Life-long Student

So many of you know that I taught Technical Analysis for the Palm Beach County School System's Adult Education program. My classes were always booked to capacity (didn't have a large enough class room) and we always had to turn people away. Out of probably 80 different courses offered, it was either my class or the ESOL (English-something or another) class that had the highest attendance. I enjoyed teaching because it made me really think about my positions, it challenged me with questions I hadn't thought of before, etc.

I will never call myself or try to pass myself off as a guru, I'm much prouder to call myself a lifelong student of the market.

With 3C, it took quite a few years to really learn how to use the indicator and I'm still learning how to make it more effective as part of the learning curve and as markets change in their complexion, but the biggest adjustment for me in learning the indicator was learning everything I thought I already knew, for the first time. For instance, many technical traders believe that large volume spikes are smart money buying, I have found time after time that smart money is buying and/or selling when you least expect it, they aren't buying new breakout highs, they are selling them, they aren't selling new breakdown lows, they are buying them.

A lot of the differences can be understood by thinking about the size you and I trade vs, the size they trade. Where we might have 100 share blocks, they are placing 10k share blocks, where we might have a 500 share position, they may have a 5 million share position. For us, selling a 100 shares or even 500 is routine, it doesn't tend to move most stocks much, however they cannot do the same, they have to break up orders in to smaller pieces and the lat thing they want is for anyone to know what they are doing, it literally costs them tons of money if an HFT picks up on their positioning.

This is what gives rise to head fake moves, breaks above a resistance level that will create retail buying so they can sell in to that or hitting stops on the downside and triggering a lot of retail stops so they can accumulate. These are just some of the things that you notice when you watch the market all day every day or you literally don't eat if you don't make money that week. Instead of thinking you know what the market is doing, you learn to let the market tell you what it is doing. Instead of planning a trend trade, you let the market tell you how much it might give and you plan your trade accordingly.

I've shown you several charts like AAPL, BIDU and GLD that demonstrate some of these principles, some you've seen, some you will see.

I just ran through several industry groups and I am going to tell you that I have never seen anything like this before. I looked at 3C, where the divergences really changed and guess what, I could guess at a level that had some technical significance that would get retail to buy, then I checked the level on a daily chart and they were right on. I'm going to post some of these charts so you can see for yourself, but I've never seen such clear market activity from smart money on such a scale and in a way that not only confirms what we have thought about how head fakes work and why, but a move in the market that takes this concept to a whole new level, one that makes me wonder if we are actually going to see something in the market that we maybe never saw before in terms of severity.

I'm going to have dinner, relax for a bit, clear my mind and try to present this neatly for you, but I'm sure when you see these charts, how many there are, how consistent they are, you'll be able to identify these concepts for yourself (which is always the best way to learn) and some of you old timers that have seen a lot of these charts might even grasp the depth of what is happening right now. It's actually kind of exciting and I can't wait until we can look back on this and see what else we can learn.

On another note, I'm actually considering breaking a few rules that I have regarding risk management although this isn't something I want to encourage (I thought about just taking the positions and not saying anything about it as it kind of sets a bad example), but there's no point in taking the positions without sharing them with you as that's the whole point of all of it to start with. It just happens to be something so big, so consistent with our concepts and so much larger than anything I've seen before, I get the feeling this is not going to just be another reversal.