Closing Wrap

Quite a while back a subscriber to Worden had mentioned in the Worden report a 9-period based trading system, I don't recall all the specifics, but  fooled around a bit with StockFinder's BackScanner and created a scenario in which a stock had to be declining for (2) 9-day periods and that was the buy signal.  This is what the market looks like now.

To make it more interesting I should have added the 200 day moving average as support, that's more what the market looks like now.

In any case, I ran the scan on the S&P-100 for a year to date. I wasn't trying to create a trading system so I didn't work to optimize the exit strategy, the third 9-period bar just had to produce a gain.

Here are the results

 More or less, this is a type of oversold system, I was just interested in seeing what the statistics would look like. As you can see, 82% of the time the 3rd 9-day period would produce a gain. This isn't part of my analysis, just an interesting aside that may have some potential as a trading system in the future.

As for tonight's Price/Volume Relationship, there was no DOMINANT relationship, except in the the Dow-30 and NASDAQ 100, which were both Price Down/Volume Down. You may remember of the 4 relationships, this is the most ambiguous, and the most common relationship seen in a bear market. Looking at the relationship in context of the current environment, it simply tells us that selling wasn't as urgent today in the two averages with the dominant P/V relationship.

As I showed you today, many of the indices saw divergences move to the 30 and even 60 min charts, this is a bit rare and signals underlying strength.

As for today, I mentioned the game will still be played and Wall Street does NOT want the longs lining up on one side of the ship before a move commences, they need someone to offload their positions to and if everyone has jumped in long as it seemed this morning, it's harder to create that demand. To beat Wall Street you need to think like Wall Street. Unfortunately we are decent people and the evil, "stop at nothing to destroy anyone and everyone" mentality does not come naturally to us. This s why I encourage you to keep a trade journal or a market journal and go back after a month has passed and you have some hindsight perspective and read.

As you probably are already aware, the House of Representatives has passed the debt ceiling and the House was the more troublesome of the two branches of Congress. The market is rather flat on the news.

As you know, 3C has been responding favorably and I do believe that a rally will follow this week. I won't discuss the debt ceiling because I think it's a farce. Our economy is in such poor shape that I feel we are headed for a totally different and new trading environment-that of the secular bear market.

As you can see, the SPY and most of the major averages are sitting on the 200-day moving average. There's a lot of volume there and if we consider Wall Street game theory, the intraday plunges below the 200-day moving average triggered a lot of stops, making it possible for Wall Street to accumulate a lot of shares by simply taking the other side of the trade.

As for the 15 min divergences...

In the past, we have seen some double 15 min divergences lift the market a fair bit, none pictured here had the same leading positive status that we have now, it's hard to imagine this divergence failing and I remain biased to the long side for a bounce, however, I'll be looking very serious at any potential bounce for a place to establish a large short position. I do believe the next leg down will be something like the second shoe to drop and will be very serious, ultimately, I believe that is why the dollar has been accumulating and on the next leg down, I expect to see the dollar rally strongly.

These are very strong signals, but as I always tell you and as you know, price is always the final judge in the market, thus I have maintained responsible risk management on my positions and if this market were to fall tomorrow and never look back, my portfolio which is long biased, would not suffer any serious damage.

So we must keep all options and scenarios open and plan for them now, not in the heat of the moment.

From what I see in 3C, a rally from here I believe would be exceptionally strong, I think it could easily post new highs, but it's essential that you understand this in advance and not get caught up in the emotion of the moment. Hopefully we'll have a nice ride up and then have excellent positioning for a superb ride down.

I encourage you to keep track or a watchlist of short candidates and more then anything, to make sure your risk management plans are in place and you follow them to the "T" :)

As for the Miners Trading System, it remains Long DUST. Both systems essentially (system 2 was right at the crossover point) we're long buys on the open of the 28th @ $39.20, giving you a stop loss of $38.02 and a 2.3% gain thus far.

One last thing to keep in mind, Tropical Storm Emily could potentially threaten production of Crude in the Gulf of Mexico, we'll want to keep an eye on USO (there are some initial positive signs) and you may want to consider some individual names with drilling operations in the gulf.

I'll be updating as events warrant.