10 yr yields soar

Upon opening up my trading screens, the market had not made any clear directional move, and consolidated into a tight range. Early on, there were very few opportunities, and most traders were sitting on their hands until the open. Once the market officially opened, the market remained in a tight range. It seems like someone got the 9 am number (Existing Home Sales) early. Home builder stocks rallied appreciably before the release, as did XHB (home builder etf). This was eerily reminiscent of yesterday's Consumer Confidence. On the release, ES and Oil rallied, but since it was apparent a bullish number was expected and the release was fairly close to expectations, the move after the release retraced very quickly, and presented a great opportunity to fade the knee-jerk pop. I found it easier to fade oil than es, and the market never looked back. The ES market consolidated after the release, and remained in a tight 5 handle range for the next 3.5 hours, which presented very few trading opportunities. It seemed to me that there were no clear signals, and it was more of a mean reversion trade. I try to stay out of these tight ranges and wait for a trade to set up. During that time, Reuters released an ECB source story about buying more covered bonds. The trade was to sell the euro, but I mistakenly bought Euribor instead, and scratched the trade. This ECB story did little to move US markets, and the real news and move of the day came later when the 10 yr price tanked and yields rallied like crazy. No one was sure if it was from convexity hedging (http://www.investinginbonds.com/learnmore.asp?catid=7&subcatid=72&id=366) or a continuation of fear of US debt eventually being downgraded. There were many opportunities to sell and fade with very tight stops. This fixed income move pulled most markets down with it. However, recently, oil has taken on a life of its own. Everyone says fundamentally that prices shouldn't be here, so it was no surprise that oil eventually rallied while the equity and fixed income markets sold off. ES moved lower, consolidated and made another leg down to finish near the lows of the day, all while oil made a run for the highs and squeezed out more shorts.

After a very rough day yesterday, (I held a loser way past my exit and blew through my personal limit) I kept very tight stops today. My only goal was to prove that I can make money and remain disciplined. Yesterday, I re-learned, again, that I need to have my exit planned before I put on my trade. This has proven to be a very expensive lesson that I just refuse to learn. This is my achilles heel, the one problem I seem to run into time and time again. I would attribute most of my losing days and big losing trades to this one problem. Today I obeyed my stops, and kept my losers very small, while allowing my winners to run. I slowly peeled out of my winners once certain targets were hit. When my reasons for putting on the trade stopped working, I exited and looked for the next opportunity. I made most of money from fading big moves, just waiting and watching order flow, and finding pull backs. I failed to capitalize on selling equities with the massive sell off in fixed income. I figured that if US yield sky-rocketed, then the dollar would become more attractive. The euro has rallied strongly the past few weeks, so I figured it might sell off with ES and 10yr. The initial reaction helped me believe that (the euro sold off initially) however, once the move kept extending, and the euro started to rally, it became clear that my logic was wrong. There are many problems lingering here in the US, so it made sense (after the fact), that people were buying / moving to a safer currency as they punished US equity and fixed income markets. Oil was and is doing its own thing, and I am done trying to rationalize that market. I haven't been trading well in the past few weeks, so I am happy that I was able to capitalize on a few opportunities and make back most of what I lost yesterday. Tomorrow is a new day, and I hope to continue the discipline from today, and wait for my entry points. 7:30 am numbers tomorrow, so I will see how and if they set the tone for the day. DOE energy stats are at 10:30 am est, so I will wait to see how oil reacts to that. Patience patience patience. Wait for setups and trade defensively, its still capital preservation right now.