There's about 23 trades up tonight, some are based on the FAZ/XLF/UUP divergences, some are based on other factors. There's a few Cats and Dogs in there as this is still rally season for those kinds of trades.
I STRONGLY ENCOURAGE YOU TO PUT THESE TRADES INTO SOME KIND OF ALERT SYSTEM LIKE TELECHART OR FREESTOCKCHARTS.COM, I can't keep track of all the orders and prices, I have to have them in an alert system that is real time. The two I mentioned above are.
Apparently we have another POMO day tomorrow. The typical POMO days have seen buying/front running the day before, and a move up until 11 a.m., after that they tend to fall, today's didn't do that.
I'm not sure what to expect tomorrow with POMO and the strong signals we are seeing that are not congruent with a POMO day. However as I have said a few times, once a pattern is established on Wall Street and it becomes easy money for the average retail trader, they find a way to somehow throw a monkey -wrench in the mix to end that relationship so we'll just have to see what comes of it. It's another one of those Bermuda Triangle moments that I've seen so often with reversals, like the September rally reversal, everyone was so bearish and there were seemingly a million reasons to be bearish, but it reversed. The big dollar reversal, there seemed to be no plausible reason for the dollar to go up. yet it did. You always find out later. Like Paulson's "Buy Stocks" Monday, and we come to find out that his fund is just at or just over 0% on the year, which means there's a high water mark in most finds ad he's probably not making a penny until he gets his portfolio above the high water mark. So he had his reasons for being out there Monday of last week pumping stocks, as I said at the time.
Again, insiders are fleeing stocks like rats on a sinking ship. They aren't doing it because they believe stocks or their stocks are going higher. The numbers are astounding. If the Fed wasn't pumping liquidity into the markets, this market would already be in the crash zone with all of the selling and fund outflows. That's probably why we are seeing more of the HFT sponsored flash crashes.
In any case, I suspect we'll see over the next few days what the real story is.
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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
4 comments:
Keep an eye on the currency trade, the amount money pushed around in currencies is much much larger than our stock market and right now you have a lot of people about to be squeezed in a hard reversal of the dollar. This is most likely what has been taking place. Just think of all those Asian countries that have been buying the Euro against the dollar. It has started to slide pretty quickly in the last hour since the Ireland downgrade and their doesn't appear to bu much support in the charts as it has been raising very quickly with little pullbacks. We could very quickly loose all of the gains put in yesterday on the Euro and from the weekend. It pierced the 1.3800 level dropping from 1.3881 and has been trying to bounce from there.
Goldman Sachs letter to client:
http://www.bloomberg.com/news/2010-10-06/oldman-sachs-says-u-s-economy-to-be-fairly-bad-recession-is-possible.html
looks like the POMO arrived
More GS propaganda, why bother with the little guys unless.... You like Paulson and trying to achieve something. We'll find out soon enough.
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