conclusion: my prediction of earlier this week that this pair would head down still remains.

2. If EUR/USD retreats which means dollar up, I would expect oil to pull down, and with it reduction in volality in stock market with a slightly up bias.

What I plan to do:

1. EUR/USD: I am trading it on short side. This is where the main action is in trading today.

2. Stock market: If the bottom of yesterday is taken shortly after the open, I expect price to head up shortly thereafter.
My main play in stock market is planned to however be mainly to sell a straddle or a strangle with strikes close to the money, as volatility would fall and also we have the long weekend coming so theta will be working on my behalf.

9:45AM: with NDX at 1812 we are in area of today's morning bottom or close to it.

9:49AM: We are at this morning bottom, with NDX at 1807. I am going long side

10:02AM: My order just got filled on the retest of 1807. They did not fill me in on the first time it was there.

10:07AM: I did not like that it cut the 1807 bottom, but at least I am in. I sold ITM puts.

Selling ITM puts allows me to earn three ways:
1. NDX rises
2. NDX stays where it is
3. NDX moves down but not too much.

Reason for the above is that by selling an ITM put, I am selling premium, and buying underlying synthetically.

I also want to add that I am trading at reduced size (less than half normal size). Why? we are against a daily trend, and also it is a half day. Less time means, less upside, which means we should trade small (if this smaller size is counter-intuitive to you like I used to, it means you need to learn more).

10:16AM: NDX at 1811. We are in the green. And with it, I am about to get to other things.

10:30AM: NDX at 1828. 21 NDX points profit. I neutralized the intrinstic value of the put, by selling a call. This means that I am now short a (gut) strangle, which is better than a strangle because I have more cash in my account and the premium you earn from either is the same.

That is it for me for today in equities unless something really different happens.
If we revisit the lows soon, I might take off the short call if I am at my screen.

If you can excuse me for 3 to 4 points from the bottom of today (which I am happy it took place as otherwise my order would have not been filled, the series of top nailing and bottom picking continues.

Live from the blog on the net that nails tops and bottoms. This blog is to trading what: Michael Jordan is to Basketball, Gretzky to hokey, the great hitter of all time to baseball, Zidane to soccer, etc...

10:40AM: with NDX at 1832. If I were still in a position and were to trade it by buying the underlying, I would take my profits now. 27 NDX points. I am done with equties. Happy 4th for americans, and happy rest of week for all the citizen of the world.

UPDATE: 2:14PM I had 7 open trades in EUR/USD. Profits were from 120ish pips to 50ish pips. I just took profits, but left a little position. I plan to re-enter if it goes up to retest.

A summary is coming with a copy of trade execution reports and eur/usd trading screens, but I am having problems with google to upload them.

I am also looking at some specials I came across on the internet that I would post.

God bless America! (4th of July is in my head)


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Best regards and happy trading,

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Happy trading,


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