Tuesday, October 5, 2010
2nd Divergence
Usually POMO days start to sell -off around 11 a.m. So we'll see in minutes what's happening. Gold saw the bulk of the advance.
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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...8 years ago
20 comments:
All this is doing is ensuring that no shorts are left to stop the plunge once it starts. This is not only the Fed's doing, but the MMs as well.
I am very bearish now.
Indeed. This is not bullish market behavior. This is going to lead to a crash.
Brandt how's 3C on SLV shaping up?
You have got to be Fn kidding me. .08 from $116 on the SPY!!! This is getting riduculous to say the least. Anyone still doubting the amount of influence the FED is having? The transports are up 3% today. They almost never gap up like this and run this hard without some sort of outside manipulation. I think we need to see a hard reverse starting today, at least for my own sanity!!! Not sure my slow stochastic can peg anyhigher
Am I missing something or declining issues are outpasing advancing ones?
so much for "not worrying about the pos divergence" yest pm???
Jack I've already said goodbye to my own sanity long time ago...
I consider this to be a very tired move which could continue but at some point will reverse to trade much lower.
Again I am very bearish.....more bearish than the april top
This morning AAPL broke to the upside of it's 5 day falling wedge. This could be adding alot of strength to the market as I'm sure that this is happening with alot of stocks that people follow. Let's hope that this is a false move to suck in the longs and trap them, because we all know that right now we feel like a bunch of trapped bears.
There are few shorts left in this market. That is a dangerous situation by itself.
a lot of strength for a "very tired move"
I'm sorry for asking what is probably a stupid question, but why is it dangerous to have few shorts in the market?
Few shorts means that there is no one to cover positions as the market falls thus providing no bid. Also the markets like to move in the direction that will benefit the least amount of people. So if there are few shorts going lower does not benefit a lot of people.
John... the momenten indicators are showing the tired nature of the move. Look at the divergences on them and you will see.
Quality Stocks knows what he is talking about.
I know but divergences don't make for a down signal they can last a long time especially when we jsut get high level consolidation like i mentioned lasgt week. We sure seem to go up alot easier than down. All of this reeks of bullishness. It is hard to maintain objectivity once you have set your mind up no?
I understand everyone's frustration, but this market action is bearish and is used to set up the market for a big move to the downside.
Quality Stocks: I was bearish in April as well but am also more bearish at this time. This is a more dangerous time for the markets imho than April was.
Mislav, on a 1 minute chart, advancers have gone straight down, decliners are about to take over.
if this is bearish i sure don't wanna be short and see bullish!!!!
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