Shambles.

Australia has a carbon tax and it's a mess, with some industries protected, others not and the tax costing the public purse for the first 4 years. There's a school of thought that the best approach to the impact of climate change, whatever it might turn out to be, is to carry on with business as usual because the benefit of operating your economy at a higher growth rate will allow you to pay for remediation. Regardless of the pros and cons, the market is not reacting well today. Weak US jobs were already indicating a soft open but the loss is 60 points where the expectation might have been 30 to 40.

I'm trying to be balanced and not attach to one particular view. My thought was that the US market was quite resilient on the employment numbers and in Australia there were some reasonably strong technical buy signals on Friday. If there had been no carbon tax news then the market would have been a buy on open. That really hasn't happened although I have gone long AWC on an intraday basis. The stock made a buy signal on Friday and with Alcoa reporting in the US tonight, I thought there was the possibility of support ahead of that figure. I bought at 218 with a stop at 214 just below last week's low. It's the sort of position I can hold overnight if it seems appropriate.

As I mentioned on Friday, I'm trying to resolve the intraday problem one way or the other but the carbon tax has created so much uncertainty that there has been very little opportunity that I could see today.

The wash up from my Friday intraday positions was that the long I held in WPL (did take some off at 4120) fell through my stop level at 4080. I got out at about 4070. I closed out the balance of the short in OST on Friday  because news of special deals for the steel producers had been leaked but without detail. Anyway, OST has kept falling and is down 6 at 197. So I picked the wrong horse there. Either way, I was comfortably in front on the trade.

I have overnight long positions in IPL and PBG and a short in PDN. IPL is down 8 which is slightly surprising since Potash rose 2% in the US, while PBG looks like it's going to be a safe haven and is just down a tick. PDN is doing the right thing with a 6 cent fall to 262. I'm looking at putting on another overnight position with a short in TOL.

I've just made up my mind with TOL. I was thinking of buying some last week, playing the dogs of the Dow theme, but it occurred to me that the stock is probably just having a choppy correction before heading lower. The last couple of days seem to have borne that out and with a trade below yesterday's low, I've gone short at 480.

It looks very much like the Asx 200 has completed this leg of its recovery with a new high on Friday and a reversal today. I can picture a scenario where the rest of the world takes a look at the carbon tax and decides it's all too hard. There are plenty of AUD gains to offset flat market performance and it's always easy to get out of a trade when you have some profit to bank.

The silver lining is that the July put positions which I bought when I was in denial about the market rally are starting to recover. Last week I mentioned that CBA had probably completed the retracement but might consolidate for a couple of days. That turns out to have been correct and there's a sell signal now as the stock has traded to 5106, below Thursday's 5109 low. I have a July 5050 to July 4900 put spread plus some extra July 5050 puts. These are up about 18 to 42.

Getting back on the trading psychology theme, the idea with these put trades in big dollar stocks is to hang on for as long as possible. My ideal would be to ride a drive down to a new low. If, say, the low is 4850 then the puts are worth 2 dollars each and I've quadrupled my money. If I hadn't stuffed up this trade, I might have bought them into the retracement for 25 cents each and that's when the leverage starts to stack up. Realistically, the odds of getting one of these moves right is not going to be much better than 3 or 4 to 1 so it's logical to hold on. (Obviously, sometimes it moves your way without really trending hard so it's not a completely binary trade).

I've rarely managed to ride the whole wave in the past and usually only when the move has been very fast. The issue is one of control, I think, not being able to allow events to unfold. Let's see how I go this time.

I also bought July 4300 puts in BHP at 31 last week. I went a day too early but the stock now has a completed 5 wave look about it. My take here is that the pullback might get back into the 4200 to 4300 range so I'm just looking to scratch something out of this trade. These puts are back to being worth about 28.

The amusing thing about these put trades is that I'm now backtracking fast from my resolution to stay out of long option punts because I never cut them when they go against me. Now I'm thinking that the best thing is to trade either deep in the money options which I know from experience that I am happy to hedge with stock or else buy cheapies where I'm prepared to write off the premium and try to jag a big move.

Actually, I did put on another intraday long which has gone a lot better than AWC. It's ACR, in the hot biotech sector, and I bought at 376 and 378 to average 377. I mention that because it's illiquid, so I only got 10k. I've just sold 2.5k at 385. It's that rarity in the sector, a stock with a reasonable P/E ratio and it had a nice little write up in the Sunday papers.I'm just trading the 60 minute chart with a trailing stop.

2.40 I didn't really give AWC enough time to show any strength before jumping in and have paid the price, chopping out at 214. I cut the ACR at 384.5 so the net impact of the two intraday trades is a small loss because the AWC trade was in larger size.

However, the banks are really under pressure and CBA is now at 5051, down 121 or 2.3%.

3.54 Approaching the close of a slightly odd day. The top 20 are mostly looking weak and giving a clear picture of a soft market. The medium caps are all over the place with some relative outperformance here and there. My assumption is that the mid caps will mostly fall into line if the broad market weakness eventuates in the next few days and any intraday trading I do will be focussed in that direction.

4.12 I've got mixed feelings about how I went today. There were some good intraday opportunities, I got one but stuffed up the other by not watching carefully enough. For example, I could easily have reshorted OST once it was clear that 200 was not going to hold. The break came just before 11 am and I still find it hard to wait that long. Plus it was a proper signal where there was nothing in AWC, just minor buying.

The point of this exercise is not to rebuke myself with perfect hindsight but to realise that I fell in love with my own idea in AWC without the benefit of any chart support. It was about being clever, so much so that I only wrote about the fairly obvious ACR trade as an afterthought and declined to do the fairly obvious OST (or BSL) trade. It was the classic trader's trap; more concerned about being right than being profitable.

Part of the reason I took the AWC trade was because I'd been thinking that great intraday trades occur when everyone realises that a stock has gone too far. This is true, but you still wait for evidence. Meanwhile, you also get excellent intraday trades when you go with the flow in fast moving stocks; usually after the early contrarians (like me, often) have tried to pick a turning point.