I AM A FUTURES TRADER

2012-01-29T15:50:00.000-08:00

NOW IT IS TIME TO WATCH CAREFULLY

We are now at the key inflection point I was hoping was going to develop in the worlds favorite market. We have learned several things about this precious little gem that have been interesting. First we have learned that it is a store of value and always goes up in times of crisis. Second, it has never been worth zero. I think G Gordon Liddy, Rhodes scholar, was our instructor on this one. Third, we have learned that China will be the new world leader and the Yuan will take the US Dollars place as the worlds reserve currency. Our teachers on that have been single A ball players for the most part. Fourth we have learned that the governments are artificially suppressing the prices of Gold and Silver to stop them from being at $50,000. We have also learned that there are several 7 year olds asking their parents how much Gold they own, and if they don't why? We have also learned that in spite of the meteoric rise in the price of this over the last several years, this is actually the best time to buy it and it is sure to clear $5000 or more. We have also learned above all these other lessons, that "it is different this time."

As to the wisdom of any or all of these teachings stated above, I don't have any idea if any of them are correct or not. My research does not confirm most of them except the 7 year olds buying frenzy. That is something I have experienced directly with friends mine and their children, so I know it too be true. I may have left out a few lessons from this list, since I always tended to tune my instructors out at some point during my years in school.

In my little world, this is very simple, this is a very good sell setup. It is not a sell entry. It is a place now where it has rallied in a down trend above my upper bands, at a time during the year when the seasonal bias is down. Further, there are some multi year cyclical influences that are also kicking in here. This just tells me to look for short entries here. Whether or not they turn out to be big moves, or whether or not the actual entries even setup on the daily charts, I do not know. It is my intention to try and ride short entries if I get in them, for a larger move because of my big picture view. What will be tough to do when the break does happen whether or not it is now or 2 years from now, is going to be the massive daily ranges we are going to see. We got a preview a few months back of what the feature presentation is going to look like once it gets here. If I happen to be short and get two consecutive $100 days in my favor it may be hard not to take that money. I will cross that bridge if and when I get to it. In any event with all sarcasm and kidding aside, this market is setup now on a weekly basis for a sell, so I am looking for something to setup to get short here.

It does seem unlikely that we could get a big move down here without the stock market going down, so we will see if that separation will happen. Maybe both will keep rising.

It does appear to me also, that quite a few other markets are setting up as retracements in down trends.

Here is one of the of those other markets that I am looking at, the British Pound. It is pretty much the same picture as the Gold market. It does also have some bullish sentiment which makes this one attractive to me. The Grains are also mostly into my bands in the sell zone, and Bonds are into the buy bands. I suppose the Indexes are still by COT standards a sell, but my bands have turned up there so those setups are not as good.

The difference to me between the currencies, bonds, Gold, and the stock setups, are that all of them are retracements against the trends except the indexes. The indexes are against the trend.

The one thing that all of them have in common is that none of them have a daily pattern for entry that I would use going into tomorrow. I will be watching these for entries this week.

Good Trading this week

2012-01-27T06:11:00.000-08:00

CSI JUST LEFT THE CRIME SCENE

The experiment is painfully over and now there is a crime scene left behind. If only that hot blonde cougar from the show could have been here during the investigation! I had mentioned that over the years I had many ideas that were very promising that turned out to be no good. I would have to now classify the stock trading system in that category. I had been saying that I thought this was the best climate I could have ever had to try it out live. We have a runaway stock market, and it has been issuing sells against that trend in individual issues. One of the things about systems is that you have to just follow the rules. You take the trades as they get spit out. Prior to this week there had not been a closed out trade that lost even though CTAS had been upside down, it was still an open trade. That was closed out earlier this week, and now I just got clobbered on two others. I admit I did not follow the rules on the exits, I just covered the trades at the market and tore up the system. The main reason I did this was simply, the flaw in the logic of this approach had been bothering me from day one. Trying to fade trends when they are really rolling, with fancy with and squiggly lines, is just a losers game. I know this all too well, but apparently not well enough.

The Achilles Heel with this method which I stated right from the get go was no stops. When you get into runaway markets, having no stops is a very dangerous game to play. I wanted to see with real money and the best filters I could develop mechanically, if I could dodge some of these bad trades. The systems showed great results, but the draw downs were big within some trades. Now that I have taken two separate 1% losses, I consider this system to be a bust. I do seem to recall a comment a bit ago about how I never mention the bad trades enough, this should cover that. You could argue that this is not the average market condition and that would be true. However, these conditions develop about 12 to 15% of the time. That is certainly often enough to warrant not trading like this.

I mentioned a few changes I was making to it that showed promise, and one of them is where I am going with this. I will keep plugging away with real money on these changes. If and when it becomes consistently profitable with real money, I will consider offering it as a service for subscription. However, those changes require discretion. The Black Box is toast. At this point that is a long ways off. This is where straight shooters like me set themselves apart from hucksters who take advantage of subscribers. I will always only offer things that I use myself with real money. The trades will always be trades I am in. This is the only true way to be able to look yourself in the mirror during times of draw downs. If you the seller of the signals are actually losing along with the subscribers during draw downs, then you are true to your word. There are not many people that do it that way unfortunately, but I am one of them. I remember one phone call I had with a client in the old days, when my Bond System was being used by subs. She had just lost about $700 on a one lot trade with one of my signals. She was new to trading, and of course was concerned. The best answer I had for her was that I had been in the same trade and lost $7000 since I was trading 10 lots. That seemed to make her feel better. It did not make me feel any better, I was still pissed I lost 7k. However, it did give me peace of mind that I made every trade with my own money that I put into the service even though I did not promise that I would. It was how I slept at night.

The one take away from this is that although my new COT Synthetic tool is great for picking spots to look, it cannot really be used mechanically. This is the case with every single technical tool I have ever used. We just can't get away from making judgments about things, and we should not be trying to do so. Life is a judgment call, so is trading. For those who want to know about mistakes and the results of them, it does not get much better than this. The mistake I made here was the premise of overbought and oversold. Yes those are sound concepts, but you have to be very careful with how you go about using them. I am now going back to using the new COT tool to establish a list of stocks to look at my other tools for entries in. It has spit out several for today, but once I looked at my short term tools, the list is down to 4. I will only enter them on weakness should we dip.

As for the futures markets, I am watching Heating Oil today for a short entry. I have not shorted the energy markets yet and I am glad I have not. I would have been stopped out yesterday had I done so, although the trade which would have been in Crude, would have been a scratch.

I have marked on the chart where I am looking to short Heating Oil today. I doubt we are going down there, I am expecting a quiet day on Wall Street today, but you never know. We are still extremely over bought and could fall hard for a day or two at any time. What I do like about this setup is a couple of things. First, we have really followed the seasonal here, almost every single swing has lined up perfectly. When I see this I pay more attention to the seasonal indication. I do know this party will end and it will veer off at some point, but until it does, I will heavily consider it. The other reason is I get a sense the public is really expecting a big move up in Crude Oil right now. Although they may be right, the fact that stocks have rallied this much and Crude has not come along for the ride, tells me there is underlying weakness. Of course Crude and Heating Oil are not exactly the same markets, but they do generally trade in the same direction.

The next chart shows more than what I can type in words. It is a chart of the ES on a daily basis, with one of my short term tools I use. Now you can see why I have no trades to look at, what a mess. This tool does not look this flat too often. In fact, I cannot recall the last time I ever saw this type of look with it.

I try to use this to help me trade swings, when it is flat like this, there is just nothing to do but guess. I am not a good guesser. I can mess around with scale and get this to show my a triple divergence against this move, but I like the scale to be constant. In it's natural state, this is just telling me the trend is strong and not to do anything.

Here is another trade I should have been in that I was not, and it appears I saved myself from watching a good win become a scratch also, just like with Crude.

I have marked the two entries I considered that I did not take. The truth be told, I blew this and should have done both of them. However, had I done so I would have been taken out for a scratch on this huge bounce that as I type this is even above where I have the arrow. The price did not reach down to where my targets would have been, so I would have still been in when this bounce happened with a stop at break even or a little better.

For those of you that have sent emails about how much you are trading this month, and how well you are doing, I applaud you. I mentioned that during these low periods of volatility, I do not trade as much, so kudos to you. This is a tough business, we should always feel good for other traders when they do well. Do not get into the mind set of resenting others for doing well, that is counter productive. I remember a quote from the Market Wizards book that was funny but rang so true. "Why is it that our greatest joy is when another man is getting screwed?" That is a paraphrase but it gets the point across. It is funny, but it is also a sad comment on how the human psyche works. Get outside of that thinking. Celebrate others success, negative thinking will get you nowhere.

It appears my interview I mentioned is going to come together in the near future, last chance to submit topics for discussion. This month I am not sure I could spell my own name properly, but in general I know what I am talking about.

That's it for today, have a good weekend.

2012-01-25T22:26:00.000-08:00

THE MORE THINGS CHANGE THE MORE THEY STAY THE SAME

It is time to return to our mystery chart which once again appears to be dead on balls accurate about it's forecast of the price many months in advance. Many of the cycles and seasonals have called for a top in mid January, which is why I was looking for one once we got into this overbought condition. However, at this point I am going to defer to this forecast until it misses a turn in the market. It is calling for a top on Feb 24th, so that is what I am going to look for. As you can see it calls for a decline of a couple of months. After that we should have a rally that lasts several months.

I know there are many talking down the economy telling us how bad things are. However, we are seeing fairly good earnings reports, so it is a bit of a reach to say the world is ending. I really think it is very difficult to determine what is really going on especially in an election year. There is so much manipulation by the government. The bottom line is now that the trend is up in all time frames, and we have somewhat of a runaway market. I have no interest in trying to short the ES under these conditions. I also won't chase it on the long side here. I am damned if I do and damned if I don't, so there is just no trade for me in the stock indexes here. There is not one in sight either. We are likely at some point to get some type of pullback, but by this forecast it should not be much of one. In my younger years runs like this used to kick my ass. I would dig in my heels with my fancy tools, and refuse to admit that I was wrong as the market just plowed forward. I now know that my weakness is that I don't trade runaways very well, so I don't trade them. KISS is my strategy. I keep it simple stupid for myself knowing I can't trade these for a lick.

My call for a Mid January short term top was just DEAD WRONG.

One thing that has been a constant is the way the FED acts to create bubbles. They do it almost exclusively through interest rates. When they announced today rates would be low at least through 2014, they are giving us a heads up not the expect anything really bad to happen in the stock market for quite awhile and too swing away. I have no doubt that by that time in 2014 or thereafter we will have another big bubble on our hands. We have plenty of time to make money and bank it before the next crash it appears. I would suggest not getting too tied up in the gloom and doom talk. Things look good to me for the near term. There will come a time if we sail along like this for months where trouble could show up, but my short term indicators are just flat lining now, which tells me not to even consider fighting this. A flat lining condition with them does not necessarily indicate a decline or a big rally, it just tells me not to fight the move at hand.

This chart to me is very interesting, it shows Bonds in Green going up directly in sync with stock prices. In the good ole days before electricity, this was the norm. Low interest rates are very bullish for stock prices because money chases the higher yields of stocks when rates are low. If rates are going to stay low for at least two more years, any declines in stocks should be pretty well contained. This is what I meant by the topic of this post. It also applies to the politics of the election. It is my contention that regardless of what people say, most people are afraid of change. This is why nothing ever changes in Washington, and it won't this time either. The guy who would truly represent change can't win in my view, and that is not Ron Paul I am referring to. He would get us all killed, so he has no chance at all, zero. Gingrich is who I refer to. I would love to see him win just to watch him belittle the media for 4 years. He has good ideas, but that is why he can't and won't win. People are just too afraid of change, and I think his ideas although good for the most part, represent change to scares people. Barry is much more mainstream and the Repubs are handing this thing to him if Gingrich winds up the nominee. Romney is just a typical politician who blows which ever way the wind blows. so I think for that reason he will wind up the nominee. He does not represent change at all to me, other than being an evil rich person we all are being taught to hate because he is successful. He never got the memo telling him not to donate to charity and to instead give 100k every year to each lifeguard who retired at 50.

The reason I state this is just for the logic, it is not to ignite another political discussion in either direction. Please no political comments I will screen them. I just bring this up to make a market point. It is by the same logic that I state that the US Dollar will not lose it's status as the worlds reserve currency. As much as we want to engage in these long shot discussions, the harsh reality is that change of that magnitude rarely happens in things such as politics and politics are what is going to determine the fate of the buck. It is for political reasons that this won't happen. I can't argue that it shouldn't with what we are doing with our finances here. I am just stating that I don't think it will because it represents too much change.

Also speaking of things not changing, I was in a Sushi restaurant yesterday with a good buddy of mine. As we sat at the bar, of course the bartender was hot. Aren't they all when they are women? I decided to challenge here to do something I thought she would never be able to do. I asked her to just repeat three words. I started with a simple one, "I." I then followed that with "Was" and she repeated them perfectly. The third word was where trouble surfaced. The third word was "Wrong." It was my bet with my buddy that no women could ever say those three words one after another under any circumstances. Here we were with some total stranger having fun, and she could not even say "I was wrong." This again proves my point, some things never change. She later made a mistake on our bill, and I said "say it, say it." She couldn't do it.

The way I see the stock market here, it is just more of the same. We are pushing it higher with low rates, same ole, same ole. Fighting the Fed is a bad idea as we all know.

I do not see one single new trade for tomorrow, and the truth be told, I am trading much less this month than I desire to. The runaway stock market is just zapping volatility across the board. Many of my normal signals are just not there at the moment. I am sure some others out there are frustrated like I am with these market conditions. Stay patient this will pass, don't throw away your money in the mean time.

Good Trading

2012-01-24T21:41:00.000-08:00

PRICE IS ALWAYS RIGHT

In spite of what this bonehead who authors this blog as well as a few other well respected traders are thinking right now, the band plays merrily on. Here is the VIX and in spite of it not always being right, I do still think it is the best stand alone tool for picking swings in stock prices. Generally speaking, once it moves into either Bollinger Bands or Standard Deviation bands, stock prices reverse. The reversals are not always big, but they are predictable about 80% of the time. That does leave us holding the bag on the other 20% like now! If you look back in prior posts, I showed the Vix and indicated I thought it would take some type of poke through look, to generate a short term reversion. I don't think I used those exact words, but I referred to a clear penetration of the Bollinger Bands. We did just get that 2 days ago.

Early today it did appear it might finally happen, but there is quite a nice quiet bid under this market, and the price rebounded slowly throughout the day to close higher for the 5th straight day in the ES. If you want an explanation as to why go to CNBC. Some suite will undoubtedly be on there telling us we rose because grandma felt good about the prospects of the Greek debt crisis or some other such nonsense. I have no idea what causes prices to move every single day. The markets are full of random action. When we get a trend going this strong it takes volume to break it and we do not have volume anywhere in sight.

Just remember, The Price is ALWAYS right in our game show here. If we are not in sync with it we are wrong. At the moment it does not appear the VIX action is having any effect at all in the price action. However, we do need to be aware of this because at some point this is going to matter.

I have been tinkering with my stock trading and doing some more of it. I am hesitant to make a strong push to the short side here just due to the pure strength of this trend. Even though using the overall trend of the market has no effect on the stock system results, my gut tells me it should. As a result, I am not fully committed to shorts here. I am doing some day trading and below is a chart of one I did today in Crude Oil that was a perfect trap pattern I love to wait for.

I missed two big swings first, then caught the third one down when that false breakout quickly reversed. Day trading is so tedious I admit I lose my patience with it all the time, especially when the markets are this slow intra day. However, this was a decent one I caught today. After I missed the first two moves and caught the third one I called it a day. My Synthetic does not work worth a crap in this market intra day, I should not even have it on the chart. A few markets that I have mentioned as setups recently moved today, the Yen and Cocoa. Hopefully some of you made some money in them. They did move in the directions I mentioned to look, but as is typical with setups, the moves did not happen right away. They usually don't.

That is all I have for tonight. I am still trying to find my way into the energies but no go so far. In tonight's teachable moment I learned once again it is time for me to share with everyone as directed by President Not. This kid just has one play and he just calls it over and over and over again. Shared sacrifice.......aye carumba! The good news is that the markets seem to be numb to him in either direction now which is a good thing.

Good Trading

2012-01-23T17:41:00.000-08:00

TIME TO CHILL OUT

After having read a few recent entries in here I have noticed I have gotten a bit on edge. As that comment that attacked me suggested that I am just trying to draw attention to myself, it got me to thinking. My first thought was, "well of course isn't that what anyone doing a blog is doing?" Clearly you are bringing attention to yourself when you have a web site. You try and provide content that is interesting enough to get people to return. This is pretty obvious. However, the other function of doing something like what I am doing here is that it helps me to organize my thoughts. When I peruse the stats for the blog, I see that at even the busiest days I only get about 500 readers, so the traffic is not very heavy. However, that is still 500 people that I can embarrass myself in front of if I am not careful. Further, there are readers from virtually every country in the world now, which is really cool. I can embarrass myself in countless foreign languages, what an opportunity!

I do try and lay out as clearly as I can what I am doing, with the one asterisk being that I hold back a few of my own proprietary tools to protect myself. It is not easy when I am dead wrong on something knowing that many people are reading my views. So, the question that naturally follows is, why do I do this?

The very first reason I decided to do this was that I thought it would help me. There is a big difference between just trading in remote isolation, where only you know the mistakes you make. You can get over them very quickly and move on. When I make them in this forum now, I field questions about them afterwards, so I wind up being in blunder recovery mode much longer. This is actually a good thing because it has a desensitizing effect. I don't like being wrong or losing more than anyone else does, but I have learned to accept it. I know I am going to make poor market calls at times, but I also know that I will recover and make very good ones. Reaching the point where an individual knows this is a big step. This blog has helped me do that. Anyone who is ever going to manage a large pool of money had better be able to handle this aspect of this business. I have no idea if or whether I even have a desire to do that, but I wanted to do some things to help me prepare for that in case I decided to go down that road. This has helped a great deal in that area.

Today I noticed I was a bit on edge recently, in what I have written. These types of very low volatility environments like we have had the last few weeks are the toughest markets for me to trade. When markets just creep every day in the same direction either up or down, my tools do not work as well as they do in other environments, so I get a bit edgy. You have to know yourself and what your strengths and weaknesses are. As you get older they become painfully clear. I try to use this knowledge to protect me when I know I am in a situation that does not fit my approach very well. I trade smaller knowing it is likely I will have more losses than normal.

The second reason is that I am not aware of another blog such as this where someone who actually trades, calls out what he is doing pretty much live. I have had to modify this some unfortunately to protect myself, once I found the government URL's spending hours reading my posts. I suppose it could have been just someone who works for Uncle Sam who happens to trade, just reading, but one of them looked at virtually every post I had ever made. This has never happened before, and I think it is unlikely that was a trader. In spite of that I still try to stick close to that mantra, and I openly discuss wins and losses. It is my hope that people can learn from this. I think I am accomplishing that based on comments and emails.

The third reason, was to help drive traffic to my web site once I re-opened it if I decided to do so. I don't know at this point if I am going to do that or not, I am leaning toward not doing it. The thought of the government having to approve every single comment I make about things is not a pleasant prospect to me. We have such a strong trend towards big government now that it is just not the right time for this. Maybe in the future if the politics change, this will be different. I know in the old days when I had my trading service that was very successful, it made me feel so good when I got emails from clients telling me about the money they had made in some of the trades. I had one guy who was just a classic. He had an incredible knack for sleeping in and missing trades, and he always seemed to miss the ones that lost. During the last year of my Bond service, there were only a handful that lost the whole year, yet he was able by sheer luck, to over sleep and miss the entries on every single loss! Of course I then had the guy who managed to lose money during a streak of 22 consecutive winning trades in my service. He of course wanted to cancel and was upset with me. It is still only speculation on my part as to how he lost money during the best streak my service ever had. This guy was the driving force behind me shutting it down, I just did not want to deal with people like him. Obviously, he did not follow the trades correctly and yet it was my fault. Ironically during that same time period, there was a good sized hedge fund in Brazil that had caught on to me and wanted to use my Bond system with their clients. We just could not work out all the legal aspects of that venture unfortunately. It was complicated due to his relationship with a US affiliate and I was not a CTA, etc.. The big guy loved me and the one lotter hated me, go figure!

The fourth reason, is that trading is such a solitary business, I was hoping to meet some other traders in other parts of the world to exchange ideas. That is also happening, so mission accomplished on this one. This is a tough business, and it is nice to know others that pursue it. I only have two local friends that trade, and neither of them is profitable, and they basically do it with a passing interest most of the time. They have good skills in other industries. It is nice to know you are not alone when you have bad trades, or just need someone to bounce something off.

With all this aside, I apologize for my being a little too "chippy" recently. I am still going to poke fun at myself for being an attention whore since I still love that take.

I was watching the America's funniest home videos show last night and saw one that made me laugh so hard I literally was worried about a heart attack. We all have had these times when something is just so funny too us we can't control ourselves. The video was of a high school cheerleader wandering out onto the field where the banner was that the team would ultimately run through when they came charging out of the locker room. It was being held on either side by a couple of groups of people. It was a big banner and was sagging a little in the middle. The gal walked up to check out where it was sagging a little, and right at that moment the whole football team charged through the banner ripping it to shreds and just trampling the cheerleader. It was almost like a cartoon. She wound up being fine by some miracle, but it was just incredibly funny the timing of her curiosity. I have had this same feeling trying to short stocks during this incredible up move.

The CTAS trade was finally exited today for a loss of 1.02 a share, so now I am on the board finally with a loss. Two others were exited with small profits, WY and SHAW. The 1.02 was more than the two wins combined by a little, but basically an overall scratch. I think this does in a way justify this method, but tells me I need to enter the trades a little better. I am finding that once the overbought condition gets to the extremes I am looking for, that I need to place the orders as limits above the prior days close by a certain percentage. Trades will be missed doing it, but it does insure about the max level of overbought something can get before it reverts to the mean. Extremes do not get pushed too much more than what we have now, so this again is an excellent test of the worst case scenario. If that worst case scenario is barely losing any money, that is very very good. We are not that extreme in terms of price but more so in the way of amount of time where we have had no meaningful pull backs at all.

When we look at charts we do see periods like this at times, so this will happen again. This is why I am glad this happened right out of the gate.

This chart shows the entry and exit in the CTAS trade. I believe this is about the worst case scenario from this method. If you just look at the daily chart of the DOW it is a miracle any of these have worked in my opinion. I have two others I am sitting on now, one is a profit and one is a loss at this point.

As for futures, I am still trying to find a way into the short side of the energy markets, but have not gone in yet. I think Heating Oil is the weakest, yet Crude is a better setup from a pattern standpoint. Maybe I will take some of each, I am not sure yet.

This is Heating Oil and it is just meandering down here. My short term indicators are showing we may bounce here, and it that were to happen I think this would be good to go. You can see how low the POIV is here, telling us there is distribution going on here. I would like to get in sync with that if possible. I did get stopped out in the Soybean Oil trade which resulted in a profit of about 1/3 of what I had. I am trying to ride some trades longer this year so this type of thing is going to happen from time to time. I just don't think you can ever get rich scalping, you have to catch some big ones. To catch big ones you have to give trades a little room, and that results in this happening.

Here is the Bean Oil trade, entry and exit. One good thing about exiting on stops is that it takes the second guessing out of things. If I leave myself too much room to second guess sometimes I do that and it is counter productive.

Other than that, as long as the stock market just goes up and up, most other markets are going to rise. We are so overbought, we could decline sharply for a day or two at any moment, but it is any one's guess when that will happen. The corrections on these types of moves tend to be very sharp first days down that gets everybody out, then they resume going up again. I will be trying to buy into that sharp day or two down when it comes.

Good Trading

2012-01-22T14:01:00.000-08:00

SOMETHING INTERESTING HAPPENED ON FRIDAY

In spite of the good sized up close in the Dow Friday, all 5 of my stock shorts closed down for the day. This was really a surprise when I checked in on them. I do not know if that means anything at all other than possibly I have chosen some of the ones that are a bit weaker than the indexes. I do wish my method was not picking all of these sells right now with how strong the indexes are, but when I test this new method adding premises about the market averages, the results deteriorate across the board. As a result, as much as I am not a huge fan of trying to fade strength like this when it is with the trend, I am going with what the method says to do. This is what we all have to do. There is no point in spending countless hours studying and developing methods, just to kick them to the curb the first time you get into some trouble on a trade. All methods have losses.

When we look at the weekly chart now of the stock market via the ES we see what I consider now to be a changed picture.

Maybe I am late too the dance, it appears so. In any event, now in my world the trend on the weekly is up, so it is buy the dips. Once we get these gaps above my bands, I consider those to be enough to confirm a change of trend. This does not mean we are not still short term oversold, we are by any number of measures especially the VIX. The change for me now is that I will be looking to get aggressively long into the next pullback. As I mentioned in my last post, a few very good traders I know are expecting a huge bull market this year, and it is starting to appear they may be right. Ideally we would dip far enough to get to the lower band to generate the next buy signal. We could be early in this new trend, however that does not matter. My rules say we are in an uptrend now, so I will be watching for short term tools to tell me when to get long.

Now that everything is hunky dory, maybe one of the classic laggards that I have been mentioning I was bullish in, the EURO, will make it's move.

You can see my new indicator went into the buy zone right at the lows. My other tools I use to enter trades have not set up properly yet to buy this, but I am hoping they will if we dip as indicated. This is still a pretty big downtrend, so I am not going to chase this one here, I will wait.

I missed the Bond short I was talking about, what can I say hopefully some of the readers caught it. We just rose too far for my indicators to stay in the sell zone, so I did not have any short term entries. The Stock Market has just gone up farther than what I thought, so it follows that I missed this also since they are inversely correlated.

This has been a really nice move, had I been in this I likely would have taken profits at the close on Friday, after these 3 big down days in a row. However, I cannot say for sure since I did not make the trade. I am still short in the Soy complex, specifically Bean Oil. I showed this one the other day, now I think I will have to get out if Friday's high gets taken out. We did have a continuation entry on Friday when Thursday's low got taken out, so if that were to fail, I will have to exit the original from the higher levels. I did not take the add on entry since I was already short.

There really is not much more to do here other than just place the orders and see what happens. Wheat, Corn, and Meal have gotten much stronger, so we might be putting in lows in the Grain markets down here.

I am still grinding in a few stock trades as I mentioned, the CTAS was the one I officially discussed here live. It looks now like the exit is any close under 37.75. The fact that all my stock shorts declined Friday while the Dow rose, tells me that day was a little weaker internally than what the averages showed. Maybe that means we are approaching the short term correction I have been looking for. I really have no statistics on that it is merely an observation. I continue to work with this stock trading method, and have found a few things that will improve it. At this point there still is not a closed out losing trade, so it is not exactly a disaster. There are a couple current ones though including CTAS, that do appear destined to be losses by the time they are exited.

According to my new friends comment, I am an attention whore, so...........

Attention Whore Out!

2012-01-20T07:15:00.000-08:00

HARSH REALITY

The above chart is that of the ES 37500 tick intraday chart. I have an oscillator on it that is not going to be labeled. It is really no grail believe me. It requires an insane amount of discretion to trade using this when I do use it. It shows what should be a pretty good short term sell signal, a Triple Divergence. The point of today is to talk a little about persistence and what it takes to succeed in this business. I have done some catching up with some old friends in the last couple of weeks, all of whom trade. Without exception every one of these people are highly intelligent, and also very successful in other walks of life. However, none of them trade well even though they desire too in the worst way. It just makes me realize how hard this gig is.

As I was speaking to one of them yesterday, I began to wander a bit mentally and just wonder why it was that I am doing so much better trading than they are. I then wandered further to a lunch I had with my infamous friend I mention in here so often. In both of these conversations, my friends were talking about different methods of trading. They are both in the search and destroy mode. What that to me means is they are going from one method to the next, one guru to the next, trying to find the holy grail. In this search process you wind up destroying your account balance, hence the name I gave it.

My famous old friend last week was talking about some recent trades he made, and he literally had a different reason for every single one of them. In one instance a 60 minute chart said blah blah blah, in another a book written 50 years ago had an adage worth following, it was complete helter skelter. At this point with him I don't bother to try and talk any sense into him anymore, I just roll with it. I have learned that he will never listen, and he is getting what he wants out of trading. Subconsciously he wants to lose so he can be forced into other business ventures to make his money. This is actually perfectly fine, he will never trade profitably and somewhere deep down inside he knows it.

What I realized makes me different is my discipline. I have always known this. I have a rare level of discipline whose origin is unknown. Neither of my parents have it and I never had any close friends who had it either. It helps me in trading because it "allows" me to be patient during very difficult trading periods like we have right now. I have certain patterns I trade, and that is it. I just wait for them to come along. Sometimes they don't. During these periods I don't start chasing some unknown guru or some new "system." What I do during these periods is study my own tools and try and find better ways of using them. I don't want to know what others are doing, I just don't care. I know from experience a couple of very important things. First, I know my patterns work. Second, I know that if I let myself get too carried away outside of my core techniques I will lose money. Guess what, the decision on what to do gets really easy. I stay with what works knowing I will miss trades by doing so. I also know that if I stick to what I know, I will be profitable. I may not make the cover of Fortune magazine, but who cares?

The point for today, is stick to your discipline. The chart at the top today is a good example of this. Just watching the tape with the market moving up seemingly every single day in a slow creeping fashion, it seems crazy to even think about trying to sell this market. The adage of never selling a quiet market is actually pretty accurate. However, when I see these 3 point divergence patterns, they are one of my core techniques. As a result, I will look for a decline to come from it. I am not going to get into chasing my tail and ignoring things that I know on average work. Maybe this one does not, it would almost surprise me to see any down close at this point, but I will stay the course. This is how I keep things simple even though it does not mean every trade works.

This is a tick chart so it certainly does not have any higher time frame significance. All it tells me is that we are in an extremely overbought market, and now also in a divergent position on the intra day charts. This says to me to be careful on the long side, so I will be. I am not going to get caught up in over analyzing this. All trades don't win.

The Harsh reality aspect of this is if you do not approach this business like your whole life depends on succeeding at it, you should go do something else. It is that difficult. Further, you have to be different than most others in how you approach this. Do not let the emotions carry you away, they will if you allow them too. There will be periods of time where you lose money, accept that. Find, develop, create an approach and master it. Then stick to it come hell or high water. You will have the most confidence is something you have developed and studied yourself. This will minimize questioning it during bad periods. Refine it along the way if need be, but just absolutely own it. Tune out all the noise and follow it. I can assure you trading the stocks on the short side right now requires extreme discipline. On the surface it appears to be the dumbest thing I have ever done. It might be but I am following my approach come hell or high water. I spent a ton of time developing this method, it seems to be viable, so it is time to trade it, refine it if need be, and see what happens. It is generating sells at the worst possible time to be selling. I have mentioned that I like that because it is the truest test I could have for this. If it can work in this environment it will work in any.

I am looking for a short term dip because my tools tell me to look for one. It is that simple. If it is wrong, it is just a trade.

Have a great weekend

2012-01-18T18:43:00.000-08:00

CINCO?

I have marked on the chart the 4 previous inside bars with up closes that have occurred during this nice run up in the stock indexes, and as I drafted this we were working on a potential 5th one. In general these are sell bars if the lows of the prior days go all else being equal. Since we did not wind up with one it is no Cinco, it is Quattro. Now we just have another higher high and higher low in a daily uptrend. I know it may seem annoying to have me constantly talking about the short side when the market is going up virtually every single day. It annoys me also. One of the inherent weaknesses in any oscillator is their tendency to diverge against trends prematurely. At this point this market is just too strong for me to short it. I do have a triple divergence on one of my proprietary tools, but this is just not a bar pattern now that I want to short. It is what I call a running market, and timing reversions with these is very very difficult. By a running market I do not mean runaway, I mean just small ranges, light volume, that just keeps on creeping in one direction. Maybe I should call them jogging markets? My next play will now most likely be to buy a dip, but that is just a guess at this point. At the very least I am going to need a lower short term high now to try to short this and we are not near that happening. We do have pretty bullish sentiment which should be bearish, but we also had that last year at this time and off we went.

You just have to know how to work with your tools. I do not just blindly go out and use them every time they diverge, to fight a trend. There was a time I did that, but the tire marks on my back from being run over finally convinced me to stop doing that. I do know that from most of my studies, buying extremely overbought conditions on average loses money. We are extremely overbought here. This does not mean we can't or won't keep going, but it does mean the odds favor a reversion of some type here. Ideally what I like to do is fade overbought or oversold conditions when they occur against a strong trend. This situation is not that scenario. It is questionable whether the trend is up or down at this point on a weekly basis. I am defining it as down due to how I use those bands I show at times, but it is close to producing daylight above them which would switch it to up.

I also know that some times in trading I have to follow where my tools take me knowing I will take losses but that the approach does make money overall, and I just grind it out. This is one of those times, I have taken a few small losses this month so far, and have one decent trade going right now that eclipses them. This is just the way it goes for me sometimes when I am not trading great. I just grind it out, stay patient, and the good wins do come along if I stay the course.

In looking at the indexes and markets that are proxies for them, it appears to me that either the Russell or the Australian Dollar ( US stock market in disguise ), appear to be the weakest. I always want to pick on the weakest. Why take on the toughest kid on the block, when you don't have to? I think for me to short anything it would be one of these two, but I doubt I will do it. This looks very much like January of last year to me, and although we had a pullback, it was very choppy and would have been tough to have made money shorting the indexes during that period of time.

I also am looking at Heating and Crude Oil on the short side here for an entry. I have not entered yet but I am looking for something there.

The strength in the Bond Market has resulted in no sell signals for me there even though I was looking for something to get me in sync with the seasonal down tendency we have at the beginning of the year. That strength is also telling me to be careful pushing longs in equities here. Both the ES and Bonds have been strong together and as we have seen, that does not stay in place for too long. They have a pretty solid inverse relationship in recent years. I think Bonds are telling us stocks are going to dip, but it could also be stocks are telling us Bonds will. Does the dog wag the tail or the tail wag the dog? Basically we are damned if you do and damned if you don't right here. In these situations I save my money and don't press marginal trades. Running markets like this are the hardest ones to trade. They don't dip enough to buy, and don't spike up enough to exhaust and reverse.

The stock trade in CTAS

Here is a chart of one of the marginal stock trades that I just closed out, CYN. There are a number of them that wind up this way, very small gains. What I like the most about this method is that it completely disregards bar patterns which in stocks are so erratic. There are so many false high and low penetrations as compared to the futures markets, that you just cannot reliably trade breaks of them anymore.

As I have stated before, I continue to be amazed that this method is producing wins when the market overall is going up virtually every single day. This made .14 which is nothing, basically a scratch, but I can tell you that trading stocks the way I was doing it last year would have resulted in me getting my ass kicked during this type of environment. I do not believe the same methods can be used to trade stocks and futures, they are just two different animals.

I will talk more about this method in the future if it continues to perform well in real time. I do not have much more to talk about, I am still short the grains with targets below that are probably too far to be hit. I will most likely get taken out on a trailing stop in them. Crude is really the only new trade I can see as a possibility for Thursday in my world. I am likely going to get more sell signals in stocks, but I doubt I will add any more shorts. I have some on now that are about even, and I don't want any more exposure due to the possibility that we have a runaway train on our hands here. I still think we will pullback, but it is anyone's guess when that will happen.

Maybe I should tell jokes on days like this?

Good Trading

2012-01-17T16:43:00.000-08:00

DUMB AND DUMBER - THE SUNDAY MONEY

Although at times I am in this crew, or feel like I am, the dumb and dumber, this is the Sunday night shorters in the emini S&P 500. I have seen more people lose more money selling this market in the early night sessions on Sunday night just to have it reversed against them seemingly 80% of the time, it makes me wonder as Seinfeld said "who are these people?" If this is you take a breath and stop doing this until we get into a bear market. When you have a strong short term uptrend like what we currently have, you are just throwing money away shorting the openings on Sunday nights. If I had one trade to make without researching it at all, it would be to buy the ES when it falls 8 to 10 points on a Sunday evening and exit when it hits unchanged. Just anecdotally, I think this would win 8 out of 10 times if not more. Maybe just throw in that we are trading above some moving average, and it might be even better than that.

Since my Gold comments are once again apparently ruffling some feathers, I will make one last attempt to make my point clear. I have felt this way before about bubbles and I have chronicled those prior instances in here over the last couple of years. Maybe it was my lack of success in 2005 trying to convince people to sell their real estate that keeps me coming back to this topic. One thing I try to do is make things as simple as I can. I do create all kinds of funky indicators to try and give me an edge, and some actually do. However, it is the basic common sense aspect of things that I think often gets lost in our world of high tech trading. In every bubble in history, there have always been arguments about why there is not a bubble and why prices should continue upward. The tech bubble was a new world created by the internet, where all these fabulous ideas would change the rules of business. Then of course we had real estate, with similar arguments about why what we were seeing made sense and would continue on indefinitely. There was T Boone Pickens when Crude was at $140 saying it was a lock for $200. He of course was such a wizard he neglected to tell us it was going to $32 first. Now we are seeing those types of arguments with Gold. All of these things I have never heard of are being bandied about as to why this has to continue.

Who in the world ever studied closely the percentage of people that own gold? People do now because it is low and supports the theory that as more people buy it price will continue to rise. Perhaps even though the percentage is small, it is still much higher than before effectively making it overbought? I have no idea but the point is this is a theory. Who would report they owned it? I sure as hell wouldn't if I did. I would not want the government to know I had it so they could choose to come take it if they felt like it. The idea of fiat currencies. You talk about a Depression, wait til you see the one that is created by limiting the financial world to the supply of Gold. The whole world would instantly collapse. Talk about shrinkage, as a guy I don't have to jump in a cold pool to experience shrinkage, I could get my max dose right in this scenario. It has never been zero. Really, seems to me most things have never been worth zero? It is a store of value. Study the charts, that is just plain not accurate. At times it has been, at times it has been a store of diminishing value. I heard Marc Faber say he would rather own Gold and have it drop 50% than have his money in cash since that might go to zero. Has this guy ever hit a ball out of the infield? I don't recall ever seeing any proof that he had made any money trading? Who the hell would be willing to lose 50% of their money just to prove a point they were being too stubborn on? I would not take investment advice from anyone who was that inflexible.

What we have now is something that is just very simple, a commodity market that has gotten into favor and has had a tremendous rally. It is nothing more than that. We know that from studying the past price movements of commodities, that these types of boom and bust cycles happen quite frequently, and they all end the same way. One thing we do have going on today that may be a bit different, is the hedge funds and how they accelerate price moves. They have been part of this craze, and they will be blamed when it ends in flames. When you get these large funds, they get limited in where they can go to trade just based on pure liquidity considerations. They can trade Bonds, Stocks, Crude, Currencies, and Metals. Many of the other markets just don't have enough volume to handle the large orders they place. This is why you see these huge sharp moves in Gold. You have hedgies piling in and out very quickly. At times when we get stock declines, they have to liquidate other positions like those in Metals, to cover margin calls and redemeptions. This makes for exciting price action to say the least.

As I get into this I need to make something perfectly clear. I am neither a long term bull or bear of this or any other market except stocks. I am a long time bull there. Why? This is a very simple point which leads into my discussion on this topic. Look at the chart below, tell me what is different about it than any other market?

This is pretty simple, you can see it just has a never ending up trend, over 100 years old at this point.The reasons for this is it basically just tracks human evolution, the advancement of our society. As time goes on we figure out new and better ways of doing old things, and we also come up with new things. All along the undercurrent is just perpetually moving us forward. I expect this to continue for as long as I am alive and well beyond. There is every reason to believe human kind will continue to evolve so this will likely in spite of set backs, be a net upward path. We still we have declines and some of them will be large, but this is not a mean reversion market. It has not historically been and I don't expect it to become one.

Now lets look at the next chart, Commodity prices. This chart is quite busy, but I think it is easy to get the point I am trying to make. It has Gold with several other commodities over layed on top of it. The take away here is that Gold is the only one that has had this massive spike up without a significant reversion. The point I am trying to drive home, and it is my sole basis for having the longer term view I have here, is that this market is doing something that has never been done before. Commodities due to the fact that they are a known supply item, tend to go in and out of favor in terms of demand, therefore they see saw up and down. Yes there are new stashes of things found here and there but not enough to materially effect the basic premise. The arguments about limited supply were made with real estate, and we saw where that led us. My favorite was always, "they are not making any more land." One of the few constants in life in the non constants. We can be sure of very few things, but one of them is change. Markets measure collectively human emotions and desires. When something is hot everyone chases it, then they tire of it and chase something else.

Prices decline not because sellers enter, it is because buyers leave. This is an important point to remember. Sellers can always be there to sell, and as long as there are enough buyers, prices of anything will rise. The minute the buyers leave, that is where price declines take place. This is why fading Sentiment works so well. Sentiment basically tells us how many people have bought, once the levels get above 80%, most of the people have already bought and the numbers of buyers is going to decrease. I have nothing against Gold, I could care less if it rises or falls, my life changes not one bit either way. What I do have something against is buying something that has already risen this far, when I know the history of commodities is that they are mean reverting. That is the genesis of my argument. It has nothing to do with this fiat currency discussion, inflation, the US deficit, the European debt crisis, et all. It is purely based on the mean reverting nature of commodities.

One other thing that always bothers me is the lack of common sense that is used in investing. If someone told you God himself would promise that Cattle prices would rise 100% if you bought them tomorrow, I would be willing to bet the majority of people once faced with that gain, would hold on then hoping for another 100% and wind up losing all of the profits as it reverted back down. They would not be willing to take the double and run. They would cry out some reason as to why the Cattle market would be forever in strong demand and there were just not enough cows to go around. I would love to think that at some point I would make one trade that made me $10 Million Dollars. The largest trade I have ever made was buying a house in 1999 and selling it in 2005 for a $1.1 Million profit. That was during the housing bubble. However, when I think about the odds of that versus having a stable approach that I know makes me money year after year, versus trying to catch one thing perfectly that is a home run, I will take the former every time. For those that are in from $400 or $500 I do not understand why you have not taken profits you already have a once in a lifetime gain? Are you really prepared to watch all of that money go poof? I sense most of you have no exit strategy at all, and you will buy it all the way down if it comes down, and wind up with nothing to show for your brilliant investment. You should not blindly exit just because some dude like me is popping off in a blog about it, but at least develop an exit strategy just in case by some minute chance you are wrong.

Now as to why I think now is the time versus some other time for the big decline to occur. If you look at just a basic regression channel, you can see the blow off top we had that extended so far out of this channel it was a mathematical lock that we would come down. These are the types of patterns you see at tops that last for many years, not just pauses in trends. Had we not had that huge blow off, I would not be nearly as bearish. I also have one of the cycles that is pretty decent for this market, the 2 year drawn in with vertical lines. We did hit a top right about when that was calling for one, hmmm.... There are other cycles of longer durations one of which is coming due about now, that call for a top. The next chart shows the Large Traders and Commercials and what they are up to.

There are a few things to make note of here. First, when we made that high, there was a failure of the Large Spec position to make a new high. Since they often pyramid positions, they generally can increase their longs during rallies like this. In this case, their buying was exhausted and we see the net decrease in buyers I mentioned earlier. This was an ominous sign at the time. The other thing to make note of is the Commercials and their critical position sizes. If you look at the last two large rallies the long size was about the same, I have drawn vertical arrows as well as a horizontal line going across those numbers. You can see now on this recent dip, we are far below that net position for them. In other words, this decline has not attracted anywhere near the buying that the last two did from the commercials. This tells me the big guys are unwilling to step in front of this yet. If they were much more bullish here, I would have a different view. They aren't. We can't always stake our whole view on the COT data, but when I see something this significant in the data, it needs to be heeded. Maybe on the next break they will bring their long position up to the prior levels. If they were to do that and price had not broken too much, I would become bullish at least in the near term. The trick with COT positions is where they occur in the price structure. If a big break is accompanied by big buying that does not mean much if the trend is broken. If the trend is intact and it happens, like in the two examples I have the arrows at, you have a great buy setup.

If I take all this together here is what I come up with. An extremely over due mean reversion in markets that always mean revert. On top of that, a blow off top of significant proportions that took place right when the two year cycle called for a top. I then add the seasonal top tendency which is right about now give or take a couple of weeks. This is the basic reason I am bearish on this market from a larger perspective. I also do not see any significant Commercial buying which I would normally have expected on a decline of this amount. We have also broken the weekly uptrend and are bouncing up in a down trend now. If I also add mechanics to this, Steve Briese's study of commodity bubbles objectivity measures this as one and gives it a very high probability for a significant decline if it is to sync up with historical price movements. It has absolutely nothing to do with any opinions I may or may not have about all of these new age arguments being made about why this has to triple from here. I don't invest my money on opinions about such things, they are just too arbitrary. This does not mean they are wrong, they are just not what I use to make trading decisions.

I realize I stand almost alone in this view, and perhaps that makes some people think I am just some moron who does not get it. Maybe I am. I do look at this just like anything else. I use my tools and experience to the best of my ability. I do not always get everything right, and I never will. I do get the majority of things right which is why I am a profitable trader. Perhaps this is one of the markets I will get wrong, but I view at as I would anything else. This is my reasoning, it is just another trade to me. I am not currently long or short this market, and will trade whichever side my short term tools tell me too regardless of what my long term view might be. I don't strive to find that one trade that I will hold for years to make my whole life's fortune in. I do plan on trying to hold shorts when I do them longer than I normally would because I think the potential down side here is enormous. That is about the only influence at all that my larger picture view will have in my actual trading.

I won't dispute other people's arguments on this but what I will ask is this. In discussions on this in here, if you have an argument to put forward they are all welcome with one asterisk. They need to be accompanied by a chart showing in the past where they have caused the price moves you claim they are going to cause in the future. I will upload these to the blog if I get any that meet this criteria. Just saying Fiat currency blah blah blah, is not an argument unless you can show me on a price chart where that caused the price of gold to reliably rise. Without that arguments are theories and are not objective.

I know at this point I have readers from all over the world so if you wish to submit a chart email it to me at mktwzrd1@gmail.com. Please make it plausible and not something like percentage of ownership of Gold. It has to be something that is measurable over time, not some new age graph that was created to support the argument. Those are theories. Maybe we can find something that will change my mind, nary a day goes by that I don't examine some way of looking at things differently. Maybe this is a case of someone just getting through my thick skull.

This will be the last big picture discussion I have about this market, I am burned out and my conscience is now clear. All my future commentary will just be short term trading opportunities that I am trading in both directions.

Capisce?

2012-01-15T09:30:00.000-08:00

NOW I THINK WE HAVE SOMETHING

I have been talking ad nauseam about a mid January peak in the stock market, and it appears we now finally have a potential trade for me to make in sync with that view. I do not have any idea if this will happen or not, but if we were to take out Friday's low on Tuesday, that would be a sell signal for me. Since it is such a large travel range, I will probably try to short a bounce after the penetration of the low, but that will be a game time decision. We may not get down there since it is a ways to go, but days like Friday that have the huge reversals but fail to close up for the day, are good sell bars the following day.

You can see the divergence in the POIV is still there, and the seasonal supports this one, so it is about as good as they get. Maybe we will just sail higher, the market is quite strong right here. If that happens there will not be a fill. It does look to me though like we have some other sells setting up also, so things may be lining up a bit. The Aussie, which has become a proxy for the stock market, is pretty much showing us the same thing.

This is a similar picture except this has been weaker, the highs of a couple months ago have not gone here, and POIV is also lagging. I mentioned Grain shorts I had on and the dreaded jinx of my friend. Something must have happened funny on this because the jinx might be off. The explanation could be that they bailed out at the highs on Friday for a loss, allowing the market to resume it's downward path. He does have a tendency to enter on a daily chart, then watch a 5 minute chart and bail out for losses on little wiggles that mean nothing. I could find out but don't want to know. I love him but he is just a terrible trader and can be a distraction at times. I cannot tell readers how many times I have tried to get him out of this emotional crap he does, and it just does not work. Ed Seykota has a quote in the Market Wizards interview that was one of the best ever. "People get out of the market what they want to get out of them." That is a paraphrase, but it rings true. This essentially means that people that lose subconsciously really want to lose. I think in the case of my experience this is dead on. My friend is very intelligent and highly successful in other business endeavors, he is a multi- millionaire. I think he really wants to be no good at this so he can keep doing the other things that really suit him better.

This is Bean Oil, and it is one of the trades I am in. I did mention I took smaller than normal size, but what I did do to give me some bang on this is I took most of the position on the bounce where I show added. This gave me an average risk of about only $200 a contract. Based on that my size was small, but the number of contracts are still between 10 and 20 so it is enough for this to add up to something. We did see the stock market influence even in this market, which provided me the add on opportunity. When stocks have their bounces off lows intraday, virtually every other market goes up with them. This is truly an amazing phenomenon that I just never thought I would ever see. It has been going on for so long now that it is the "new normal." I would assume that at some point it will stop happening but not anytime soon. The grains are much weaker on a relative basis than stock indexes, which is why I did my shorts there. I have a target well below, so this trade could still wind up as a scratch or very small win if it starts going up again. We just never know what will happen.

The Bond market has now rallied enough that at the moment my short term entries are off the board on the short side. I suppose if Friday's low were to go Tuesday that could be a trade, but most of my indicators have moved up too much, so that is not a trade I will do if it happens.

The trade of the decade might be beginning to set up here. I have been talking about Gold bouncing off the oversold condition, which it has now. It is in a downtrend and now the seasonal peak time frame is fast approaching. I know there are many readers here who think this will never go down, so you will throw up your arms once again as I point out a trade on the down side. I called for the rally almost to the day at the lows, I am not a one sided trader in this market. Thus far all we have is a bounce in a down trend. If we were to continue upward from here we could re-establish an up trend in which case dips would be buys. I am dealing with what is here now, not what may or may not happen later. This is a rally in a downtrend about as straight forward as they can be. My indicators on the daily chart are not indicating a sell yet, but I am hoping they do in a week or so. They appear to be in the process of rolling over now but have not done it yet. I do think this is the trade of the year when it sets up. It will be the story on every news channel when the fraud behind all of this action in Gold comes to the surface. The fraud is in the marketing of the idea that it never goes down, it is not in the price itself. Price rises or falls based on buying and selling. Millions of people have been hoodwinked here, and it will be sad to see them lose so much money. It will give me no satisfaction at all to see it happen, I almost hope it doesn't. I don't like seeing uneducated investors get taken to the cleaners. It is sad to say, but it has almost become the american way to take advantage of your fellow man. You sell someone a bill of goods just so that you can make money regardless of what happens to them. Keep in mind that many of these transactions in Gold feature 30% commissions for the coin sellers.

My new tool is neutral here, maybe if we are really lucky, it will move up into the sell zone before the waterfall happens here. If it does, it will be a bet the farm type of situation. Silver has been weaker, so I will trade the weaker of the two when I do the trade. That is likely to be Silver.

In summary, we do have a short term sell signal now if Friday's low gets taken out, that I will act on. Bonds do not appear to be a sell anymore, and Gold is nearing the time frame to look for shorts but it is not there quite yet. I guess I was a week early on my Tebow mania call, but I think everyone knew New England was going to slaughter them. He is a nice guy so I hope he winds up doing well. I am not a big fan of players giving God credit for wins in sporting events. By that logic he then would have to be looking dis favorably on the competing teams, and forcing them to lose. I just don't think he is doing that. He might just be a bit more busy with other things? Speaking of sports, numbers do not lie. When the turnover margin reached +4 in the Saints vs 49ers game, the stats showed a 71-1 win/loss record in those situations. That told us that as we watched the end of that game regardless of how it looked at times, the 49ers were going to win.

I had guests at the house that said I was crazy, especially when New Orleans went ahead late in the game. People get so tied up in momentum, they are always the most convinced on something at the very worst times. This is so similar to trading, when the crowd is heavily leaning one way and the numbers tell you this, you need to get used to doing the opposite. This is why I am taking these stock trades, my numbers say they should work at an 80% clip. As a result I place my bets as surely as I would have bet on the 49ers scoring at the end, had I been able to call a book and done it with a minute to go.

The Robbins people want me to fly to Chicago to accept my trophy in a presentation on the floor of the Merc. I do not know if I feel like doing this but if I do I will let readers know. It might be viewable either on CNBC or some other forum. I do not know all the details, only that they are aiming for mid February to do it. They also have me being set up to trade a house account for them for a split of the profits. I am not sure it is a large enough amount to be worth bothering with, only 50k. Those results will not be publicly posted since it will be their money, so I don't know if there will be disclaimers about what I can or cannot say about how it is doing if I decide to do it. I already have several trading accounts with far far larger balances than that so it might be more of a pain in the ass than it is worth. I have to think about this one. I certainly have the option of becoming much more publicly visable, I just am not sure if I want that or not. There is no doubt if it happens, their will be a crackdown on this blog at some point. This is why you may have noticed a change in how I am wording things, more to what I am doing not what is setup. This way they cannot critique me for recommending trades even though I specifically state in the disclaimer that I am not doing that.

Lets hope this week brings some more action, it has been kind of slow.

Good Trading

2012-01-13T09:44:00.000-08:00

OBSERVATIONS

As I sit here watching what in a normal world could have turned into a big down day in the stock market, I felt compelled to re-visit one topic I discussed about a year ago. When the current administration started taking us down the socialism path I was curious what had happened with prior countries when they had made conversions into socialism from other types of structures. After all the conservatives all cried out that Barry was taking us down a path of destruction. You always have to be careful with these political hyperbole's because they are always designed to manipulate opinions. I remember when Barry won, Larry Williams said in his forecast that we will finally resolve the matter once and for all about whether socialism does or does not work. I think we are seeing it does not work too well, but the party is not over yet. The question is what if any effect on stock prices with this transformation have if it takes place?

I set out to study stock prices where countries converted to Socialism and found something interesting. The stock prices did not crash or rise consistently, but they did do one thing 100% of the time. They followed the path of the US stock market. In other words they basically deferred to the leader. There is no reason in the philosophy of socialism that should result in stock prices crashing. The whole system is designed to make everyone mediocre. As a result, that means stock prices should flat line in this type of system or be directionless. This does seem to happen, and they seem to take their lead from the places where innovation and success is "allowed." With that as a back drop, the $64,000 question then becomes, who would we follow?

There are those out there that say it will be China. The problem with this theory is that there is no encouragement for innovation or success, they are basically the kings of copying others and doing it more cheaply. If you add on top of that the corruption that goes on there that makes ours look like the junior varsity squad, it seems highly unlikely we would follow their path. I have written in here that I think the China bubble is about to pop and the whole house of cards is about to fall. They are more highly leveraged by far in real estate and construction than we were at our peak.

Where else to look? The rest of the BRIC countries? I doubt it. The net answer is that we are going to continue to be the leader in spite of how badly Barry or anyone else tries to mess things up. It is all a question of relativity. We will still be the best on a relative basis. I love the video that was advertised on the news networks all of last year calling for Armageddon. It seems the Stansberry folks and Martin Weiss are the two biggest fear monger guys out there. They both called for a fundamental event that would change everything about how we live, to occur last year. Now last year is behind us, it has not happened, now more new videos about how it will happen this year. Please hire someone to kill me if I ever produce on of these videos where I read the power point to you. These are beyond annoying. I tried to make it through the Weiss one and about stabbed myself from the pain of how annoying it was. Both of these guys base most of this on the debt situation and what has to happen to the dollar in their view to resolve all of this.

One of the problems I see with the arguments is that increasing the money supply just by itself will not cause inflation. What is required is velocity in the turnover of money. With loans almost impossible to get at banks, there is no velocity at all. The rates may be low, but you can't really take advantage of them, hence no velocity. This is why inflation is not really moving up as much as some say it should be. Maybe that is in the future, but I don't see it anytime soon. I have said over and over that it is of no value to me as a trader to try and use whatever macro views I have to trade my money. They just don't translate well enough into shorter time frames.

As I watched the stock market go down steeply early today, my thought process was as follows. First, I thought the PPT would save it because of all that is at stake politically. If the stock market were to roll over big, that would dash the last hope Barry has of a second term. It is really the only thing good that has happened on his watch, other than killing UBL. Then I thought that was somewhat of an over reaction of my part. Manipulating stock prices is something the other side will also do if they get back into power. There will be scandals, corruption, gay affairs, you name it. That is not unique to either side. What is also not unique is all the trade offs that get made in governing. It is so hard to get everyone to agree on anything, that they are constantly forced to give in to things they don't want to get things they do want done. This is why nothing ever really changes much. If the other side gets in and tries in unravel some of these socialist things that have been instituted, they are going to run into trouble. Nobody wants to endure any short term pain to get long term problems solved.

Repubs win, but overall over the course of a year it will make no difference. My second conclusion is an asterisk to the first. If by chance the Democrats were to wind up with all 3 again, we could really have some serious problems. As long as they don't have all three they are limited in what they can do to destroy us. Since we really have no precedent to follow if we did became a completely socialist European type of country, I don't think it will ever happen. Again, I bet on the favorites not the long shots. As a result, I think after the election it will be just more of the same crap, kicking the can down the road. There is a critical mass point, and I don't know where that is, but I don't think we will see it this year. I do expect at some point a pretty sharp stock decline to occur, but not of the magnitude that these chicken little's are calling for.

By the way, for several thousand dollars they will tell you how to avoid it, by subscribing to all their ancillary advisory services. How convenient for them!

2012-01-12T20:42:00.000-08:00

BURNED OUT

I am taking a day off from trading, so no real post today. For my views on the various markets just review the recent posts, nothing has really changed. I know my limitations, and when we get these one way trains in the indexes like this with small ranges that just creep up or down every day, I just don't find many trades to take. There seem to be a lot of cross currents. I am short in the grains, but those trades appear to be messed up now with the big reversal off the report lows that has taken place. I knew I was dead when one of my friends who is notoriously wrong, shorted the bounce. I was tempted to go to the market and exit right when he did that and I should have. I don't know if my stops will survive the bounce or not. I doubt they will.

I do still have that CTAS stock trade on which is out of the money by a little bit. If it closes <= 37.33 I will exit. In as much as I am looking for a short term top in the indexes, it is impossible to pick the day when the markets are trading like this and I am not going to try to. Been there done that in my younger days. I am continuing to monitor several stock trades with the new rules and a few of them are underwater now but not closed out yet. It appears my winning streak is about to come to an end here. I am amazed they have done as well as they have with the market just going straight up like it is. Since the market is extremely overbought, I am not getting any buy signals which require oversold levels to be hit. A work in progress.

I learned something today that I did not know that I feel compelled to relay to everyone. When you have stops in electronic markets the market has to actually trade at the price for the fills to take place. If it gaps past it on a big opening like what happened in the grains today on the report, the orders remain there and will fill only if the market trades back to them. This is particularly dangerous in that if you have a protective stop in on something you better make sure to be there watching the opening. I was trying to short Wheat today and had alarms set for the price level. When they went off on the opening I knew something was up. I then noticed after the huge gap, I was not filled in any of my accounts because the open was 20 cents past where my orders were. Some of you may know this, but I did not know this was how electronic markets handled gaps.

Have a great weekend and I will be back next week.

2012-01-12T07:24:00.000-08:00

"SIR HOW WOULD YOU LIKE YOUR CROW TONIGHT?"

This is a scene about to play out at a local restaurant starring yours truly. I have been looking for a mid January short term top in the stock indexes due to cyclical, seasonal, and a few other things I have mentioned. I have starred in this musical before unfortunately, most recently last year. The trade setup I mentioned yesterday for a sell did not trigger, since the prior days low was not taken out. There were some sells on my list that did trigger and I took a couple of them, which are both about even right now. The hardest part about trading the short side at this time of the year is that the market is pretty quiet and just creeps higher day after day on light volume. This pattern has played out over and over since the 2009 low. It should put to rest the idea that rising prices on low volume is bearish. It is my contention that rising prices on low volume make it very easy for the PPT to save the market when short term declines develop. They just don't need to commit nearly as much money into the futures buy programs to reverse the drop.

They have no way of determining when the market will have high or low volume. I am sure that they like light volume conditions when they develop, they are much easier to control. For today I do not see anything I would consider a sell signal in the indexes, so I have no orders in there. Last year at this time I was also looking for a short term decline while we had this slow creeping price action, and if you look at the charts you can see I was dead wrong about that. There are some people that I really respect predicting a huge bull market this year, perhaps they are right. I don't trade on predictions, so this is just engaging in speculation. The next chart of the VIX shows what we probably need to get a sell signal going.

The purple line below on the chart is the SP 500 price. You can see that we were creeping higher with the VIX in a down trend, and it was not until the VIX got below the bands that we began a short term decline. These bands are just 10 percent above and below, and Bollinger Bands, there is no magic science in them. It is possible that we need a quick drop in the VIX to trigger a complacency sell signal. This just like anything else is just one possible event that could trigger something. I do know that when I review trades against the trends that I make that become losses, they often have this creeping look to them. As a result, I trade light or not at all against trends that look like this. I take a taste here and there just so I don't miss something, but rarely if ever would I have full size on during periods like this. The trades I have on now are less than full size.

The next market that is also telling me stocks should come down is bonds. I have been looking for sell signals here, but now we appear to be heading back up again.

We are right into the down trend line off the top here so if we are going to have a decline here it needs to begin pretty soon. My short term tools are going to turn up in a few more days if this does not start down by then. We know the FED is likely to keep rates low for several years by what they are saying, so it is hard to look at the short side knowing this. However, it is impossible to trade off what they say or do, and my tools that I use have been telling me to look to the short side. I think something has to give here because even though in the old days Bonds and Stocks could move together, in the modern era that rarely happens. One is going to decline.

I am looking at possibly shorting Cattle in a day or two and I am trying to short Wheat today. The Wheat trade seems unlikely since we have to travel a ways to get to my order entry spot, but you never know.

The CTAS disaster trade has an exit today at a close of 37.25 or less. If we close there or below I will get out and take the loss in this one. I am in at 36.52 so it is a virtual lock this will wind up being the first losing trade with my new stock trading approach. I do have some other sells indicated for stocks, but I am passing on those due to the strength of the overall market here. It is a miracle that all of the short term stock trades which have been shorts have made money considering how strong the up trend in the overall market has been. I think it lends credence to this new method to be able to perform that well in the face of what should be an environment where it would not work at all.

Good Trading

2012-01-11T06:07:00.000-08:00

THE WORLD IS A SELL

Above we have the Russell 2000 and you can see there is a trap pattern set up for today. If we were to take out yesterday's low after closing above the prior highs yesterday, this would be a classic trap and reversal pattern. This is one I am going to play if it happens. Of course what this also means is that virtually every single other market in the world is also a sell if this happens except Bonds and the DX.

This is really starting to aggravate me, but for all I know this could go on for a decade so I have to deal with it. As I went through my trade list last night I literally had a dozen markets that all were sells, so I had to pare down the list some keeping the correlations in mind. I guess what the correlations mean is that as traders we are not able to make as much money as we can at other times because it is not prudent to put all your eggs in one basket over and over. I know that I won't do it because I know better. We just can't put on that many positions whose outcomes are independent of each other, hence we make less money.

We are at the time when the goofy market predictor I showed last year is telling us a short term top should form.

I still marvel at how well this has worked especially since it was made public by the gent who discovered this more than 9 months ago. Since then the highs and lows have rolled out so accurately it is really quite hard to believe. I will give readers a hint since I have shown this a few times, that it does have to do with the EURO. It is easy for anyone to see that when news about the EURO breaks, it effects our markets here. It certainly makes sense that there should be some way of predicting prices with it. What is unusual is the variation of that idea that this guy came up with. It makes no sense to me, but for now I am still considering it because it has been so accurate. You savvy surfers can probably track this down on the web if you try hard enough, but I am not going any further for risk of being held responsible for revealing this.

One thing I did yesterday as an experiment whose outcome has yet to be determined, is I went back into SHAW at a higher price than the original short I entered, that I exited against the rules for a profit due to a tee time. I guess I will no refer to that exit strategy as the Tee Time Exit.(TTE) I reasoned that since I still should have been in that trade, if I could get back in at a higher price it made sense to do it, so I entered it again on yesterday's open. I also considered that in general I am looking for a short term pullback in the overall market, so why not take another shot since I had house money to play with in that one.

I have labeled the entry and what today's exit would be if it happens. Other than that it is sit back and let this one play out. The next chart shows the one problem with the new stock trading technique I am using.

This certainly appears destined to be the first loss so far, as it is just running away upward against me. I do have an uncle point of about 5% of the total margin, so this is not there yet. I do overlap a couple of completely independent techniques to arrive at these trades which is an attempt to eliminate this scenario. Unfortunately, there is just no way I can find to completely stay clear of this occurrence. As a result, I just am using a close only stop point of about 5% of the total margin as an exit. Barring a total meltdown day on Wall Street, this trade will wind up being exited at a loss by the time it is done.

For today, it is take your pick of what to short if the indexes take out yesterday's lows. Unfortunately, most of the entries will already have been triggered by the time the indexes move that far if they do. I do not expect a big break in stocks if we get one at all, but I am looking to the short side. I never know in advance if a move will be big or small or even if I am right about the direction to begin with. If you know that you don't need to read anyone's blog.

Good Trading and be careful with the correlations

2012-01-09T21:33:00.000-08:00

JUST NOT MUCH THERE FOR ME RIGHT HERE

I detailed why I exited this trade early last week, and it was lucky in all honesty. I should still be in the trade, looking for a dip to get out. As a result I am likely going to wade back into this one tomorrow. I have not yet completely decided. Having my father in town takes so much time away from my trading, I wind up burning the midnight oil making my final decisions on things.

I have gotten some new glossary definitions that I think most people will be able to relate to. First, PALMING. This has traditionally been a basketball term for mishandling a dribble of the ball. My new definition of it is when my father takes his hand and places it in the carton of blueberries handling virtually all of them before choosing the select few he will eat, then throwing the others back into the carton for everyone else. The move gets even better when he takes a pee first, fails to wash his hands, then comes into the kitchen to palm something. Don't get me started on the double dipping with the chips and salsa.

The second has to do with watching sporting events. A loss has previously just meant the game was played and one team one and the other lost. Now it has be redefined as a referees decision to screw the team he wants to win. I have yet to see a team he has rooted for lose a game without it being the fault of the referees, and that includes the Clemson/West Virginia game! It was a small detail that West Virginia scored 70 points. Only a bad call be the refs determined that outcome. Aye Carumba, yet get the drift.

I know this seems like I am picking on him and I suppose I am but I thought some readers might be able to relate to this. I have explained my new stock trading approach to him. I have showed it to him several times. He still asks if I am using it, what it is etc... All of this got me to thinking quite a bit about the following. Life gets so complicated at times, and it is returning to the simple things that help makes us more happy and more successful. I spent the last 2 months trying to trade more to make more money, and just could not find any really good new techniques other than the stock trading method. It makes me realize, that I really do not need too. I do fine doing what I do, being patient, and "letting the game come to me." I hate that phrase, but I have to admit it is applicable.

I do see several markets within a day or two of being very nice setups by my rules, but none of them for tomorrow. I did some day trading last week and made a little bit of money, and I am just going to fill up my time doing that, until the larger money makers show up. As I watch the stock market stay strong and just keep crawling upward, it does remind me to be careful of fighting these slow markets that are trending. Every little small dip gets bought. I have covered why I think the stock indexes are due to come down some, and I have not changed my view on that at all. The conditions I based that on are still in effect. However, this does not mean just blindly going out and shorting this. I do not have any really good setups that have triggers for tomorrow. There is one marginal one, that is a half assed triple divergence in one indicator I use.

It does not have great probability so I am content to just participate in that if we happen to go down tomorrow, by some of the stock trades I am doing on the short side. I did enter the TAL short today, and that has an exit tomorrow at a close of 30.94 or less. I have a few new ones that I am looking at, but I am going to stop listing all of them. We will just track one or two at a time.

I wish I had more, but I do not. I am waiting hoping the next day or two behaves itself and sets me up in the markets I have been mentioning in here in the last week or two. I had a buy order in for Silver today, but the market never traded up high enough for it to fill, so no go there.

Good Trading and no PALMING!

2012-01-08T08:34:00.000-08:00

THIS COMING WEEK

Here is the dollar index, the market dumb asses who know nothing talk about around water coolers at work. They spit out some stuff they read on the Internet about how the dollar is dead, China is taking over the world, blah blah blah, trying to sound smart. The best thing about the markets is that they resolve all the arguments themselves. Make no mistake about it, I feel like a dumb ass at times too when I make lousy trades. Ironically we have the perfect storm for a dollar decline in some ways. We have the worst President the country is likely to ever have, along with many other internal problems that could work to hurt the value of our currency. However, it is always a relative matter. In spite of all the mistakes Barry has made as well as those made by the other party, the US is still far and away the most powerful country in the world. It is always going to be this way. If you get caught up rooting against the US too much, you ignore history. People reference the fall of the Roman Empire as precedent for the fall of the US. For all I know that may be right, but one prior occurrence from that many years ago, is hardly enough to bet the farm on. I bet on the favorites not the long shots as I have discussed before. This is why overall, I expect the dollar to be pretty strong this year.

Keep in mind the Dollar Index and the Euro are very highly inversely correlated. If you think the dollar is going to get pummeled then by default means a huge rally in the EURO. Maybe that will happen, I don't know and neither does anyone else. My overall feeling on this is that the dollar is going to be strong this year net, and the EURO weak. However, we do at the moment have some things telling us we could be coming into moves down in the dollar and up in the EURO. These are fundamental setups not trades.. Those of you who watch Larry TV have to understand the difference. I have one friend who for the last few months always bashes Larry saying his broadcast called for moves that did not happen. When either Larry or I discuss setups, they are not predictions and they are not trades. We are pointing out conditions that in the past have led to moves in certain directions. Please keep this in mind. I also get occasional emails on this subject and I always respond the same way.

You don't just go into the market the next day in the direction of a fundamental setup. If you do that you will be wiped out that I can promise you. They are conditions that should be used as support for shorter term signals you get in whatever tools you use to enter and exit trades. If you look at the above DOLLAR INDEX chart, there are a few things to take note of.

First, my new tool has dipped into the sell zone. I consider this an early warning signal, it is not a sell signal just by itself. When markets are running like this one is and I have labeled a prior instance of the same thing, these signals can be very early. It is normal for the commercials to position themselves against trends, so you don't just fight them when you see this. We do also have open interest pretty high here, and as you can see it is not the big guys buying. This is generally bearish. We have the seasonal tendency for a rally to occur kicking in here as well. The trend in this market is up by the bands I use. If we look at the EURO, it is pretty much the opposite picture, with mostly bullish things and a strong down trend.

As a result, we don't have a one way street here with the fundamental measures. In these situations, I trade in both directions on the shorter time frames. I have support for a buy or a sell here. I am leaning to the long side because of my down bias in stocks right now, and the inverse relationship between stocks and the dollar. That is how I put all this together. It may be incorrect I am not always right. That is the way I am looking this week, down in stocks, up in the dollar. Also keep in mind that I may at times trade in the opposite direction of a setup if I get a short term signal that looks good.

I am still looking for signals in the same direction in the markets in have mentioned in the last two weeks in here. The Grains in particular seem to be very well setup for a decline, and Gold and Silver look bullish to me. I think the big down move in GOLD will happen when stocks drop sharply. I think they will move together. I don't think that moment is here yet.

The SHAW stock trade was exited at 27.09 on Friday for a gain of .42 per share. I had to leave early to play golf with my dad and was not going to be around for the close, so I took the small profit. By the rules the trade is still on and the exit is a close of 27.19 or less for Monday. For those who might criticize the fact that I did not follow the rules, I often don't. Trading is about making decisions and working your way through things. I am tracking these completely mechanically for the benefit of readers, I doubt I will ever trade them that way personally. If I ever off them via a pay service, I will have the rules the way I am showing them here, but it will always be up to individuals to use them the best way they see fit. I know from experience, no matter how I lay out the rules, subscribers never follow them correctly anyway. They will then blame me when they don't. That is how our world works. There must have been an amendment to the constitution making it law that people are not responsible for their own actions.

TAL and NFLX are new shorts that are in play for Monday in the stock world. I have not gone through the longs yet to see if there are any there. For the purposes of tracking these things live, we will just stick with these two.

A prediction, Tebow mania ends today.

Good Trading

2012-01-05T21:48:00.000-08:00

WE ARE APPROACHING CRITICAL MASS

As can be clearly seen on this chart, the huge divergence in the POIV continues to build as price makes new highs and it lags way behind. I sure wish my new little toy was in the sell zone here, it would be a bet the farm short. We rarely have everything especially with the SP 500 which is the hardest market to trade. I think it is because all the small fries are in there trading one lots and making it very choppy intra day. I have not changed my view in that I am looking for a decline here to start any day now. I think we should mostly trade sideways to down into March. Maybe if we are lucky my toy will drift down into the sell zone while we are moving up here, that would be ideal.

As readers know I am working the short side in individual stock trades for a couple of reasons. First and foremost, I have my indicator in the sell zone for the most part in many of them. There are a few buys that are not being confirmed through my filtering process, but by and large the majority of possible trades each day are sells. Second, I have an overall cyclical and seasonal down bias here, and I am honoring that since we have followed it pretty well the last year. I like following seasonals until they veer off course. Of course we never know in advance when it will happen. We also never know in advance when most things will happen. Who would have guessed it would be 90 degrees in San Diego Jan 5th of this year? It was.

We also had a potential dollar break out upward today, although there is divergence at hand in POIV there also. If it quickly reverses it could have been a trap. I don't think it is simply because it is going to be the flight to quality spot when Europe implodes, and that will happen sooner rather than later.

My COT tool is not quite into the sell zone, but could be there tomorrow. Also we have not quite broken out to new highs maybe that will happen Friday. If it did, then we would really have more of a trap reversal pattern formed. It really isn't there yet since we have not closed above the recent highs. This bears watching and I certainly will be doing so.

The only new stock trade I have for tomorrow is CTAS, so I will be trying to get short there tomorrow at today's close or better. The exit for the SHAW trade tomorrow is a close < 27.12. We can watch these two live and see how they work since I am in SHAW now and will be in CTAS Friday unless it gaps down big.

It is starting to look to me like we are about to start heading down in many places in my short term indicators. For those who are bullish in commodities, I think we need to hold here if we are going to hang on. There are many markets setup for buys based on COT stuff, but often commercials are way early on getting long so I personally need more than that to fight a trend and look for reversals.

I did take a shot at Hogs on the long side this week and got stopped out for a loss. Fortunately for me I put half the trade on and tried to enter the other half on a dip the same day which never came. This was a judgment call but I just was not completely thrilled with the bar pattern that I entered on so I held back some. As a result I only had half my size on when I got taken out. I love it when that happens! Small losses please me almost more than big wins.

That is all I have for tonight, doing these posts from my notebook computer is a pain in the rear from an editing standpoint, so I have to keep them shorter. I hope to have my tower computer back by tomorrow.

Good Trading

2012-01-04T21:29:00.000-08:00

NOT MUCH NEW

I am still looking at Bonds as a potential sell. I could have been short on the huge gap down after the holiday, but it caught me off guard to be honest. Also, my short term tools were not clear at that open, so if it just goes from here I miss it. I have diagrammed what would get me into this trade if it were to happen. If the equity decline I am looking for begins, we may have a shot at this. The one large picture problem I see with any long term hold type of thing on a short in Bonds is the Japan like path we are following where we could have artificially low rates for a very long period of time due to the economic malaise we are experiencing. This is why shorts are most likely short term trades, but we never know that coming in we just have to take what comes along and hope for the best.

I have to admit that I am having a hard time finding a lot to trade right at the moment. I have mentioned the trades I am looking at in prior posts, and there is nothing new. The stock trade in CPT was exited today for a profit, while all along it appeared to be heading for a loss. As a result, there are still no losses in that new methodology yet. I front ran the exit today, getting out at 60.79. I state this over and over, but once again, I trade with discretion. The rules called for an exit on any close below 61.73, so I knew today was most likely going to be the exit day. I had been sitting in this trade out of the money for several days, and my patience was wearing thin. When the ES moved down sharply, it moved into a buy zone on a day trade basis, so I expected most stocks to bounce with it. I decided that it was best to not leave the last few hours to chance, when it was not likely the stock market was really going to roll over. I covered the short into the sharp selling and wound up getting out at 60.79. This was lucky since it was 3 ticks off the low of the day. However, my logic was sound and I made a bit more than I would have had I held it to the close.

I will always trade with some judgement calls like this. By the rules the exit was at 60.95 which was a gain of .17 per share. This trade was lousy to be honest, but it still did make a profit further enhancing the validity of my new system. It now has still not had a single loss. The 3 trades I mentioned today, had 2 that just went straight down right from the open, so the orders were not filled resting at yesterday's close. The third one, SHAW was, so that trade is on. The exit will be tomorrow on any close <= 26.99. The rules I have developed actually call for just entering at the opening, so I should have technically been in the other two. It was another judgement call to have the entries as limit orders at the prior close. I missed one by just two cents. Oh well, I will never get them all correct.

This does illustrate one tough reality for me. The use of stops does diminish performance with systematic methods. This trade intra-day went quite a bit against me yesterday. However, when you have a sound fundamental setup, you need to give things some room and let the noise not ruin your day. I never for a moment considered exiting this trade up there. The key is position size. You have to select manageable size positions relative to your equity so that no individual trade makes or breaks you. There is nothing else left to say about this one. Now we watch SHAW live to see where that leads me.

I am running into some legal snags on what I am considering for my web site. Any liberals reading can thank there blessed belief in regulate, regulate, regulate. These regulations are likely to cause me to kiss the whole idea good bye. I just don't want to be under Uncle Sam's thumb night and day. They have ramped things up quite a bit, and I don't want to become a CTA again. As I get more popular they may even come after what I talk about in here. I have seen them surfing my site here and there on reports I run. I guess for now the whole thing is off until further notice. Thank Uncle Sam if you were looking forward to any of it.

I will not spend hundreds of thousands of dollars defending a blog that makes me no money. Let's hope they let me be and don't start chiming in about all the disclaimers I don't have. I will never forget the first time I registered as a CTA at the end of a year. I had not even thought about where I was going with it or made any decisions at all about how to raise money etc. All of the sudden I had the NFA screaming that they had to audit me! I kept telling them I had no clients. They wanted to come sit with me for 5 straight days. It was only when I told them I would not sit here and they were on their own with my dogs, one of whom was not friendly to strangers and weighed 190 lbs, that they finally said, "we have decided that it might be best to conduct the audit at another time." They never admitted how silly it was that they were demanding to audit records of someone who did not have any clients. I think the only way I will return to that scenario is if a large firm who paid for everything hired me to run a fund for them. That is a longshot and it would take one hell of a salary guarantee, so it will never happen.

The funny part was they thought I was kidding about the dog, I wasn't.

For now I am still looking at some type of stock market sideways to down movement to begin in the next week or so that should last until about March.

Good Trading

2012-01-04T07:45:00.000-08:00

SWEET SETUP

Here is a trade I am looking at potentially for Thursday, Cocoa. The post was a play on words, COCOA is actually very bitter without sugar added. We like to add sugar to everything, but in this case a little is needed to consume this stuff. For those who may not know, Dark Chocolate is one of the most healthy things you can eat. I eat small amounts of it every day. Of course if you pig out on it you will get fat, so moderation is the key. You can read up on it if you don't believe me.

The setup does not have my new toy in the buy zone unfortunately, but we do have a favorable seasonal and cyclical picture here in place. We also have a pretty clearly defined trend in place that if broken would signal a potential trend change in this market. That along with a couple of my proprietary tools, is telling me to look for buys here, so I am. I mentioned in my resolutions that I wanted confirmation on trades, and in this case the seasonal and cycle stuff fits that bill even though my indicator does not.

Speaking of the indicator, here are the 3 stocks I am trying to get into today with it. CLP, SHAW, ZMH. I have limit orders at the prior days closes for all 3. Unfortunately they are all down already, so they may not fill. This is one potential problem with my new stock techniques. The conditions trigger at the prior close and sometimes the next day they just go right away without ever even visiting unchanged for the day. This is frustrating, but it tells me how good this methodology is so it does not bother me too much. The CPT trade exit today is a close < 61.73. We are way below that here at press time so if it stays down here this trade will wind up basically a scratch. The entry was 61.12 and we are at 60.99 right at the moment. If it is .13 either way I consider that a scratch. I am really excited about this approach. It might very well be the best mechanical thing I have ever created, time will tell.

I am looking for sells in the Grains up here now, and Wheat is the one with a good seasonal. All of them now have my indicator in the sell zone now. It could be that I will take a different commodity than Wheat when I enter the trade, but I am looking at this group as a whole for sells. There are not any entry setups for today. This is on the watch list.

My short term tools have not rolled over yet, so this is a no go for me right here. I am anticipating just knowing how they tend to move from day to day, that they are going to wind up in sell mode in a few days. There are certainly approaches that just promote selling strength like this against a trend. I like them, but I want to price to start moving in my direction typically, which this has not done yet.

I just wanted to show this chart again, with the huge divergence in POIV that is at hand. This along with the weekly trend being down, are the main reasons I am bearish on stocks at the moment. Larry Williams even mentioned this in his Larry TV segment this past weekend. This is no surprise since many of the things I look at utilize tools he has created. There is no way of knowing if moves are big or small from these types of situations, but they do happen with pretty high probability. I am looking for sell signals in the stock indexes but I don't have any yet.

I would also like to buy Gold or Silver on a pullback here if we get one in the next few days but nothing for either of them today.

Confucius say don't assume anything, when you do you make an ass ........ Let the markets go where they will, use stops, and don't assume anything. You just never know what will happen. Hopefully you all know Confucius was not really the gent who coined this phrase.

Good Trading

2012-01-03T11:02:00.000-08:00

OFF TO THE RACES, NEW YEARS RESOLUTIONS

The above chart is that of Coffee and it illustrates one of my New Years Resolutions. My main computer crashed and I am operating from my backup notebook computer. I do not have all the same software on this machine, so the blog entries might be a bit sloppy here for a few days until I get back in business with my Tower Computer.

I entered a long in this market at 222.90 last week when we broke the down trend line that is on the chart. I noticed after being in the trade for a few days, that we were really more at a end of a retracement in a down trend than what looked like the first leg of an up trend. One of my rules for this coming year is to always confirm my trades with a few fixed larger time frame influences. Although I won't state all of them for protection purposes, one of them is not to trade against cycles and seasonals unless I really have something else like a strong COT setup backing the trade. In this case I just don't see anything strong enough that over rides the fact that we are at what should be a short term seasonal peak. When I noticed this I put in limit orders for today 40 points above last weeks close and also a stop below Friday's low in case it just went straight down. I did the orders OCO. I was lucky in that my limit orders got filled before we went down to where my stops would have been hit, so I got some money out of the trade. I felt at the time of entry I still had a small little seasonal influence upward that could help me in the trade for a few days. At this point I would have to say that logic was correct, but it had run it's course. We have come back up now and made a new high forming an outside day, so maybe this will go, but it will go without me if it does.

Here is my list in no particular order

1) Filter all entries with larger influencing items

2) When all the filters are met trade aggressively - I did too much nitpicking once all my parameters were met and missed some biggies last year as a result

3) Trade stocks differently than I trade futures - trying to pair up ETF trades with futures trades does not work due to all the overnight moves, gaps etc, you just can't get good entries

4) Launch my website again - I have been dragging my feet for too long on this

5) Continue to build my blog readership but trying to provide the best quality postings I can. It would be nice to get 1,000 readers a day

6) Get my golf game back to respectability - 2011 was the worst I have ever played since I have been an adult, only two sub par rounds the whole year and about a million trees hit in the process

7) Gain 5 pounds of muscle not fat - I at times just get too lean from working out the way I do, and it makes me too injury prone

8) Develop the best mechanical trading system I can with my COT Synthetic Tool
9) Save another dog from a rescue - this past year was horrible with all the animals I lost, but it reinforced why I to what I do for them
10) Get another Carrera - I sold my last one and gave my wife the money to buy a horse, time to reload. Most of my buddies thought that was a lousy trade
11) Write a book - I have already been writing the draft for it, need to finalize it
12) Tune out the noise - I did get distracted some by politics last year because of how much they have influenced the markets, no mas this year
13) Overall, be the best human being I can be, this is a goal every year. I don't always accomplish this but I try my best
14) Make 100% or more returns in my accounts except stocks. Stock accounts just don't allow the leverage to make that kind of return. I am shooting for 40% in the stock accounts I trade.
15) Eliminate typos from the blog

Now that all of this is behind me, here are some setups.

The first one is Hogs. Here is a chart of Hogs and this appears to be a buy on just about everything I study. My COT Synthetic has been in the buy zone down here for awhile, we have a nice trend line break, and we have the seasonal bias going upward. My other short term entry tools I do not show are also saying higher, so this is a trade I am looking at.

The Sugar market is another one with a very similar setup, and it a long I am considering.

The big stock market move to start the year is kind of what I expected, although I guess I would have been better waiting another day to exit my trade in the retirement accounts. Overall I am looking at a short term market peak being made in the next few days to a week, so I did not want to push a long too far. I think the best buying spots are going to be lower prices, most of the weekly things I look at are telling me sell in the indexes not buy here. Most of the stock trades with my new method are giving me sell signals here.

I spent a lot of time over the holiday studying my new methodology using my COT Synthetic Indicator and a short term overbought and oversold condition. I found that from 2004 to present, in just the DOW 30 stocks, there were 76 trades with 61 being winners, or 80% wins. This was just on the short side. I find this particularly significant because most sell signals in stocks over time do not work due to the overall upward bias in the stock market over the last 100 years. The buys always test better in everything I have ever studied. Due to the fact that I am looking for a stock decline here, most of the signals at the moment are spitting out sells not buys. I did not have any for today that were new that met all the rules. The CPT trade which is still on and upside down, has an exit of 61.65 or lower today if we close there or below. That will most likely make it a loss if that is hit unless the market really rolls over big today which seems unlikely at press time here. 61.12 was the entry in that one.

I will post the trades I am doing in some of these, but not all of them, and we will just watch them live and see how they do.

One of my loyal readers brought something to my attention this weekend, and as much as it aggravated me, I had to admit it had merit. I have changed my site some to display the disclaimer in a second place right at the top of the blog. In this world we live in, it would just be par for the course for someone to try and come after me for a losing trade they blamed me for getting from a free blog. In order to fully protect myself, I am going to have to be a bit more guarded in how I discuss things in here. I started off just wanting to help people by talking about my trading and what I do, but in this world of lawsuits and shenanigans, I have to be careful. I make no money off this blog, so I have no reservoir of money from daily viewing to fend off lawsuits.

It needs to be clearly understood when reading my words here that I describe what I do and what I do only. It falls solely upon readers what they choose to do with the information. My comments are not intended to be in any way explicit or implied, as recommendations to do anything. When I launch my website it will be required to acknowledge that this is understood before access to the page with the actual trades. I had not really thought much about this in terms of the blog until this was brought up to me.

I am looking to get short in this rally here in the stock market, and also at individual stocks to short as well.

That is all for today, sorry for the late post. Technology problems are always a pain in the ass.

Good Trading

2011-12-31T10:48:00.000-08:00

FINAL INSTALLMENT OF THE FORECAST AND HOUSEKEEPING

Just to get this out of the way, the final standings in the World Cup show that my 6 month venture brought me a bronze medal. I discussed this recently, so I won't go too much into it beyond just showing the final standings. A return of 52% for 6 months is not bad I guess. This is the only contest that has people trading real money, that is why it is the only one that matters. Trading in a CNBC simulated trading contest is nowhere near the same thing as trading real dollars. I wish I had been in the whole year, since all of my competition was, and doing this in half the time is what makes me the most satisfied with it. Of course, my other botched business venture is what caused me to enter so late, so that is on me. Readers know that the entry in the contest from my venture was up 25% or so in the first quarter, before I pulled the plug on it for extraneous reasons not related to trading at all. Onward.

As to the rest of my forecast, I want to mention something about a market I have already covered, GOLD. If you are of the mindset that the bull market there will rage again, and no matter what happens you cannot be persuaded to change your mind, it is clear what you need to do. Do not ever look at charts of the price, EVER. One thing you don't want to do in trading and investing, is mix time frames and approaches. If you are bullish on Gold some of these reasons that people are putting forward about this new economic malaise etc.., there is no reason to look at charts or read comments from someone like me. You need to stick to your guns and just buy all the dips. Charts will potentially mince your thoughts. There is no reason to look at a price chart if you are not buying it because of a price chart. This is the same logic I use in reverse fashion about not considering these types of arguments when I trade off charts. I stick to my core approach which is charts not opinions. I hope this makes sense. Tune guys like me out, our approach is irrelevant to what you are doing. Who cares what we think or what we are doing.

I wanted to cover this because I happened to read an article about Gold on my Blackberry while I was waiting at the vets office the other day. It was written by a bullish writer, and it was so confusing. It was basically talking about a great buy coming but it was not here. He went on to say it could be anywhere from days to months! Good grief! That sure is a lot of help isn't it? Stick to your guns and don't mix approaches. Speaking of that I did mention I thought the take out of that low would result in a trap and short term reversal, and I was right about that.

CRUDE OIL

I do not have great vision for this market coming into 2012. We currently are in a solid up trend, and we recently had Open Interest get down to a low level not seen in years which is very bullish. However, we have seen the link between this market and stock prices. It is hard to imagine a big bull market in Crude without one in stocks. Due to my view on stocks, I think this market is going to rally some at the beginning of the year, but that rally is going to be tempered by stock prices being flat to weaker. On a relative basis this market has switched to being stronger than stocks, so it should remain so.

The one wild card that is always out there is T Boone Pickens. If he happens to come out and publicly announce Crude is going way higher, we will need to shift to shorting with both hands almost immediately. It is perplexing how someone who has made billions of dollars in Oil is such a poor prognosticator of price direction, but it is what it is. The last two times he has come out and made big appreciation calls, this market has fallen off a cliff within a week or two. Barring the TBP effect, I am looking for higher prices during the first part of the year, but not a runaway bull move. I do think we will have a pretty sharp down move that will happen at some point, and my best guess is either May/June or in the late fall. These are just guesses based on cycles and really not worth anything to be honest.

I do not have at the moment a clear short term signal, although as of today it looks like more of a buy than a sell.

The next chart is the CRB Index. We are at a point where the water cooler economists are going to have to be proven right pretty soon, or even they are going to have to give it up.

The theories are that all the "money printing" that is going on is going to cause a huge amount of inflation. You would think if we had a lot of inflation, that commodities would be rising. Do you see them rising on this chart? What they miss is the concept of velocity. The money supply does not mean anything, if it is not turning over at an increasing rate. We are at a point in time where the seasonal tendency is for prices to rally, and we have followed the overall seasonal bias very closely here. If we are going to have this huge explosion upward, this is the spot where it is going to come from. I am and have always been in the deflation camp. However, if we were to switch to an up trend here at this time of the year, I might change my mind. For now the trend is still solidly down.

This is pretty much it. I don't have time to summarize every individual market and if I did that would be a pay per view service. The recent posts have covered in a broad brush fashion, what I am looking for. I am a short term trader, so at times I will trade in opposition to longer term trends. I do not consider them in my short term trading unless they happen to sync right up with an entry, then I look for the move to be larger.

Happy New Year and thanks for reading in 2011

2011-12-30T09:09:00.000-08:00

TURN OUT THE LIGHTS THE PARTY IS OVER

Here is the type of transaction the folks on Wall Street hate, and they penalize you for it. I do have some retirement money that I still have in an old 401k plan. I know this makes no sense, but I am not going to go into a full explanation of why. It has to do with my wife and her employment. I had mentioned when I bought into the stock market to try and catch a year end rally, and this was the buy and today's exit which will occur at the close today. This will be about a 6% gain, big deal. I am of the mind set now that we could have some trouble brewing and I want to have no long exposure going into January. We may well rally the first couple of weeks, but I think by mid January at the latest, we are going to turn down. I might be getting out of this a bit early, but 401k's are just so inflexible I am not completely comfortable with them.

I noticed when I entered the transaction this morning, they charge a .5% fee for positions that are shorter than 90 days. These people just never stop trying to take advantage of the American public. So I was able to make more in less than a month than these geniuses make in a year, and I am penalized for it. The game is so rigged it is just beyond belief. I say I go into the Octagon against the guy who created that rule and whoever walks out gets his way. As Spock said in a Star Trek movie to Captain Kirk, "what do you think of my solution?" I don't know what it is going to take to reform all of this crap, and I doubt I will see it in my lifetime. As long as they get their fees, they could care less what happens to anyone else. I wish I had a solution, but this just goes so far to the core of the real problems in our society, that the only thing that will cure it as another depression. All the bad has to be wiped out completely, and the government is just going to always kick the can down the road. I do believe though at some point, and I don't know where that point will be, that the market forces are eventually going to overcome the interventions. Once this happens, and the sharp downward move happens, everything will be cleaned out and we can start anew and build something legitimate ( that is where my dream ended and I woke up! ).

I seem to have created some controversy with my new indicator and the stock trades I have been showing. I base this on some emails I have gotten. The problem I got into in the past is beginning to show itself again, but it is the nature of the beast. I know it is tempting when readers see good results like some of what I do, to want to jump all over that and I urge caution with this. There is the old "past performance does not guarantee future results" phrase. This is never more true than it is with systematic approaches. I show these trade results at times mostly to support ideas that I am discussing, so that readers can see they have some merit. I rarely if ever, just blindly mechanically buy and sell anything. Even with the stock trades I have been discussing, the entry is discretionary. Once I find something in my zones with my indicator, I then run them through several filters before I narrow down to a smaller list It could be mechanical and it would still work, but when I have these trades on my new site, the odds are that the actual trigger prices are not going to be exact numbers my system spits out. It will be me taking those and making the best judgments I can about where to actually get in and out.

I have had a few people request that I show all my trades and I am just not going to do that. There are a couple of reasons. First and foremost, it puts too much pressure on me. If I were to get to the point where I was not trading freely enough because I was too concerned about how everyone was viewing my trades, that could literally ruin my life. I have a lot of people and animals that depend on me, I will not risk their well being for anything in the world. I enter the Robbins contest, so that is at least some semblance of trading in the public eye, and that is as far as I am going to go with this. It proves I trade profitably. Second, there are always legal issues, and I am quite sure some jerk would try to sue me if I showed a trade I was doing, they did it, and lost money. In our litigious world that is a lead pipe cinch. If a subscriber of a pay service does that at least I have some money from the subscription fees to put toward a legal defense.

I try to show trades both good and bad to make my point. I do show more wins than losses, but I have more wins than losses, so of course that will be the bias. At least I discuss and show bad trades, that is more than anyone else who does this is doing.

For now everyone is just going to have to be patient until I have this methodology fully dialed in. Once I do, I will discuss how it can be accessed moving forward. I am always messing around with things like this and some just never wind up working as well as this appears to be doing. I have been tracking quite a few of these stock trades that I have not actually done, and I will post the results of how they turn out once they are all closed out. Most of them have won, but there are a few that appear to be heading into losses.

I have been contacted about doing an interview at some point in the near future, so please email me or post topics you want to be covered. I cannot guarantee they will be, since I am not the interviewer, but I will see what I can do to cover things as best I can that are of interest. mktwzrd1@gmail.com is my email address, feel free to send feedback for the interview there. I prefer general comments be made in the blog for the most part just in case any others might be interested in any answers or replies I give to things.

I am having a hard time finding anything really compelling in terms of a new trade for today. Copper is a market I am looking for a buy entry in.

There is a trend line that can be drawn in, that we are just breaching as I go to press here. I am not in this trade as of this point. I would like to see my indicator pick up a bit here, it is actually close to the sell zone. It may not get there, so if we consolidate a bit more over the next week or so, I will be looking for higher lows and a way into this one.

I still have not finished all the installments in relation to my forecast, that will be completed this weekend.

Happy New Year

2011-12-29T08:01:00.000-08:00

GOOD NEWS AND BAD NEWS

The Good news is that the first trade I went live with here with the new tools was closed out with a profit yesterday. I have posted my exact fill prices on the chart, it yielded .91 cents per share or 1.3%. My exit prices were slightly different than the actual MOC price, I made a discretionary call to exit a bit sooner since I was leaving to go play golf and was not going to be in front of the screen for the close. That call wound up getting me a few more cents out of it than it would have brought had I been here. I am glad this trade turned out like it did because this is typical of how these trades seem to be.

What I have tried to dial in here is the following. I am trying to spot very short term trades, that are very extended in price, that are also in zones that my tools tell me the insiders are betting in the opposite direction of the current move. In this case, my indicators were telling me we were very overbought in a spot where the big guys were looking down. The bad news is that I am getting a lot of emails from folks wanting a lot more on this.

I am going to be a little patient with this. I need to have some trades under my belt with real money, both wins and losses, to reconcile them with how the system says they should work. I have to be sure that this methodology will work consistently with real money, before I go to the next step with it. One other thing to keep in mind here is that when one of these trades signals, there is not a magic price to get in. What you want to do is try and find the strongest momentum on a short term basis that you can find, then go against it. You do this with the idea that we are at a short term turning point, and a reversion should happen very quickly. There is also real danger in this method, there are no stops. Some of the trades will go against me quite a bit before a reversion happens. That reversion may only take me back to a place where the exit is just a smaller loss, and not actually a profit. The next chart is just such an example. I mentioned I put a few of these trades on. All of the closed trades have brought in a profit, but there is one that is still open, that is likely to be a loss.

You can see from the chart, that if the trade were to be exited today which is unlikely the way it looks now, it would be a loss of .09 per share. This trade is a likely example of one that by the time the short term oversold condition gets here, it will be above the entry price which was 61.10. Let's watch this bad one live now together to get a good idea of the downside to this method. I do worry that less experienced traders see good trades in here and get too eager to jump into the game without making sure they have their ducks enough in a row first. Trading is a difficult profession. As you progress you will come across countless seemingly incredible discoveries. Most if not all of them will be proven to be no good in short order. If it were that easy, everyone would be doing it etcc...

This tool I call the Kitchen Sink, is over 10 years in the making, Tennnn Yearrrrs!!!!

I cannot emphasize this enough. I have no idea how many hours I have spent studying, typing code, thinking until my ears hurt, trying to figure out the best way to get around some of the COT data limitations. There have been countless things that seemed very promising, that did not turn out to be any good at all. This one is different. No matter what market I look at, it works. However, how to best trade signals on a short term basis with it is not complete. I know I have a functional method, which is the one I used for the COO and CPT trades, but I think it can be improved. Here is one of the other trades I have done with it that worked out quite well and indicates how good it can be, whereas the COO trade was marginal.

This is an example of one where the method just dead nailed a great short term move. I believe this will happen quite a bit, but I also believe the other two scenarios will as well. One thing to keep in mind, there are countless trade opportunities, the markets will be here tomorrow. Of course I have to qualify this with as long as Douchefett does not get his way, we will be able to trade them. Let's just be sure the approach is the best it can be before hard earned money is put at risk.

In summary, we have 3 trades I have shown, one was a small gain of about 1%, one is a losing trade, and the other is a big win. This if it were to be representative of a large group, would be quite promising. As soon as I am comfortable that this will be the case, I will release more trades. Until that time I am going to cherry pick them. In this case it would have been best had I cherry picked the last trade, but we never know in advance which ones will be best. The very first one I did, was COO so that was why I posted that one. I posted it when I did it.

I always generate a lot of energy, probably mostly negative, when I make bearish Gold comments. I know the world wants this market to be their savior. I missed a recent short here, and you can see alas the new indicator is not perfect after all. It did not signal a sell other than at the very top of the last few months price level.

You can see it gave us the Sell at the top, then a good buy zone after that. It has not gotten into either zone yet, but is close to the buy zone. This is why I mentioned the other day that I was looking more to the long side than the short. We are closing it appears on a weekly basis below the key support levels. This could be a short term bear trap, but overall this is an ominous sign. I did have recent short term sell signals a few days back, but I passed on them due to my seasonal bias which was up. A blunder obviously. It always seems so easy after the fact. The bottom line was it just did not meet my rules the way I like trades to so I missed the trade.

I am not trading much this week, I just have a couple of trades on, I am mostly gearing up for next year. The markets are very quiet intraday right now, so don't push things.

Good Trading and thanks for the interest on the new tools, just be patient.

2011-12-28T08:36:00.000-08:00

PSEUDO FORECAST PART DEUX

Here is the next market I want to cover, the Greenback. However, I want to mention the COO stock trade again that I have been covering live. The exit for today on that would be any close <= 69.98. The entry was 70.59 so if this happens this will not be a great trade, but it will be a profit. I have done a few others that I have not mentioned in stocks with this new tool, and all of them have been closed profitably so far. I just mentioned this one since it was the first one I did, and it was somewhat of just a live experiment with an actual specific trade called out in advance. I guess I am wetting every one's whistle with this, or at least trying to!

I think we are going to see an up year in the Dollar this coming year, or at the very least the larger moves being up, at least during the first half of the year. My tools do not give me much vision beyond 6 months out, so I would just be guessing at that point. I am a terrible guesser so I stay clear of those types of decisions. Of course when I am being a loose cannon and running my mouth at times, I do step outside a 6 month window from time to time. I am taking a contrary position of what most people expect here, so let me explain why I think this will happen.

Most currencies are in downtrends on a weekly basis, some more pronounced than others. The DX is in an up trend as per where I marked it on the chart. Although I never gave the specific rules, the daylight you see above those bands where I have the arrow, is a trend change in my world. Once we see that pullbacks are buys, and you can see the first pullback here was a dynamite buy. They usually are. We have a strong seasonal tendency for the Dollar to rally at the beginning of the year as I have drawn on the chart. If you look at the bottom of the chart, we can see that the new toy is almost in the sell zone. What this tells me is that we will have a pullback in the first month of the year, which will be the buying spot for this market, and the selling spot for the individual currencies.

As with any forecast, I am anticipating things to some degree which I don't often do when I actually trade. When you are looking out 6 months you have to do some of that. The other reason that I think this rally will occur is that I am expecting weakness at the beginning of next year in the stock market. The total lack of any meaningful rally here to close out the year in stocks, tells us we have some problems. Since we know that the DX trades opposite of the stock market, I have to be bullish there if I am bearish for stocks during the first half of the year. There is so much government intervention now that I think things might be choppy. They have shown no tendency to back off in any way, they are actually ramping up the moves now. It is an election year, and a stock market slide is going to doom Barry. I expect the Fed to begin to be active again if we start to decline. This should be good for us short term traders, but it is going to cause long term holders fits.

This next one is sure to be a crowd pleaser.

I know I have readers that think the Bond Market is a bubble, you may be right. I do not have that opinion simply because bonds prices should and always have moved higher during crisis periods. This is where the Gold people miss the boat. It is alleged that Gold has always also done so but if you look at charts, it has not always risen during crisis periods. It is argued that Gold should rally being a commodity with intrinsic value, during crisis periods. However as some astute people have said, it is just not in the data. Bonds rally during these times for obvious reasons, rates are lowered to try and save the day when things get bad. We certainly do have now and have had, this situation for some time now. This is why the Bond Market has rallied. However, this market is setup as well for a sell as anything I have seen in a while.

We have a pretty bullish position with the small specs, indicated by an arrow on the chart. This is accompanied by the commercials selling. We are at the time of the year with one of the most reliable seasonal patterns in all of the markets. Bonds very often decline in January, as I have marked with the arrow on the chart. We are also approaching the short term sell zone with my new tool. I showed a chart the other day demonstrating how well that tool works in this market. In summary, on a weekly basis this is setup very well. The next chart is a daily chart, and I think a sell entry is here any day now.

I mentioned recently that there was quite a bit of divergence in the POIV indicator developing in this market. You can see on the chart how prominent it has become. I think at this point with a potentially lower short term high forming any day a prior days low goes, that this is a short the first low that gets taken out.

We also know that there is a pretty reliable low that typically develops in the June/July time frame. As a result it is not too much of a reach to expect Bonds to decline for the next 6 months overall. The one variable that has to be considered of course is the potential for QE3. If the stock market does happen to get into some trouble, you can be your sweet .... QE3 will be announced. At some point though I fear that all of this meddling is going to fail to move things much. I think at some point the market is going to almost become immune to the manipulations. We have not reached that point yet. As a result, my call is for lower bonds for the first half of 2012. The weekly uptrend is still intact, so nothing really bad happens here until that changes. I also think for those who think this is a bubble, it won't pop until the stock market has a huge rally.

More tomorrow

2011-12-27T09:31:00.000-08:00

2012 WHAT WILL THE NEW YEAR BRING?

I have just read through Larry Williams 2012 Forecast, and he appears to be in agreement with me about most of what I think is going to happen. He is my mentor, so I do tend to look at things in a similar fashion to him due to that, so it is not a huge surprise. I am going to do a quasi forecast over the next several days, with just a few things each day. The first market to discuss is of course Gold. It has been my position recently that the trend in this market has turned down now, and that we are going to begin a huge decline in this market. I have showed the reasons why I think that in previous posts, so I will not rehash those. These reasons were all based on trend lines and my bands I use to identify trends. Whether or not I think it is a bubble or not was not part of that rationale. Bubbles can go on for long periods of time. There is no reason to short a market just because you think it might be in a bubble state, that is a sure way to get run over. My bubble comments are just observational, they do not dictate my trading.

I was pleased to see that Larry in his forecast also is forecasting mostly downward prices in the Gold and Silver markets. For those who want those details, go to his site and purchase the forecast. These are great tools to have at your side during the year. It will be the best $200 you will spend. What I would most like to see is for a bounce to occur here and to have my new indicator get into the sell zone. I do worry that this market is so weak now this will not happen. However, if it does, bet the farm on this one to move back down. This is the trade of the year, maybe of many years. As readers know, I think there are a lot of weak hands in this long trade right now. When we reach the point where they realize they have been hoodwinked, it will be one spectacular decline. I hope I am short when that happens.

What I really like about my new indicator is how well it picked the top not being too early. Most of these darn tools always fight trends, and this one seems to pick pretty much the right times to fade them. That Gold top this year was impossible to pick any other way that I know of. I do not have a position in this market right now, but I am looking for a short. This has been an incredible trend that has made a lot of people a ton of money. However this types of moves in commodities do not go on forever. The game is over for now here.

For the stock market, it does appear to me that a sell signal is coming very soon. This total lack of a significant rally at a time when everything that "should" influence stock prices upward, is lined up, is a very negative overhang to me. That mystery chart that I have showed does show down into June, and I think that is about what we are going to see. Larry's forecast shows things a little different, but not too far off. I won't discuss it specifically other than to say when it supports what I am looking at, because it is a great product. He puts a lot of time into this, and I will not compromise it by telling everyone what it says specifically. If we take into account the big picture of all the stock influences we get the following overall view.

The European mess is just being kicked down the road, nothing that is being done over there is doing anything to solve the real problem. Socialism does not work. When you look at China, the worlds savior, and the reason Gold and Gi Joe's and everything else in the world will rally in price, is in reality a house of cards. We also have a bear market in commodities going now, just look at the CRB chart if you are not sure about that.

If we look at China you can see this market has been in a downtrend for 2 years now, hardly what a boom economy should look like. When you read about all the accounting fraud that goes on over there, and you couple that with the shocking stat that about 70% of their GDP is real estate and construction, doesn't that make you wonder how real the "boom" is or more importantly, how long it can last. At the top of our Bubble in Real Estate, I think out percentage was about 40%. That tells us that this bubble is expanded far more than ours was. Jim Chanos is right in his bearishness on China in my opinion. We will see this talk about how China's currency will become the new world reserve currency disappear this year when the dollar soars. What a ridiculous idea that is anyway, I wonder who the pinhead was that started that one? You can say what you want about our problems we have here in the US. When the "sh..." hits the fan, the best safe haven in the world is still the good ole USA.

I also forecast that I will stay on the top of the comments better now that I know what the problem was before. That forecast is likely to be accurate! I also had a few typos get past my editing due to being in a rush a good bit of the time I try and crank these out. I will try to catch all of those next year if possible. I just think it takes away from the professionalism when there are grammatical errors.

I have tried my best to put out a good product here every day and I think I have for the most part accomplished it. There have been times where I have been very accurate and others not so much this year. However, overall I have had a good trading year, and been pretty good about my market calls. That is all I can hope to do.

Enjoy the holidays, more coming tomorrow