And while it wasn't a downside reversal, at least not of any magnitude, the initial bullish enthusiasm right after the statement quickly reversed as I told you is often the case. We may see more as it is analyzed for every jot and tittle, but on balance, I feel today wasn't bad. I'm breathing a little easier as the market did NOT follow through on yesterday's move, although the price/volume relationships yesterday did foretell a weak breakout.
The S&P-500 was a few cents away from a Harami Reversal.
The Dow put in a narrow range day forming a Star candlestick, which is a bearish reversal sign when it comes after a prolonged uptrend like we have seen.the long upper wick shows us higher prices were tested and failed to hold.
The NASDAQ 100 put in the same Star with a little more bearish bias.
The Russell 2k put in what would be similar to a Harami downside reversal, the body of the candle was a bit too big to qualify, but the implications are similar especially considering it closed near the lows of the day-almost at them
The Nasdaq Composite did put in a Harami reversal (bearish).
The only index to close up was the Dow-30 by +.09%
The Russell had the biggest decline of -.75%
As of now the market is trading down a bit in extended trading.
So, I'm going to take a little break as this has been an intense day, then back to research and tonight's post. I have a few new ideas that we'll be looking into.
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Risk Management
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3C Quick Start
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 $4,000-not risk money or 2% rule, but share price entry x shares.
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Futures Update BR-EXIT Edition - So the conventional wisdom couldn't have been more wrong. Those chasing risk and closing hedges couldn't be in a worse place right now. I would still remin...8 years ago
5 comments:
Where it was wilder was with the currencies and gold/silver.
Consumer confidence numbers down again (reported after hours):
http://www.zerohedge.com/article/abc-consumer-confidence-drops-poll-gets-downright-cynical-recession-ends-nobody-notices
From -43 to -46.
Brandt,
I know you updated GLD today, but would appreciate an update tonight after the pop in GLD after FOMC and the drop in the USD.
Thanks
Hi Brandt,
I note that looking at the FTSE using 'traditional indicators' that it looks it's ready to roll over:
Overbought RSI
MACD lines are at a high and about to cross over each other.
MA 50 day and 200 day about to cross also (by the looks of it).
FTSE is also struggling to make higher highs.
And i also think the volume has been getting weaker.
http://stockcharts.com/h-sc/ui?s=$ftse
I know you said that the powers that be use traditional charting indicators against you. But i also think that sometimes these traditional charting indicators are self-fulling. If you look at the chart, every time the MACD lines have crossed there has been a change in direction in the market price.
Your thoughts?
Mr. Pink,
I use all of those indicators, I just use them differently. I believe your edge comes from seeing that which others missed so I use really long versions of them of really short versions of them, I don't use what everyone else uses. Most of the manipulation and false breakouts we see are temporary and the market continues in the implied direction, and it is moistly price pattern based. What charting system do you use? If you had TeleChart I could show you some ways to use those indicators that would make them 2x more effective.
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