Tuesday, May 25, 2010
A few charts
Congratulations
I received several emails today from members that held on through the plunge and bought at the lows, it was brave and goes against natural instincts, but I think we have a sense of what is happening in this market, although every time you get too confident you get knocked down on your rear end.
The analysis has not changed. I do not see anything of consequence suggesting that this market will not go higher. IF everything that I've seen in 3C over the last week or so is correct, then we have their number.
I read a few places today, "The Bulls got brave", etc. This has nothing to do with the bulls, this was an orchestrated effort by smart money, look at the gap down alone and our analysis that those levels would be taken out to the downside an then we'd get a reversal. Smart money built a position quietly, now they are openly creating volume and breakouts, they are trying to encourage higher prices so they can unload their inventory at a profit.
The market is often about sentiment, this time it was strategic developments.
There could be some early weakness tomorrow as the 1 min 3C charts have gone negative, everything else is positive so unless you are trying to catch every intraday swing, I don't think it matters much. I would continue to hold the longs. I WOULD NOT ADD to them. Remember, this is a correction, not a bull market move. Smart money is selling into it and soon you too should be selling in pieces, taking some profits off the table. Do not get greedy and hold too long. We should see the reversal in 3C, but I do not know if they did the same as we did and set up a larger core short position, if they did, then the change in the uptrend could come very quickly. If they will be building that short position, we will have plenty of time. the point is, hold for now, but if you start accumulating nice profits, take them-this is not trend, it's a correction.
My guess is that we see resistance around $110-$111-they accumulated up there, but the huge sell-off on the break of $105 allowed them to average their cost down so they don't need $110. However, if $110-$111 is taken out, then we could really see a fast move up and I would definitely be taking profits off the table and leaving a small position in place.
Tomorrow will tell us a lot about where we want to start selling the longs and where we want to add to our core shorts. At $110 (SPY), I should be able to see the laggard stocks and those will be our targets to short, plus the leveraged short ETFs.
For now, be patient and NEVER let a winning trade turn into a loser. You'll have a lot of picks in the coming days, but it's too early now to start targeting shorts.
We want to behave as Wall Street does and sell our accumulated longs into higher prices, if you have a large enough position and can do it 25% at a time without commissions eating profits, then that is what I'd do. I'll let you know when. Don't panic if you see early weakness tomorrow.
Areas of interest on the SPY:
$109.40 area, $110, $111.50 $115.20 and any whole numbers like $112. Each time one of these is broken to the upside, it will cause shorts to cover, which creates an imbalance in supply/demand and leads to higher prices.
A final word of caution, making money is addictive, so much so that people are reluctant to let go of the stocks that made them the money and we find reasons to hold-DON'T! The new normal on Wall Street is Fear-we saw it this morning. Do you have any idea how many people dumped positions when they should have been buying and how many are still sitting on the sidelines? Those people will be buyers if the rally continues to advance for a day or two more, the more spectacular, the more that will be drawn in, but they will buy the top, we'll be the ones selling to them. This site is not called Wolf on Wall Street for nothing.
Hopefully you are finding a new perspective, one that takes you out of the flock of sheep and makes you a wolf in the market. Those who emailed me today with the gains they made, you are the wolves.
As always, email me with any questions or suggestions you have.
The analysis has not changed. I do not see anything of consequence suggesting that this market will not go higher. IF everything that I've seen in 3C over the last week or so is correct, then we have their number.
I read a few places today, "The Bulls got brave", etc. This has nothing to do with the bulls, this was an orchestrated effort by smart money, look at the gap down alone and our analysis that those levels would be taken out to the downside an then we'd get a reversal. Smart money built a position quietly, now they are openly creating volume and breakouts, they are trying to encourage higher prices so they can unload their inventory at a profit.
The market is often about sentiment, this time it was strategic developments.
There could be some early weakness tomorrow as the 1 min 3C charts have gone negative, everything else is positive so unless you are trying to catch every intraday swing, I don't think it matters much. I would continue to hold the longs. I WOULD NOT ADD to them. Remember, this is a correction, not a bull market move. Smart money is selling into it and soon you too should be selling in pieces, taking some profits off the table. Do not get greedy and hold too long. We should see the reversal in 3C, but I do not know if they did the same as we did and set up a larger core short position, if they did, then the change in the uptrend could come very quickly. If they will be building that short position, we will have plenty of time. the point is, hold for now, but if you start accumulating nice profits, take them-this is not trend, it's a correction.
My guess is that we see resistance around $110-$111-they accumulated up there, but the huge sell-off on the break of $105 allowed them to average their cost down so they don't need $110. However, if $110-$111 is taken out, then we could really see a fast move up and I would definitely be taking profits off the table and leaving a small position in place.
Tomorrow will tell us a lot about where we want to start selling the longs and where we want to add to our core shorts. At $110 (SPY), I should be able to see the laggard stocks and those will be our targets to short, plus the leveraged short ETFs.
For now, be patient and NEVER let a winning trade turn into a loser. You'll have a lot of picks in the coming days, but it's too early now to start targeting shorts.
We want to behave as Wall Street does and sell our accumulated longs into higher prices, if you have a large enough position and can do it 25% at a time without commissions eating profits, then that is what I'd do. I'll let you know when. Don't panic if you see early weakness tomorrow.
Areas of interest on the SPY:
$109.40 area, $110, $111.50 $115.20 and any whole numbers like $112. Each time one of these is broken to the upside, it will cause shorts to cover, which creates an imbalance in supply/demand and leads to higher prices.
A final word of caution, making money is addictive, so much so that people are reluctant to let go of the stocks that made them the money and we find reasons to hold-DON'T! The new normal on Wall Street is Fear-we saw it this morning. Do you have any idea how many people dumped positions when they should have been buying and how many are still sitting on the sidelines? Those people will be buyers if the rally continues to advance for a day or two more, the more spectacular, the more that will be drawn in, but they will buy the top, we'll be the ones selling to them. This site is not called Wolf on Wall Street for nothing.
Hopefully you are finding a new perspective, one that takes you out of the flock of sheep and makes you a wolf in the market. Those who emailed me today with the gains they made, you are the wolves.
As always, email me with any questions or suggestions you have.
Patience and A Steady, Steeled Hand.....
Market volatility is always crazy at tops, this is why I tell most of my students to leave the top and bottom 10-20% alone and go for the 80 % in the middle of a trend, these are just too volatile for most people.
So you must be feeling anxious, don't. We are where we are and we've taken the positions we've taken. If you have been at WOWS for awhile you should have some core shorts that will hedge any downside break of our long poitions, but let me remind you of last night's post on T.G
"As for tomorrow, we have negative divergences in the 1-5 min charts, this suggests continued downside. Considering the accumulation zone, I suspect prices are heading lower to test $107.30, if that fails, then possibly as low as $105.25. There could even be a test below $105.25 and we could still maintain a bullish perspective for the short term. However, this is a huge gamble to take, at least if you are not long term short and hedged as many of our Wolf on Wall Street members are."
So $107.30 seems to be history, to take out $105 they'll need to go down to $104.75 to hit the majority of limits, so while down there why not take out February's $104.56-I wouldn't think it would be wise from thier perspective if they intend to shoot this market back up, but they know more than do I.
In any case, I do believe this is another false breakout/Shakeout. You may want to freestyle this one a bit and dump some of the planning and take on some 2 or 3x leveraged long ETF's-they are on both lists. The trick is timing, if we break $105 then any move above $105 intrday, you'll want to go long right in that area, maybe a little higher. The idea is that all the weak longs are shaken out and the shorts are trapped in a squeeze. so that's plan A.
Plan B is, "This breakdown is for real", which it may be but I have a hard time believeing smart money would accumulate at higher levels and then just let all that inventory go at a loss, if it were not for that reason, I'd be telling you to load up 100% short right now. So I'm doing what I tell you to do, trust your indicators, ignore your emotions and make rational decisions based on the evidence you have right now, that is the very best you can do. Second guessing at this point is out if pure fear and fear is not objective and it's also not good for you in the markets like it is in life. The market's count on the human fight or flight mechanism and use fear to make money, so this is one place it won't serve you well.
Back to plan B-a break below $104 and most likely the worm has turned. Remember that you should have risk management plans/stops in place before you enter the trade, also remember that stops are to be executed on closing numbers only, not intraday swings. So you have an entire day to see what will happen and my money is on "False breakdown" and a rally after that, maybe right off the open.
I'll be updating in both places today after 12.
By the way "sell in MAy and go away-" Sell at the end of April and buy back at the end of may 7 of 10 of the last years, May is up.
So you must be feeling anxious, don't. We are where we are and we've taken the positions we've taken. If you have been at WOWS for awhile you should have some core shorts that will hedge any downside break of our long poitions, but let me remind you of last night's post on T.G
"As for tomorrow, we have negative divergences in the 1-5 min charts, this suggests continued downside. Considering the accumulation zone, I suspect prices are heading lower to test $107.30, if that fails, then possibly as low as $105.25. There could even be a test below $105.25 and we could still maintain a bullish perspective for the short term. However, this is a huge gamble to take, at least if you are not long term short and hedged as many of our Wolf on Wall Street members are."
So $107.30 seems to be history, to take out $105 they'll need to go down to $104.75 to hit the majority of limits, so while down there why not take out February's $104.56-I wouldn't think it would be wise from thier perspective if they intend to shoot this market back up, but they know more than do I.
In any case, I do believe this is another false breakout/Shakeout. You may want to freestyle this one a bit and dump some of the planning and take on some 2 or 3x leveraged long ETF's-they are on both lists. The trick is timing, if we break $105 then any move above $105 intrday, you'll want to go long right in that area, maybe a little higher. The idea is that all the weak longs are shaken out and the shorts are trapped in a squeeze. so that's plan A.
Plan B is, "This breakdown is for real", which it may be but I have a hard time believeing smart money would accumulate at higher levels and then just let all that inventory go at a loss, if it were not for that reason, I'd be telling you to load up 100% short right now. So I'm doing what I tell you to do, trust your indicators, ignore your emotions and make rational decisions based on the evidence you have right now, that is the very best you can do. Second guessing at this point is out if pure fear and fear is not objective and it's also not good for you in the markets like it is in life. The market's count on the human fight or flight mechanism and use fear to make money, so this is one place it won't serve you well.
Back to plan B-a break below $104 and most likely the worm has turned. Remember that you should have risk management plans/stops in place before you enter the trade, also remember that stops are to be executed on closing numbers only, not intraday swings. So you have an entire day to see what will happen and my money is on "False breakdown" and a rally after that, maybe right off the open.
I'll be updating in both places today after 12.
By the way "sell in MAy and go away-" Sell at the end of April and buy back at the end of may 7 of 10 of the last years, May is up.
