FOMC Day: Monday Morning Quarterback

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  • on September 18th, 2013

I wanted to take a few minutes to talk about my day. I think it’s important to look back and reflect on your decision making, whether it was right or wrong. This post is both for me (to look back on in the future) as well as for you (the best way to learn is from other people’s mistakes right?). I’m not a day-trader but with this much volatility, there are some things we can do intraday on a day like this.

Let’s begin with how I started my Wednesday. I came in heavy short Vietnam after it rallied back last week to retest broken support. This one seemed like a no-brainer to me. With all that former support just above 18 broken that badly, the first retest has to be met with sellers right? And it was. We nailed. Now, did I cover all my shorts at the lows? Of course not. But I did get half off down in the 17.60s-70s.

I also shorted the heck out of the russell2000 this morning after the new all-time high that it put in at the open couldn’t hold for more than a couple of minutes. Talk about sick risk/rewards. I nailed that one. Pre-fomc decision, your boy was looking nice on that short. But I didn’t cover a single share and got stopped out when it took out those highs. Lesson learned. Don’t be greedy.

I came in Long US Treasuries via $TLT Calls. After the morning dip started to reverse higher, I doubled the position. This time I was smart, I took off my add before the rate decision. But I guess I wasn’t that smart, because they ripped a lot higher later in the afternoon. Man this market is humbling…

As far as that Vietnam short position? The half piece I had left ripped in my face after 2 o’clock. But did anything change? No, we’re right back to where we shorted it originally. So put back the other half position that we covered earlier…..

Now it’s 3 o’clock or so. Everything is hitting new all-time highs: S&Ps, Dow Industrials, Trannies, the Dow Theorists are going buck wild….but look who’s not making new highs. Look who isn’t even close to all-time highs. Look who has been quietly underperforming for months: regional banks $KREokay, S&Ps are approaching R3 and regionals are not making new highs – let’s short the heck out of them.

Oh wow, S&Ps are still rocking, and Regionals are rolling over – let’s short more….

Nice, treasuries are flying. As we approach the 50 day moving average in $TLT – we’ll take the rest off. Flat the bond position…

But now regional banks are red. And no one seems to care. I like that. Do we cover? How much do we hold on to? It’s the first sector that’s red since 2 o’clock. We’re short the hell out of them. Do we be disciplined? Or do we push the envelope? They went right through VWAP like a knife through warm butter. The market is speaking – let’s stick with the moster position. S&Ps are rolling over back below R3 and regionals are now down 0.40% and it’s only 3:30.

Ok now we’re back down to the lunch lows in $KRE – let’s not be greedy and take 1/3 off. Fine, pull the trigger. Covered at 36 – nice trade J – 2/3 short position left.

Ok so now there’s about 25 minutes left in a very volatile day. I’m having a nice one P&L wise (thanks to bonds and the regional bank short). I have 2 positions left – VNM and KRE: both shorts. P&Ls are approaching intraday highs from earlier today (you know, the ones I gave up for not covering enough….)

Regional banks still look like crap – now they’re down 0.75% and at the lows of the day – all while S&Ps are just ticks from all-time highs. Stick with it J.

It’s 3:40, S&Ps are bouncing to retest R3 and regionals got no bounce – making new lows for the day. Stick with the short J.

We’re approaching the 20 day moving average, which is also the 5 day. Let’s cover another 1/3 here in $KRE. P&Ls are at highs of the day, let’s not be greedy – we nailed this trade. Okay, put in a limit order a few pennies above those moving averages$KRE now down almost 1% for the day and 2% from the highs. I hope we get filled. Someone once told me that limit orders limit profits…..

It’s 3:45 – vietnam chilling near the highs of the day. not good. Treasuries rolling over. Nice! Good sale.

Meanwhile $HLF the one I sold all of yesterday and have no position in is chilling at $73.00 – right at last year’s all-time highs. Nothing to do there yet. Man I love this one…

10 minutes left until the market closes. My 10-minute chart in $KRE still hasn’t put in a green candle since we shorted it just before 3 o’clock. Still haven’t gotten filled on my short cover. Damn! Vietnam making new highs. Damn! Emerging markets also at highs – not a coincidence. Damn!

Okay market is closing, I’m not getting filled on that limit order in regionals, let’s just take it here and leave the other 1/3 position into tomorrow. Vietnam looks great, way too much strength to be short this much, let’s cover what we added back on and leave half on against former support and the 50 day moving average.

Should we get back in the bond trade? Nah, let it chill out a bit and we’ll worry about it later in the week.

Anything else? Pissed I missed that emerging markets trade. Oh well….

P&Ls near the highs of the day, but man we could have done so much better….

 ***

What could have I done differently? –> Covered half the Russell2000 short, or even all of it before the fed meeting. We were up so nice going into it. Why take it through an announcement that we have no control over. My bad.

What did we do well that we could potentially do again in the future? –> Shorting the underperformer right at the highs. Great risk/reward, failed at the 50 day, first one to turn red. We crushed it. Job well done.

So how else did we screw up? –> Re-shorted Vietnam a bit too early. Just like we shorted the weakness in banks, we should have taken the strength in emerging markets and Asia pacific a bit more seriously. It was starring at us right in the face.

And that was my day….how was yours?

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Tags: $VNM $KRE $TLT $ZB_F $SPY $ES_F


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