Wolf on Wall Street: Tuesday, March 13, 2012

Tuesday, March 13, 2012

A quick look at today

Today the market was manipulated, there could be several reasons and there could be several players. For now I'm just going to stick with the previous assumption of a strong breakout for a market reversal, as mentioned regarding AAPL several times, the stronger it is, the more dangerous it is. The SPY, DIA and QQQ were all in striking range of a breakout as noted yesterday and the day before with the IWM playing catch up as it is the furthest from such a breakout.

This is ES/3C at yesterday's close. One of my last market hour posts was there was a positive divergence in ES that was likely to lift ES in to after hours )and probably overnight).

We got the gap up that pushed the Dow through the psychological level of $13k early today.

This is ES premarket today with a negative divergence sending it lower toward the NY open.

At the open there was a positive divergence lifting ES/the market.

Before the FOMC even came out, 3C was already negative in the market averages and the ES as seen above (chart ends at 2:59 p.m.).

The SPY was already losing momentum as you can see by the Rate of Change in white.

After the FOMC announcement and the initial knee jerk higher, the market started trending lower making lower lows and lower highs and breaking intraday support. (below)

Just as the market is breaking down, threatening the Dow 13k close, JPM announces the results of their stress test 2 days before the F_E_D is scheduled to release them sending the market higher.

Here's ES since after hours, right now it's a couple of points below the close...

More to come...

The Blow off top?

The stronger the move on a head fake move, the stronger the fall. In addition to the F_E_D knee jerk reaction which was originally bullish and then traded down until JPM announced they passed the stress test at 3 p.m.

Watching some of the financials (I posted a couple compared to JPM-STI didn't look good), STI, C, MET and Ally Financial (GJM) are trading a bit interesting in AH.

JPM was pretty much the strongest in the financial test, they are trading down in AH by -.85%

The 4 that missed, C, STI, MET and GJM (except GJM which seems not to be trading) have moved off their lows.

Citi

On the close (see the light blue bid/ask)

STI

STI AH

Where STI is in AH compared to the close

MET

AH

On the close

ALLY which I can't pull on AH

And XLF..

XLF is down a bit.

Interestingly, AAPL is down a bit in AH. I think this is going to be an interesting night.

Updates as they occur.

EOD SECTOR ROATION

JPM's announcement t 3 p.m. didn't only cause the F_E_D to move up the stress test results by 2 days, look what it did to the sector rotation, some are quite surprising...

Financials at the bottom took off at 3 p.m. on the JPM announcement, the defensive sectors you would expect to see fall, like Utilities, Healthcare, Staples, but it also brought down Tech.

Stress Test

I just heard the Stress test was supposed to come out Thursday, I wonder how Bernie feels about Jamie Dimon.

Here's a few financial charts and how they have reacted vs JPM since the stress test results were announced to be released today...

After JPM Front Run the Stress Tests for the banks...

The F_E_D is set to release results at 4:30 after market. I'm not sure when the original release date was, but it was not on today's economic calendar.

What is up with PCLN?

PCLN is not moving...

VIX Buy Signal?

I have no idea what is holding the VIX up today, it should move opposite the market and be at new lows, instead it's near the highs of the day and looks like it may give a buy signal (remember a VIX buy signal is a market sell signal).

This is the daily VIX, yesterday's close below the Bollinger bands sets up the first part of a VIX buy signal, a close in the VIX above the Bollinger bands where it is today is the second part of the VIX buy signal.

Even more strange is how the VIX has held up near its highs.

UNG SHAKEOUT

I think so...

UNG looks like it was setting up a base, just loo at the trajectory of price recently and the volume, something is going on there.

This move below what looks like a base forming has been excessive, but the EIA coming out for Nat Gat Thursday is one of the most leaked reports.

Both 3C and UNG started moving well before the Fed statement, I'd say it's unrelated.

Finally a move in PCLN?

JPM moves the market...

JPM announced a buy back and an increase in their dividend at 3 p.m.

Financials...

JPM

DIA

Market Update

The 5 min charts are still catching up, but close enough to post.

DIA 1 min

DIA 2 min

DIA 5 min

IWM 1 min

IWM 2 min (remember earlier I said the IWM looks to be best supported today).

IWM 5 min

QQQ 1 min

QQQ 2 min

QQQ 5 min

SPY 1 min

SPY 2 min

SPY 5 min

Unfortunately, I haven't made it to the TV to turn off CNBC, but I've never heard so much pumping, the final straw was that we had very strong retail sales today! Retail sales came in, "in line"!

PCLN Update

Unbelievably, PCLN still hasn't moved, not even on the knee jerk reaction, it's at +.11% right now.

Initial 3C reaction

These are the 1 min charts, the 2 min charts should be catching up shortly.

The DIA

The IWM shows the least movement..

QQQ

SPY

I'll update the 2 min/ 5 min shortly

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.