Tuesday, October 5, 2010
UPDATE
I have more charts, but I wanted to get this out ASAP
Forget about the insider selling ratio even higher today, this is why I do NOT trust this move.
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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
16 comments:
Brandt,
I appreciate your hard work. It is frustrating to get whipsawed around, but this is the way the market shakes off the weak shorts and traps longs before making its move lower. And you can see from the comments how effective it is.
These are blowoff moves in the Euro, GLD, SLV, Aussie Dollar, and equities. Just like in April it seemed like it would never end, it ended in spectacular fashion to the downside. This will end the same.
GLD and SLV in particular may have topped today. GLD is WAY overbought on all timeframes and sentiment is close to 100% bullish. The move down will be swift and deep.
Brandt, I know the frustration level of everyone is at an extreme; let's hope that this is a signal of the extremes that a top brings that we are looking for. I know, personally I need the market to retrace back to the $112 level to begin to break even. I would not be chasing gold, silver or any other commodity type trade right now, but would wait for a pull back. At the same time I would not be short them either as they can be irrational in behavior. I think what we are seeing is the fear trade. People are afraid and putting money into physical metals and so forth in fear of the unkown. Is my paper money going to be worth anything. While paper gold and silver are not a good idea, I believe the physical asset might be worth acquiring a position in.
More UP/DOWN/SIDEWAYS for this Market. I REALLY hope this going to the START of the REAL DOWN!
Enough with the ***(UP/DOWN/SIDEWAYS)*** market already!!!
Jack,
Seriously, after all this, if we only 'pull back' to SPY $112 i will be well beyond disappointed. I thought we were all talking about a huge crash (lower than lows seen in 2009) leading us into a 1930's style bear market... so, to only have a $40 down move on the SPY would be a joke really...
... and, yes, i've got my gold and silver physical. You can bet on that!
Brandt,
Based on the charts you've posted above, are you going to put your conviction behind it also and say we are going to have a big down day? What news is due tomorrow (bearing in mind we have POMO too).
Pink, I am certianly hoping for a much further pullback than $112. I was just trying to point out that I need that rough area to get back to happy place. From the distrubution levels that we seen on 3C, I think we are in for a good one.
Alesund Thank you. I do not predict the market, but I think 3C shows very valuable information about days like today. For a day trader, great, but, but for someone who wants to sell all their shorts and go long, ignoring these charts could be fatal. I think many here do not understand the significance of the information they provide and are frustrated with the market. 3C is simply a reflection of the market, but some of that frustration is clearly misplaced.
As for comments here, everyone is welcome to express their opinions and frustration, but please keep it civilized. I started Trade-Guild because of the non-sense at Yahoo groups. If you have direct questions for me that are relevant, I'll do my best to answer them, but I WILL NOT spend all day arguing back and forth about this and that. I have enough to do already and am working 15 hour days at minimum.
Take a look at the new post, I think it is enlightening
Jack,
Yes, and that's the crux. This all relies on 3C being correct in it's calls. And we have to rely on Brandt when it comes to 3C's credibility. Brandt has said 3C has always been right at making major calls, oil tops, equity turning points, etc. And yet, even in the short 3 months-ish i've been a WOW member, it looks to me 3C makes some very dubious calls to say the least (gold, silver specifically), so that's why my faith is being held on by a string. I think Brandt said he's been shorting the SPY since $118, well, that's only $19 away now. Not a very good result for staying overall net short since May time really, is it? Seeing as we have been down to $104 about 4 times in that period.
Maybe i'm just to use to doing my own critical thinking.
I tell ya, it doesn't half feel like we are a bunch of cult members sitting in a cave in the mountains listening to our leader '3C' telling us what will come to pass, hail, fire, brimstone, etc. And yet, day after day it doesn't come, and even, the opposite happens... and yet, we all come up with new explanations why tomorrow might be 'the day'.
I certainly hope 3C calls this equity reversal correct and soon, my faith in 3C is certainly being tested (mentally and financially).
Mr Pink, you should not be using 3C alone for your trading decisions. Everyone trades differently. there is information there for all kinds of different traders, some may not pertain to you. I would prefer if you use it as a tool, part of your own "Critical thinking and analysis".
I have posted numerous charts just for you. I can't spend that amount of time trying to convince you. I'm providing information, the market does what it does, to expect 3C to be a crystal ball, is really not realistic. There are many trades on the list that are doing very well, those came from 3C. For those that don't, then there's the most important thing you can do, have a good risk management plan.
You are use to seeing the market from one side, like everyone else. I'm showing you a different side of the market. However, if you put together all the information, the breadth charts, insider selling, 3C, etc, I don't think 3C is that far out on the credibility limb.
If you think calling the September rally was just good luck, and the other turns before that, then I don't know how to answer that. And yes, clearly the market is different now with Fed intervention, but the Fed money is not large enough to register as accumulation. I don't know what they are doing, pumping and dumping or what, but there is a difference. I've seen this before-the 2009 bottom, and despite the Fed, 3C was correct in calling the bottom.
Brandt, can youu also look at TZA, the end of the day put in some pretty large accumulation bars, one that was double the average 1 min volume.
Brandt,
Can you clarify what you meant by this:
"And yes, clearly the market is different now with Fed intervention, but the Fed money is not large enough to register as accumulation. I don't know what they are doing, pumping and dumping or what, but there is a difference. I've seen this before-the 2009 bottom, and despite the Fed, 3C was correct in calling the bottom."
- Are you saying that the type of FED intervention we see today you saw before, at the major 2009 bottom? Wouldn't that suggest that this is a bottom also then? I think it's worth clarifying this point to exactly what you mean.
Also, if 3C is so reliable in calling reversals as you suggest (i think you even said it was 100% correct and you have complete faith in it), it seems strange that you suggest that it's not a crystal ball and i should only use it as a 'tool' and i should use other information with it combined.
Trouble is, 3C seems to contradict what other information suggests, like it stopped me buying gold ($100 dollars an ounce cheaper than it is now) and silver (over $2 an ounce cheaper) as 3C showed distribution and 'ugly' charts.
Mr. Pink, 3C showed accumulation during that bottom, there was so much Fed intervention that we got to the point we could call it within 15 minutes, as soon as last support was to be taken out, they's announce something. I don't think it needs clarification, that was a bottom with Fed intervention, 3C called it a bottom, this looks to be a top with Fed intervention, 3C is calling it a top, Pretty clear.
Yes I have faith in 3C, but no where, at no time have I ever said it is 100% correct, that's ridiculous. I've said I think it is the best indicator I've worked with in over a decade of using every indicator out there.
100% correct? Where did you get that? Yes it has called major turns for quite some time now. As well as less significant ones, nothing is 100% correct, otherwise I would be charging a lot more then I do if I had this site at all.
JACK, TZA is showing the same type of positive divergences, it's not as strong. Strong enough for me to put it on a watch list and buy a technical breakout. I always want confirmation, no matter what 3C says. In any case, it's beyond an ordinary divergence, it's quite strong.
Brandt,
Thanks for the clarification.
So, putting you out on a limb (so we can judge performance in retrospect). What percentage chance, based on your experience with 3C and all the signs you are seeing, would you say this is definitely a top which will see significant downside? (80% chance, 90% chance?).
And based on the charts you posts after close of play today, what chance do you think tomorrow will be a significant, say 100 DOW, down day?
I think to have faith in 'a system' it's good to judge it's performance, so that's why i ask these types of questions. Otherwise, i'm literally submitting myself to blind faith.
Thanks Brandt, keep up the good work and sooner or later the FED will let this market act as it should.
Jack,
Why would the FED suddenly let the market act as it should? We've got more and more POMO coming up, we've got the possibility of a big QE2 (which 3C by all accounts, doesn't think will happen).
Brandt compared the FED intervention at the 2009 bottom with the FED manipulation we are seeing at the top. But surely the two are separate and opposite? The 2009 bottom FED intervention worked, because the market then went up big style there after. Whereas, we are currently seeing FED intervention to try and get the market up, and yet 3C says (and we want) it to go down. Seems strange that in one instance 3C is confirming that the FED will win (the bottom in 2009) and in another (now) the FED will be lose.
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