Wolf on Wall Street

Monday, August 1, 2011

Financials Update

Here we look at FAS/FAZ (bull ETF financials vs FAZ Bear ETF financials), there's some recent movement.

FAS 5 min

FAZ 5 min

Resistance

The market is starting to take on the first levels of resistance, but if volume is any indication, the real fight is at levels higher.

DIA breaks the first level, stuck under the second level.

IWM taking on the first level, higher levels seem to be where the action will be.

Several important levels for the QQQ

SPY taking on the first level

A closer look, volume indicates these are not yet significant levels to overcome.

Market Update

This took awhile longer then it should have because of problems with my screen capture software.

DIA 1 mn pointing to a consolidation or intraday pullback

DIA 5 min in leading positive position.

DIA 10 min close to making new leading positive highs, even at these price lows.

For the first time, the 30 min charts are going positive, look how much ground the DIA 30 min 3C chart gained today, this is near a new high when prices were 7 DIA points higher!

IWM 2 min is positive short term

As is the 5 min, look at the relative divergence between the two red boxes when the IWM was higher, now price s lower and 3C is significantly higher, a very positive relative divergence.

IWM 15 mins approaching a new leading high.

Again, for the first time since this all started we are seeing movement in to the 30 min timeframe with a powerful leading positive divergence.

Even the 60 min which was not in the game before has posted a positive relative divergence, again compare the red boxes and price levels/3C levels, this is a positive relative divergence on a 60 min chart, one of the strongest indications we have seen to date.

The 1 min Q's pointing to an intraday pullback/consolidation

The 5 min chart is approaching new high leading status today.

Again, the 30 min chart is now n play with a positive relative and leading divergence with most of the ground gained today.

The 1 min SPY pointing toward an intraday pullback/consolidation

The 5 min chart gaining ground today, it is now higher then the open.

The 15 min chart continues to move higher, again compare the relative divergences between the price/3C levels between the two white boxes.

AAPL holding up pretty well

5 min 3C, AAPL holding on to a 1+% gain today

SPY Leading

Earlier I mentioned a scenario in which the SPY leads on the 15 min chart giving a very strong signal

Here's the follow up..

The 1 min chart is leading for the day even though price is hovering near the lows.

This red line is where the SPY 15 min chart was at last update so you can see it's moving up. It is seeming like the move down today which triggered volume may have been as another round of accumulation with the 15 min chart moving up. We'll see shortly. I'm maintaining my long bias in my trades.

On the DAX Flash Crash

Usually an algo creates these flash crashes, I've been watching and studying them for awhile and typically the trades are busted up, making me wonder what the point was, I'm sure there is one, but in this note from GS to clients about the DAX FC, note NO TRADES WERE BUSTED UP making the stop busting flash crash a profitable event for whoever ran the algo.

LINK

FAS Update

Remember FAS s a leveraged long ETF on financials...

This is a clear bear pennant, traders will view this as a bearish consolidation/continuation pattern, it is likely to be shaken out, maybe once or twice (Crazy Ivan)

The BB's are tightening suggesting that directional move shortly.

The 1 min chart has been positive most of the day.

More interestingly, we now have a 60 min positive divergence in FAS, remember, the longer the timeframe, the more important the divergence.

SPY Update

Just looking at the SPY 15 min chart...
Remember my GLD 15 min negative divergence and I said I thought GLD would move to a new high and put in a second 15 min negative divergence and that would be a very strong signal for a decline, well think about the SPY in reverse...

The 15 min chart has started moving up despite the slide in price or more likely because of it (stop-losses triggered, etc). Should this move into leading position here we would have one of the strongest positive divergences I've seen in awhile.

GLD continues to deteriorate

Looking at the SPY low of the day

Here's the SPY low of the day on volume.

I rarely look at the TICK of 3C, but it does work, this is the low of the day, which seems to have been accumulated on that volume spike.

And I thought the ulcer market days were behind me...

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.