Wolf on Wall Street

Wednesday, October 6, 2010

AAPL is still the Patron Saint

Want to move the market, just buy 1 stock.

I wish I could afford the $10,000 a year subscription to NASDAQ to see the NASDAQ 100's actual weighting. I understand AAPL accounts for nearly 20% of the NASDAQ 100.

Update

The DIA looks like the last little positive divergence is now negative and heading toward a leading negative divergence.

This is what I meant on Monday night's post, "I don't see the natural progression of bullish to bearish being taken out" when I was talking about the bounce and why I wasn't to worried about it. There's a trend intact, one day does not make a trend.

There is something off with this market today, it's behavior has deviated substantially from a normal POMO day, I haven't quite figured it out, but I'll keep looking and I don't see it as anything other then god news for shorts.

Movement in the Dollar?

Shooting atar o the Euro hourly

Spike in the USD vs JPY

Do I SPIE A DESCENDING WEDGE IN THE DOLLAR?

SPY by Request

SPY

SPY just tok out a major support zone around $115.90. This is multi-day support.

AAPL

Is about ready to take out this morning's last ditch support. Look for heavy volume.

By Request GLD in multiple time frames

Update 1

So far there's not much activity. On the SPY there was a negative 1 min divergence at the 10 a.m. Highs and a small positive divergence at the 11 a.m. Lows. Everything else is in confirmation mode-meaning tracking price with no divergences at this time. The DIA did put in an 11:30 small negative divergence, while the QQQQ put in an 11:15 positive divergence. Right now the QQQQ looks the strongest on 3c.

Because of the solid leading divergence yesterday, the 3C chart on the averages is trading relatively low as compared to what it should be, this is an effect of yesterday's distribution into higher prices.

Living in Florida, I've been hearing about this for awhile, but it seems the bank/service provider/legal council side of the foreclosure epidemic, has made some serious no,no's in trying to speed up foreclosures including falsifying documents, foreclosing when the actual lien holder is not known, but rather faked, etc. Now it's spreading. It's been in the local papers for sometime here-everything controversial seems to start in Florida-think hanging chad-not the child.

Do not underestimate the root system this controversy could have. Home sales numbers, banks and drawn out litigation, losses, etc. This could be shoe number 2. It may also be why we are seeing pressure in the financial sector.

XLF is seeing more 3C selling pressure as it is in another leading negative divergence on the 1 min. The hourly 3C chart on XLF is lower then it was in August at the price lows.

I'll keep you informed if anything picks up.

OOOPPPS

SPECIAL POST. I woke up this a.m. to the plumbers I hired to do some heavy plumbing at my house, they had the trench dug in 30 minutes, and had my Cable/Internet cut. So I've been dealing with that. I just got to our family cafe where there's wi-fi and I'm going to look at the market now so there will be an update coming as soon as I get caught up. Emails , I'll get to them ASAP.

Thanks.

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.