A Democratic Wolf Pack

OK, a lot of people are seeing the results of the model portfolio and wanting to emulate these trades and asking for some sort of trade tracking spread sheet like we use to have. I want every member to get the most out of the site, but there are many issues that need to be considered to make this effective.

I will raise the issues, give you some links to read and wait to hear back from you and then we'll tweak this to make it work.

First the issues:

I use to keep a spread sheet of trade ideas, it filled up very fast and maintaining the spreadsheet (for a month of trade ideas) would take me several hours a night. I'm already putting in about 12 hours a day so the old spread sheet way isn't going to work, I have too much analysis to do and too many emails to answer.

So I started listing trades as trade ideas which I like better because they are timely, they are in a post format and explain the trade much better then a spread sheet can and most of all, because we have every kind of trader you can imagine here. This is a big deal because what works for one trader doesn't work for another and I could list the same idea and have 5 people with 5 different results ranging from a profit to a loss.

It is of utmost importance that you make the trade your own. That means that the trade fits your style of trading, your account size, the time you have to devote to watching the market and most of all, your risk tolerance. I have a very high risk tolerance, so trades that work for me or stops that work for me shouldn't be forced on you. You must make the trade your own and that is one of the advantages I see in posting the trade as members tend to contact me and we work together to make the trade fit their style.

Some of you may not know what style of trader you are yet, it's a process. I personally will trade anything in any timeframe because I have years of experience and faith in my indicators, it might take you time to get to that same place. There's a lot most of us have learned about the market that we must unlearn to be successful traders.

So here's an old article I wrote and it is linked at www.Trade-Guild.net on the left side of the site under "Resources and Concepts". Please be sure you read this as part of this discussion.

Zen and the Art of Investing


So it is crucial that you align your trading with the the issues I mentioned above. It is not realistic to think everyone can do 80% in a month, most hedge funds can't do 25% of that in a year, so don't worry, this isn't a competition, it's about learning to beat the market.

That brings me to another issue, one of my main goals and what I have seen to be most effective with long term members, they don't follow along with every trade, the follow along with the idea and they make the trade their own. No trade list can outperform learning and making the trade your own.

I mentioned risk management and my high tolerance for risk, if you are trading a retirement account, you don't want to be as aggressive as I might be, I don't want you to be that aggressive. You MUST find risk management that works for you. I submit the following post as a start for some ideas, I'm always available to discuss them at length with you.

Risk Management


Position Sizing


Another issue is timing, depending on the type of trader you are and the time you have to devote to the market. I try to give the best timing I can, but because we can see what smart money is doing, doesn't mean we understand how long they will be doing it and other related issues, so a trade that I might take at 11 a.m. price levels may have moved too much for someone who won't see that trade until after the market and can't enter until the next day. I almost always phase in to my positions rather then put on a full single position at one time, this is the same way Wall Street does it, but account size and transaction costs may make that impractical for some of you.

Allocation of assets... This is not the same for every single person. For instance, read this post.

When You're in a Hole, Stop Digging


The idea here is pretty simple, but if I say, "I'm going all in on this move" it doesn't mean that is appropriate for you. Besides recent performance we must also consider risk tolerance, what kind of portfolio you are trading-is it your kid's college fund? I think you probably get the gist.

I could simply list, as I have been doing, what positions I have in the model portfolio, however for some traders with larger accounts, the liquidity may make the trade unrealistic. For options traders, there may not be enough volume in the options contracts and there may not even be options available.

Another issue is your understanding of our key edge in the market, 3C. I've been writing an ongoing column so everyone can better understand an indicator that took me years to learn and  invented it. Your trust in the indicator will also determine your actions, members who have been here a long time have a degree of trust that allows them to take trades even when the market and the pundits are creaming the opposite. The ongoing link to understanding 3C is on the right side of the site, you'll see the links to each post.



Stops and other technical issues.

I have a lot of proprietary indicators that help me and other members manage our trades, my Trend Channel is one. I'm happy to share these with those of you who have TeleChart or StockFinder a they only work on those 2 platforms, 3C DOES NOT WORK ON Worden's TC-2000.

If you want to use these indicators, as long as you don't share them or republish their charts, I'm more then happy yo share them. First you'll need one of the two above platforms. I am a Worden affiliate because I've used their products for about 10 years. If you sign up and tell them Trade-Guild.net of affiliate 335 sent you, they send me a commission, but it doesn't cost you a dime more.

Here's a link to Worden products, please, just do not share these with anyone. They are only available to WOWS members. Just click the link to go to the Worden site. 3C ONLY works on the 2 Worden platform I mentioned and while I love TC-2000 and the real time mobile phone app with all of my charts and watchlists in real time on my phone, 3C doesn't work on TC-2000 yet.



The easiest way to share a stock list is via Google Spread sheets unless someone has a better idea, but consider the many realities, such as updating, stops , entries, options, liquidity, etc.
My goal is not to run a follow along trading service, it is to teach you how to beat the market and give you the tools and information to do that. As I showed, I have a member who is trading options and dong better then the model portfolio, but he says 3C is a big part of his success in knowing when to enter the market, but, he has made the trades his own and most of my long term members have as well. For newer members, my goal is to get you there, self sufficient and provide the data you need to make trades that fit your style, but I also realize that we do things 180 degrees different then most people are use to and learning by example initially is important.
So consider these issues and let me hear your ideas and hopefully we'll get a system in place that is of use and benefit to everyone.

Today

We started the day with bad news as the Dallas Fed missed expectations with an ugly report, housing was ugly as well, but yet the market rallied, WHY? Because Wall Street set up the chessboard and it was time. This is why I can't stand the news saying the market did this and that because of this or that news, it just isn't how the market works, although that's what they want you to believe.

As for the dire predictions by UBS's Art Cashin that we would have a 1987 Black Monday type sell-off either last Thursday, Friday or today... well....

We've known that this was a powerful accumulation cycle and by the charts below, we are seeing real strength...

 DIA 1 min making new leading positive highs

 DIA 2 min doing the same, look at the 3C depth chart (I know I've showed you this 100x already, but here you can see how shallow the accumulation trough is and it is the strongest round we have seen for months!

 The DIA 15 min moved in to leading positive position today, almost as if accumulation continued today despite the rise in prices, something rarely seen.

 QQQ 2 min moved in to a leading positive divergence today

 The 15 min chart is leading positive as well and added more strength today!

 The SPY moved out of the earlier funk it was in and moved higher in to leading positive position

 And the 5 min SPY is leading positive for on a fairly long chart when prices where much higher.

The SPY 15 min moved to leading positive today.

If you followed my long term advice given about 20 times to buy GLD at the long term 150 day m.a., even on a day trade, you made money in GLD today, although for longer positions I'm still hesitant and would not go huge on this trade until it settles a bit.

Look at the recovery off the 150 day m.a.!

If we don't get a multi day accumulation scenario separated by a rally as we saw on 8/6 (acc.) 8/8 (rally) and 8/12 (more acc.), then we should be on our way for this leg. You can see by the red arrows how sharp the accumulation was this time around by how shallow the 3C depth chart in the lower window. Note how a rally reacts and how the depth chart reacts, it will rise in to a crest as the market moves higher and as the crest peaks, the market turns down. Judging by the accumulation, the crest should be deeper then the previous crests market with a red trendline, so that gives you some idea of the upside possibilities.

As for correlations that had me thinking we'd see one more day of accumulation today (which we may have, just in to rising prices which would be only about the second time I have seen that), correlations as mentioned about a month ago are off as I theorized they would be back then.

One of the most consistent correlations has been that of the Euro trading with the market, look how far off it was today.

 Above is the EUR/$USD -the green box is our stock market hours. Although the Euro closed higher at 4 pm EDT compared to the market open at 9:30 EDT, it couldn't make a new high as the market did, this is an epic failure in correlations.

Here's the SPY in green and the Euro in red, note in the red box the weakness in the Euro and the market ignored it 100% and moved higher. Look at the red arrow that shows the high in the Euro/FXE compared to the close and look at the green arrow showing the SPY at the same relative high/time and its close much higher, that's a divergence and a failed correlation. It seems Wall Street had to pull the move now, despite what the Euro was doing. This may be due to end of quarter results.

Here's another correlation gone bunk today.

 GLD in red/SPY in green. Note the inverse (opposite) correlation between the two, when the SPY is up, GLD is down and vise versa, you can see it in the arrows and at relative points marked by white trend lines.

Now look at today's action, they moved nearly in unison!

I haven't even looked at the looser correlations yet, but I'm sure many of those are broken too. We saw something pretty rare today. However the market has been showing us accumulation for days now, so today may be a bit surprising in timing, but the move shouldn't be a surprise at all. This is what I meant about not reading the financial news, all of which has been heavily skewed toward the bearish including a call by the very well respected Mr. Cashin that we would see a 1987 Black Monday today. The charts do lie, but I think 3C chowing what smart money is really doing is quite a bit more honest.

As for the options portfolio I told you I was going to fiddle around with, I opened it today and here are the results from option trades initiated today.

Nearly 14% for today alone and ranked #10 putting this model portfolio in the top .00692 or just above the top half of 1% and the monthly ranking in the top 2% with only 1 day's performance!

The model portfolio of equities only added 9.22% today, putting it at 90.34% for the month of September, almost a double.

All of these trades are published before I enter them and they have the same transaction costs, margin interest and bad fills as they are 15 minutes delayed.

I hope this convinces you that Wall Street is not only crooked, but standard Technical Analysis DOES NOT WORK, but ....  AS SOMEONE WHO RARELY HAS TIME TO EVEN PLACE MODEL PORTFOLIO TRADES, YOU CAN BEAT THE MARKET!


I'm off to look at more charts, I'll likely be back with some more information later.

Some of our long positions

While there are some minor divergences, the trend of 3C is what I want you to focus on, it's been very supportive of these positions we entered.

 BAC 1 min

 BAC 15 min

 FAS 1 min

 FAS 2 min

 FAS 5 min

 TQQQ 2 min

 TQQQ 5 min

 TQQQ 15 min

 TYH 5 min

 TYH 15 min

 UDOW 2 min

 UDOW 5 min

 UDOW 15 min

 UPRO 2 min

UPRO 5 min

As I said, thus far the early charts on the early move in the long positions we opened last week are very supportive.

Bollinger Bands

Interesting markt today, I've been talking with some trader friends of mine and they are pretty confounded.

Lets look at some Bollinger Bands on the SPY

 This is the 10 min chart with BB's in the top window and a version of Demark buy/sell signals n the bottom window. You can see price has a tendency to bounce from the lower Bollinger band to the upper, back to the lower. Right now, it's pretty close to the upper band and we have a Demark intraday sell signal-this is a short term sell signal and doesn't effect the bigger picture we are looking at, except to say that this could be an indication of prices moving toward the trading range.

The long term 60 min hart is starting to narrow, this would imply a highly directional move is going to play out soon, being a 60 min chart, the move would be pretty big. You can see the buy signal of the DM indicator at the lows as well. If the price were to pullback within the BB's now, the bands would likely tighten more indicating a greater chance of that directional move. So long as a pullback to the trading range maintains accumulation, even on a break below the range, this would be a very bullish signal.

Added Thought

If you are an active trader and want to, you could consider taking some profits and look to re-establish positions at a better price within the trading range. The trade-off of course is that we don't get that pullback, which is why I would only consider partial profits.

This is for active traders that have time to watch the market all day. I personally am not making any changes to my equities portfolio at this time.

Market Update

 DIA 1 min short term today is in confirmation, but there is a relative negative divergence.

 DIA 2 min shows a couple of negative divergences, the first sent intraday prices lower.

 DIA 5 mins showing a leading negative divergence, suggesting the pullback I expected today.

 QQQ 1 min is about in line with price

 QQQ 5 min shows a negative divergence supporting the idea of a pullback to the range area.

 QQQ 10 mins is in a leading positive divergence and getting stronger today

 SPY trading range, prices are just above the range.

 SPY 1 min close up shows accumulation today and then a move up and confirmation

 However if you back out, there is a negative divergence, again suggesting a pullback

 SPY 2 min is about in line

SPY 5 min is in a leading positive divergence overall, with a slight negative relative divergence today. Note this is not heavy distribution, look at the last market top and crest on the depth chart, we are far, far from that.

Euro hinting at a pullback?

SPY in green/FXE-Euro in red, look at the recent failure of the correlation between the two with the Euro headed lower. This may be an early sign of a market pullback.

Market Update-Outlook

DIA 15 min gong negative, although still in a leading positive divergence, slightly above the trading range

  DIA 15 min with the 3C depth chart starting a small crest, common when the market starts moving up.
You can see this behavior after past rounds of accumulation as the market starts to rally, the first two white boxes where like 1 big accumulation period separated by a 2 day rally. Whether this is part of a trading range head fake or the start of a move higher is difficult to tell unless price moves bak in to the trading range, this is why I started buying last week.

 This shows the same as the chart above, just in the SPY.

TLT showed accumulation on 9/20-9/21 just before the FOMC announcement, I have mentioned since then that it has formed a negative divergence and now price is acting on that divergence by heading lower. This s a risk on trade as people move out of treasuries and in to equities seeking a higher rate of return, however this may still be part of the FOMC knee jerk reaction. It is very difficult to say at this point. So I am maintaining my long positions for the time and will wait to see what the market tells us. There is a short term 5 min positive divergence present in TLT now, which if the market moves on this, then equities should fall if correlations hold up, that would put them near the trading range.  In either case, we should have a profit and if we go on to accumulate more in the trading range or below it, then the move should be even bigger.

Talk about playing the race card

Obama has a Freudian slip during a speech today,

The White House Transcript:

"When you start saying, at a time when the top one-tenth of 1 percent has seen their incomes go up four or five times over the last 20 years, and folks at the bottom have seen their incomes decline -- and your response is that you want poor folks to pay more? 

Give me a break. 

If asking a billionaire to pay the same tax rate as a janitor makes me a warrior for the working class, I wear that with a badge of honor. I have no problem with that."

The Actual Speech:

"If asking a billionaire to pay the same tax rate as a Jew, uh, as a janitor makes me a warrior for the working class, I wear that with a badge of honor. I have no problem with that." 


We can only hope that this was a mistake made by someone who has to talk a lot.

However, recent comments from Democratic supporters have taken to calling Tea Party members, "Racists". There may be a few in the Tea Party, but it is not defined by them, they are every where and are not specific to the Tea Party.

This of course would not be the first time that the people of the Jewish faith have been blamed for economic crisis I do believe that was a central theme in the propaganda that started a World War.

From my research, it seems people of the Jewish faith over the centuries have fared well is largely due to the fat that while most people over the past centuries were uneducated, it was mandatory for every Jewish child to learn how to read, something that many others did not and clearly was an advantage, but not something evil.

I'll chalk this up to a gaffe, but I sincerely hope in my heart this is not our president's view. Israel already faces increased danger because of the Arab Spring and how governments that are not making good on their promises such as Egypt, will seek to set the people against an outside enemy and foster nationalism in order to take the spotlight off their own misdeeds and lies. This is a topic I covered in great detail many months ago and predicted that the Egyptian government, who was going to overthrow Mubarak any way before the Arab Spring even started, would not keep their promise of free, democratic elections within 6 months. The problem is simple, the Egyptian military is the real government there since Nasser, they wanted Mubarak out because the military chooses the leaders from within the military, Mubarak himself being a former high ranking air force member. When they heard that Mubarak was grooming his son to succeed him, they already planned to over throw him, the Arab Spring just gave them the cover to do it and ultimately it wasn't the people that overthrew Mubarak, it was the military. So should we believe that they are now ready and willing to relinquish power through free and fair democratic elections? No.  The people will rise again, it has already started and Egypt will continue down the path of hostility toward Israel and hope to distract the Egyptian population and create nationalism that backs the military government against a perceived enemy of greater threat, Israel.

I have many great Jewish friends and have the utmost respect for them and their faith. Just look at the selfless dedication of every member of Israeli society in serving their country, man and woman.

NYSE TICK Chart Indications

 TICK chart trend, it seems to be breaking the uptrend we have seen this morning.

 The 3C 5 min readings of the TICK chart have been supportive for the early trade today...

However, as per last night's post, I do expect a move lower in to the trading range and maybe below. The 10 min TICK chart, which represents a longer trend then the 5 min above has gone negative on today's strength, implying a reversal in the TICK chart to a downward trend. The NYSE TICK hart is a running tally of NYSE advancing issues on each TICK minus declining issues, thus a reading above zero tells us more issues are advancing then declining, a reading below zero tells us more issues are declining then advancing. However, this is PRICE ACTION ONLY and what we really pay attention to is the underlying smart money action which often contradicts price. This is possible because Wall Street knows which way the market is going in the short/intermediate term because they are controlling the direction. Wall Street typically plans these moves out hours, days, weeks, months and even years in advance. My chart of HOV showing a year and a half of accumulation while the tech bubble exploded, shows that they were taking on a Huge position in home builders nearly 3 years before the rally started going parabolic in home builders. If you remember, the tech revolution was a new way of looking at the market and most people assumed the next bull market would be led by tech 2.0. How many of you can honestly saw that after seeing IPOs of no name dot coms trading at P/E's of 400 with poor earnings, sometimes no earnings, really imagined that housing which has previously gained about 2-3% a year would be the next bubble? And ask yourself, "How did smart money know this years in advance and were so sure of it and committed to the idea that they spent over a year in pure accumulation which means their positions were enormous?" This is why they are called smart money and I doubt their analysts figured it out, more likely the FED let them know where the next gravy train would be so they could make up losses on the dot com bust.

Oops, I said Fed, I probably just got flagged. If I disappear over night, you'll know why.