I hate doing this without really clear evidence. I have that on the 1 min 3C, the 5/10 min are mixed, the 15 is positive.
Bernanke is the big deal tomorrow. I always assume that what he's going to say for the most part has already been leaked to the market.
Today we saw the retail gap up and a slow, steady descending channel down right through Dow 10,000. The way the channel moved down slow and steady leads me to believe it's the work of market makers just adjusting the bid and ask all day to bring prices down, right until they cracked Dow 10,000. At that point volume picked up for two reasons, any longs most probably put their stop at that level-it also correlated with a support line in the SPY/S&P. Once broken longs stop out, shorts dive in. I would think if I were institutional money and what Bernanke was going to say was going to move the market down, I would want to keep prices elevated all day and short into them. The fact they moved prices down and 3C moved up, suggests they were accumulating today and drawing shorts into the market. This is the Judo concept.
So don't take this as the gospel and don't send hate mail if I'm wrong, it's my working hypothesis and it's the most likely course that I see right now. As the market moves off Dow 10,000 higher, the shorts are squeezed, they cover adding to demand which=rising prices.
That's my take. You have to decide whether it sounds whacky or plausible and what you'll do about it. Remember-CASH IS a position.
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Risk Management
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Many of the charts you see here at WOWS are my proprietary indicator 3C which reveals underlying institutional money movements and often contradicts price. To understand the annotations made on charts, you must first understand that 3C has no numerical value, it is a pure divergence indicator. Positive divergences represent accumulation by smart money, negative divergences represent distribution by smart money and when 3C trades with price, that is trend confirmation.
The chart annotation system is simple; white arrows represent relative positive divergences, red arrows represent relative negative divergences and green arrows represent trend confirmation. When 3C is in a white or red box, that represents a leading positive or negative divergence, leading divergences are the most powerful.
We analyse 3C in multiple timeframes, the longer the timeframe the stronger the accumulation. 1-2 min timeframes represent intraday moves, a 5 min timeframe can represent a day or two and 15 min timeframes average trends of a swing trade nature. 30 and 60 min charts can move the market for a month or more and daily charts can be over a year.
You'll get use to seeing the charts and understanding how the multiple timeframe analysis works and works well.
Welcome to Wolf on Wall Street.
The trades featured here are meant to maximize returns with the least risk and highest probabilities. Unless otherwise mentioned, all trades are meant to be executed at market. I prefer long-term trending trades which perform well in rising markets, but really stand out in declining markets. However, we get occasional one day gifts 30,40,60% 1-day gains. I'd urge you to consider taking some or all off the table in such cases, the markets don't give gifts like that often or for very long. Most of the returns that make the system outperform so well come in short-entry trades. If you are opposed to short trades, this is not the system for you, unless you are ok with buying an inverse ETF. If you would like more information about the truth about shorting stocks, just email me.
Risk management. I recommend a specific and consistent risk management approach to all positions. In most cases we try for 2% risk money (2% of portfolio) unless such a position size exceeds 15-20% of overall portfolio in actual position size. Each trader is different and each has a different allowance of open trades. I like to keep the overall money in the trade around 10-15% of portfolio per position in case of gaps against you. Stops are generally executed at the end of day and I personally never place a stop order, all my stops are mental; remember, the middle man gets to see everyone's cards. When you are not in tune with the market or opportunities just aren't that spectacular, I take my risk per position down to 1% or even half a percent of portfolio value.
Each trader is different and must determine their own level of comfort with risk. I do have a channel stop which I provide to TeleChart/StockFinder users for automated stops, I appreciate you using my links to sign up if you do. The Trend Channel catches trends and works well as it automatically adjusts for each stock's volatility. Arbitrary exits based on nervousness about the markets WILL decrease the portfolio performance dramatically. This system will not ever get you in at market bottoms or tops. The recent 1 year performance against the Russell 2k buy and hold had the system beating it by 3:1. Ultimately it is up to you as to how you proceed, but I'm always available to help you determine what might work best for you.
Risk management. I recommend a specific and consistent risk management approach to all positions. In most cases we try for 2% risk money (2% of portfolio) unless such a position size exceeds 15-20% of overall portfolio in actual position size. Each trader is different and each has a different allowance of open trades. I like to keep the overall money in the trade around 10-15% of portfolio per position in case of gaps against you. Stops are generally executed at the end of day and I personally never place a stop order, all my stops are mental; remember, the middle man gets to see everyone's cards. When you are not in tune with the market or opportunities just aren't that spectacular, I take my risk per position down to 1% or even half a percent of portfolio value.
Each trader is different and must determine their own level of comfort with risk. I do have a channel stop which I provide to TeleChart/StockFinder users for automated stops, I appreciate you using my links to sign up if you do. The Trend Channel catches trends and works well as it automatically adjusts for each stock's volatility. Arbitrary exits based on nervousness about the markets WILL decrease the portfolio performance dramatically. This system will not ever get you in at market bottoms or tops. The recent 1 year performance against the Russell 2k buy and hold had the system beating it by 3:1. Ultimately it is up to you as to how you proceed, but I'm always available to help you determine what might work best for you.
I do use other scans and systems when market conditions warrant their use and may change strategy with market conditions.
The MOST IMPORTANT tool you have to bring you long term success is RISK MANAGEMENT. There are plenty of articles linked at Trade-Guild.net on Risk Management. We can be wrong 75% of the time and still outperform the market with solid, consistent risk management.
Position Sizing
The position sizes noted in the positions @ 2% risk of portfolio are based on a $20,000 portfolio-adjust as needed. Due to tight stops, there is the possibility, even probability that one position could take up the entire portfolio. You need to decide how many positions you want to trade and reduce the position size according to that. For instance, if you want to trade 5 positions in a $20,000 portfolio, no one position should be valued at more than $4,000-not risk money or 2% rule, but share price entry x shares.
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Futures Update BR-EXIT Edition - So the conventional wisdom couldn't have been more wrong. Those chasing risk and closing hedges couldn't be in a worse place right now. I would still remin...7 years ago
7 comments:
What are the daily and hourly 3c's doing?
They for the most part, each has individual charecteristics, but pretty much the daily is in line with the bearish price action and quit a few of the hourly charts support the view of a bounce. It's interesting it's made it all the way to that level, again which is in line with the idea of a scare bounce. The 1 minute though were the show stopper, almost everyone in a new high or close to it, positive divergence. I think the shorts were drawn into a trap today. Oil had a nice day as well. In either case, if it's bad for the market your core short positions should do well, if it's good for the market any bounce positions will be extra cash and set up even better shorts.
THIS comment makes the MOST sense. CHARTS don't lie!
"The fact they moved prices DOWN and 3C moved UP suggests they were accumulating today and drawing shorts into the market."
That's my feeling MEEEEE. They also kept raking the Dow, as soon as a position/stop was entered they went back and forth above and below 10k-good day to be a market maker. They kept the DOW at a level to keep the shorts in place, so if Bernanke says anything that the market rallies off of (and remember, anything out of the Fed is typically reversed in a few days), then the shorts burn as rocket fuel. Either way, if you have been establishing position trade shorts and the market goes down, you win, if you have some bounce trades on and it bounces, you make extra cash, you get excellent positioning on short trades of which I have hundreds and then you make the downside money as well. If you followed the main strategies, kept the bounce in perspective and used risk management, you really can't lose unless you think the market is going bull from here.
Hi Brandt,
So, probability wise, you think that the market tomorrow will go higher from todays closing level based on Bernakes statement? The smart money has accumulated while squeezing longs and setting a bear trap today?
The only think that i can think of that Bernake could possibly say to give the markets at jolt upwards is if he is going to print more fresh dollars to give to wall street (i.e. quantitive easing part II). The $dollar would then go through the floor and anything priced in US dollars, equities, oil, other commodities etc, will get the much talked about bounce.
Is this pretty much your thoughts? After all, what else can the FED do? They've ran out of bullets so to speak?
Not sure what Bernanke can say, I've documented plenty of Fed leaks though-the Senate hearing was the most recent I believe. Whatever he says, if they rigged the market, it doesn't have to even be anything effective if there is anything effective even left. I think traders would be happy just to hear his Doctor say his blood pressure is up since the last meeting. Anything that shows that he's taking this seriously and that makes traders feel like he's on the job. the last meeting left the impression of a white flag. I'm guessing the MExican stock market ordeal brought the market lower then they wanted, if this is a scare bounce they need to break some levels that will drive the longer term shorts out, if they let the market fall too low, they may have felt they wouldn't have been able to reach that "X" number they are shooting for. If they felt this was going to be a bust, then I think they would have let the opening gap continue up and we'd see 3C go down, the opposite happened.
Well, reading into what 3C has been suggesting recently, the markets and commodities are all due a good bounce. The only thing i can think of to do this with all the bad news around is for the $dollar to take a hard hit, and the only way i can see this happening is for Bernanke to commit to or mention the potential of quantitive easing part II.
That's what all the piece of the 3C puzzle say to me. Why else would there be accumulation by the smart money unless the outcome of Bernankes statement is not already known? What are the odds of 3C calling the recent accumulation wrong?
Precious metals, priced in $dollars, have also done very well recently.
Can we have an update on the oil long as well please Brandt when you have chance?
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