The week started strong with 1 1/2 days of trend followed by 3 1/2 days of some of the most extreme chop as the market seemed to twist and turn against every trade during the second half of the week, fighting hard to hold up the lows of last week's Jay Powell's rally.
The 200K Portfolio live trading result are -$3,200 and the 50K live trading results are -$970 on the day. There were only three trades on the day. We started the week strong but ended down -$1,400 on the week in live trading.
We discuss the current drawdown and how we will manage risk into the end of the year. The last three weeks we have seen mean reversion of our weekly cycle with Monday - Wednesday being stronger trading days than Thursday - Friday. After 3 1/2 days of extreme chop, I'm looking forward to seeing how Monday - Wednesday will trade especially with CPI and FOMC.
If we continue to see unfavorable chop, we will pause and lock in gains on the quarter and focus on research and trading systems that trade incorrect markets in a profitable way.
This market has been propped up since June 16th, the entire second half of the year, We have also observed the market being propped up the entire second half of the trading day. The market paused on Tuesday afternoons lows to chop around at last Wednesday's lows, where the Jay Powell rally started. The Jay Powell speech that the market heard as bullish last Wednesday has been given back in a seven day trading period with a 100% retracement.
The market isn't trading correctly and as traders we just have to manage risk or find a profitable way to trade an incorrect market.
Today's PPI was hotter than expected. It is interesting how the market absorbs inflation reports and how the bulls look for reasons to buy while mostly being surprised by higher inflation for the past year.
On the other hand, if the market won't go down anymore on bad news it can be a sign the bottom is in.
Next week, on Tuesday, we have the CPI report and on Wednesday we have the FOMC meeting announcement. I can make a case for a santa claus rally, a 2018 sell off into the end of the year as well as chop into the end of the year.
My approach is to trade the strategies with the risk management we described in the video.
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