Good morning.
Overnight futures melted up on very low volume apparently on AAPL concluding the deal with China Mobile which was assumed to be completed last week before we found out on Friday that it wasn't, it's not exactly new-news as this has been 6 years in the making, but nonetheless Tech traded up in Europe on the AAPL news, now lets see if it's a sell the news event which I'm guessing with a 6 year lead time on the rumor, it likely will be.
China is still having massive interbank liquidity problems as the 7-day repo hit all time seasonal record highs (as it tends to rise at the end of the year for regulatory reasons), but last night hit 980 basis points or 9.8%!!! The situation is so bad now that the Government has called on Chinese media to cool it or tone down stories on the liquidity crisis, if anyone remembers, this is what got the ball rolling in the US in 2008, it was because of subprime, but it was the lock up in interbank lending that created the Lehmans and Bear Stearns, not good news.
FX is more or less flat and boring still, the USD/JPY lost ground and broke $104, found some support, bounced, but still can't get back above $104 as the Yen slowly gained more ground.
Crude did pullback as I suspected last night, it found some support, but I expect a larger pullback, we'll check in to that early.
And the big story of the long bond fat finger trade executed in large size in low liquidity sending it up from 130 to 135 instantly, kind of like some of the other strange , large block trades of the last week in the overnight. Had this occurred during regular hours, it's hard to see how it would not have crushed risk on sentiment. For now it is a mystery who put it in, if indeed it was a fat finger or something else, I have a little diffficulty believing it was a fat finger trade at that time of night.
As was said in last night's post, I'd rather see the market up early today than late today and so it shall be with about a 10 point rise in ES overnight on a low volume melt-up, however we'll see what happens in regular hours, there's usually 3 trends in the day, the overnight, opening and a.m. and afternoon that tend to all be distinct.
Key to watch, the Yen, the Chinese banking crisis, Carry Trades, Now the Long Bond and any longer dated bonds and gold which is looking to be stabilizing.
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Risk Management
Get the Most Out of Your Experience
- * Understanding the Head-Fake Move Part 1
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- * Placing Stops-What you should consider...
- * A Currency Crisis
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My Charting Software
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.
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.
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Futures Update BR-EXIT Edition - So the conventional wisdom couldn't have been more wrong. Those chasing risk and closing hedges couldn't be in a worse place right now. I would still remin...7 years ago
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