Markets never repeat, but they OFTEN rhyme...

Hello traders, I hope your week was profitable, and at the very least you were able to exercise discipline in a market environment that has and will continue to test the best of traders. In an environment like this, where rampant price manipulation (mostly financials), 'news' leaks, false stories, and misrepresented economic data reign supreme, trading the indices makes things a little bit easier in certain ways that stocks do not. Although the indices are obviously tied to each an every equity in some form or fashion, the movement of the indices is not solely based on the news, data, or movement of one stock or sector, but instead many all at once. There have, however, been days lately where the financials have dominated trading, just as oil and gold were able to do several months ago.
The title of today's post relates to several aspects that traders must keep in mind if they are going to participate on a daily basis in this type of environment. The first is that the market almost never repeats itself, but it most definitely rhymes quite often with what it has done in the past. This is not to say that it would be a safe bet to put positions on solely based upon time symmetry and or candle chart patterns, but these are most definitely aspects that can help to fill in the wholes in your trading thesis. A lot of big time technicians, market crooners, and so-called Gurus, are beginning to dip their feet into the 'CRASH CALL SCENARIO'. Not only do I think this is reckless, and self-satisfying, but I also pay no attention to this WHATSOEVER. How can this help my trading? It cannot, all it can do is allow my emotions to begin to alter and shift the ways in which my mind perceives the information that the market is sending, or in other words, the data that I need to be able to perceive objectively in order to make high probability trades that reflect my strategy's rigid methodology. Okay, well what about taking positions JUST IN CASE a crash does occur, you say? I condone one and only one form of such gambling(that is exactly what it is), and that would be to take one to two positions WAY OUT OF THE MONEY, expecting ZERO return, and being totally comfortable with the fact that the most likely outcome is losing your entire investment. The most important part of doing this is that if you lose your entire investment, it should have no effect upon your ability to continue to trade, both fiscally and emotionally. Such plays are called "lotto tickets", and rightfully so. Now, I have had several lotto tickets in the past that have ended up being very large winners, upwards of 10x-20x the original investment, but for the most part they have ALL been losers, and have all ended up as big fast ZERO's. So, ultimately, the point is that many people would love to see the market crash, and potentially just as many would like to see the market rebound and bottom. It is just impossible to fully quantify such data in a manner that makes it tradeable, at least responsibly tradeable, so the best idea is to forget about these attention grabbers and take a few lotto tickets so that you do have exposure in the event that something like this occurs. I do agree that it is always a good idea to have some exposure, very limited at most, to a scenario like this since it does not happen that often and yes, can be extremely profitable. My main point is simply that as a trader, you should not focus on such extremes, since they really are the exception and not the norm of daily trading.
Today's trading environment was similar, and rhymed with several of the others this week in that it screams 'indecision'. The SnP 500 has been able to form a short-term base since we touched 1212.25 intra-day on the SnP Futures, but the last three green days have had decreasing volume in compared to the previous large candles from the start of this week and end of last. This tells me that not only is the market indecisive, but there are more participants making trades when the market is threatening new lows, then when it is trying to base and move higher. All of this is short-term, of course, so things can change at any moment for any reason. This weekend is going to be very interesting, with potential deals for Lehman Brothers going on, WaMu take under rumors, and a continued focus on whether or not the market can hold itself together. In my personal opinion, which I never base my trading on (outside of the limited lotto ticket exposure previously spoken about), I would expect there to be another couple of 'straws' coming this weekend, and next week, yet the question remains 'which straw will be the one to break this camel's back'....Have a great and safe weekend, and good luck next week. Stay on your toes!

Today's Trade Log:
Today's trading was very similar, if not exactly matching, yesterday's trading. The reason is that the environment was also very similar, and I found that my best option was to take a high-probability entry (had to wait 90 minutes to get it) and use a larger than normal position size while at the same time cutting my normal profit target for such a high-probability signal, in half. As described the other day, this allows me to profit in a similar fashion as on normal trending days, but limit my overall exposure and risk due to very patient trade execution, and a smaller profit expectation (exposed for less time, need a smaller move in a my favor).

Buy To Open: 20 NDX Sep 1700's PUTS @$8.50
Sell To Close: 20 NDX Sep 1700's PUTS @$9.00