Wolf on Wall Street: Friday, September 09, 2011

Friday, September 9, 2011

Portfolio Performance

As you know, I keep a portfolio to track WOWS/3C signals and trade ideas. I don't get to trade it much because I'm busy with analysis, updates, emails, fixing broken email systems, etc. However, when I do trade it, it's only the ideas and updates from WOWS posts and only after they have been published here first.

Here's the WOWS ranking for the week and month. This is equities only, NO OPTIONS, but I'm thinking of seeing what kind of performance options would produce.

This is the performance vs. the S&P for the week and month along with the rank against all other portfolios.

This is the monthly ranking, placing # 32 out of 9827 portfolios

This is the weekly ranking at #19 out of 8304 portfolios.

Now if we can just get a managed fund together and support some charities, one of my favorites is 4Kids of South Florida which I am a member of the development council. This organization does incredible work with foster care in South Florida and has the highest success ratio in the counties they work in, so much so, local governments have asked them to work in their counties as 4Kids provides a network of support not only for the kids, but the Foster parents as well.

If you live in South Florida, check out the great work 4Kids is doing. To me what religion someone is isn't what's important, it's results they produce.

There are many other fantastic charities, but one of my main goals is to eventually help people who need and deserve it, but fall outside of the system's that provide help. In other words, people who need help, but an't get it through the systems in place. I know it's not good business from a tax deduction standpoint, but these are some of the people who need the help the most. I'm blessed to work doing what I love and helping my members, hopefully one day that can grow.

A word on the Wolf Pack real quick, I don't know what it is, if like energy attracts like minds, but I have some of the greatest members I could ever imagine-GREAT PEOPLE. I was always concerned with what kind of people the site might attract. I don't know how it happened, but I'm blessed with some of the best people in the Wolf Pack I could ever ask for. I appreciate EVERY ONE OF YOU!

Have a fantastic weekend!

Ill be posting a big update this weekend to update the bigger picture. We have been concentrating on the short term because the markets have been so choppy and while I use to teach my students to just stay out of choppy markets and stay in cash, I know the strengths and potential of our membership and today I saw that the Wolf Pack is nimble enough to make good money even in this difficult market.

Could it be?

The big afternoon tease, could it be getting ready to materialize in to the close?

FXE to rise-knocking the dollar down and sending stocks higher? I don't see why the Euro would be discounting next week with all of the uncertainty in Euroland.

The dollar showing distribution, again equity positive?

Late improvement in the IWM

And SPY

And the TICK chart starting to trend up?

Could the big tease actually happen in the last 30 minutes?

Market Update

Well this is a confusing mess. All I know is the longer term charts look bad, so I took partial profits on my shorts and will hold the rest , even if we are setting up for an end of day bounce or a Monday morning bounce.

DIA 1 min is not acting well, but not off a cliff either

Same with DIA 5 min

IWM 1 min looks better

But the 5 min isn't showing the accumulation in to the test.

QQQ 1 min looks pretty good here.

The 5 min doesn't look as strong as I hoped for earlier, but not bad either.

SPY 1 min is still in the area of a possible bounce, but just hasn't added the strength we usually see on a test of resistance.

The 5 min doesn't look bad, but it did not add the strength I hoped to see earlier for a bounce.

As for those longer term charts I mentioned...

IWM

DIA

SPY

QQQ

All suggest this market will see lower lows before this is through.

For Example

Here's a possible head fake in the Q's

Market Update

I don't use this tool often, but on the 5 min chart, it is showing more accumulation at the second low or the test I mentioned in the last post. The 1 min chart isn't holding up as well.

However, the 1 min is still in the range that a bounce could still pop from here

Now that we have a very well defined region of support that every trader is watching, don't assume a break of support is a move lower, remember, HEAD FAKE!

Market Update

We have one more chance for a bounce here...

DIA 5 min, probably 50% of the time we get a test of the first positive divergence and then a move up, this looks like it could be that situation, although we still could use Euro support, yes I'd like to see a bounce to add shorts. Besides, it's healthy so we don't get an oversold condition.

The IWM needs to see 3C move up a bit from here to bounce on this test.

QQQ 5 min-looks the best thus far

The 1 min SPY also needs to see 3C move higher on this test.

The 5 min still looks decent, but the market will be discounting the German news I posted more then likely, before the EOD.

A test like this would suggest a decent intraday bounce rather then a single positive divergence.

Consolidation

This "bounce" is starting to look more like a consolidation and that's entirely possible based on the signals.

TLT is showing signs it wants to start moving up again as a safe haven trade and if the Euro can't rise, there won't be much more upside.

Bad to Worse For Greece

I couldn't title this article any better. We know there are legal issues dealing with the European bailout mechanism, we also know that Angela Merkel has thrown her political career on the pitchfork over this issue, it is HIGHLY UNPOPULAR with the German people and why shouldn't it be?

Now, there's a potential issue of a referendum and we know how that will go down with the German people already fuming and ready to send Merkel packing.

You have to read the story for yourself, it is very, very bad for Greece and probably the market as well.

Maybe the G7 will pull a rabbit out of their collective hats?

Market Update

About that bounce....
In my last two market posts I've shown you the growing probability of an intraday bounce and here we are.

DIA 1 min in a leading positive divergence-remember, this is an intraday timeframe for intraday moves.

DIA 5 min is in a relative positive divergence

However, the bigger trend, the 10 min hart is at a new leading negative divergence. I'll be looking for a spot to possibly add shorts on this bounce so long as 3C goes negative on the short charts. This hart suggests there's more downside to this move over the coming days.

QQQ 1 min

QQQ 5 min

And a horrible looking 15 min hart making new leading lows, opening the possibility of the market making a new low in the days ahead.

SPY 1 min positive

The 5 min is just in line, not positive.

And the 10 min hitting new leading negative lows.

:)

That's a happy face...

I just received about 10 emails from members who made a bundle today, most have taken some profits, some will look at add on any intraday bounce, some will hold through the weekend. Some used Inverse ETFs, some made thousands using options, some are just short stock, but I'm VERY HAPPY to hear it and I love that everyone is applying analysis to their trading style and trading this market nimbly.

I have a job I love, working with the market all day and trying to help people, I couldn't ask for anything more, except maybe a hedge fund, then I could help a lot more people-I mean charities!

Keep sending me your success stories, it makes my day.

Market Update

Nothing moves straight up or down, we may see a small bounce here or a consolidation from these 1 min charts.

DIA 1 min

QQQ 1 min

SPY 1 min

Treasury Safe Haven Trade

TLT (20+ year Treasury Bond) has lifted off-

1 mn in confirmation

5 min in confrmation

!0 min had a leading positive divergence two days ago, it's moving toward confirmation, but remember these longer term charts are slower to catch up to a fast pace move in prices.

TLT 15 min with a leading positive divergence yesterday, moving toward confirmation

Market Update

As I said in the last post, I always look for intraday volatility around important support.

DIA 5 min a possible relative divergence or the 5 min chart just has not kept up with the speed of the drop.

The 10 min DIA is hitting new leading negative lows.

The 15 min is a bit negative, but pretty much in line.

Here's the same situation on the 5 min QQQ chart as mentioned on the DIA chart above, except this is within a leading negative divergence setting new lows.

The 10 min chart may be showing a relative positive divergence, or again it may not be able to keep up with the speed of the drop, especially as it is longer term.

QQQ 15 min in new lows on a leading negative divergence.

SPY 5 min is in line

And the 10 min is hitting new leading negative lows.

I personally may start to take some of the substantial profits on my shorts, not because I'm worried about a big reversal, but this is how I usually operate, pretty much the same way as Wall Street. However if I do, it would be on the order of maybe 25% of the position. If there was intraday strength and 3C was negative, I may even add that 25% back.

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.

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.