This is strange, last update I told you the Dow had been seriously lagging, keep that in mind.
In about the last 20 minutes some serious damage has been down and 3c 1 min has headed significantly lower in the SPY. One of the 3 versions is nearly at a new low for the day. Two of the 5 min versions have also seen rapid deterioration.
The QQQQ has deteriorated but not to the same extent, but it has become more negative.
The IWM has one version of 3C that has made new lows for the day in the 1 and 5 min time frame. Another version has the 5 min time frame looking very bad headed towards new lows and pointing down, the 1 min is also showing some of the worst readings of the day, but not quite at the lowest point. This is all significant as prices are significantly higher then the open.
The Dow/DIA however, -well, forget that. I can't type fast enough to keep up with it. In any case, it was improving, while still negative, while the others were falling apart. There is 1 1-minute that shows a pretty decent looking positive divergence still, but with the others falling apart, I'm guessing it will follow soon.
You can see how fast these things move and this is why I prefer to concentrate on the overall trend, but you never know when one of these is going to lead to something significant. Lets see if they move the Dow up in the next 20 minutes as it has lagged all day.
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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...7 years ago
4 comments:
Looks to be some leaks in the dam...maybe somebody has figured out ahead of time what is about to happen and don't want to be holding the bag. I wouldn't have expected a sell off 20 min prior unless there was a leak.
It's hard to say, day traders making a profit aren't going to risk losing gains in front of the Beige book. However, when Institutional money soaks up all the demand by selling short to them and there is no institutional demand to push prices higher, this is also what happens. And then there's what you said, but they'd likely already be short.
I find the lack of volume interesting, considering that we're past the holiday. Kind of eerie... not even the crickets are chirping. Like a slasher movie, right before something bad happens.
I think part of it was the uncertainty of the afternoon events, but the other thing is that smart money has already set up their trade last week, so they're not as active in the market right now leaving only retail traders. As for a price advance, I warned of this last night, but I really thought if they did it, it would be more jolting, today's advance is so average and typical, I could probably find 100 charts tonight with the hanging man reversal and a 4th day like today up slightly.
The market obviously knew what both events would be because they have been distributing and there was no sign of any accumulation beyond some market maker stuff, so they knew there would be nothing coming out worth buying.
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