Conflicting objectives

I was getting that sinking feeling yesterday – along with the market – and once again found myself frozen and unable to stop out of things, let alone take advantage of opportunities on the short side. The Asx 200 had started to accelerate down from a lower high on the 60 minute chart. The index is now within range of the recent lows around 4450. It's at 4479 to be precise which is a loss of 58.4 points. I expect that low to hold but it looks like it's going to be a close run thing.

It's a decent possibility that the DJIA is having a 4th wave retracement before pushing on to a new high. The pullback has held above the breakout level of 12,217 from June 21st, although there's only about 80 points breathing space before any overlap so it's also a close run thing. I flicked on CNBC after about 20 minutes of the US trading day, the market was down about 75 points and the sangfroid had vanished as fear of the consequences of a political stalemate was gripping the markets. When I turned the radio on this morning, I expected a drop of about 200 points in the Dow and it came in at 199.

It's also a decent chance that the concern turns into panic and the old head and shoulders scenario starts to pan out.

My main question today is "why am I finding it so hard to act on what I can see unfolding in the market, especially when it runs counter to my positions?" That has frustrated me for some time and I've been trying to work on ways to resolve it, but I've had a fresh thought about the issue which is kind of interesting.

My motivation to trade all the moves that I can stems from being an options market maker for a decade or so at the start of my career. It's possible to make excellent returns with low risks (although the set up costs are very high now) and the crux of the matter is to always be seeking balance. If you get long or short as a market maker, you might ride it for a little while, even a day or three if you're experienced, but you're always looking to square up. The same goes for your volatility exposure, expiry risk, time decay etc etc. Whereas, if I'm looking to trade a simple swing, it's generally going to have a 3 or 5 wave shape about it which presupposes a few days where the trade goes backwards. It's rarely viable to chase these little moves and yet I'm often trying to do it or fearing the move is over and getting out prematurely while the best probability is that there'll be continuation.

There's an obvious conflict here and it may be the reason why I'm continually battling with this issue. It also raises another question: which is it going to be; intraday or short/medium term trading? Quite frankly, I've been looking to do medium term trading for years and it is time to take that seriously. The more trades you do and decisions you have to make, the more stress and time is involved. It could be worthwhile if the money is much better but it hasn't worked out like that for me, probably because I don't really want it, it's just habit. If I wanted to aggressively trade short term, I'd still be a market maker.

2.48 The market has outperformed on the downside with a 1.6% fall, slightly worse than Japanese markets and a fair bit weaker than Chinese markets which are down around 1%. The index is ever closer to the key support and another bad night in the US might do the trick. In the meantime, I'm sitting tight. I can see that the CPI figure has been a big negative and while there may be doubts about the flood impacts, the currency markets aren't concerned and the dollar strength is bound to start feeding into analyst models. However, heading into reporting season, the market is already priced for flat earnings and no growth and the US will negotiate some sort of debt ceiling agreement so things may look a lot better next week.

4.10 Today was option expiry day so there's plenty of volume on the match although no significant move. The Asx 200 has closed at 4465, down 73 with selling across all sectors. US futures are slightly up but all depends on the talks.