Wolf on Wall Street

Friday, October 7, 2011

EEM/Emerging Markets

EEM 1 min, negative, suggesting a possible bounce intrday

2 min the same as above

5 min was negative yesterday, continued today and is almost leading negative.

10 min and 15 min above and below as well as 30/60 min are all about in line with price-trend confirmation.

QUICK MARKET UPDATE

DIA 1 min looks like there may be a consolidation or intraday bounce

DIA 2 min leading negative

DIA 5 min leading negative, but also may be ready for a bounce, or the 10 min just hasn't caught up yet

DIA 10 min leading negative

The 30 min is flat, not sure if I would say negative as the market is flatish, but this has me thinking about getting a little more aggressive on my shorts, I'm just concerned with the Germany/France meeting this weekend about the ESFS-a wild card over the weekend.

QQQ 2 min also showing signs of a possible intraday bounce

The 5 min is negative, but is also close to looking like an intraday bounce.

The 10 min is leading negative.

As is the 15 min, another reason to think about shorting some more.

The 30 min is probably in line, but not looking as good as it was before when it was leading positive a bit.

SPY 1 min suggests an intraday bounce-which may serve as a good area to make any tactical adjustments you may want to make.

The 5 min also looks like a probable consolidation or intraday bounce.

10 min is leading negative-again, bounce or just hasn't caught up?

SPY 15 min has been the strongest of all the averages, it's still in positive territory, but flat today, which is somewhat of a deterioration.

The same with the 30 min.

Again, this has me thinking (if I can get to it) to get a little more aggressive on the model portfolio.

RIMM Update

I can't remember if I posted on RIMM yesterday, but I know I answered a lot of questions about it.

RIMM 2 min leading negative since yesterday

RIMM same on the 5 min-not good

RIMM 10 min leading negative-even worse

RIMM 15 min leading negative-very bad-WORSER!!!

The 30 min is negative as well, the 60 min isn't there yet.

This is the range we have been watching in RIMM , originally we thought it might break out and make a move in to the gap-I didn't say fill it as RIMM is still getting destroyed by AAPL/Android phones until they release their new operating system. As far as the target question, the furthest I would venture at this point is the bottom of the range unless the 60 min chart starts looking negative.

It's official, my typing fingers are smoking right now-BOTH OF THEM!

SLV Update

SLV 2 min slight leading negative

SLV 5 min both relative and leading negative.

SLV 10 min both divergences, like above.

The 15 min chart has a small negative, not too bad yet.

Both the 30 and 60 min above and below have leading positive divergences. There's a range in SLV as you can see above, it may be heading for the bottom of that range. I haven't had time to look if there's any COMEX activity, but we have seen moves in the day that were negative and find out after the close that COMEX raised margins again. I would keep an eye on SLV's behavior around the bottom of the range.

GLD Update

GLD once again heading toward the moving average/consolidation with no reason or rhyme to any correlation, it's certainly not a risk off, flight to safety trade thus far today.

GLD 1 min very negative

GLD 2 min leading negatve

5 min is actually a relative negative divergence, although it's not marked

The 10 min is leading negative

15 min looks really bad lately.

As does the 30 min, this is why that 150 day moving average must hold, as I have said before, gold is a bubble and a manipulated one at that, but as we all know, bubbles can last a lot longer then anyone would guess.

USO Update

In the last hour or so I've had a ton of requests and chart updates, I'm going to try to get through them, but need to watch the market at the same time.

Until I catch up, if you have a question that is urgent, please mark the subject line "URGENT" so I know, at least until I catch up which I'll let you know. That doesn't mean don't send your emails as normal, just my response time will be a little longer, but I will get to them.
Thanks.

USO 2 min is starting to go negative, remember USO wasn't on my list of shorts, I didn't see a strong edge there yesterday.

The 5 min is just starting a slight leading negative divergence, it's still early though.

The 10 min has lost some momentum, but is still largely in line.

The 15 min is slightly negative today, but right now it's not horrible.

The hourly chart is still in line.

There was a recent dip on some volume, this 1 min chart shows a positive divergence, so there may be a consolidation off this or maybe a little bounce, or it may just be nothing. From the looks of what I see above there is deterioration starting, but not that far along and could still be in the realm of a lateral trading environment or pullback. You can see below the EUR/USD is very choppy and this will influence USO the most today.

Personally I don't feel comfortable shorting it, I don't see an edge in buying it and as far as holding it, I would probably reduce my risk and draw a line in the sand/stop level.

Short Term Market Update

DIA 1

QQQ 1

SPY 1

I may add about 10% to my short positions, bringing exposure to about 35%

Names like SQQQ, SDOW, SRTY, SPXU, FAZ-these are inverse ETFs so they are a buy and you must be nimble and be able to close them out quickly if need be. That's just what I'm doing.

Eco Reports a Wrap

Actually we still have Consumer Credit

The big event of the day at 8:30 a.m. was the NFP, which beat pretty spectacularly at 103k on consensus of 65k. However, I believe and have always believed that the true measure of unemployment is the U6 number which is the same way unemployment was measured during the Great Depression, peaking at 25%. If you work 1 hour a week you are included in the NFP release, that's not really employment, the U6 number is a better representation of what employment really looks like and it was ugly today coming in at the highest level since December of 2010-that is if we can trust any of these numbers. Unbiased 3rd party polling firms have come up with much, much higher unemployment rates.

Here's the U6 and the other fly in the ointment, the average duration of unemployment.

A new high.

Inventories missed at .4% on consensus of .6 and previous reading of 8.

Consumer Credit is out at 3 p.m.

There were some decent numbers out of Europe today, I found Switzerland's unemployment rate which came in stronger then consensus to be interesting, 2.8%. Here in Florida the U3 unemployment is far above the national average and just from our experience and seeing people around us, I can tell you that wages are extremely depressed and it is very hard to find a 40 hour a week job, my wife works two jobs because of this and ends up putting in about 60 hours a week, but she changed jobs 3 or 4 times in the last 9 months because of the issue.

As for the market, it's not really flying high considering a NFP beat of 58%.

It's within that range I mentioned last night...

In gap resistance that intersects the bear flag resistance at the red arrow.

The 45 daily ema is around the same level.

Franc and Germany are at odds over using the EFSF to recapitalize banks with France for and Germany against, this will come to a head this weekend when they meet over the issue, that is part of the reason I think the late, EOD trade today will be more interesting.

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.