Be Ready, Be Brave, Be Smart

As usual, check tonight's extensive post at Trade Guild.net, it will give you the confidence you will need. If you did what I mentioned last night and accumulated positions in the Ultra longs and 3X Bull ETFs you did the right thing today, so long as you followed risk management plans. Tomorrow, if we break below $105, I'd add maybe 25% when prices move back above $105. If we don't make it that low, then you'll want to do one of two things, (first you may want to take any profits off the table in shorts or some any way for the time), you will either want to add a little on lower prices, and then add the rest as we break above the trend channel reversal point at $110 on the SPY as of now. Like I said in the TG post, if the market moves lower, so will the trend channel and our level at which we have a reversal (which is at $110 now). This is why it is very beneficial to you to have these indicators for yourself on a realtime basis. I have written them for both TeleChart and Stockfinder, the links to each are at the top of this site on tabs. If you sign up, tell them Trade Guild sent you, email me and Ill set you up with the code.

So the idea is we want to have accumulated at lower prices (that should have happened today) and that represent half of our intended position and then we want to add the rest upon confirmation of the reversal. To draw in buyers, Wall Street will have to make this rally look really, REALLY convincing, that means it will rocket up and traders will have this sinking feeling that they were left behind. So that is why I suggested being in early. I suggests adding at the reversal to mitigate risk. We add as they trade moves in our favor. If for some reason all of this analysis is wrong and you'll know that if price moves significantly below $105 then you'll ant to be out quickly. I saw this because the stop/limit orders are sure to be piled up below $105, it will only take a move to $104.75 to hit 90% of them and they don't want to take this market that far down if they need to turn around and take it back up, they just need to hit the stops under or at $1o5.

By the charts look and feel, I think they don't need the $105 shake out, I think they are close to being ready now and Friday makes a good day to put in a strong rally.

If you have core shorts, it's still ok to hold them, although we did take some off the table in larger positions, we will add them back later. Either way you should be in good shape if you do have the core shorts, a failed rally and you are hedged with the shorts. A good rally and you will gain on the longs and only have temporary drawdown on the shorts as the longs have hedged them and the outlook for the long term is down to new lows so that just makes the long trade an extra bit of profit and another chance to load up the shorts at better pricing.

Tomorrow is going to be a key day, you will want to watch the market as this rally could come Friday and it could blow through $110 in minutes.

Look for updates-subscribe to email updates at Trade-Guild or just check. I'll probably post something pre-market, but the trades are the same ones I've had listed, the ETF's that are 2-3x leveraged and you only need 2-3. I'd choose a good 3X financial and something leveraged on the Q's or Russell, so you have financial and broad market exposure. There's no need for a bunch of positions on this trade.

As always, email me with any questions and happy profit hunting. DON'T FORGET YOUR RISK MANAGEMENT PLAN!!!!!!

$109.41 was the shakeout level

Pre-market we have already hit it.

Use the long ETFs I gave you Sunday on, I'd consider strongly accumulating half a position under or around $109.41, and the rest either as we move lower, but in smaller bits the lower we go, or the other 50% when we pass $112 or 112.90 for the very cautious. YOU MUST use risk management-and position sizing, so get calculating-QUICKLY!

A Lesson in What Smart Money Can Do

YOU MUST READ AND LOOK AT THE CHARTS AND THEIR ANNOTATIONS AT TRADE GUILD TONIGHT, HERE'S THE POST


http://www.trade-guild.net/2010/05/today-smart-money-took-drastic-action.html


Something rather amazing happened today and if you look at the charts and understand divergence analysis or my 3C indicator, you will see with your own eyes that smart money has been pulling this market down the last few days, even though it originally appeared that they had the intent of a bump up in price along the order that we anticipated.

SOMETHING CHANGED and probably over the weekend. Smart money pushed the market lower and between 11:30 and 2:30 today-which includes a significant portion of the lows, they accumulated en massse . I do not think I have ever seen such an impressive shift in the longer 3C charts (15-60 minutes) so quickly and so obviously, it was very distinct and confirmed on all 3 major averages and all 3 independently written 3C indicators. You will be surprised to see that the accumulation occurred during light volume, except for a spike or two, but that is exactly why accumulation is so difficult to see, they don't show their hand and say "We Are Buying!" as that would drive up price, instead accumulation almost always happens on low volatility and low volume as we saw during the period we are interested in.

This chart is just for you, I did not post it at Trade Guild, but you can see at the lows of the day, 3C 1-min went into a huge upside divergence-positive accumulation-Amazing

You can see where price was heading lower before 12 pm today and 3C (blue) was already in motion higher and peaked with a leading divergence around 12:30. As prices climbed, their accumulation activity waned. They were in for the cheap shares, which may indicate that the move, while possibly fast to the upside (so you may want to get long exposure soon) may not carry further then our targets around $116.00 (SPY)

So what does this mean? It means that as of now, it seems that either they were covering a lot of shorts and or buying. Of course the two actions are one in the same, either way the intention would be to be ready for a move higher. This move could be as short lived and reverse as quickly as it did today in two hours, or we could see the pendulum swing hard in the other direction.

This is a trick time, in technical analysis all we can see is what they are doing, we don't know why and won't until it doesn't matter anymore so there's no point in trying to reason the actions taken this week and especially today. I was shocked to see what I saw as I went from chart to chart and confirmed with all 3 versions of 3C.

So there are many possibilities, I tend to be skeptical and a bit paranoid which is good for a trader so I'm concerned that they will make an effort to move this market below the two closest support levels at $109.41 and $105 on the SPY (add a zero to see the levels for the S&P-500).

So we have the trades that are most useful right now-those would be the longs, ultra and 3x leveraged long ETFs I've listed the past few days. Those are the trading vehicles I'd use for the time being. The question is when to buy. A break below either support level would be a gift and you'd be a buyer as soon as prices rose back above those levels. Or they could have all the inventory they need now and take prices up now with an obvious Doji reversal signal it is what most traders are expecting anyway, which helps them mark-up prices.

You'll have to choose your plan. You could, if you haven't already, accumulate portions of your intended position so if there is a break below support you don't have huge exposure and you have dry powder to load up the truck. You could wait for a pullback or for a move up or you could sit this one out. I have a feeling you'll need to be nimble toward the top of the move.

In any case, choose your stops before you enter the trade, do not make them so tight that you are easily stopped out and make sure that you position size accordingly so that you don't risk more then 1-3% on any single trade or for more conservative traders, on the portfolio.

The bottom line is at some point, probably very soon (day/days) we will see a move up unless something drastic happens to shift sentiment again, which I can't see at this point with the level of planned accumulation.

As usual, if you have questions, please feel free to email me.

Battle Plan

Everyone needs a plan, here's a few ideas, but first read the analysis at Trade-Guild.net tonight.

If we see a breakout above $112.80/$113 on the SPY, then the longs I gave you the last two days are quite workable. There is a high chance of a false breakout below $112/$111.75. If that were to happen and then we see a move back above those levels, especially on volume, we have another workable long setup. You can sit in cash right now too, but we do have a strong 10 minute divergence, but it may be destroyed as the 1 and 5 minute divergences from yesterday were, remember I said this market is susceptible to news and news is what caused the breakdown today, however it seems that there are institutions with positions at higher levels and I'd think they'll want to see the market move up to unload them. 10 minute divergences are also stronger then 1-5 minute divergences and the 10 minute positive divergences have been strong today.

If we get a break of the hammer at $111.75 (SPY), you'll want to look at the shorts I listed in May-there are two lists, both to the right of this post and I'll add more once we see what is what-you are not going to miss the train with all the downside we have below.

The triangle that formed at the end of the day will be an upside breakout at $112.80-that is worth adding to longs or establishing partial positions which you add to as the market moves higher, but I never expected more then a few days of upside so these longs are quick trades. No matter what you do, you must follow the risk management rules. There's no excuse (other then a bad gap ) to lose more then 2% of your portfolio on any bad trade. If you are losing more then that, you need to email me and we need to work out a risk management plan.

Ultimately, most of you should be holding core short positions, remember the longs were just for a bounce trade. So in any case, you should be somewhat hedged. If the longs work out , you'll make money and set up great shorts, if they don't you'll be hedged, you'll close them and the shorts will be profitable. Just review all the trade options I laid out and be ready to execute them on a break either way. I can see adding to shorts below $111.50 on the SPY.

Bottom line, with the information we have right now, I still expect upside, intraday there's a lot of false moves so follow your risk management plan, but don't jump out of positions that have no reason to be out of if they haven't hit your stop levels (don't react to emotions). In other words a downside breakout of support is a high probability and a move up after that is also a high probability, you don't want to sell at the low unless your risk management plan dictates that in the position sizing you choose.

To me a gap down means nothing, just as the gap up today meant nothing except (as I pointed out in my posts) it was an opportunity to sell some longs at a profit. The market will do everything to fool you and scare you out of trades, don't fall for it. Volume is always a good indication of how real the move is. I'll try to update in the morning on TG and again in the afternoon. Whatever happens, think risk management and remember, the longs are tactical, the shorts are strategic as I believe ultimately this market is going much lower.

Finally, CASH IS A POSITION, if you are not feeling good about these longs and want to wait for the shorts to hit, then be in some cash.

Email me with any specific questions or and especially if your risk management plan is costing you more then 1-2% of your portfolio on any failed trades. Be sure to look for my updates on TG, and check WOWS too if something serious breaks I'll be updating here.

ADDING A COUPLE ULTRA/3X LONG

THE MARKET IS SET TO GAP UP, I'D SAY IF YOU ARE ESTABLISHING A NEW POSITION, PICK UP 50% OR SO OF THE INTENDED SIZE ON THE OPEN, WAIT AND SEE IF THERE'S AN EARLY MORNING PULLBACK AND THEN ADD THE OTHER 50 AFTER THE PULLBACK MAKES IT'S FIRST HIGHER HIGH/HIGHER LOW ON A 1-MIN CHART. HERE ARE 3 ADDITIONAL LONGS YOU MAY WANT TO LOOK AT. DO NOT LET THE GAP UP DISSUADE YOU FROM ENTERING THE MARKET. IF YOU ARE PRETTY MUCH SET WITH YOUR POSITIONS, THEN MAYBE ONLY ADD ON THE PULLBACK SCENARIO.


TRY NOT TO OVER CORRELATE-FOR INSTANCE, YOU DON'T WANT TO BE IN BOTH THE RUSSELL AND THE QQQQ OR UYG AND SKF (BOTH FINANCIALS).


ERX
DRN
URTY
UWM

Yes, Bears Can Bounce

As usual, make sure you read tonight's Trade-Guild post. If you did what I said last night and followed the updates, you should be sitting on some decent long positions and should see at least a day if not two of additional upside. Today was really just a reversal day-my note on TG about the support level being hit gave you a great opportunity to add at even better prices.

For now we will not be adding to shorts, there's no point as long as we have a bounce because we can get better pricing at higher levels, but I imagine before the week is out, we will be adding to shorts and you will hopefully have made a nice little profit in the long trades we re in now-IT's not too late to get in! There should be early weakness that can be used to enter the trades. Whatever happens, DO NOT LET A WINNING TRADE TURN INTO A LOSS!

The fact that the SEC will be coming out with a report in the next few days about "Circuit Breakers" on trading platforms (meaning if a stock drops by 10% in 5 minutes, trading will be halted in that issue for 5 minutes) is probably what is propelling this market higher, however it underscores a fear that the SEC has about the waterfall sell-off that 3C predicted last week and that was just the start. I think the SEC has some information about the direction of this market and is putting panic plans in place, which is great for our short positions, it means we ARE on the right side of the market.

DO NOT BE COMPLACENT with these long trades, Europe is falling apart and it won't take much to spook the US markets, news can change things fast, but for now we seem to be ok.

I see numerous long trades, they all look like the market, since they are sensitive to individual news items, I choose the Ultra and 3x ETFs in last night's post as your long trading vehicles, I see no reason to change that plan as I don't see any particular stock outperforming these leveraged ETFs. So, keep an eye on Trade Guild, do not panic and sell too soon, unless the market spooks badly on news, even a gap down in the a.m. should not run you out of your long trade-I expect we may see just that.

If you have TeleChart of StockFinder, you can use my TrendChanel for stops. If you don't have the platforms, please visit Trade-Guild and use my links as I'm an affiliate and it wont cost you a dime more. I'm more then happy to share my custom indicators with you. You can also use the StockFinder and TeleChart tabs at the top of WOWS.

Hang in there, we are on track, don't let emotions govern your decisions.

Can Bears Really Bounce?

YES! And we are about to see one bounce. See tonight's post at Trade Guild. I expect the $116 level of the SPY to be tested and it should fail, news could derail this of course but as far as what we know now, it looks like a day maybe two of upside coming. Watch the volume, it should stay low. You can trade around this a little pretty easily using an Ultra Long like QLD, UWM, UDOW, DDM, FAS, EDC, TNA, MWL, BGU, or SOXL.

I would not let go of short personally, but rather hedge with these Ultra or 3x long positions for a day or two. Any gift -10% I'd take. This way you are hedged to some degree, you get to add to shorts at a higher level and then when we go back down you've made profit on the long trade (quickie) as well as the higher -add-to shorts. IT's a pretty nice opportunity and I don't see anything on the charts to suggest this is anything more then an attempt to fill the gap and maybe kiss the bear flag good bye-which is typical.

I'd say go for it, but treat this trade as any other and make sure your risk management schedule, position sizing, etc are all in place, do not try to hedge an entire portfolio and I wouldn't trade more then two of these. REMEMBER, THIS IS JUST A PLAY ON A SHORT BOUNCE-unless something develops from there which I doubt.

I'm not putting these on the spread sheet as they are so short.

Have a great week.

THIS MARKET IS LOOKING WORSE EVERYDAY

Because of the above, I'm accelerating some of the trades from yesterday and putting a few at market and a few closer to trigger levels. I have also added a lot of ETF's that are Ultras, you'll want to look at those and have some exposure to them in different industries, ETFs have some advantages-like they are not as news sensitive as a stock and the Ultras have the advantage of leverage. However, an Ultrashort which you buy is not the same as a true short. A true short wil add money to your account as it becomes profitable and a portion of that money can be used right away to finance or add to other trades, this can not be done with a long position.

The stops are a bit further so in risk management that means you need to take on less shares-Read at TG about position sizing and the 2% rule. You can always add to the trade later so for now, get exposure but don't swing for the fences. Also look back at the last list, the trades listed in late may are also worth considering.

Risk management is the name of the game right now, even if this market moves higher for a short period we can still make a lot of money but you must follow the rules. If you have ant trade or portfolio specific questions, be sure to email me. I want to see you make money and if I can answer a question and help you do that then by all means, send me the email and I'll answer ASAP.

Do not correlate positions, do not put more than 15% in any one trade and for now do not take full positions but 50% or so of your intended position and make sure you position size so your risk on a failed trade is under 2%. Also do not over diversify, for most people's portfolios 6-8 positions will give you all the exposure you need. As a rule of thumb, $10k =3 positions, $20k maybe up to 5 positions, $100k 6-8 positions. If you are over that level I can help you diversify without over diversifying which kills returns, it's a wall street myth designed to increase brokers commissions . THERE IS NO SAFE TRADE, WHENEVER YOUR MONEY IS IN THE MARKET IT IS AT RISK SO MAKE THE MOST OF IT!!!

CHECK TRADE-GUILD INTRADAY FOR UPDATES ON THE MARKET

A TRADE FOR ALL SEASONS

WEDNESDAY WAS THE FIRST DAY IN NEARLY 3 WEEKS THAT I HAD THE MARKET DIRECTION WRONG, EVERY OTHER DAY 3C CALLED IT EXACTLY. I STILL SEE A NEGATIVE DIVERGENCE AND I'M STILL STICKING WITH DOWNSIDE TOMORROW, I HAVE TO TRUST MY INDICATOR EVEN IF IT'S WRONG ONCE IN AWHILE.

GIVEN THE UNCERTAINTY SURROUNDING THE VOLATILITY OF A TOP, TONIGHT I LISTED A LOT OF LIMIT ORDER TRADES THAT HAVE THE ADVANTAGE OF PUTTING YOU IN THE TRADE AT A HIGH PROBABILITY/LOW RISK SCENARIO. THERE ARE TRADES FOR IF THE MARKET GOES UP AND IF THE MARKET GOES DOWN. THERE ARE A FEW THAT ARE READY TO BE TRADED TOMORROW MORNING AT THE MARKET OPEN AND WE TRADE THOSE AT MARKET PRICE.

I THINK THIS IS THE BEST ANSWER FOR NOW.

PLEASE READ AND REVIEW THE PLAN FOR ZSL AS THAT TRADE STILL APPEARS TO BE UNDER CONSIDERABLE DISTRIBUTION. BECAUSE A TRADE DOESN'T WORK OUT THE FIRST TIME IT DOESN'T MEAN YOU ABANDON IT.

SHOULD YOU HAVE QUESTIONS, EMAIL ME AND BE CAREFUL WITH CORRELATION, THE FIRST 6 OR SO TRADES ARE ALL IN THE SAME INDUSTRY.

GOOD LUCK AND DONT FORGET TO CHECKOUT TRADE GUILD'S CONSIDERABLE ANALYSIS TONIGHT.

Limbo?

The 3C charts have taken a turn for the worse, but that does not preclude the possibility of a bear flag which means later in the week we may see upside, but tomorrow will say a lot. Until then, I'm hesitant to post any new trades as this market could swing like a pendulum and move down quickly, despite my original feeling that we would see a bear flag consolidation.

The list of April/May  has a number of shorts, the same shorts I'd post tonight if I felt we would see downside or a continuation of the downtrend.  So look at the 26 ideas, specifically the shorts and make sure you are not in any two trades that are closely correlated. At this point we will give up a few points to put the probabilities on our side, which right now, we have none other then to say tomorrow appears to be a down day at this point.

Should the SPY break the $114.80 level you may want to add 1/4 of your intended short position choosing from the trades of May 2nd on the above mentioned/linked lost. Forget the stops for now, I'll update them if the scenario plays out. A break of $113.65 and you will want to be at least 50% short so you will add. Should we close higher then today's close of $115.81, you'll want to close 1/2 of the positions you took at this point. Should the market break $112.50, you will want to be all in, but always consider your risk management rules. Even at that point you don't want to swing for the fences, we'll swing for the fences below $111.25 on the SPY.

As for the ZSL trade, as I mentioned, I believe it may be a false move. In the previous post I told you how to handle it.

At this point, 3C is not showing anything more then the probability of downside Wednesday, it is not showing any particular probabilities beyond a close lower which could be only marginal.

As the market's movement account for more than 60% of your stocks probable move, you can see we don't have a strong position yet unless the above support levels break. Until we have a strong edge, it is irresponsible of me to post trades that I can not definitively say "You have an edge".

Part of your ability to make money in the market, is know when to hold, fold or walk away-as the song goes. Your only real edge over smart money is your ability to sit and lie in wait, whereas they are forced to trade everyday. Right now, we are going to use that edge until the picture becomes more clear.

Watch those support levels and add judiciously, in similar fashion to the example I gave above.

Tomorrow if we see continued deterioration in 3C, the bear flag scenario becomes less likely and I will list additional short trades. Right now the list I mentioned has some of the better trades that I would be pushing for now.

Be patient and don't hesitate to email me with any specific questions. My contact info is on the site under "Email Me". Don't be misled, we have a huge opportunity and taking advantage of that does not mean that you must always be doing something. Sometimes the best thing to do and the hardest thing to do is nothing at all.