See Trade Guild

I just posted 2 charts, 1 suggesting a pullback-we (my client) are taking some off the table and intend to buy at lower prices as the 5 min chart is still positive suggesting this is what I said last night, early weakness that may fill the gap.

This is also an opportunity to go long, but wait for the crossover system I described this a.m. to give you the signal with RSI > 50 or if you use 3C, just watch for the positive divergence and start buying, but check that the 5-min 3C is still positive first.

A Way to Play

If you're nimble, and you can watch the trade, I have a way you might be able to participate in the market right now. This is for all the new members who haven't been with us and gotten in on the bigger picture, which you will shortly. Basically I've said that if you are long since yesterday when the market moved above $105 on the SPY (first it broke below and when it went over $105 in the early a.m. that was our signal to buy longs or Ultra ETFs) I don't think it's a great idea to be adding right now, you pretty much should have a position in place and be ready to start selling into the rally.

I also posted a chart last night that showed a negative 1-min divergence which is interpreted as early weakness in the market-despite the gap. The day before we had a positive divergence meaning early strength and we had a huge gap down, so it didn't make a lot of sense, but we saw the market rebound very quickly off the open"early strength"

So does that mean that today's gap is going to pullback, be filled, maybe even pullback even lower? I'm not sure because there was a lot of different activity toward the close, short covering, non-institutional money buying, institutional money distributing (selling to regular Joes like you and I). Being that smart money needs higher prices and a spectacular move to suck money off the sidelines, I think maybe they will support the gap, but if they don't you may want to buy early weakness.

Here's a setup, but you have to be watching and nimble. If this market goes on a tear to the upside as I believe they would like, then we'll see nice strength so use a 1-min chart of the SPY, add a 22 (blue) and 50 (yellow) simple moving average to price. Also add a 22 period Wilder's RSI. You can stay long or buy long as long as the 22 is above the 50 ma and your stop should be a break below the 50 ma, or a cross down of the 22 below the 50 ma. You'll also want RSI to be above the midpoint (50) to confirm you are not getting whipsawed as moving average systems commonly due.

Many times the market opens at the low and closes at the high, so there's no pullback, that's why I'd say buy 50% of an Ultralong ETF or 3x leveraged ETF. I gave a few examples in last night's post and there are more on the spreadsheets.

So you have a position if this doesn't pullback, if it does, you add the other 50% of your intended position size. Be sure that you have a risk management plan with a current stop at $107.25 on the SPY (This is your market signal despite the vehicle you use to trade) and that a stop out does not risk more than 2% of your portfolio. This is all on Trade Guild under "Resources and Concepts"-"Position Sizing" and "The 2% Rule".

As long as the short average is above the long and RSI is above 50, you should be able to ride the intraday trend, especially if it is strong. Follow the system though. Now get to it, there's not much time.

Using the signal above and trading FAS, you would have made 7% from 2-4 pm

A few charts

At this point we should see a lot of buying as this is our downtrend reversal point

This 1 min chart suggests early weakness, but every other chart is positive, so the weakness should be short lived, but for new members, it may offer an opportunity to get long. As I've said, 2 of the Ultra/3x ETFs is enough exposure, 1 should be market representative (QLD, UWM, etc) and the other financial (SKF/FAS). Don't panic if we see early weakness, you know now that it is likely, but also likely short in duration.

Congratulations

I received several emails today from members that held on through the plunge and bought at the lows, it was brave and goes against natural instincts, but I think we have a sense of what is happening in this market, although every time you get too confident you get knocked down on your rear end.

The analysis has not changed. I do not see anything of consequence suggesting that this market will not go higher. IF everything that I've seen in 3C over the last week or so is correct, then we have their number.

I read a few places today, "The Bulls got brave", etc. This has nothing to do with the bulls, this was an orchestrated effort by smart money, look at the gap down alone and our analysis that those levels would be taken out to the downside an then we'd get a reversal. Smart money built a position quietly, now they are openly creating volume and breakouts, they are trying to encourage higher prices so they can unload their inventory at a profit.

The market is often about sentiment, this time it was strategic developments.

There could be some early weakness tomorrow as the 1 min 3C charts have gone negative, everything else is positive so unless you are trying to catch every intraday swing, I don't think it matters much. I would continue to hold the longs. I WOULD NOT ADD to them. Remember, this is a correction, not a bull market move. Smart money is selling into it and soon you too should be selling in pieces, taking some profits off the table. Do not get greedy and hold too long. We should see the reversal in 3C, but I do not know if they did the same as we did and set up a larger core short position, if they did, then the change in the uptrend could come very quickly. If they will be building that short position, we will have plenty of time. the point is, hold for now, but if you start accumulating nice profits, take them-this is not  trend, it's a correction.

My guess is that we see resistance around $110-$111-they accumulated up there, but the huge sell-off on the break of $105 allowed them to average their cost down so they don't need $110. However, if $110-$111 is taken out, then we could really see a fast move up and I would definitely be taking profits off the table and leaving a small position in place.

Tomorrow will tell us a lot about where we want to start selling the longs and where we want to add to our core shorts. At $110 (SPY), I should be able to see the laggard stocks and those will be our targets to short, plus the leveraged short ETFs.

For now, be patient and NEVER let a winning trade turn into a loser. You'll have a lot of picks in the coming days, but it's too early now to start targeting shorts.

We want to behave as Wall Street does and sell our accumulated longs into higher prices, if you have a large enough position and can do it 25% at a time without commissions eating profits, then that is what I'd do. I'll let you know when. Don't panic if you see early weakness tomorrow.

Areas of interest on the SPY:

$109.40 area, $110, $111.50 $115.20 and any whole numbers like $112. Each time one of these is broken to the upside, it will cause shorts to cover, which creates an imbalance in supply/demand and leads to higher prices.

A final word of caution, making money is addictive, so much so that people are reluctant to let go of the stocks that made them the money and we find reasons to hold-DON'T! The new normal on Wall Street is Fear-we saw it this morning. Do you have any idea how many people dumped positions when they should have been buying and how many are still sitting on the sidelines? Those people will be buyers if the rally continues to advance for a day or two more, the more spectacular, the more that will be drawn in, but they will buy the top, we'll be the ones selling to them. This site is not called Wolf on Wall Street for nothing.

Hopefully you are finding a new perspective, one that takes you out of the flock of sheep and makes you a wolf in the market. Those who emailed me today with the gains they made, you are the wolves.

As always, email me with any questions or suggestions you have.

Patience and A Steady, Steeled Hand.....

Market volatility is always crazy at tops, this is why I tell most of my students to leave the top and bottom 10-20% alone and go for the 80 % in the middle of a trend, these are just too volatile for most people.

So you must be feeling anxious, don't. We are where we are and we've taken the positions we've taken. If you have been at WOWS for awhile you should have some core shorts that will hedge any downside break of our long poitions, but let me remind you of last night's post on T.G

"As for tomorrow, we have negative divergences in the 1-5 min charts, this suggests continued downside. Considering the accumulation zone, I suspect prices are heading lower to test $107.30, if that fails, then  possibly as low as $105.25. There could even be a test below $105.25 and we could still maintain a bullish perspective for the short term. However, this is a huge gamble to take, at least if you are not long term short and hedged as many of our Wolf on Wall Street members are."


So $107.30 seems to be history, to take out $105 they'll need to go down to $104.75 to hit the majority of limits, so while down there why not take out February's $104.56-I wouldn't think it would be wise from thier perspective if they intend to shoot this market back up, but they know more than do I. 


In any case, I do believe this is another false breakout/Shakeout. You may want to freestyle this one a bit and dump some of the planning and take on some 2 or 3x leveraged long ETF's-they are on both lists. The trick is timing, if we break $105 then any move above $105 intrday, you'll want to go long right in that area, maybe a little higher. The idea is that all the weak longs are shaken out and the shorts are trapped in a squeeze. so that's plan A.


Plan B is, "This breakdown is for real", which it may be but I have a hard time believeing smart money would accumulate at higher levels and then just let all that inventory go at a loss, if it were not for that reason, I'd be telling you to load up 100% short right now. So I'm doing what I tell you to do, trust your indicators, ignore your emotions and make rational decisions based on the evidence you have right now, that is the very best you can do. Second guessing at this point is out if pure fear and fear is not objective and it's also not good for you in the markets like it is in life. The market's count on the human fight or flight mechanism and use fear to make money, so this is one place it won't serve you well.


Back to plan B-a break below $104 and most likely the worm has turned. Remember that you should have risk management plans/stops in place before you enter the trade, also remember that stops are to be executed on closing numbers only, not intraday swings. So you have an entire day to see what will happen and my money is on "False breakdown" and a rally after that, maybe right off the open.


I'll be updating in both places today after 12.


By the way "sell in MAy and go away-" Sell at the end of April and buy back at the end of may 7 of 10 of the last years, May is up.

Patience

As I have said many times before, your only edge over wall street is that you DON'T have to trade, you can sit it out and be patient and that is what we are going to do tonight. There's no point in posting trades when we have 24 decent trades from yesterday, many of which haven't triggered yet. I feel fairly confident that the $107 level on the SPY will be taken out, maybe lower, but I also feel these are to set up short squeezes so for the moment we are going to be patient and see how this plays out in the a.m.

We have plenty of leveraged ETFs and long trades on the list should this market show resilience, but we will wait for confirmation first. This is for many people the hardest part of trading, sitting still, but it is also your greatest advantage, tomorrow will be an exercise in patience. If the market comes our way, I will post the trades that should be added, the limit orders are all still the same.

Hang in there, the fog will list soon.

In the meantime, if you have any questions, as always, feel free to email me and I'll answer ASAP.

Edge?

Right now? No, we don't have a strong edge which means that you should pullback your position size and be diligent with your risk management. This market is very volatile which is tropical of tops, but it "seems" like we still have some upside owed to us by the market. As I pointed out last night, the positive 10 minute chart doesn't need to take place the next day, it could be a few days.

Nevertheless, we did have some decent trades today, one made nearly 19.5% in a day. We had some that lost money around 4-5% and some that gained the same. We had several that did not trigger on their limit orders, they are still very much viable trades.

Now is not the time to swing for the fences, that may change in a matter of minutes tomorrow, but right now it seems as if we will see continuation of the downside that started at 1 pm-I (remember to read Trade-Guild updates-the reversal was posted there for all to see). i have a feeling that we may see at least one more support level shaken out, but there's a chance that we see the $105 SPY area shaken out, which becomes very dangerous as this could cascade out of control under that level, which is great for our shorts, but not so good for any longs.

Tonight I will list several trades that seem to fit with the analysis and show strong probabilities if i can find them, you must understand though that 65% of the gravitational pull on any stock is first and foremost "market direction", which also means that most people spend way too much time looking at stocks when they should be studying the market and the industry groups which are the second most powerful determinant in a stocks direction.

Check back in a bit, this will take awhile -and also remember that today's trades are not dead, even ones at a loss right now. This is why I advocated last night for wide initial stops with fewer shares.

Keep An Eye Out For Those Updates

I updated Trade Guild today at 12:51 with this,

"Be prepared for an intraday pullback, it should be coming any minute as the 1 min 3C charts have gone negative.

My Bad

I just posted and promptly removed a post called "Huge opening gap down". My chart was scrolled back several days, it is no where near as bad as I thought then, and very much in line with what I said in last night's post under the last 3 charts. so if you received that post in the email or saw it, please disregard it as i have removed it from the site.

Getting started

Friday the S&P/SPY was technically called a one-day key reversal. In Candlestick vernacular it would be called a piercing pattern, for all intents and purposes they are the same thing, a reversal pattern. Remember, reversal patterns need to be confirmed with follow through and it's not unusual for the market to close on Monday in the same direction as FRiday.

The S&P 500 saw increasing volume. The Dow did not qualify for a true piercing pattern, but did dee rising price and volume-bullish. The NASDAQ 100 qualified for piercing status but volumr fell off slightly-which is s bearish P/V relationship, but it wasn't a huge difference. Same story for the NASDAQ Composite. I prefer all 3 or 4 majors confirm together, it's a more solid foundation especially at a critical moment like a market reversal.

The SPY/S&P may have outperformed due to financials strength. XLF put in a full strength bullish engulfing pattern-stronger than a piercing pattern, but again volume fell off. But is it enough to look at the dailt volume itself and make judgements? Not always. It's obvious on these charts and the XLF chart that volume fell off into the rallies, it picked up at the deline bottoms and at the lows of the day, which ordinarily would be bearish to me, but in this case, knowing and seeing what we have seen, I think we are seeing accumulation-now out in the open, on the dips. So perhaps the daily P/V relationship isn't as meaningful as usual. The other observation would be the fact that they are now accumulating in the full view of the public, which as I mentioned last week suggests that they are ready to take this market higher and then we get reversal days in the majors. The strength in financials would also explain the relative strength in the S&P as it is more heavily weighted with financials then any of the others.

So if you are not in already how do you play this? OR if you are in, how do you play this. At this point nearly every chart I see has a positive divergence suggesting upside in the near term, so what to pick? I told you last week to use the Ultra/3x bull ETFs and to have broad market exposure through an index and exposure in financials, if you have that, then you should be fine. I like the ETFs in this situation because they are not as sensitive to individual news events and they can be heavily leveraged.

I think continued upside early in the week is a strong possibility, but do we want to use the ETFs or the individual stocks? MAPP is a strong looking chart, it has a bullish engulfing candle, rising volume, huge spikes near the close when Wall Street trades and 3C q-min suggests early upside Monday. The target is about $17.00 so that is about a 22% gain, not bad. Using the same target criteria, but this time using FAS (1 3x leveraged long on financials), I come up with 21%-the same for all intents and purposes. The only real differences (besides the 1-day target on most ETFs-which can work to your advantage occasionally) and the market specific news, would be the volume. FAS is averaging about 85,901,100 shares a day over the last 50 days. Whereas MAPP is averaging about 153,00 shares over the last 50 days. So you have to consider how big you are trading, the spread and slippage. Also I consider what market they trade in, MAPP trades over the NASDAQ-and so long as you are not using level II (unless you know every player on there and what their tricks are), I have no problems with the NASDAQ. FAS is trading on the NYSE-not my favorite exchange. Why? First because I've seen significant profits erode because I couldn't sell my profitable SKF position because the Specialist had not opened the SKF market (and it was a fast moving market that morning). Also there is the discretionary opening price which is chosen by the specialist, whereas issues trading on the NASDAQ have their opening price dictated by actual supply/demand. Does this so far sway me one way or the other? No. I point out these issues because your trading is different than mine and maybe these issues will sway you. I also have a general disgust with the NYSE, many day traders won't trade the NYSE at all due to ongoing corruption issues, at least in their opinions. These issues could include things like front-running-”Oh but times are different?” yes they are, but some things aren't.

When considering shorts, which we will be back to adding shortly, you must consider the fact that the inverse ETFs do not put money in your account that you can use as they become more profitable-you need to close them like any other long to gain access to the gains, whereas a true short on a stock will put money in your account and allow you to use it without closing the position, read my article on Trade Guild “Making More Than 100% in a Short” and you'll understand.

OK, now that you understand those issues and you know what ETFs I recommended, lets take a look at individual stocks and what I'm going to do is look at Friday's gain for all 228 Industry groups through Morningstar and choose 5 of the top performers.

Copper +5.44%

Steel and Iron +5.29%

Industrial Metal and Minerals +5.19%

REIT/Hotel/Motel (condominium...-just an inside joke) +5.06%

Aluminum +4.51%

Problem? If you have read WOWS for any amount of time exceeding 3 days you will know that I always say not to “over-diversify” as it kills returns, but more importantly not to trade any two individual issues (unless you split them as if they were 1 position) in closely correlated industries. With the exception of the REIT, we are heavily correlated so I'm choosing Industrial Metals and Minerals because there is a larger pool of securities to choose from-this is 1 group. Group 2 will be REITS, based on financials strength on Friday, I'm choosing Financial Diversified Investment for Group #3 because they are in the top 10 best performers for Friday and there are 441 securities to chose from (and yes I will look at every chart, now you know why I charge $50 a month). Group #4 will come from one of my scans, “Stocks closing up on rising volume by 5% or better” and Group 5 will be a scan that looks for stocks between $5 and $20 and have a BETA in the top 10% of the market. I'll also weed-out stocks trading less than 200,000 shares a day. These are stocks that have the highest probability of making large gains.

While I'm not going to go through my analysis for every stock, I do want you to learn, not just get stock picks. So I looked at Groups #5 “High Beta-Scan”. I took out of the watchlist anything that traded less than 200k shares Friday. I sorted the remaining 215 stocks by Beta and the top of my list was VNDA with a BETA of 7.45, which means typically or historically might be more accurate, if the broad market measured by the SP-500 were to advance 1%, VNDA would advance 7.45%. It has a high relative price movement. I looked at the chart, it traded over 600k shares on Friday-and not on big volume, more like average. It also saw a capitulation-like event on April 29^th on a huge gap down and closed down 8.84% that day on volume of 3,137,100, about a 6x volume surge. This tells me that most weak hands have been shaken out of this stock. On May 5^th a huge hammer created a second shakeout as it violated all nearby support, remaining holders are in there and prickly. The gap down on Friday re-tested the low but stayed above the low by about 2%, which is a successful retest, I don't think it needed to be shaken out anymore like the rest of the market considering recent events.....

I'm going out to dinner real quick, I'll be back with the rest of tonight's analysis and ideas, but there's something to chew on....

Ok, so Here's our charts of VNDA (click the chart for a larger view to read the notes)

Here are the support levels and capitulation I mentioned.

My Trend Channel I use for objective stops also identifies reversals in trends based on a stock's recent behavior

Long-term 1-day 3C chows accumulation at the retest of the May low

The 60 min 3C chart shows confirmation of the successful retest and accumulation

More confirmation on the 15 min chart with a different version of 3C

This one minute chart shows how reliable divergences are in calling reversals, you can see the distribution at the top in red leading to a downside move and in green accumulation that has started an upside move. Based on this chart I'd guess VNDA will show strength right our of the gate Monday so if you are interested, you may want to get in at the open with a market order.

So there's some of what I look at. VNDA seems to be a pretty nice setup, but you need to move quickly and take the early market price. You may want to scale into the position as we often do, you may pick up some shares at better levels, but there should also be a point in which the position is filled out as the trade moves in your favor. Off the top of my head, I might call that level $8.01, but be prepared for an intraday attempt to shakeout buyers at the whole number. Personally if that were to happen, based upon the evidence, I would hold through that sake out as it may add more fuel to the fire when the stock advances again above $8.00 on a mini short squeeze

The 3C charts for the market are suggesting morning weakness, that may be the time to purchase. However, do not let it close lower on you without exiting the position, at least partially.

The rest of the trades will be posted on the spread sheet, just click the link on the right of the post called "May List" There are more ETF ideas on the list below that at the very bottom of the spreadsheet.


*NOTE-REMEMBER, ALL LIMIT ORDERS ARE ON AN INTRADAY BASIS, ALL STOPS ARE ON A CLOSING BASIS.

THE OUTLOOK FOR TOMORROW BY THE CHARTS:

HERE THE SPY 1 MIN IS SHOWING WHAT APPEARS TO BE EARLY WEAKNESS, MAYBE AN ATTEMPTED SHAKEOUT THROUGH A GAP LOWER, BUT.... 

THE 5 MIN 3C CHART CLEARLY SHOWS STRENGTH, SO I'D THINK ANY EARLY WEAKNESS SHOULD REBOUND FAIRLY QUICKLY

HERE'S THE DIA 10 MIN 3C CHART, THERE IS A BIT OF A TWIGHLIGHT ZONE BETWEEN THE 5 MIN AND 10 MIN CHARTS AS THE 1-5 ARE USUALLY MARKET MAKERS/SPECIALISTS, POSITIONING AND THE 10MIN IS THE SHORTEST TIMEFRAME TO SEE INSTITUTIONAL ACTIVITY. THEREFORE WE COULD HAVE ALL POSITIVE CHARTS AND A CLOSE LOWER ON A DAY LIKE MONDAY, BUT ULTIMATELY WITH IN A DAY OR TWO, WE GET THE MOVE HIGHER. I DON'T SEE THAT AS BEING AN ISSUE TOMORROW FOR SEVERAL REASONS, ONE MONDAYS TEND TO REPEAT FRIDAYS AND TWO, TO SELL THEIR ACCUMULATED INVENTORY, THEY NEED THIS RALLY TO LLOK VERY REAL, VERY CONVINCING AFTER THE BEAT DOWN THE MARKET TOOK OVER THE LAST 6 OR 7 DAYS AND BEFORE THAT. I SUSPECT THE CHANGE IN CHARACTER I MENTIONED AND DISPLAYED CHARTS OF THAT OCCURED LAST WEEK HAS SOMETHING TO DO WITH SOME IMPENDING ANNOUNCEMENT ABOUT THE 5-MIN CIRCUIT BREAKER NEWS, I FEEL SOMETHING NEWS WORTHY IS COMING SOON THAT WILL ENCOURAGE THE BULLS, BUT THEY (THE NEWSMAKERS) KNOW SOMETHING THE REST OF US DON'T AND THAT IS WHY THERE'S A NEED FOR THE CIRCUIT BREAKERS. REMEMBER, WE VIEW THIS BOUNCE AS A TACTICAL PLAY ONLY AND OUR STRATEGIC OUTLOOK IS SOLIDLY BEARISH. IN FACT WE INTEND TO USE THIS BOUNCE TO FIRM UP OUR POSITION SHORTS. BE CAREFUL NOT TO FALL INTO THE NEWS TRAP-WHATEVER IT IS, WHATEVER THIS RALLY BRINGS, WILL BE CONVINCING!


For our new members, we have a lot recently, please, please, please-read everything on Trade-guild.net regarding risk management, "Position sizing", "The 2% Rule/Video" etc. You NEVER want to take more then a 2% loss on any position and if you trade multiple positions you want to divide them up so that any losses do not exceed 2%. Don't make your initial stops too tight, don't move your stop away from the winning trade in a losing situation and don't hesitate to execute the stop on a CLOSING BASIS. Also, I never out more than 15% of my portfolio in any one position and often less-that's the only way to protect against gaps. Keep your risk management solid and you will make money, falter even once and you could lose a lot.  Always RISK MANAGEMENT FIRST, ALWAYS!


HAVE A GREAT WEEK