Watch what happens with volume, especially around $113, if it picks up big and red on the downside, Wall Street is most likely sending retail a sign, "It isn't going to happen". Note how the green volume (1-min) increased into $113.
They seem to be running the SPY via AAPL so I have AAPL overlaid on my SPY chart.
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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
23 comments:
Why are they waiting till the end of the day for these runs. I know some traders only trade the end of the day, but this is the fourth or fifth failed attempt at $113 this week already. I would think by now most traders are going to be looking for something more substantial in a move that just piling in at $113. Maybe another candle to confirm the trend change is what they are looking for.
Close of 113.12 ?
Brandt's post at 3:10PM, said there was a negative divergence In the DIA, QQQQ, IWM, (but not the SPY)... and yet the DIA, QQQQ and IWM went nothing but up from that time (the DIA and QQQQ especially strongly).
What's happening here?
We closed above the much talked about $113 today. Where was the big sell off by the 'smart money' over $113?
Seriously, i need to see a big down day tomorrow, this has gone on way too long.
... and after hours just burst upwards. The dow is up a further 20 points+ and SPX 2-3 points.
Seriously, what's going on.
The spy is trading around 113.42 in after hours on what seems to be quite a bit of volume. It looks as if they may have accomplished their goal in trying to get people enthusiastic about that trade.
Remember that After Hours is like the Wild West. You will pay or sell for the going rate no matter what. It can be bid up pretty easy and if they are selling naked shorts to those willing to buy...think of it as kindling wood.
Jack,
If it burst after hours, then surely it can't be 'retail' (which is the ones that are allegedly being trapped by this huge 'bounce') as the average retail investor doesn't have access to after hours trading.
Something doesn't add up here. And if we don't get the much talked about 'reversal' tomorrow now that plenty of 'retail' have been trapped above $113 (and at around that level for the past 4 days) then that will confirm it for me.
I need to see the negative movement calls 3C has been making confirmed (equities, precious metals, etc) as the market has done the opposite of 3C's calls recently. I need my confidence seriously boosting.
I hear you load and clear and think several of us are sitting on what we might determine a signaificant loss. Remember 2 things, it is not a loss until you sell and the market will go up and down. It takes alot of nerves to sit through these trying attempts to top out. I actually made some money holding positions today in FAZ, TZA and EDZ with the market flat to up. It shows that there was underlying weakness in the market that isn't seen through the major indexes. By the way, retail does have access through AH trading. The online trading firm I use allows access to it and I can trade before and after hours. It was a mater of calling them and having it added to my account. I know alot of traders I traded comments with have access. The problem is that the unexeperienced traders will see a stock rise in AH and chase it thinking they are missing out on a good thing, especially if they were watching it into the close. I have used some 3C calls before to sell in AH when the market was bidding up the price and 3C indicated that the next day was going to be a down day. I would suggest using extreme caution and limit orders in after hours. My broker only allows to for limit orders in AH. Either it is filled at your price or it isn't.
Jack/Brandt,
What would your thoughts be if we finished up again tomorrow?
What time frame are you personally looking at for the big down 'reversal' to occur?
As i've said before: physics defines that a bounce cannot go higher than it's previous high point (otherwise it has gained energy and therefore isn't a bounce). The last high point before this 'bounce' was around August 18th at around SPY $110 (we have 'bounced' well above this), and the high before that point was around August 9th when the SPY was at the current level $131.
If the SPY goes any higher now, i can't really see how can this really be called a bounce.
It was another day of poor numbers and the market goes higher. On the DOW we've had a 100 point swing, from down -50 points at the start of the day to where we are after hours now.
What news is due tomorrow? And why would any bad numbers tomorrow suddenly cause a sell-off?
Jack is right retail can trade AH ( just depends on your broker)
Brandt,
But would the 'average joe' really be getting into this market after hours? I think that's really unlikely.
I am going to leave most of this question for Brandt as he has better insight with 3C. I would say that after 4 failed attempts to breach the 113 area significantly that the good traders are ready for a breakdown of the market. From some reports I have heard they are indicating we are range bound, at the top of the range and wouldn't surprised to see it drop. They are careful to say that "they are not looking for new lows". Does that mean we won't get them, I don't know. I know I would like to score a pretty big return, but not sure if it is the cards yet. I think Brandt might be able to clarify what he expects based on the level of divergence of 3C in its current position. I think that it does head lower itself as the market sells off, so a true target might be hard to identify.
News tomorrow is CPI and Michigan Sentiment. I know several Tool and Die shops in the Midwest from my area are not doing well for orders and keep getting jobs postponed. We know the market is bad, when that plays out I don't know.
Jack/Brandt,
Surely, the whole point of these different 5min, 10min, 15min, 1hr 3C charts is that they give us a good idea of when things will happen. Otherwise, it's not much help, a bit like saying "its going to rain but not saying when".
We've had a strong negative 1hr 3C chart on the SPY since the 1st of September. It's the 17th tomorrow. Surely the negative 1hr 3C chart should convert to 'real market negative' move by now? Especially when we everyday since then we've had 1m and 5m negative divergence daily?
"Brandt's post at 3:10PM, said there was a negative divergence In the DIA, QQQQ, IWM, (but not the SPY)... and yet the DIA, QQQQ and IWM went nothing but up from that time (the DIA and QQQQ especially strongly)."
Usually the averages run together, very seldom do you see that not happen. The SY put in the first divergence, it would seem to me it's because that's where the attention is, but retail buyers see the market move higher and they buy, they don't know anything other then what CNBC tells them. All the other averages fell into line with 3C confirming the up move, which is to say there 's no real bias, nothing negative, nothing positive. The SPY is the one that got the ball rolling. As to why into AH, I don't know Jack. If you've ever traded it you know the liquidity is very poor and the spreads are very wide. As soon as the market closed, AH jumped considerably.
Mr pink, as to why prices move opposite of 3C until the reversal it's pretty simple. Take the 2009, September/October 3C called a positive divergence in the Dollar index, it continued down until December and then rallied past price levels where accumulation started, it was a 6 month rally, they do not operate the way people think. People think as prices rally smart money is behind the push, it's the opposite, they buy/accumulate into lower prices and sell into higher prices. What is going on now is not in the same scope as back then, but that's why you see opposite 3C/price movement. Same as distribution, prices go higher, they sell slowly into it. If they dumped a 3 month long accumulated position in a week, they'd pressure prices to below what they paid for it and that wouldn't make any sense.
I think if you look a a 6 month chart of the SPY that you will see that last top took about 7 trading sessions at the top before it failed. We had a gap down on a FRI the 6th that didn't get confirmed until the following WED. Right now we are on day 4. Tomorrow could be a gap down with some recovery of that, Monday another sideways day and then the selloff on Wed. Would I like to see tomorrow just go down, absolutely and it just might. But the market will do what it does. We can only trade what we know.
Brandt,
Based on the strong negative 1hour divergence we have seen since 1st September and based on experience, when do you think this will convert to a real market negative move? It's been 12 trading days since then and the market has gone higher and higher.
You've posted that you thought the reversal might occur last week, and then this week. What are your current thoughts?
As for AH, retail traders have been allowed to trade AH since 1999, it depends on your broker, there are less protections for investors and liquidity is horrible. If you wan to see real manipulation, look at AH trade. MM's used to close a stock and put in a bid of .01 and an ask of $2,000 for a stock, some were more reasonable, they were hoping to catch anyone dumb enough to place a market order in AH, that's what they'd get filled at, since then they've adopted protections and it's up to each individual broker to set the rules for their clients, most now require limit orders. Severral days back maybe a week, I wrote about my experience in AH on a biotech, the manipulation, corruption and insider knowledge all in one trade.
Jack said "I hear you load and clear and think several of us are sitting on what we might determine a signaificant loss. Remember 2 things, it is not a loss until you sell and the market will go up and down. It takes alot of nerves to sit through these trying attempts to top out. "
None of these major calls have ever been easy. 3C called the end of the 5 + year oil rally to within about a week, Cramer was telling everyone to buy oil at the same time, you can imagine the flack I took for that daily. ME against Cramer-who do you think most people believed? Yet oil reversed and never recovered, that top wasn't pretty either.
In October I did a video about accumulation in the dollar (2009)-it reversed in December and rallied 6 months, it took them that long to put on the size position they wanted-3C can't tell you that, how big or when, just they are buying. You could see them sell into the rally. This is where people misunderstand the market the most, they think rising prices is due to institutional buying, it isn't, they bought at lower levels or during a decline when no one was watching, the same thing happened with our situation now, they started buying August 25th and it didn't reverse up until september, you've seen the charts of the distribution as we've moved higher.
The 2007.2008 top was a huge call that lasted a long time, but look what happened, 50% loss in the market 5 years of rally and then some destroyed in a year and a half.
By the way Jack, you are the third person I've heard of today that made money in the inverse ETFs-
BTW, the market shot up after hours because of Oracle Q1 results which were released after hours.
Well, the SPY $130 has been achieved, so when the reversal? I thought $130 was the target for this bounce. How much higher can this go? $130, $140, $150?
Surely if this is the 'top' that is being formed, then it can't go much higher, otherwise it isn't a top.
MR. PINK
"You've posted that you thought the reversal might occur last week, and then this week. What are your current thoughts?"
I think I'm learning not to make predictions of when. But as I said BEFORE this bounce started, this is going to be scary and probably when you feel like you HAVE to get out, we'll be pretty close to the destination.
3C can only show what they are doing, not how long, for what reason, or anything else. When it made the dollar call in 2009, it took another 3 months after it reversed in our direction to find out why.
these guys work way in front of the market. In 2000 while everyone was fixated on the tech crash, they were buying home builders for over a year, then they let them rally a bit, the housing bubble came into play and they sold for over a year all while it rallied. Obviously we are talking about much different timeframes and the top in the market is well formed and extremely mature now. Yes, I didn't expect it to be this long, but looking back, I can say that about every other signal, the market always swings way too far one way and way too far the other.
But if I was telling you all week that we are about to break out to new highs and you saw 5 attempts fail, you'd be asking the same questions. I'm going to do my research now and see what I can find, however, have you traded any of the ideas from the list? 70% gains in several stocks and decent gains in others.
There's always going to be bad calls and sometimes smart money is not always so smart -think LEH, they also have the right to change their minds as the world economy is at play and dynamic, so the best we can do is make decisions based on the knowledge that we currently posses and let risk management take care of the rest. Anyone could have traded 20 of the stocks on the list and taken losses on every one and had 1 that made 70% in the last 3 weeks and still be in the green. As you know, if you read my Risk management article, a failed trade should never cost you more then 1-2% of your portfolio, but I can't force people to follow this. The guys I manage accounts for, I can't even get them to follow it, but after all the time I've been doing this, it is the most important piece of information you will find on this site.
As for ORCL, a friend asked about FedEx-3C said negative, it came in negative, more often then not the wheels are in motion and stuff like ORCL are passing distractions to account for something that's already under way. You just don't know, BOJ could start another cycle of intervention at midnight and crash the market. The point of TA is to see what smart money is doing, TA doesn't do that anymore, in fact it sets you up as I show you every single say. 3C allows us to see what they are doing. No one can say why and when, it's all speculation. I thought the dollar reversal was all about the strong dollar policy announced several weeks after the reversal, it wasn't until the treasury started restricting banks to get them out of "high risk trades" did it become obvious, they were concerned about the risk and the dollar carry trade. The dollar was most likely driven up because of listing sentiment to the bearish side, but obviously Wall St. was aware of what was coming down the line. Same thing with housing and interest rates, how they find this out-billions of dollars buys a lot of information.
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