Passion reborn

About 6 weeks ago, I spent some time considering what I really like about trading and a couple of things surprised me. For example, I realised that I love trading actively and that hasn't changed despite my big plans to move to what I thought of as a more mature and considered trading style which would give me time for other things. Quite frankly, with my kids both into their 20s, I have plenty of time outside trading hours and I can't think of anything else I'd rather be doing (for work). In fact, it occurred to me that I had cause and effect backwards; I thought I traded actively because of years as a market maker but I wonder if I simply gravitated towards market making and did well at it because I enjoy the action.

Since I've unashamedly returned to an active style, I've done pretty well and also found – in fact, remembered - that I can keep to a longer term plan despite the everyday noise.

The other surprise was that rather than a focussed book of two or three trades, I'm quite happy to be in, say, 15 positions even if half of them are just an outlet for tinkering and the rest are the serious trades.

The overriding insight I've gained is that I get pleasure out of trading and I'm once more excited to get into work and see what the day brings.

I still have to work on the balance between sticking to a plan and realising that the tide has turned but that challenge is a big part of the pleasure of the job.

Although I've been doggedly writing about individual trades, it's with an increasing lack of enthusiasm, because I think that the value of the trading diary over the last few years has been to help me find my way back to this point. I've learnt and taught myself a lot about a methodical and disciplined approach to trading and having assimilated that knowledge, I have returned to the very intuitive style of my earlier days with the addition of that technical backbone.

So, it's goodbye from me, at least for now. I hope my work has helped a few people along the way and I wish any traders the utmost success.

Vacuum

More strength as we approach the mid point of the day's trading; the Asx 200 is up 20 at 4088, seemingly led by a strong futures market and arbitrage buying. It's still very patchy and volume seems thin so I'm assuming it's a continuation of short covering rather than a sea change. European markets returned all of their early gains last night as the reality of Spain's banking problems hit home so today's rally is either brave or foolhardy.

I've shorted MQG via the June 2500 puts – at worse levels unfortunately – but I think this is a retracement and the lows will be retested.

2.26 The market kept surging and didn't pause until it got close to last week's high at 4118. It's up 1.1% and we've built in a big overnight jump.

4.06 I sold out the last few puts in WBC at 150 (2050 equivalent in the underlying) as the stock made a new low and traded above that bar's high. The chart is odd because of a trade – clearly an error – that went through two dollars above the market.

4.14 The market went flat in the last hour but finished near the high at 4114, up 1.1%.

All day sucker

It looks like one of those markets which is going to push up to the close and would be typical of a day when there's no US trading to come overnight. It often seems as if one day's trade is stretched out to two so that a typical situation where an early short covering rally fades into the close is played out at a more leisurely pace. I have a couple of gold longs which have rallied well but my shorts are also up so it's a negative day overall.

Weekend polls from Greece show the incumbents back in the lead and this has helped sentiment along with more noise about a common Eurobond. However, the only concrete development on the weekend is the need for a Spanish government bail out of Bankia SA to the tune of EUR 19 billion.

The Asx 200 daily chart, below, is recovering after a fractional new low on Friday. It's a common reversal set up so despite my scepticism about Europe, I'm wary of getting caught out.

4.14 As per the script, the market kept pushing and some of the laggards had strong catch up rallies in the order of 5 to 10% with LYC winning the prize with a rally of 18% to 105.5. I'm disappointed to have missed out but it was patchy and I picked the wrong horses this morning. As posted earlier, this could continue to rally but I'm treating it as a one day wonder for now.

The Asx 200 closed up 39 to 4068, the high was 4071.

Crushed

The index can't recover and after a little early buying gave us a lift, the crushing reality of PMI figures from China and Europe have put the kybosh on any bounce in resources. On top of that, the banking sector is under pressure and the index is lower by 21 points at 2.44 pm.

It suits me although, once again, I don't have any big winners. That's partly because I've given up on shorting the resources and have been selling the better performers on the assumption that they will follow suit. I did have a couple of gold shorts too and they are the latest safe haven.

I bought back the RSG at 146.5 and went long a few there too. It looked reasonable earlier in the day but is fading now...not a big position though and I made a little on the short side.

I'm out of a few of the WBC puts at 176 (or 2024 equivalent in the stock) and the intraday low has been 2008. QBE has tested my patience all week but looks ready to resume the fall.

4.16 It wasn't a big day for me. I sold a couple more puts in WBC at 2008 equivalent and covered odds and ends elsewhere. The index close down 27 at 4029.

Buckling under

US markets recovered sharply from a 1.5% sell off to close square but the boost was short lived for us and the index is down 11 points at 1.46 pm. Despite being short, I have no real winners. I fiddled around early, buying a few of the mining services stocks since I thought there could be another kick to the retracement. That didn't happen and I got out of those positions having lost a little in each. In the meantime, the short positions are flat to up slightly.

The data point for today was Chinese flash PMI numbers, the independent measure of growth and that showed continuing contraction in the Chinese economy. It's helped to take Asian markets down about 0.5% on average.

My inclination is to reduce position size since the momentum has slowed and I'm vulnerable to a second leg of a retracement. Here's the XJO daily.

2.04 It's option expiry too, so the majors are stuck around strike prices which limits the possibilities for the rest of the afternoon.

4.06 There's very little to be said for today, simply a market that's waiting on developments. I sold a few more June 2200 puts in WBC at 162 to reduce exposure and covered bits and pieces elsewhere.

4.10 The market has closed down 11, finishing the day at 4056.

QBE under pressure

I was squeezed in QBE yesterday as the stock rallied against my short position but today is a different picture as early gains in the US faded with a flat close. The stock tends to track US 10 year bonds and a flight to safety is possible as the Greek exit draws closer with a US bond rally implying a lower QBE price. There is also the prospect of legislative change affecting margins in the US. Apart from that, the chart suggests the potential for the stock price to accelerate its fall from here assuming that the sharp rally from January is complete and the lows could be retested. Price has again overlapped the March breakout level of 1230.

QBE is lower by over 3% while the broad market is down 1% with banks and other financials falling on a par with the index by and large.

The RSG short has performed, dropping 6 to 145 and I've added another gold short in SBM at 190.

4.19 The market failed to recover significantly intraday and drifted down to close just off the lows at 4067, a drop of 54 points or 1.3%. A good day for me and I'm predominantly short again having also added QRN and PNA. I covered bits and pieces of other sold positions, buying some CPU, IAG, ORG, RSG and WTF.

Here's the QRN chart. It's another continuation pattern and I'm short at 336.

PNA is similar although it has had some support in the last few days and may not have finished the retracement. I've done some at 282 and would consider selling more on a weak rally. Stop is at 300.

At the moment I'm tending to jump in and out of stocks while holding a core position so I bought back some CPU today at around 784 having shorted extra yesterday at 797. The stock looked very weak by the end of day and I would look to reshort on any minor bounce.

All boats lifted

The rising tide of a relief rally is lifting most of the market. The index has pushed steadily all day. At first, the speccy longs did best but then the larger cap shorts started to rally more strongly so that I'm slightly down thanks to QBE and WBC despite having done well in ASL, AGO, IMD, NWH etc.

I've been selling out of the smaller cap longs but I've also covered a couple of shorts in ALL and JHX. I'll be net short overnight because I don't want to fight a strong downtrend although there's certainly more scope for a retracement rally.

I've added a new short in RSG at 149. It was looking pretty weak but has just perked up. I'm hoping for a resumption of the sell off.

4.14 It was a grinding rally with some minor selling into the match. Up 47 to 4121.