Wolf on Wall Street

Tuesday, August 7, 2012

QQQ Example

I'd post longer updates, but I'm watching so closely I'm afraid I may miss something with longer updates.

QQQ 2 min intraday today at a new leading neg. low.

2 min QQQ trend at a new leading negative low.

ES may be getting interesting shortly on the negative side

Furthermore, TLT, the flight to safety trade is seeing some sharp intraday divergences as well, with a 60 min new leading high.

Quick SPY Example

Intraday 1 min

Trend 1 min

Lots of charts like this right now...

This will be quick, High Yield Corporate Credit is peeling away from the SPX, a bearish signal. The Euro is as well, and it looks like commodities are about to on an intraday basis, longer term they are already way dislocated.

Watching the charts VERY close here

There are some really interesting battles going on, the SPY in this flat range since about 11:45 is looking like it's almost about to tip, the Euro on an intraday timeframe just saw a nasty intraday negative divergence. I'll be watching and get information out ASAP.

MCP Charts

Remember that the MCP move in 3C yesterday was very sharp and strong, but it wasn't a big base which is what we look for when looking for an extended move. Today's move has been sharp like yesterday's accumulation.

I'm considering taking the quick almost 9% 1 day profit.

The charts...

1 min intraday in line, but trend is seeing a negative divergence.

migration of the negative to the 2 min above and 3 min below.

It hasn't reached the 5 min yet and this is still leading positive and in line.

As is the 15 min.

I think if the negative hits the 5 min, I'll close the position or maybe if it hits the stop around $12.15.

MCP Follow Up

There are some intraday neg. divergences in MCP, I thought I'd offer a tighter stop as well.

MCP's interesting accumulation-up 6% today

MCP is now up 6% today, no stop out.

I don't have confirmation, but got an email this may in fact be why and we caught it at exactly the right time.

China National Radio reported the country plans to shut down ~20% of rare earth industry capacity

One Reason a Break Above Resistance Has Such Low Volume

First, thinking about the last post, I just wonder if Thursday's accumulation was because of knowledge of the fact of Friday's F_E_D repo operation? It doesn't seem likely at that amount, the GS "Free Euro" buy advice seems more likely as part of a market cycle, but just something to think about.

I noted the lack of volume on the move above resistance yesterday, take a look.

DIA since it broke above resistance and volume

IWM intraday 60 min chart with today's break above resistance, not much volume.

QQQ

And the SPY

I just read this, QQQ short interest is at the lowest since October of 2000, the SPY short interest is the lowest sinceOctober of 2007. There's no volume because there's no short squeeze, simply because there aren't any shorts.

Think back to our trend expectations, the next move a deep move down bringing shorts roaring back in to the market, followed by a bear trap, the shorts are squeezed and we see the resumption of the sub-intermediate trend we are in right now, except it hits a higher high and is more volatile, followed finally by the re-emergence of the Primary Bear trend.

Those assumptions were based on the charts, but if we think about it, Wall St. can't make much money if they don't have retail to trade against, since there aren't any shorts to squeeze here the next logical move (FORGET THE CHARTS) is the exact move down we have expected to come next, it has to be strong enough to really get the shorts excited. Then and only then can we see a huge short squeeze move higher as we expected in our future trend assumptions (assuming there's no Central bank intervention which changes everything).

I thought that was very interesting as it is in line with the charts that gave rise to our trend assumptions.

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.