A Few Charts-Back on the Short side

Last night I warned that this market could turn very quickly,
"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."


Today at 2:07 we sold all of our longs at an additional profit and started short positions. I intend to add to those shorts, but at specific levels and when 3C suggests it. Below $104.50 this time I doubt very much will be a shakeout, i think it will be the break of a Broadening top, at that point we want to be pretty close to fully loaded. Remember, markets fall faster then they rise.


We started with Short leveraged ETFs, we may add individual stocks if I believe the return in those stocks will be greater than the ETF's.


Here are a few of the charts of some of the ETFs I mentioned today. Click on the charts for a larger view. All have very positive divergences, as I mentioned, we are long term bearish and were short term bullish for the bounce only.

Now it's about correctly putting these positions together. We have reason to suspect downside so we started the position. As the market moves in our favor and the signals get stronger we'll continue to add. This is part of our risk management, not add everything at once as the market can be very unpredictable at a top like this.


The nice thing about the shorts is we will be entering into a trending trade, there's a lot less to do. Not to try to up sell you, but it would be very helpful for you to have my Trend Channel Custom indicator which is only available on TeleChart or StockFinder. 

This system adjusts to each individual stock and takes arbitrary opinion out of the equation. With my Trend Channel (which received an award) lets you catch the meat of the trend and get out before the lateral volatility (opportunity cost). Other methods are too easy to be shaken out and arbitrary decisions could have left you with a gain of 10% rather than 50+%


If you want to take a look at the charting software, click the links below. I am an affiliate so i would appreciate you letting them know Trade guild sent you. In addition, this is the only two platforms that will run my 3C indicator which you see above.






I'll add the positions in the post below to the spread sheet and be on the look out for any other interesting trades. This should have been a good week for most of you, I appreciate the emails and I'm glad to hear that so many of you are doing so well. Just keep the risk management in the forefront and you should be fine in any weather.


One last note, I'd like to create a library of common technical indicator, show you their faults, how Wall Street uses them against you and how you can use them to turn the tables, so send your suggestions of your favorite indicators and we'll get that library up for you. any other requests, let me know.

Here are the candidates

These are the positions we picked up in the last few minutes-they were all bought at approximately 25% of out full intended position, maybe a bit less.

There are two I think look good for tomorrow, those are:

SSG > $17.53
SMN > $43.02

The ones that we just purchased-(remember these are ultra or 3x short ETFs so you are buying, but the net effect is you are short the underlying index or issue):

FAZ- 3X leveraged gives us exposure to financials
TWM 2X leveraged gives us broad market exposure in one of the more volatile averages
SRS 2x leveraged, not a big position here, but some exposure to real estate
EDZ 3X leveraged exposure to emerging markets which should be hit hard in a global fall
EEV 2x leverage on emerging markets through Proshares instead of Direxion-this and EDZ will              be treated as one position
FXP 2x leveraged against China-a little correlated, but they should suffer in a global crisis
ERY 3x leveraged short on Energy-less economic activity, less demand for oil

You can see with the exception of the emerging markets, none of the positions are too correlated. Also these are baby steps although I do believe the next break of $104.50 (SPY) will be the real deal.

I hope you made some nice profits the last few days, it may not be over, but the situation changed too fast as I warned might be possible because of smart money's averaged price being lower because of the shakeout yesterday. This means the accumulation at $112 was averaged lower and as I said, "They may not need to go that high".

A little Bear Buying

OK, I think you can go ahead and take on some Ultrashort/Direxion 3x Bear ETF's-they should be on the 2 lists, I'll add more.

UYG, SKF, QID, TWM, TZA, SRS, BGZ are a few examples-still do not take on more then 25% of your full intended position, have a stop that is a bit wide, even if you have to take on less shares and position size so that your stop getting hit will not risk either more than 2% per position or divide the number of positions you intend to have into the 2% to figure out how many shares you can buy.

*UPDATE
Here are the leveraged shorts you can buy that look decent, be careful not to over/cross correlate positions

TZA
TWM
SKF
SRS
QID
BGZ
EDZ
TYP
EEV
FXP
ERY
FAZ
PSQ
DXD
SSG
SMN

Short?

It's really too early to tell if this is just going to be a mediocre day in a larger trend or the end of the bounce. In any case, we are buying FAZ in a very small portion if it crosses $115.85. I'll post more soon, this is just to get your toes wet, especially if you didn't already buy a long term short position over the last few weeks.

These two charts are the reason we are taking profits now, it may change later as we have positive charts on the longer time frames, but the 5 min deteriorated rapidly as I said it might last night. with a profit we are being safe than sorry.

Take Profits!

The charts are starting to fall apart, I'd be taking a majority of profits right now. We may see strength later and add them back, but I would at least get out my original investment and let the profits ride or get totally out. The charts have fallen apart very fast as I warned they might do.

Later today could be different, but for now, I'd close the longs. Keep an eye on both sites, things could move fast.

See Trade Guild

I just posted 2 charts, 1 suggesting a pullback-we (my client) are taking some off the table and intend to buy at lower prices as the 5 min chart is still positive suggesting this is what I said last night, early weakness that may fill the gap.

This is also an opportunity to go long, but wait for the crossover system I described this a.m. to give you the signal with RSI > 50 or if you use 3C, just watch for the positive divergence and start buying, but check that the 5-min 3C is still positive first.

A Way to Play

If you're nimble, and you can watch the trade, I have a way you might be able to participate in the market right now. This is for all the new members who haven't been with us and gotten in on the bigger picture, which you will shortly. Basically I've said that if you are long since yesterday when the market moved above $105 on the SPY (first it broke below and when it went over $105 in the early a.m. that was our signal to buy longs or Ultra ETFs) I don't think it's a great idea to be adding right now, you pretty much should have a position in place and be ready to start selling into the rally.

I also posted a chart last night that showed a negative 1-min divergence which is interpreted as early weakness in the market-despite the gap. The day before we had a positive divergence meaning early strength and we had a huge gap down, so it didn't make a lot of sense, but we saw the market rebound very quickly off the open"early strength"

So does that mean that today's gap is going to pullback, be filled, maybe even pullback even lower? I'm not sure because there was a lot of different activity toward the close, short covering, non-institutional money buying, institutional money distributing (selling to regular Joes like you and I). Being that smart money needs higher prices and a spectacular move to suck money off the sidelines, I think maybe they will support the gap, but if they don't you may want to buy early weakness.

Here's a setup, but you have to be watching and nimble. If this market goes on a tear to the upside as I believe they would like, then we'll see nice strength so use a 1-min chart of the SPY, add a 22 (blue) and 50 (yellow) simple moving average to price. Also add a 22 period Wilder's RSI. You can stay long or buy long as long as the 22 is above the 50 ma and your stop should be a break below the 50 ma, or a cross down of the 22 below the 50 ma. You'll also want RSI to be above the midpoint (50) to confirm you are not getting whipsawed as moving average systems commonly due.

Many times the market opens at the low and closes at the high, so there's no pullback, that's why I'd say buy 50% of an Ultralong ETF or 3x leveraged ETF. I gave a few examples in last night's post and there are more on the spreadsheets.

So you have a position if this doesn't pullback, if it does, you add the other 50% of your intended position size. Be sure that you have a risk management plan with a current stop at $107.25 on the SPY (This is your market signal despite the vehicle you use to trade) and that a stop out does not risk more than 2% of your portfolio. This is all on Trade Guild under "Resources and Concepts"-"Position Sizing" and "The 2% Rule".

As long as the short average is above the long and RSI is above 50, you should be able to ride the intraday trend, especially if it is strong. Follow the system though. Now get to it, there's not much time.

Using the signal above and trading FAS, you would have made 7% from 2-4 pm