This week has been a slow one for me.  There hasn’t been a ton of news announcements outside Tuesday and today.  Tuesday we were playing with new technology and I’ll tell you all about that later.

So, I traded live today for the first trade (Unemployment Claims) and sim to try out a trailing stop for the second trade (CB Leading Index & Philly Fed).  Let’s get down to biz, shall we?

Unemployment Claims, 8-19-10

So, as you can see, I sold short at 1093 and my profit target, set at 3.75 points, got me out of the single contract trade, netting me $187.50 in literally 5 seconds.  Do I hear a “WOO-HOO”?

Okay, on to the second trade – CB Leading Index & Philly Fed.  For this one, I decided to simulate.  I wanted to practice a trailing stop, which doesn’t require a profit target at Infinity!  If I had used a trailing stop on the first trade today, I would have been able to maximize my profits and leave very little on the table.  Trailing stops aren’t good for every trade, but for trades where the news is usually dramatic and runs one way or the other quickly and unhesitating, they are perfect.  Trade these announcements long enough and you will know which is which.  So, while these announcements didn’t drop quite like a rock (like unemployment claims), they were good enough to practice a trailing stop.  I’ll show you a few stills from my video, once my MMT strategy was filled.  Click on the individual pix to enlarge.  Enjoy!

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We expected to see some extra volatility coming into today’s trade after yesterday’s shenanigans.  But news that was mixed left the S&P having a whipsaw reaction.  Patient traders who made it through the first couple of minutes on the trade were rewarded.

Dawn-Renée's Non-Farm Payroll Trade 05-07-10

Leading up the the announcement, you can see the S&P move up (yellow arrow moving up on the left side of the graphic) in anticipation of the move.  I don’t normally put orders in prior to the announcement, but the movement up made me expect that we would be likely to see immediate movement downward on the announcement.  So I sold short at 1131.25, expecting the market to move downward.  Instead, it started wicking (the skinny green section of the candle) up.  I drug my stop loss farther up once, expecting that it would go back down because even though the market added 90,000 more jobs than expected, most of those were temporary government census jobs and unemployment actually went up .2%!  I tried to drag my stop loss up a second time, but didn’t make it and it filled me at 1134, causing me to lose 3 points.  However, true to my Market Mover Trading education, I didn’t panic and instead focused on the news.  Sure enough, there was a correction downward as the market realized that the Non Farm Payroll news wasn’t actually good news!  I made 4 trades on the downward movement (see yellow arrow down in the middle of the graphic) using MMT’s proprietary Prediction Points for 6.50 points of profit. (S@1132, B@1129.75; S@1129.75, B@1128.75; S@1129.5, B@1127.75; S@1128.25, B@1126.75).  Then, using a MMT strategy, I suspected we would see similar movement (as the initial news), so I bought long and made an additional point.

So, for the day, even with the initial 3 point loss, I was up 4.5 points, which is 45% and $225 on one $500 contract.  I was 7/8 trades for the week and up 70%! Woo-hoo!  If I can learn and succeed at this without much brain damage, anyone can.  I spend WAAYYY more time blogging about this than I ever do actually setting up to trade and trading.

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ForexLive:

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Stocks plummeted in a flashback to the panicked trading of 2008. Investors fled everything from stocks and risky bonds and poured money into safe assets such as U.S. Treasuries.

Stocks began the day in negative territory but took a sharp dive south in the afternoon as selling built up and some indexes fell through key technical levels, sparking new waves of selling, investors said.

As losses piled up, the Dow Jones Industrial Average plunged more than 900 points. Key short-term credit markets—such as the rate for three-month Libor—began to show signs of stress and corporate bonds tumbled. The Dow was recently down about 485 points to 10380.

A 20% drop in the Dow would have been needed to halt trading. After 2:30 p.m. EDT, the 20% standard goes into effect. Before then, a 10% drop would have triggered at least a 30-minute halt. For the second quarter, 10% equals a 1,050-point drop in the Dow industrials while 20% equates to 2,150 points.

The exchange first implemented the circuit breakers in the wake of the market’s crash in October 1997. In 1998, the New York Stock Exchange set the triggers at 10%, 20% and 30% declines in the Dow for three levels of halts.

The S&P 500 and the Nasdaq Composite, which also saw steep intraday drops, were down more than 4% each in recent activity.

Credit markets, too, are beginning to show signs of stress. Three-month Libor, the benchmark rate for billions of dollars in debt, shot to 0.42 percentage point from 0.37 percentage point, traders said. Corporate bond indexes also tumbled.

“It’s getting pretty ugly out there very fast,” Guy Lebas, chief fixed income strategist at Janney Montgomery Scott. “There are definitely some major concerns that are escalating this afternoon.”

Investors remained deeply worried Thursday about the unfolding drama of Europe’s efforts to prop up Greece’s finances. Despite boisterous street protests, Greece’s parliament passed a bill with austerity measures that will give the country access to an assistance package jointly offered by the European Union and International Monetary Fund. Other EU members will take votes in their respective parliaments soon to approve spending on the package, with a first test expected in Germany on Friday.

“A lot of traders are getting carried out of their seats. There are lots of liquidations including hedge funds out of riskier assets,” Michael Franzese, head of Treasury trading at Wunderlich Securities in New York. “No one was expecting this sell off in stocks and the euro and a flight to quality trade is in full effect and it’s not yields levels it’s just capital preservation.”

While the bailout is expected to pass in Germany and elsewhere, it remains unpopular among voters who don’t want to see their respective countries’ resources used to solve Greece’s problems. Traders said that any hints of populist backlash could slow the package’s implementation or lead to omission of elements needed to prevent global economic contagion.

“Some of the panic-mode has come in now,” said Jay Suskind, senior vice president at Duncan-Williams. “What you’re seeing in Greece—even the pictures on the television with the protests starts to spark some real fear.”

With about an hour of trading to go, New York Stock Exchange composite volume has already topped 8 billion, making this the second-busiest day of the year in the market. The 2010 high was 8.4 billion shares, set on April 16 when the government filed fraud charges against Goldman Sachs.

Traders described Thursday’s trading as driven largely by automated sell orders, which piled up after several technical barriers were breached, in particular the 1150 level on the S&P.

“A lot of people thought we had support around that level, so there was some disappointment that it didn’t hold,” said Phil Roth, chief technical analyst at Miller Tabak.

But he added: “The numbers themselves are a little less important than the manner in which the market gets there. The important thing is that we’ve had a very non-traditional bull market, without any major correction or several years of advances alternating with sideways periods. This could be the thing that sets off a real correction, but we’ll have to wait and see.”

—Donna Kardos Yesalavich and Kristina Peterson contributed to this article.

Write to Peter A. McKay at peter.mckay@wsj.com

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Riding The Tax Credit Roller Coaster…

Pending home sales surprised to the upside for a second straight month in March. Follow through for April existing home sales (up 6.8% in Mar) should be expected. Pending sales (contract signings) lead existing sales (closings) by a month or two.

The homebuyers’ tax credit has generated big swings in pending sales: +40% from Jan 2009 to Oct 2009; -20% from Oct 2009 to Jan 2010 (after original expiration); +14% from Jan 2010 to Mar 2010 (ahead of current expiration).

Apr 30 Deadline

Buyers need a contract in place by Apr 30 to qualify for the tax credit. Further upside for pending sales is likely next month.

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So, much of the information on this site may appear to most people as gobbledygook if they aren’t traders.  Since non-traders are our main readership, we thought it would be helpful to occasionally explain what the heck we are talkin’ about.  Uh, ya think?  LOL!  So, anyway, here is the low-down on selling short and buying long.  It’s pretty simple, actually.

Y’all already know what ‘buying long’ is.  It’s the regular old way to make a profit.  Buy low, sell high.  You buy something at as low a price as you can, and then you sell it for more.  It’s called “marking up”.  Retailers do it all the time.  You hopefully do it when you buy and sell a house.  Pretty simple.

Selling short is just as simple, but since most of us don’t sell short on a regular basis, it’s more unfamiliar to us.  Say your next door neighbor has been working long, tough hours.  She really needs a new car, but she doesn’t have the time or energy to shop for one herself.  She tells you what she wants…a 2008 Toyota Prius.  She wants to pay no more than $16,500 for the car.  You say, sure, neighbor.  You can buy that car from me for $16,500!  Then you find the exact one she wants that someone, terrified of the Prius recalls, is willing to sell for $13,500.  You buy that car for $13,500 and sell it to your neighbor for $16,500 and you made the difference for your time.  So, you sold a car that you didn’t own, then bought it for a lower price and profited by the difference.

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To understand PMI (Purchasing Managers Index) in this context, you need to understand that the Institute of Supply Management (ISM) Manufacturing Index measures the activity level of purchasing managers in the manufacturing sector by surveying more than 300 manufacturing firms on employment, production, new orders, supplier deliveries, and inventories. A reading above 50 indicates expansion. Traders watch these surveys closely because purchasing managers, by virtue of their jobs, have early access to data about their company’s performance, which can be a leading indicator of overall economic performance.  More specifically, PMI is a rating from 400 purchasing managers who are asked to rate the level of business conditions including employment, production, new orders, prices, supplier deliveries, and inventories.

Dawn-Renée's ISM Manufacturing PMI Trade; 05-03-10

There is a whole slew of related information that comes out with the ISM Manufacturing PMI.  When the PMI came out today, it was slightly lower than expected, which caused an initial drop in the market.  I did not get in right away because volume was low.  Then the volume spiked and things started moving.  At the point volume started increasing, we were close to one of Market Mover Trading’s proprietary Prediction Points.  So I decided to buy long at 1190.25, knowing that we were likely to see a correction.  The market continued to go down.  However, the rest of the ISM Manufacturing data had come out and it was all positive, more orders, higher prices and lower inventories was GOOD news!  I

Jody's ISM Manufacturing PMI Trade 05-03-10

knew the market should start to go back up as traders digested the rest of the ISM news.  We were coming up on the next Prediction Point, so I decided to put another buy long order in at 1189.50, in case it got that low.  It did, and then started going back up.  I put my sell order for both contracts at another Prediction Point, 1191.50, but I got nervous and decided to pull down the sell orders to 1191.25.  A bird in the hand…told you I was conservative! Anyway, I still made 2.5 points total on my money (1 contract @ $500), which is a 25% return or $125.  Took me all of 10 minutes to setup and 7 minutes in the trade; and 7 minutes is a long trade for MMT!

To the above right, you can see Jody’s trade.  He waited for the initial movement downward to stall out, then he bought three contracts long at a Prediction Point (1089.50).  Then, his profit target, which was set at 1.5 points above his buy point,  sold him out automatically at 1091 for 1.50 points, or a 15% return on his investment – $225!  Jody said if he would have been thinking about it, he would have pulled his profit target up to the next highest prediction point at 1191.50.  But profit is profit!  What a great trading day!

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There were several trades today, including Chicage PMI and GDP, but we are going to focus on the last trade of the morning.  So, UMich CC is the only news item we don’t get instantly on our server.  It’s normally delayed about 15 seconds, but we can still get in and make money.

Dawn-Renée's UMich Consumer Confidence Trade 4-30-10

Consumer Confidence was down; under expectations.  So, since the market was reacting negatively to this news, using Market Mover Trading strategies, I sold one contract short at 1202.5.  At first, it looked like a good move, but then the market started moving up (bad for my trade).  We were smack dab between two of Market Mover Trading’s proprietary Prediction Points.  The rest of the UMich CC numbers had come out (in addition to the main number, there are numbers for Current Conditions, Expectations Index and 6 month Outlook) over the previous few minutes, and all the numbers were lower than expected.  So I drug my profit target down (remember, this is a sell short, so moving my profit target down means I was trying to *increase* my profit!) to the next lowest prediction point, as I felt the market should turn around and the positive movement was not reaching or breaking through the next highest Prediction Point.  One minute of patience paid off, as the market moved down to the lower prediction point and filled my profit target and I made 1.5 points, or 15%/$75.  At that point, I had to pack up and leave to make a meeting and MMT class, or I might have pulled my profit target down again, as the market was plummeting.  The ride down in response to UMich CC ended up being 6 points, or 60%.  On one contract, that would have translated to $300.  But as long as I am on the upside, I am a happy camper!  The higher profits will come with experience; the point of MMT for me is to trade without emotion or greed.  Remember, until a few months ago, ALL of this stuff was Greek to me, and via Market Mover Trading’s fabulous educational tools, I have easily learned these tools and strategies.

Jody's UMich Consumer Confidence Trade 4-30-10

So, here’s Jody’s UMich Consumer Confidence Trade.  He went short with 3 contracts at 1202.50.  Then, on the same upward (bad for a short trade) movement that I decided to hold fast on, he panicked a bit and flattened (bought all three contracts) out for a profit of .25 points, or $37.50.  This is okay, as it’s a learning experience.  That’s why it’s a good idea to simulate trading for at least 100 or so trades before you trade live.

It gives you confidence, as you know what you trade well and what you need to work on.  Journaling is a MUST!  In this case, Jody had successfully traded the Chicago PMI earlier in the morning and had a profit of $275 for the day!

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The Conference Board Consumer Confidence Index rose for the third straight month in April to 57.9 from 52.3 the month prior, and stands at its highest point since September ’08. The present situation index also rose for the third straight month to 28.6 from 25.2 the month prior.

Dawn-Renée's Consumer Confidence Trades 4-27-10

Here you can see my trades this morning using this news on the e-mini S&P.  The news was positive, and we saw the market go up as a result.  So, I wanted to buy, but I got in a little later than I wanted to; at 1204.  Working off of MMT’s proprietary Prediction Points, I decided to sell at 1205, which ended up being a pretty good decision.  I am a conservative trader.  Then, using one of MMT’s strategies, I was able to pull an additional 1/2 point on downward movement by selling short at 1204.25 (again, I missed some of that movement…I am a little SLOW, lol) and buying at 1203.75.

I traded one $5oo contract, so 1.5 points translates into 15% return on my money, or $87.50.  Pretty good for 2 minutes of work.  When I do that a few times a week, I easily add $1000 to my monthly income.

As soon as Jody gets his act together, I will post his trades from this morning.

Jody's Consumer Confidence Trades 4-27-10

Okay, well, here are Jody’s trades.  He didn’t trade the movement on the immediate news, but used a MMT strategy to make the very next trade.  He traded three contracts and scaled his exit strategy.  He sold short at 1205, then bought one contact at 1204 and bought the other 2 at 1203.5.  This made him a total of 2 points on his three contracts.  That’s 20%, or $300 for a couple of minutes of work.  Then he was on to other things we needed to get accomplished, including some mortgage work and some yard work.  It’s that time of the year!

This illustrates how two completely different trading styles can make money, quickly, with Market Mover Trading!

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Lots of people ask me this when I tell them we trade futures contracts.  They assume they might be like stocks.  However, they are pretty different. A futures contract is a standardized contract to buy or sell a specified commodity of standardized quality at a certain date in the future and at a market-determined price (the futures price). The contracts are traded on a futures exchange. Futures contracts are not “direct” securities like stocks, bonds, rights or warrants. They are still securities, however, though they are a type of derivative contract. Understanding  the origin of futures contracts certainly helps to explain what they are:

The Dojima Rice Exchange in Osaka, Japan c. 1914

Aristotle described the story of Thales, a poor philosopher from Miletus who developed a “financial device, which involves a principle of universal application.” Thales used his skill in forecasting and predicted that the olive harvest would be exceptionally good the next autumn. Confident in his prediction, he made agreements with local olive-press owners to deposit his money with them to guarantee him exclusive use of their olive presses when the harvest was ready. Thales successfully negotiated low prices because the harvest was in the future and no one knew whether the harvest would be plentiful or poor and because the olive-press owners were willing to hedge against the possibility of a poor yield. When the harvest-time came, and many presses were wanted all at once and of a sudden, he let them out at any rate he pleased, and made a large quantity of money.

The first futures exchange market was the Dōjima Rice Exchange in Japan in the 1730s, to meet the needs of samurai who – being paid in rice, and after a series of bad harvests – needed a stable conversion to coin.

Hopefully, this helps to explain what we trade.  For more information, attend a live seminar near you, a Thursday evening 7 pm MDT webinar or check with us.  We can email you links to videos or send you a DVD.  Remember, Market Mover Trading only exudes pressure on the market; never pressure on you!

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