Like most op-ex Friday's that tend to open and linger near Thursday's close and despite the Citadel (probable) SPX futures ramp, all average have fallen and are trading near unchanged from yesterday with a bit more weakness in the Dow, which is classic Friday op-ex pin behavior (whether standard or weekly options).
I suspect yesterday's successful attempt to hold the market in place rather than let the SPX slip below first major support at 1991, probably has more to do with op-ex in the immediate near term than it does with a head fake move.
What I am seeing, even though this is early a.m. trade which is full of games, so much so many professional traders won't even start their day until 10:30 -11 a.m. after the a.m. games (tagging limits and such) passes, I'm still seeing quite a bit of sharp deterioration a lot faster than we saw yesterday. My first inclination was it was likely to bring prices in line with the op-ex max-pain in which seems to always be very close to Thursday's close. My second inclination was that this may also have something to do with squaring up positions, taking some risk off the table as the UN security council met yesterday after NATO released satellite imagery of Russian artillery, encampments, main battle tanks and supply vehicles in side several areas of Ukraine territory and several others just several kilometers outside Ukraine territory, all set up in formation and pointed to the north where the only possible outcome could be the shells landing inside Ukraine so it's apparently not a drill. This has caused NATO to call an emergency meeting later today.
With a 3-day (US holiday) weekend coming up and escalating tensions, many investors won't be keen about holding positions over the long weekend, at least not without some serious hedges on.
The point being, although it's early, I'm certainly interested to see if this increased rate of negative 3C disposition is related to either situation mentioned above or if perhaps there's something larger in play which as I said yesterday would be my lowest assigned probability (skipping a head fake move and just allowing a rounding top to roll over).
In the case of the reversal process, today's early action so far (price only) has maintained and continued a very nice looking, proportional reversal process.
I'll give the 3C signals a little more time since the market is at the or near the unchanged op-ex max pain levels, perhaps they'll mellow out a bit. If they continue on the course they've been on so far this morning I'll be forced to consider more drastic steps and perhaps a change in the outlook although it's very difficult to say whether market deterioration is true rolling over without a head fake or whether it's investors taking some risk off the table with a long 3-day weekend in an environment of heightened geo-political tension.
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Risk Management
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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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