Market Update

I wanted to get the trade ideas out first as they are a bit more pressing, but I want to try to give you some perspective as to what I see and what I think about it. It's no secret that I thought we'd see some market downside Monday as early as last Friday, last night I also wrote the same for very near term trade.

I said Friday "If we get downside Monday, it would be a market gift", that's because the longer trade is entering long positions on market weakness and 3C strength.

This is why I closed some of the long Call positions Friday and entered some of the short positions mentioned in the last post, but those positions are just small hitch-hikers, I'd prefer the chance to open larger, a little less speculative longs in to weakness so what I'm looking for is near term weakness with signs that it won't last long and will be followed by market strength.

From a psychological point of view, as I explained last night, Friday's move up stopped right at resistance from last week's first test of resistance which failed and gave the bears confidence to enter shorts, but most of them won't take the failed attempt to break resistance alone, they also want price confirmation which can only be obtained by prices moving lower, this helps Wall St. and us as it brings in more shorts which gives us more propellent on a short squeeze (which is why I want to add those long positions back in to some price weakness to get them cheap and profit on them a second time.

So again, from Wall Street's perspective, they know what will move Technical Traders and they will give it to them in the short term to get them to move and get short, to lock them in.

Here are the charts, most of these were taken before the last post so they'll be 20 mins or so old, but the message is no different.

 This is 1 min ES (SPX E-mini futures), you can see overnight to the left from about 10 p.m. EDT to present and the initial knee jerk reaction to the S&P US outlook upgrade, but as I mentioned, we are in the bizzarro world of the market where good news is bad because it gives Uncle Ben more reasons to abandon QE faster, in fact with the hot water the S&P got in on the US downgrade, I wouldn't be surprised if this ratings change toward the positive weren't some part of a deal to keep them out of bigger trouble, kind of a punitive move, "You do this for us and we'll let you off the hook, you don't and we have every electronic form of communication you've ever sent for the last 10 years). Note the Payrolls data has been mild too, also offering Ben a chance to exit stage left and we know how manipulated the B.S., oops, sorry, the B.L.S. data is.

Point being here, ES is not in an intraday positive stance, just the opposite.

This is the 15 min ES chart, it called the bottom with perfect clarity, we have a leading negative divergence now, the two are "roughly" the same size and the positive was good for 2-days, this is why I'm thinking the trade ideas from the last post will probably be good through tomorrow.

Remember that the market moves, especially now, on emotion; so don't expect just some small pullback, the more powerful it is and scarier it is, the more effective it is, but it's still just a means  to achieve and end - Get Shorty! 

This is the USD/JPY pair, it's about the only risk driver left in the market, it also happens to move directionally (and until last week, proportionately) with the SPX/market, there's a 1 min negative divergence suggesting the pair move down, that would confirm the ES charts and suggest the market also move down in the VERY near term.

 This is the USD/JPY pair on a 5 min chart, it too suggests that the pair and thus the market, see some near term downside.

To confirm, I checked the single currency futures for the $USD ($USDX) and the Yen.

 This is the 1 min $USD future showing a negative divergence just like ES, just like the USD/JPY, since the $USD is the first in the $USD/JPY that means it is the long, the JPY (yen) is the short in the pair, the $USD moving down should signal the pair moves down as long as the JPY confirms.

The JPY (yen) being the second in the pair is the short (if you buy the $USD/JPY you are long the $USD and short the Yen), the positive divegrence in the 1 min Yen chart confirms everything above, again suggesting the pair fall and the market with it, short term!

 I checked the averages, they are confirming in the near term such as the 1 min SPY above which is negative.

The SPY 5 min above which is also negative and suggests a move of at least 1-2 days.

However, this is IMPORTANT, the SPY 15 min is strongly leading positive, this is a stronger timeframe than anything above and suggests that we see near term downside that will be ACCUMULATED by smart money and as such, we want to be on the same side, then the market will move higher which should be OUR BEAR TRAP SPRINGING SHUT !

 I used TVIX rather than UVXY (they are the same, 3x leveraged long short term VIX futures), the only difference is TVIX is an ATN and UVXY an ETF, but because UVXY had a reverse split, the chart is difficult to read with 3C today. VXX, UVXY and TVIX all move opposite the market generally so being long any of them works in a market expected to move lower, this is why UVXY was a long idea Friday. 

Here you see the positive leading divergence suggesting a move higher and a head fake move suggesting it comes soon.

 Longer term however, as we saw above with the SPY, TVIX has a negative divergence suggesting the move up is a bounce and short lived as we expect.

 TLT (20+ year Treasuries) also tends to move opposite the market so the positive 1 min divergence also confirms market downside to be the most likely course, we also have a head fake move this morning which is a great timing indication as they are typically the last thing we see before a reversal (to the upside here).

TLT 5 min is also positive with a head fake move, this suggests the market move down as TLT and VXX move opposite the market, they are also SPY arbitrage assets used to manipulate the market intraday.

HYG is another arbitrage asset, but this is the opposite of TLT and VXX, HYG is High Yield Credit and it moves with the market typically, actually it tends to lead the market. The good thing I see here is if the market's downside move were serious, HYG would be very negative, instead its positive, so it looks like smart money is accumulating this (one of their favorite risk on assets) in expectation of a move higher later this week-our bear trap move.

 And the 15 min chart is VERY positive for HYG, this also suggests smart money has been accumulating in expectation of a sharp, very strong market move higher, probably much higher, but first we have this downside head fake jiggle to deal with and trade if you like.

 This is the Yen in Green vs the SPX in Red, you see how they move opposite each other, don't forget the 1 min SPY negative and 1 min Yen positive.

And this is the SPY in red vs the thin High Yield Credit in green, this usually would be the first to fall if the market decline were serious, the fact it is holding up tells me smart money will accumulate in to any market downside retail bears chase and then squeeze them (shorts).

Our outlook and trade plan is no different than what I posted last night...

"How we play this...

1) If we get the move lower in the market tomorrow (it could reverse at the end of the day, it could run in to Tuesday, we won't know until we see the charts tomorrow) I'd be looking to close any short biased short term/speculative trades we opened Friday for this purpose. More importantly, I'd like to set up the long (Call or leveraged long ETF) positions that were closed to take profits Friday, we should be able to get them at lower prices allowing us to make the profit a second time.

2) We set up positions  that are smaller as they are speculative to take advantage of the move up in the market a springing of a bear trap should create. If we get the kind of short squeeze I expect with two failed moves at resistance last week, there should be a lot of fuel to lift the market higher.

3) We'll want to sell the smaller/speculative long positions in to the move up for a profit and start filling out or starting knew short positions, these are longer term or Core positions. I prefer to go with short equity like AMZN, GOOG, XOM, GS and many others, I'll let you know what they look ready.

From there it should be position management and trading around counter trend rallies which can be very strong and thus profitable to trade."

Very Short Term Speculative Trades-Leveraged ETFs

I already double checked the market and I'll put out a market update right after this, I wanted to double check and make sure what I expected Friday and what I wrote about last night for very near term expectations, as in today, was still on track and they are.

Understand that these are speculative trades by nature as such short term trades, they may last today, maybe tomorrow, but you also have to be prepared to close them possibly late today, it depends on how the market develops so if you are not Regulation "T" compliant, make sure you don't get in to a situation in which you are labelled a pattern day trader in case you have to close a trade later today which I doubt, but you have to be ready for it.

Of course if you had to close the trade later today and wanted to avoid the day trade scenario, you could always just hedge until tomorrow, for example if you bought SQQQ and it went up today, but then looked like it needed to be closed later today, you could buy TQQQ as a hedge and close SQQQ Tuesday and not have a day trade.

These are speculative as well.

As far as Puts of assets like XLF (as I opened Friday) or XLK, etc, it's not my favorite idea here because there's not a lot of momentum, but they could work.

I think 2-3x l;leveraged inverse or bear ETFs would work well here for a quick trade.

Here are a few ideas, you'll get the gist.

 FAZ-3x short Financials looks decent, note the 3 min positive divergence, this is what we were seeing Friday and why I thought Monday would see some downside, it could be fairly ugly, but not that long lasting which you'll see in the market update. My best guess is in to Tuesday.

SPXU 3x short the SPX, also a leading positive divergence, this time on the 1 min chart, note the head fake move as well so these should be ready to move soon.

 SQQQ 3x leveraged bear/short the QQQ with a 3 min positive divergence.

 SRTY, 3x leveraged bear/short the Russell 2000 with a 3 min leading positive divergence and a head fake move as well this morning.

TECS, 3x short Technology.

I'd prefer sticking with broader assets like the averages or groups like Financials or Technology, you obviously probably don't want say SQQQ and TECS as the Q's have a lot of tech exposure and adding more just gives you too much exposure to a single group.

TECS and SPXU would work or SQQQ and FAZ. I also think UVXY would work pretty well here, that was also from Friday.

Market Update is coming next.

Pre-Market

The only thing I see this morning of significance was the recent US upgrade by S&P from Outlook Negative to Stable, this sent futures a bit higher, but as far as the market is concerned, this just helps Bennie exit or taper QE faster so I don't think the market will like it and today's the day for that. Here's the Index averages on the S&P news and overnight.

 3C 1 min  for ES went negative on the S&P news this morning.

 This is NQ (NASDAQ 100 futures) overnight since the week's open last night with a decent negative divergence suggesting some downside today.

And Russell 2000 futures with a negative divergence on the S&P news.

I'll keep an eye on the USD/JPY as well.

The Week Ahead and the Micro to the Macro Picture

First I hope everyone had a relaxing weekend and you are ready for a volatile, but profitable week a head.

I want to thank everyone for all of the great letters today, I really learned a lot about what many of you are picking up and learning, some of it I was surprised by, but it's exactly what I want to offer and the fact that some of it was more than what I thought I was offering really hit home and makes me want to work that much harder for all of you, you are a great bunch of people, hard working, think for yourselves and are deserving of every bit of success, so thank you very much. I'll have an update on the new site. I looked in to text alerts for trades, they are incredibly expensive, I think I figured it would cost about $40 to send the current members 5 trade ideas, I can send that many in a day, multiply that by 22 days, so I'll see what else is out there, of course any suggestions of what you'd like to see are welcome, but get them in as we are getting closer to our launch date.

 Remember this increasing volatility is there to make as many people wrong at any one time as they can. For the very immediate future they are going to give bears what they want in order to give them confidence to hold shorts, the longer they hold them in to a short squeeze, the more effective the squeeze. Just like they conditioned everyone to "Buy the dip", now they are conditioning them to "Sell the Rip".

Europe

Just as some background information for what will be the next big fight in Europe between Germany (Merkel has an election in several months, she'll not want anything to do with yet another Greek bailout), the Troika (less Germany if that is possible ) and the IMF over a new Bailout for Greece (Deja-Vu, the second verse same as the first or 4th or 5th verse as it were).

It was only 6 months ago that the EU and IMF agreed on Greek GDP targets and essentially said that their last round of severe and extremely controversial bond-holder haircuts had been effective and put the country on the path to sustainable growth for ... what? The fourth time? 

Tonight as part of a recent ongoing situation starting with a leaked IMF document, the IMF says Greece needs another bailout, but this time refuses up front,  to participate in one unless funding for the next 12 months can be secured to fill a $4.6 billion Euro shortfall. Troika's Greek GDP forecasts have been overly optimistic and real GDP has missed the Troika's dreams for each of the last 5 years consecutively. 

According to a confidential IMF document (leaked and obtained by the WSJ), "The International Monetary Fund is set to admit to major missteps over the past three years in its handling of the bailout of Greece, the first spark in a debt crisis that spread across Europe."

In an internal document marked "strictly confidential," the IMF said it badly underestimated the damage that its prescriptions of austerity would do to Greece's economy, which has been mired in recession for years....  

If you recall, we knew the moment we heard the final deal that this would be yet another filed Trokia/IMF bailout, it doesn't matter which country, they are always wrong.

The IMF said that it bent its own rules to make Greece's burgeoning debt seem sustainable and that, in retrospect, the country failed on three of the four IMF criteria to qualify for assistance.

And as for their Greek GDP targets vs. reality and as proof positive that installing a regime of harsh austerity couples with an Ex-Goldmaite for the post of Prime Minister (whether that be Greece, Italy or even the head of the ECB)  was never going to work, here's a chart of their expected GDP targets and reality.

I drew in the arrows, but it's quite clear that not only have the targets been a major foul-up, but the trend isn't even close. This is of course ASSUMING that we are talking about fixing Greece at "Face Value" as the honest objective of these bailout efforts, if we look at reality, the bailouts were nothing more than adding more debt to a country struggling with debt (that has never worked well for me with credit cards, maybe I just haven't tried hard enough) for the sole purpose of essentially stealing bond holder value and transfer that not to a resurgence in Greek economics, but rather to pay back the banks that Greece owes money to, this is the real and only reason the bailouts were given.

Perhaps this explains why Greek GGB bonds that had rallied +119% , have fallen -10% over the last week, $4.6 bn Euros need to be secured and just as the last time in Greece or the Cypriot bail-in  which was nothing short of pure theft from those with savings accounts in the money laundering nation's banks of over $100k, Greek GGB bond holders know that they will be targeted again for another haircut or blatant thievery of their asset/value  and are getting out of them while they still can before the Troika decides to take another 50%-70% of their value.

In more immediately pressing matters, such as near term market direction, the Vampire Squid has issued a new proclamation....

As you may know, my expectations that started fleshing out over a week ago and were put in to fine detail Monday and Tuesday of last week have thus far gone just as expected, although the finer details of exactly when and to what degree are almost impossible to forecast, the main gimmick and what it leads to have been spot on allowing us to make some trades and get in to position just when all of retail was expecting the exact opposite.

To be clear, it is retail that is being targeted in this entire exercise which has several chapters all leading to the big ending.

Here's what I expected last week and EXACTLY what we got. First, increased volatility in the form of daily ATR or the daily amplitude of the moves was expected and second increased volatility or almost "Random" price action to accompany in another sort of volatility, that which is best summed up as a meat grinder for most traders. For example, take the Dow-30 last week.

Since the Key Reversal Day "A" the Dow's daily range from then until now Friday has been 2,296 points or what would be 15% of the Dow. If you shorted the Key Reversal day ("A") and were able to stomach all of the intraday and day to day volatility, your gain from over 2 trading weeks until Friday's close would be +0.39%. There are very few areas there where you could hold a trade for more than 1-2 days without being chopped up and that's looking back with the benefit of hindsight, this is why I announced a more, "Hit and Run" strategy going in to the increased volatility.

However the real plan that I outlined last Monday has been nothing short of a bear trap, which will lead to a bull trap in my opinion, which will lead to a horrific Black Swan event to the downside. I don't want to get too far ahead of myself as we are still in the bear trap area, but this is what I was looking for and continue to look for and I'll tell you how I'd like to use and continue using it.

Before you go further, especially for new members, let me say that a bear trap is not random events, it is manipulation, it is a form of what I call a "Head Fake move". If you have time, please review the two articles I wrote explaining all the dynamics of a head fake move from why to how. These articles are always linked at the top right of the member's site for you to read any time. 

Part 1, "Understanding the Head-Fake Move...How Technical Analysis Went From An Asset to a Trap"...

Part 2, "Understanding the Head-Fake Move...Motivation"

 The main focal point of this chart is area "B", a fairly large triangle. The fact that a symmetrical triangle (nearly perfect in construction) was used is no coincidence. This is the most easily recognized Technical Price pattern that even traders with 1 month of Technical Analysis experience will recognize. Although this triangle is a bit too big to be a REAL consolidation/continuation price pattern, it doesn't matter, technical traders are typically very lazy and Wall St. knows EXACTLY how they will react to the price pattern. A Consolidation/continuation price pattern is expected to to both, consolidate and continue the preceding price trend which was up at "A".

Retail Technical traders expect the triangle to hit approximately 5 points of contact between the upper resistance and lower support and as it narrows to reach an apex (point), they expect the triangle to breakout to the upside and continue the next leg of price moving up, however, that never happened, instead the triangle broke to the downside which matched retail bearish sentiment. This is the important part of the set up... Technical Analysis teaches, "If a price pattern fails, reverse your position and trade in the opposite direction".  That means as price broke below the triangle, many traders would have gone short at "C". 

Technical Analysis also teaches as one of the mainstays of trade set-ups and stop placement, to wait for a "test of resistance" to fail which happened at "D" then to enter or add to your short with a stop just above the resistance trendline or the apex of the triangle. Now even more retail traders will go short as price moves down the day after "D" as Technical Analysis dogma teaches to, "Wait for confirmation", which actually makes technical traders late and chasing prices rather than what we do, let prices come to us. At this point, a large amount of stops are congregating just above the triangle's apex. 

On Friday at "G" we see another move, that would have shaken out some of the weaker shorts, right to resistance again and again fail to break above resistance, giving traders even more confidence to short this area with a stop just above.

From what I saw Friday, it looked very much like we'd see some downside early this week (Monday), this would serve as "confirmation" for traders that the test of resistance has failed a second time, more stops for new short positions will congregate on limit orders just above the apex of the triangle and above the triangle pattern itself. So from what I saw intraday Friday, I expect the direction of highest probability for Monday (perhaps part of the day, perhaps more than a day) would be down to draw in more shorts or bears, but remember, THIS IS A BEAR TRAP IN MY VIEW AND SINCE I DESCRIBED WHAT I EXPECTED LAST MONDAY.

The goal of Wall Street is to get enough shorts in place that when they run prices ABOVE the apex of the triangle, all of those stops are hit sending price higher, which will hit more stops sending it higher which at some point will change sentiment among retail traders from bearish to bullish as the move to the upside looks strong, then longs will come in to the market sending prices even higher.

I believe the upside move will also be a head fake/ Bull Trap and it should be quite impressive, but again this is not random, it is not bullish although we have some short term speculative long positions for this move, it is to set up yet another move to the downside, this one real; just reverse all of the sentiment, the head fakes and emotional manipulation and you get a very strong downside move but we aren't there yet.

If you look at the 3C chart of the SPY during the triangle, instead of seeing bearish distribution as you'd expect, instead it looks like smart money has been buying the lows and getting ready for the next move to the upside in which prices will move fast and high because of the retail shorts caught at a loss and covering (buying) to get out.

The 3C chart is very positive at the most recent low, in fact leading positive.

Something came out of Goldman Sachs tonight that just reinforces my view...

Goldman rec'ds going long Nikkei NKU3 ahead of the Tuesday BoJ meeting with a target of $14,500 and stop below $12,700.

Whenever an Investment bank, especially Goldman Sachs who is known for trading against their own clients, comes out with FREE analysis and trade ideas (which I'd assume costs them a lot of money to put out the accompanying research report) you can be sure there's a reason and the most likely is they have Nikkei long exposure that they have built up in to the recent 20% decline and are looking to sell it at higher prices. Because the Nikkei and U.S. markets often trade in the same direction, this is little different than saying, "Go long the SPX".

Goldman's take and reasoning...

"Our central expectations for Tuesday’s BOJ meeting are relatively modest – we expect the term period for fund-supplying operations against pooled collateral will be extended to two years. But the incentives for Governor Kuroda to use the meeting to signal a firmer and clearer commitment to the easing course, and to highlight the potential to do more, are high and rising."

"Based on these measures, on the way up the equity market did overshoot other markets in mid-May and so the subsequent damage there has been particularly large. But if anything, Japanese equities now appear somewhat “cheap” to where FX and rates are trading, based on this analysis."

The Bank of Japan's next meeting is this Tuesday, the last was April 4th. Here's what the Nikkei looks like which confirms my suspicion, Goldman has bought the Nikkei as the media has reinforced this 20% correction non-sense and now we have seen the Nikkei hit the -20% mark, I believe Goldman has bought the Nikkei over the last several days and will sell to retail buyers as it moves higher and will start selling short to retail buyers and the bottom of the Nikkei and thus U.S. market will fall out while everyoine is still bullish, a Bull Trap.

 Above is the Nikkei 225 in my Trend Channel, note that the Channel held the entire uptrend (as parabolic as it was because the Trend Channel automatically adjusts to recent volatility,  the stop out of the Trend Channel came as the Nikkei broke below the channel (yellow) on a very volatile -7% closing move and somewhere around 10% intraday swing. 

Also note that my custom DeMark inspired indicator gave a sell signal 4 days before the collapse and if you got out that day you'd have made more money than if you sat through the close at the yellow arrow. Also note the recent buy signal my indicator is giving.

Finally note the size of the candles went from large bodies to most recent small bodies, signaling a loss of downside momentum.

This is the daily 3C chart of the NKD 225 in orange with leading positive accumulation from the summer to the fall of 2012 and then distribution as the NKD headed higher, my long term TSV 55 indicator shows the same signals.

Looking at a 60 min 3C chart of the Nikkei Futures, note the negative divergence/distribution before the -20% drop and the recent positive divergence/accumulation-I believe this is Goldman's buying as well as other institutional money that saw Goldman's order flow.

If the Nikkei moves up, it's almost certain the SPX / US markets will do the same as the main risk catalyst is the last open carry trade currency pair, USD/JPY as I have been showing the last several weeks as it has had a nearly perfect 1.0 correlation with the SPY.

This fits PERFECTLY with my expectations of a bear trap leading to a strong upside move, setting up a bull trap which will lead to a major catostrophic failure in the market, probably right in time for the F_E_D to announce they are backing out of QE and moving to normalize policy- THE LAST THING THE MARKET WANTS!

As for tomorrow, as of Friday my opinion was we'd see some downside, this is why a few speculative short positions were opened Friday in small size like VXX Calls, Gold Calls ( as gold has been moving opposite the market recently), UVXY long, added to the AMZN short position, FAZ long and otherwise took profits off the table in several long positions such as USO, AAPL, IWM and XLF calls as I believe I can re-open them at better prices Monday. I also left several long Call positions open as I am not worried about a short term pullback early this week.

Here are a few charts of what I saw Friday,

 SPY 5 min intraday suggests a pullback coming, at this point the chart suggests it will be short term, remember how positive the more important (larger trend) SPY 15 min chart looks.

IWM 5 min leading negative divergence Friday.

QQQ 3 min leading negative divergence Friday.

As for futures...

These charts of ES (SPX E-Mini Futures) as well as the FX (currency) pair, USD/JPY (which recently have been leading and moving in the same direction as the market, for example, USD/JPY moves up, the SPX moves up) seem to confirm my short term view of tomorrow's most likely direction, then the springing of the Bear trap with a move higher and ultimately that becoming a bull trap and sending the market deeply lower.

 

 ES 1 min The green arrow is this week's open of the futures market (Sunday night) and the short term 1 min chart is showing ES moving up in to a negative divergence or distribution on a short timeframe as ES moves higher overnight.

ES 5 min The 5 min chart which is more in line with a near term move for (at this point and if it keeps up) at least Monday, shows distribution and it is leading negative which is the strongest type of divergence (leading). This seems to confirm the SPY, IWM and QQQ 5 min charts from Friday above suggesting a pullback Monday. 

Why would a pullback be important in setting up a bear trap? Because technical traders like to wait for price confirmation, Friday they saw the market not able to break above resistance, some may have entered short, but when they see confirmation with prices moving lower they will enter on the short side and at this point the more shorts we have and the longer we can hold them, the faster and higher the reversal to the upside will be when the bear trap is sprung.

USD/JPY 5 min The pair is giving the same negative divergence on the same 5 min timeframe, since these move so closely together, the negative divergence is decent confirmation of the charts above.

However, this is short term action only, I'm not saying that a move to the downside won't or can't be strong, in fact the stronger it is, the more convincing it is and the better it works for the bear trap, I'm just saying this isn't a major move or any kind of reversal of our set up.

ES 15 min The 15 min ES is even showing a leading negative divergence since futures opened today, this suggests that we could see a pretty sharp move on the downside Monday or thereabouts, you can also see the positive divergences as traders chased the market lower, they were slapped around pretty good.

ES 60 min The 60 min chart of ES is in a large positive divergence, this trumps everything above, this looks like the accumulation being put in place for the bear trap move and market moving higher, smart money seems to be accumulating at the lows to eventually sell higher, the same reason I have call positions open still.

USD/JPY 60 min The FX pair confirms the same, a positive divergence to send the pair higher and if you look at the price pattern, a short term pullback Monday with the market would create more of a "W" bottom rather than this "V" bottom, as I always remind, "Reversals are a process, not an event".

ES 4 Hour. Ultimately, and this is further down the line, the bull trap will be created and will fail, however I think we will see a very strong and convincing move to the upside. If you read the two head fake articles, you'll understand why these are not random events, why Wall Street creates these set ups and how they benefit Wall Street, but us as well as we can track them and see what Wall Street is doing and thus far it makes perfect sense.

USD/JPY 4 Hour The FX pair confirms the same ES 4 hour chart above, a large pattern of distribution that should send the market significantly lower. Remember to check out my two articles linked on the members' site, "Currency Crisis", which were written in April and pretty much are all about how the Bank of Japan lost control with the biggest QE ever announced, doubling their monetary base in 2 years. The conclusion of my two articles was that the Yen would ultimately shoot higher, the markets lower and the Japanese Market as well as their Bonds would create a situation in which the BOJ lost control and created a monster rather than fixing anything.

How we play this...

1) If we get the move lower in the market tomorrow (it could reverse at the end of the day, it could run in to Tuesday, we won't know until we see the charts tomorrow) I'd be looking to close any short biased short term/speculative trades we opened Friday for this purpose. More importantly, I'd like to set up the long (Call or leveraged long ETF) positions that were closed to take profits Friday, we should be able to get them at lower prices allowing us to make the profit a second time.

2) We set up positions  that are smaller as they are speculative to take advantage of the move up in the market a springing of a bear trap should create. If we get the kind of short squeeze I expect with two failed moves at resistance last week, there should be a lot of fuel to lift the market higher.

3) We'll want to sell the smaller/speculative long positions in to the move up for a profit and start filling out or starting knew short positions, these are longer term or Core positions. I prefer to go with short equity like AMZN, GOOG, XOM, GS and many others, I'll let you know what they look ready.

From there it should be position management and trading around counter trend rallies which can be very strong and thus profitable to trade.

I'll check precious metals again tomorrow for the short term and longer term.

Have a great week ahead.

New Site and a New Core Position Watchlist is Coming

First, some exciting news for Wolf on Wall Street, we've grown on average about 35% the last 3 years and that's mostly just word of mouth which I'm very grateful for, there's no higher compliment. We're now at maximum capacity for members on the current Blogger-hosted website platform as they limit the number of members you can have for a private site, I've even had to give refunds recently for new people trying to sign up as I literally didn't have anymore room. Over the last month or two I'm lucky to  have 1 or two slots occasionally open.

The new website will be much more functional on my end which will allow me to free up a lot more administrative time for more important things, such as analysis. The log-in / password system will be different, more like the ones you are use to allowing you to choose your own name and password and certain preferences.

When the launch date arrives, all current members will receive the link and instructions to create your own profile. We are adding more member functionality, we are working on allowing you to choose what posts are delivered to you and how. The site will also automatically refresh so there will be no need to refresh to see if there are new posts.

There are a lot of other VERY exciting additions we are exploring, some will make it, some probably won't, but as we continue to grow,  more and more tools to help enhance your experience will be added.

All of the ideas each of you have sent me... I didn't forget them, they all went in to a folder so I can review them and try to add the functionality and implement the ideas that you sent, just because they didn't materialize (mostly because of current site and time constraints) at the time doesn't mean I don't value your input and I think you'll see that in the new site.

If you have ideas, things that would make the site more useful, easier to read, better content delivery, even the colors and fonts,  if they make the site better, I will see what I can do, but get them in soon as our launch date will be very soon (it could be next week to perhaps the end of the month depending on what else we add and how long it takes to run all of the functionality tests).

For existing members the monthly fee will remain the same, you are grandfathered in. Because the new site is also going to come with new costs, new memberships after the site is launched will be a little more expensive, but I don't think anyone works as long and as hard as I do for $50 a month - the average NEWSLETTER delivered once a day is $99.00 a month.

In researching other sites for ideas, I've seen some other sites that tell you that you can become a millionaire shorting penny stocks, in fact this particular individual sent me an advance copy of his book years ago and asked me to review it on Trade Guild and he wanted to add my review to the back cover, the problem was, I couldn't finish the book. To me it had no useful content, was very long and I simply couldn't endorse something I couldn't finish reading.

The point is, the promises of riches beyond belief has a slight hiccup to it. First, doing anything with penny stocks is inherently dangerous as they are probably the most manipulated and least regulated market. Second,  only shorting them (or taking a single approach to any market) is an even worse idea.  I only know this person tangentially, but I thought he seemed to be a sincere person, if not a little self-absorbed, but the fact remains,  if you were to try to place a short order with any of your brokers on a penny stock, you'd have zero chance of getting filled.

It's not illegal to short penny stocks, but see how many brokers will let you short anything below $5.00 and the portfolio size and margin costs for the one that does allow it are simply insane. He recommends 1 broker that will allow shorting of penny stocks of which he is an affiliate so beyond the high membership fees and in certain cases I mean higher than many of your portfolio values, he's also seemingly making money on every order you place through the affiliated broker. So the point is, I think our membership fees are fair, I don't promise you the world, but rather try to bring you the reality of the market and how you can use that in any trading style you chose to gain an edge.

Another popular site charges $2000 a year just to follow the real time trades they place (again in a paper traded portfolio, no explanation of the trade, just a real time alert), they then choose their 10-top performing ideas a month and put those in their "Model Portfolio" to show their yearly performance!

If you want to add their "Daily Market Commentary" including a weekly watchlist and two emails a week to ask questions- oh and get a discount on their seminars that teach you Technical Analysis, THEN ADD ANOTHER $800 A YEAR and this is standard, run of the mill Technical Analysis (I know because I use to be a member and from the radio show I recently listended to, they are doing things exactly the same as they did in 1998,  50/200 day moving average crossovers, candlestick set ups, etc). So $233 a month for no real market edge or understanding and run of the mill technical analysis - the same you can find in 1 of 1000 books.

So I'm pretty excited, I'm excited to hear more ideas, I'm eternally thankful for working with such a fine group of people. As many of you know, I taught trading/technical analysis for 3.5 years for the Palm Beach County School system's "Adult Education Program". I made $18.50 an hour for 3 hours a week plus the additional 6-8 hours it took me each week to prepare that week's course and handouts which I always wanted to reflect what was going on in the market at that time, so you do the math - about $5 an hour. Obviously I didn't do it for the money, I did it because I have always wanted to help those who were being scammed by financial media and Wall Street, that's why I started my free site, Trade-Guild almost a decade ago and it's still there today. I want to give the little guy the chance to play on equal footing with the big guys and there's nothing more fulfilling than to be able to do what you love  and do it for a group of people (our members) in which in which no others could be more deserving.

I believe in Karma, The Law of the Harvest, Do unto others, etc. In fact, some would say to a fault. I stayed in a bad marriage for 10 years, 8 years too long because I had made a promise, there were only 3 things that were deal breakers for me, the 3 "A's", Addiction, Adultery, Abuse, one of the 3 let me feel justified in asking for a divorce, but even then, I put the money for my trading account (as I had been trading for a living at the time,  in my name only as she had been out of the country for 4 months (we decided to take a break and see where we were after 3 months and during that time one of the "A"'s popped up). I told her when she returned back to the US (I didn't want the money disappearing to Europe through an international withdrawal) I would put her name on the account as it had been as well and it would be decided on in the divorce. EVERYONE told me, "She'll take all of the money the first chance she gets" and you know how much I love trading and the market, I told them, "You're probably right, but this is her money too and I'm not going to do the wrong thing just because she might". Some, probably most would say that's naive, that's not a rational decision given what I knew about her, I AGREE. However, I believe so strongly in the concept of "You get back what you put out" that I put her name on the account as I promised when she returned.  Four weeks later, the account was emptied and by the State of Florida's divorce laws, since we were still married when it happened, there was nothing I could do about it. The sum was large enough that I could no longer trade exclusively for a living, I lost the one thing I loved doing most so I could do the one thing I believe in doing most, the right thing.

In any case, 5 or so years later I have a thriving business in which I get to do the two things I love most, work in the market and help others, you get what you give.  She on the other hand had her heart broken, lost a lot of friends and ended up moving back to Europe to live in her parents house while I own mine free and clear, we both started from the same crappy place 5 or so years ago, THAT'S PROOF TO ME. My point simply is, I have no agenda, I'm here to do what I say and further proof has been given to me in the form of my membership, I honestly have the best group of people I could ever imagine and mathematically it's nearly impossible to have so many members and not have one that is less than desirable. You can't put this many people in a movie theater and not have several pain in the butts! So, again, proof to me, whatever you SINCERELY put out there comes back to you.

I feel a little silly to be writing these things as it feels like boasting, but most of you have known me a long time and know I'm very open about things, I guess in working alone every day, all of you have become akin to my co-workers and you're all such good people I feel very comfortable being very open with you like you might with a buddy at work you trust. 

Finally, I have a favor to ask... I have a ton of emails of member success stories, thank you notes, other very kind and flattering emails, etc, but they're private communications between you and I. I'd like to add a "Member Testimonial" section to the new site, I think it's better for members to describe what we are doing in many instances than myself. This isn't just as an advertisement, but in a way to ensure the site continues to be a blessing, that I don't get "the wrong" sort of people. I think members' own words may attract like minds.

I can describe what it is I'm trying to do which is not to be a guru (although I can tell if if I did act like I was sure of everything I said, I'd have twice as many members as people crave that stability in a very unsure and dynamic market, but I'd end up with a lot of people I wouldn't respect, I wouldn't enjoy working with and I feel are not deserving of success), but to be a lifelong student of the market, I don't always live up to my standards or goals, but I try. I'm not trying to keep my members by giving them trade ideas alone and not explaining why. I don't withhold  any of the tools or concepts or make you rely on some "Mysterious, Secret Trading System" that you never see and will never understand.  Instead of trying to ensure your success is dependent on me or anyone or anything else; I'm trying to show you what I know and watch you grow and help out wherever I can.

The fact is, what we do isn't for everyone and I'd rather not have members that aren't willing to learn or who are looking for a guru or someone just to tell them what to do at every step. I want the kind of members I have now, good people who work for their success and are deserving of it, people who give you (me) a chance, but confirm.

Our members are good hearted, deserving people that don't want to be part of the herd and are the most deserving of a chance to beat Wall Street at their own game, not just be an apathetic victim of the "Evil Market". Our members take control of their destinies, I'm just trying to do my part in helping new members break away from the herd, see what really happens in the market under the media fascade and why;  to occasionally be a guide along the way in a way that people can understand when I can. You probably don't realize it, but I get back just as much from all of you.

Honoring the Individual...

I have back-tested hundreds of trading systems starting with those in Technical Analysis books and my own, I've found very few are what people say they are, very few are robust enough to beat the market in  different market scenarios. I recently wrote to a member about one of the rare trading systems that actually did work, "The Turtle Trend Following System", which I believe the movie, "Trading Places" with Eddie Murphy was inspired by. This was one of the most successful commodity based trading systems of all time, it did have bad times when it lost money for 2 consecutive years, but came roaring back because the creators knew what they had worked, the market gets funky from time to time like it is now, but they trusted in their system even after 2 years of losses and everyone on Wall Street saying their system was dead, they had confidence in it and kept going and proved everyone wrong and they ended up with one of the most successful trading systems ever built.

For those who don't know, the "Turtle Traders" were a bet between the two designers of the system, like the movie "Trading Places", one thought traders were born, the other thought anyone could be a good trader if they had the tools to do it, he bet he could "Raise Traders" just like a turtle farm was raising turtles that he had seen on a recent far east trip.

They took in, I believe 14 people initially, most had no any experience at all with Wall Street or trading, they taught them the system in two weeks, gave them cash accounts and put them in the market, the "Turtle Traders" were an astonishing success. However, as I pointed out to the recipient of this recent email, ironically the man who wrote the book, "Trend Following" and gave away the Turtles' secret system was a former Turtle trader himself who was kicked out of the program because he couldn't follow the rules and couldn't make money, in fact was losing it while the others following the same set of rules were making tens of millions. I find it ironic that he (Michael Covel) wrote a book about a subject he was an utter failure at, but the point of the email was simply this...

There is no one best way of trading, it is what fits you best. I can give the same trade idea to 10 people and have 10 different results even if I walk them through it step by step. Why? There are many reasons, perhaps it's time, perhaps it's a mismatch of risk tolerance, perhaps that person who failed in this trade has fantastic talents in another type of trading, I've seen this first hand in working with a large portfolio for someone else, I gave him every detail of successful trades, but he couldn't follow them and lost money because he was too greedy at the start of the trade and too fearful in the trade, which ironically was the result of being too greedy at the start of the trade. I gave this man in 4 months, trade ideas that if he had stuck with, would have netted his portfolio 45% in that timeframe not accounting for  the additional gains from accrued profits. I miraculously was able to keep him flat, but I had to dig him out of a lot of holes. If you are wondering how this can happen, take this small example.

I'd send him a trade, buy 100 shares of FSLR (I had already done the risk management and position sizing for him, he just had to place the order), he'd think, "If 100 is good, then 1000 is better". Fair enough, IF you have the risk tolerance. FSLR could be a pretty volatile stock at the time and in the course of a normal day's volatility, the position which was 10 times larger than I had recommended was now at an intraday loss of some crazy amount on the first day, his greed caused that, but his fear of normal volatility for the stock within a normal day caused him to sell at the bottom of the day's  range and take a pretty big loss, the next day or week, FSLR would be up 10%, but instead of a nice gain, he took a big loss.

This is why I try to give you the concepts, ideas and truth of the market and try to help you find your own "best trading system", the one that fits and works for you is the best.

Any way,  in addition to ideas for the new site, if anyone would like to send a testimonial (whether a sentence or...) I'd appreciate it, no identifying information or anything else will be used without your permission.

Many thanks.