The Bigger Picture

AAPL's -45% decline taught me an invaluable lesson, there's a time, especially in choppy tops, to play it safe, to try to get the best positioning and the best timing you can, after all, the moves aren't that big as a top is a form of a range bound market, we now have something like 48 consecutive days in which the S&P has not made a gain over or below 1%, one percent moves use to be a normal day. So yes we've had to be careful, but as you may recall, I was calling a top in AAPL as it was making all time new highs, I was positioned short and I closed that short because of a small positive divegrence forecasting a small bounce and I thought I could get another short entry a couple percent higher, then the bottom fell out from under AAPL and it was nearly cut in half, when that happened, I had just closed my short. 

I knew AAPL was in a dangerous area, that was not the time to be playing it nimble, it was the time to "SIT" as Jesse Livermore would say. There are a lot of traders who will be right, but very few who will have the patience to sit and reap the benefit of being right, again as Jesse would say, "Being right and having the ability to sit tight is a rare trait among traders".

Take a look at some of the IWM charts, remember the R2K/IWM is the average that leads the market in a risk on or bull market (even Ben Bernanke agrees with that) so in a way, the market has already topped.

 IWM daily chart with a large H&S top through 2014. Don't worry about the shape, they never look like the textbook examples, EVER!

There are 3 places I'll short a H&S as you know, the top of the head, the top of the right shoulder and AFTER a break below the neckline and a volatility shakeout of new shorts with a bounce/head fake rally back above the neckline, this is the first or second best place, it's the second best as far as price, obviously the head would be best, but it's also harder to know for sure at the top of the head if what you have is truly a H&S top. The right shoulder is probably the first best as far as timing goes.

Now, backing away from the nitty-gritty of intraday chart signals and making sure we are not missing the forest for the trees...

 Trend of the 1 min 3C chart at the top of the right shoulder and we even have the head fake move which tends to look like an "Igloo with a chimney". 

2 min trend of 3C in the same area...

This is what is starting to feel very dangerous besides the fact we are at the top of a right shoulder...

A bear flag, but this time there's not much accumulation, we saw that yesterday as it started to form, the 5 min chart is starting to lead negative out of the flag.

Market's don't give you a lot of warning when they break, the warning they do give is above on that daily chart. Thus Jesse Livermore's admiration for the golden trait among traders of patience, "sitting".

"“I learned early that there is nothing new in Wall Street. There can’t be because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again. I’ve never forgotten that.”"

Some ADVICE FOR THE MAN WIDELY CONSIDERED TO BE THE WORLD'S GREATEST TRADER...

1. “Money is made by sitting, not trading.”

2. “It takes time to make money.”

3. “It was never my thinking that made the big money for me, it always was sitting.”

       4. “Nobody can catch all the fluctuations.”

5. “The desire for constant action irrespective of underlying conditions is responsible for many losses in Wall Street even among the professionals, who feel that they must take home some money everyday, as though they were working for regular wages.”

6. “Buy right, sit tight.”

7. “Men who can both be right and sit tight are uncommon.”

8. “Don’t give me timing, give me time.”

Back to the charts...

 The 10 min IWM, each successive top see lower and lower 3C readings.

 The same with the 15 min

And of course where the probabilities for downside resolution lay, the 60 min chart

And the strongest of intraday timeframes, the 4 hour chart... Distribution begins well before the top, smart money has to sell in to strength and demand.

If I have time, I'll get some SRTY charts up, there's surprising confirmation, but timely as well.