7 years ago
Tuesday, June 8, 2010
Bounce , Bounce, Bounce.....
It looks fairly sure we'll get a bounce here. You may want to buy some Ultralongs or FAS , UWM before the close. This could last several days possibly.
Not looking good for a bounce
Dow vs. The NASDAQ
If the Dow breaks, the S&P won't be far behind. Remember, watch the SPY for a break of $104.35, it's your cue to quickly add the last 25% (then you should have 25% in cash) to your shorts.
Today could be the day, or we could get a bounce which would be great for all the newcomers to get their core position setup.
Monday, June 7, 2010
Sitting Still Can Be Profitable
All the newcomers, get your core short position together. We are over 50% of portfolio short, only UNG long, and 25% will remain in cash. The other 25% will be added as/if the SPY breaks below the $104.40 area. You can use the shorts I listed of actual companies, be aware that if they have a dividend and you are short when the go ex-div, you will be responsible for paying that quarters dividend which usually is not a big concern of mine.
I still prefer using the ETF UltraShort/3x Bear, but make sure your risk management accounts for the leverage.
If you are new to the site, this is the plan so make sure you have a decent short position in place because the break of $104.40 could come very soon. Look at these two charts of the DOW
See any similarities? Look at the dates at the bottom of the charts, they are both the Dow-30
With all of this in mind I thought I'd share a little of tonight's Worden Report with you,
"Strong, Purposeful Selling
With fear of holding over weekends, Fridays have suffered the frequent effects of trader trepidation, with Mondays providing bounces. Friday last was a horrendous day. Bulls and bears alike probably expected today would be a bouncing Monday.
However, it was not to be. There is too much shell-shock underlying the action, and the market was in the midst of a downside resolution on Friday. Today, we got a continuation of the slide, although the market may be ready for a mini-bounce before the end of the week."
I don't think I could have said it any better. If you are in position, then you need to just be patient and let your positions work for you. If you are new, you need to look at the ETF's I have on June's list and consider spreading some funds around in each of them, that will give you broad market coverage.
When we come to support at $104.40 a few things could happen, we could see some consolidation before slicing through it, the market may just make a huge move down on big volume through it, we could see a bounce before seeing downside below the level or least likely, the market could set off another rally from there and form a right shoulder in a H&S top formation, in which case we will take action to hedge shorts, jump into longs and wait for the final reversal. However, I'm thinking we will see a repeat of 1929 as posted above. The downdraft after the break of support on the 1929 chart is not visible, but it moved down 30% within a few weeks and within the next couple of years dropped another approximately 85%. Read my post at Trade-Guild, "How to make more than 100% in a Short"
I don't know where we are headed but I have maintained for over a year that this market will see new lows. If you are new and need help or have questions, let me know and I'll answer ASAP.
I listed a few decent shorts tonight. Most of these are pretty far from the stops on purpose, it's in case we get a bounce to resistance, then they all would be excellent add-to candidates.
When looking at the spread sheet remember I list the trades and put in the entry prices, I do not follow up after that. For instance, the trades of 6/2, a few made money, most didn't trigger, but the post for that night says specifically the are 1-2 day trades so whatever gains or losses they show now are irrelevant. *I CANT KEEP UP WITH EVERY TRADE I LIST, IT IS YOUR RESPONSIBILITY TO EMAIL ME IF YOU NEED CURRENT INFORMATION ON ANY TRADE YOU TAKE WHICH WOULD INCLUDE AN UPDATED STOP AND TARGET. I OFFER YOU THIS AS PART OF THE SERVICE FOR FREE SO TAKE ADVANTAGE OF IT AND EMAIL ME. I HAVE OBJECTIVE STOP SYSTEMS THAT WILL TAKE THE MOST OUT OF THE TRADE AS POSSIBLE.
ABOVE ALL, IF YOU DON'T UNDERSTAND OUR RISK MANAGEMENT PLAN, AND IT IS POSTED BELOW A FEW DAYS BACK, THEN LET ME KNOW AND I'LL HELP YOU.
I still prefer using the ETF UltraShort/3x Bear, but make sure your risk management accounts for the leverage.
If you are new to the site, this is the plan so make sure you have a decent short position in place because the break of $104.40 could come very soon. Look at these two charts of the DOW
With all of this in mind I thought I'd share a little of tonight's Worden Report with you,
"Strong, Purposeful Selling
With fear of holding over weekends, Fridays have suffered the frequent effects of trader trepidation, with Mondays providing bounces. Friday last was a horrendous day. Bulls and bears alike probably expected today would be a bouncing Monday.
However, it was not to be. There is too much shell-shock underlying the action, and the market was in the midst of a downside resolution on Friday. Today, we got a continuation of the slide, although the market may be ready for a mini-bounce before the end of the week."
I don't think I could have said it any better. If you are in position, then you need to just be patient and let your positions work for you. If you are new, you need to look at the ETF's I have on June's list and consider spreading some funds around in each of them, that will give you broad market coverage.
When we come to support at $104.40 a few things could happen, we could see some consolidation before slicing through it, the market may just make a huge move down on big volume through it, we could see a bounce before seeing downside below the level or least likely, the market could set off another rally from there and form a right shoulder in a H&S top formation, in which case we will take action to hedge shorts, jump into longs and wait for the final reversal. However, I'm thinking we will see a repeat of 1929 as posted above. The downdraft after the break of support on the 1929 chart is not visible, but it moved down 30% within a few weeks and within the next couple of years dropped another approximately 85%. Read my post at Trade-Guild, "How to make more than 100% in a Short"
I don't know where we are headed but I have maintained for over a year that this market will see new lows. If you are new and need help or have questions, let me know and I'll answer ASAP.
I listed a few decent shorts tonight. Most of these are pretty far from the stops on purpose, it's in case we get a bounce to resistance, then they all would be excellent add-to candidates.
When looking at the spread sheet remember I list the trades and put in the entry prices, I do not follow up after that. For instance, the trades of 6/2, a few made money, most didn't trigger, but the post for that night says specifically the are 1-2 day trades so whatever gains or losses they show now are irrelevant. *I CANT KEEP UP WITH EVERY TRADE I LIST, IT IS YOUR RESPONSIBILITY TO EMAIL ME IF YOU NEED CURRENT INFORMATION ON ANY TRADE YOU TAKE WHICH WOULD INCLUDE AN UPDATED STOP AND TARGET. I OFFER YOU THIS AS PART OF THE SERVICE FOR FREE SO TAKE ADVANTAGE OF IT AND EMAIL ME. I HAVE OBJECTIVE STOP SYSTEMS THAT WILL TAKE THE MOST OUT OF THE TRADE AS POSSIBLE.
ABOVE ALL, IF YOU DON'T UNDERSTAND OUR RISK MANAGEMENT PLAN, AND IT IS POSTED BELOW A FEW DAYS BACK, THEN LET ME KNOW AND I'LL HELP YOU.
Update
Well it looks like the false breakout repercussions in the NASDAQ took precedence over anything in the SPY.
I hope you newcomers took my advice last night and got your short positions together.
Here's why the NASDAQ situation exerts such a strong downward gravitational pull. When a stock or an average makes a breakout of a consolidation pattern, all eyes have been on the support and resistance level of that consolidation pattern, a breakout is considered by many to be a bullish even and it used to be a fairly reliable bullish event. Now that Technical Analysis is so mainstream, Wall Street knows exactly what everyone is looking at as well. It's like playing cards, but Wall Street can see yours.
So the average or stock breaks out, a lot of buy orders are triggered and a sense of "I don't want to be left behind" becomes overwhelming to many, so like sheep they follow and chase the breakout, this is why breakouts generally see high volume, not because Wall Street was doing a lot of buying. In fact they were more likely doing a lot of selling to those who were buying. A day or two above former resistance (now support) and it's time to let it fall and become a failed breakout, we see them now more than ever, but traditional technicians keep buying them making it an easy poach for Wall Street.
When prices fall below the breakout level, all that volume that represented buyers, now represents holders at a loss so a few with risk management plans start to sell, that creates downward pressure, which makes more sell as their losses mount and before you know it, you have a snowball effect. This is why false breakouts fail hard and fast.
Now things get much more unpredictable, which is why I had you get into your shorts a little at a time a while back. The market's volatility could bounce us, but we just saw a decent divergence fail, that's why I didn't say but, I said buy at trigger "A" and/or "B". However, now everyone expects volatility so maybe the market throws us a curve ball and just slices through all resistance. YOU KNOW WHAT TO DO THEN
The SPY's relative strength vs the QQQQ
I hope you newcomers took my advice last night and got your short positions together.
Here's why the NASDAQ situation exerts such a strong downward gravitational pull. When a stock or an average makes a breakout of a consolidation pattern, all eyes have been on the support and resistance level of that consolidation pattern, a breakout is considered by many to be a bullish even and it used to be a fairly reliable bullish event. Now that Technical Analysis is so mainstream, Wall Street knows exactly what everyone is looking at as well. It's like playing cards, but Wall Street can see yours.
So the average or stock breaks out, a lot of buy orders are triggered and a sense of "I don't want to be left behind" becomes overwhelming to many, so like sheep they follow and chase the breakout, this is why breakouts generally see high volume, not because Wall Street was doing a lot of buying. In fact they were more likely doing a lot of selling to those who were buying. A day or two above former resistance (now support) and it's time to let it fall and become a failed breakout, we see them now more than ever, but traditional technicians keep buying them making it an easy poach for Wall Street.
When prices fall below the breakout level, all that volume that represented buyers, now represents holders at a loss so a few with risk management plans start to sell, that creates downward pressure, which makes more sell as their losses mount and before you know it, you have a snowball effect. This is why false breakouts fail hard and fast.
Now things get much more unpredictable, which is why I had you get into your shorts a little at a time a while back. The market's volatility could bounce us, but we just saw a decent divergence fail, that's why I didn't say but, I said buy at trigger "A" and/or "B". However, now everyone expects volatility so maybe the market throws us a curve ball and just slices through all resistance. YOU KNOW WHAT TO DO THEN
Two Paths
Not it appears we have a bottom formation in place, which fits with my analysis. The breakout of the formation is at $107.25 on the SPY, the breakout to new highs is the $107.65 level on the SPY. The breakdown of the formation is below $106.25. Whatever long you use and I suggests a leveraged long ETF, you may want 1/2 @ the formation breakout and 1/2 @ the new highs breakout.
A Successful Retest? Yes?
And it looks likely to pass? Yes it does.
1 min, 3C v.II showing the level of the retest which has become an important level for the near term outlook. 3C is showing a leading divergence
Finally 3C v.III in 10-min, is showing another leading divergence suggesting the $107.50 area will be broken.
A good play on the breakout if it occurs will be to ride UPRO until we get a reversal, it shouldn't be a very long trade, a few days at the max and possibly today at the min.
You would enter UPRO if the SPY breaks above $107.65 and a stop would be around $107.20. You may want to cut your exposure to 1% risk as this is a fairly tight stop.
a 3C v.III 5 min chart again showing a leading divergence.
Finally 3C v.III in 10-min, is showing another leading divergence suggesting the $107.50 area will be broken.
A good play on the breakout if it occurs will be to ride UPRO until we get a reversal, it shouldn't be a very long trade, a few days at the max and possibly today at the min.
You would enter UPRO if the SPY breaks above $107.65 and a stop would be around $107.20. You may want to cut your exposure to 1% risk as this is a fairly tight stop.
Update
It appears we will get the retest of this morning's highs. The call on early strength was correct, then it was a bit of a mystery, but I said I thought Wall St. would try to take this market up (volatility-shake out the weak hands) and possibly re-enter the flag before letting it fall. If the retest is successful and breaks out, you could probably ride an Ultra/3x long up for a day or so, just don't be deceived about what this really is.
Sunday, June 6, 2010
Take a Look at Trade Guild
I posted one of my indicators I use (custom), Price/Volume Relationships. Red is the worst, Green is the best, you can figure out the rest. Notice the Red in the recent consolidation and the orange on Friday on the daily chart. However, remember I said early strength on Monday, look at the size of the last green bar on the second chart! I used 3C for that, I looked at this for the first time on a long time and it happened to confirm the 3C analysis. I have a lot of custom indicators for TeleChart and StockFinder. any re much more useful than I sometimes give them credit for.
Probabilities
***Update-futures are down overseas, which doesn't mean we will open down but makes it more likely. That does not negate the probability of early strength, if you are a nimble trader you may want to buy an ultralong like UWM at the first sign of it moving up and sell it, well that's your choice, but maybe in the $29 area or until it stops making higher highs/higher lows on a 5-minute chart.
Playing cards professionally and gambling are two distinctly different things. One entails risk management and having the probabilities on your side. The other usually has no risk management or something even worse-human emotions dictating the size of a bet (which is why Las Vegas hotels can build as grand as they do) and no edge. The edge is probabilities, the only sure thing is already behind you. Risk management is there for when your probabilities fail you.
So the probabilities have been stacked against this market pretty bad, the breadth readings for anyone listening to them (they are boring) have foretold all of this as we've gone.
Now below we have a series of very negative situations.
Click on the charts to enlarge. First the NASDAQ COMPOSITE: it broke out with the NASDAQ-100, the S&P and Dow didn't follow. Since the days of Charles Dow, it has been well known that this can mean trouble for the market. I posted as such last week. The breakout now has failed which means it's a false breakout-note where it failed-at that gap. False breakouts, because of the structure and emotions behind them tend to reverse quickly and deeply. STRIKE 1
And here's the bear flag target for the SPY.
However, the 15 min, which is the rock vs the 10 min which is the scissors, ultimately wins out and says the downtrend will prevail. Again, the fall on Friday was fairly easy to see as of Thursday.
The plan for tomorrow is the last thing you probably want to hear because we as humans don't feel productive unless we are doing something, but there is a time to be still that will accomplish more than any flurry of trades you can throw together. Unless you do not have your 50% or so, core short position together with proper risk management which I talk about every post, then you have nothing to do tomorrow unless by some strange occurrence the market breaks below $104.40 (SPY) then you need to add 25% more to your short positions, whether they be the core ETFs or any of the shorts I've recently listed. You can always play any of the limit trades that have not triggered if you just can't sit still.
If you are new, then you have work to do and tomorrow if we see higher prices as probabilities say we will, then you should be looking at the core inverse Ultrshort and 3x Bear ETFs and shorts I just listed the last few days. Ultimately you have to do what you are comfortable with, but our plan is to be 50% short right now, many of us are. When the SPY breaks $104.40 we add another 25% of the portfolio short and 25% stays in cash.
So if you are new to the site, you may have some spring cleaning to do, selling longs into higher prices, selling short into higher prices, read everything I have on both sites on risk management and if you need help please email me. When this market breaks you do not want to be scrambling to get yourself positioned. We have been doing this since the SPY was well above $112-$114. You need to get caught up. Take a look at the core ETFs, it is what I am using. Also you may be able to buy a little UNG right on the open at market but only 25-30% of your intended position. It's already moved, the rest you'll probably need to wait for the first pullback to the 10-day m.a.
If you have questions, email me at BT46n2@Gmail.com
Silence is the sound of dignity, patience is the mark of a successful trader. Time to be still....
unless this market goes the other way in a big hurry. Remember, we are with the probabilities, not the fortune teller's crystal ball so RISK MANAGEMENT (new people, read the "2% rule" and both "position sizing " posts at Trade Guild under "Resources and Concepts" on the left side of the site.
Playing cards professionally and gambling are two distinctly different things. One entails risk management and having the probabilities on your side. The other usually has no risk management or something even worse-human emotions dictating the size of a bet (which is why Las Vegas hotels can build as grand as they do) and no edge. The edge is probabilities, the only sure thing is already behind you. Risk management is there for when your probabilities fail you.
So the probabilities have been stacked against this market pretty bad, the breadth readings for anyone listening to them (they are boring) have foretold all of this as we've gone.
Now below we have a series of very negative situations.
All the indexes had this pattern in them, it's called a bear flag and it's a continuation pattern. This is the SPY and the implications which are laid out on the chart give us an "initial" target of $95. Wall Street's new volatility game will usually try to pull prices back into the flag, it could take a day, or two days, maybe more, but they want to wring out the shorts, get there bulls back in the market, set their shorts and then let it all fall apart again so watch for that possibility, but don't take it too serious. It's probably not worth betting on unless you are using 3C and watch the market all day. Note the diminished volume into the flag, the increased volume on the breakout and the nearly vertical drop that forms the flag pole (upside down).
And here's the bear flag target for the SPY.
I mentioned the divergences building last Friday, here we see a good example of a positive divergence in the 1-min SPY, suggesting that we will see early strength.
Here's a 10-min 3C SPY Chart, this divergence carries more weight. However, note the negative divergence on Thursday and remember Thursday night's post and how much I talked about "key" negative divergences. With a chart like this, it was fairly easy to see where the probabilities were. However, if this 10-min divergence continues, then we may see more than just early strength and as I mentioned above, Wall Street would love to see prices back inside that flag for a few hours or a day. So the probabilities are increasing that our little bounce here may be more than just an a.m. event.
However, the 15 min, which is the rock vs the 10 min which is the scissors, ultimately wins out and says the downtrend will prevail. Again, the fall on Friday was fairly easy to see as of Thursday.
The plan for tomorrow is the last thing you probably want to hear because we as humans don't feel productive unless we are doing something, but there is a time to be still that will accomplish more than any flurry of trades you can throw together. Unless you do not have your 50% or so, core short position together with proper risk management which I talk about every post, then you have nothing to do tomorrow unless by some strange occurrence the market breaks below $104.40 (SPY) then you need to add 25% more to your short positions, whether they be the core ETFs or any of the shorts I've recently listed. You can always play any of the limit trades that have not triggered if you just can't sit still.
If you are new, then you have work to do and tomorrow if we see higher prices as probabilities say we will, then you should be looking at the core inverse Ultrshort and 3x Bear ETFs and shorts I just listed the last few days. Ultimately you have to do what you are comfortable with, but our plan is to be 50% short right now, many of us are. When the SPY breaks $104.40 we add another 25% of the portfolio short and 25% stays in cash.
So if you are new to the site, you may have some spring cleaning to do, selling longs into higher prices, selling short into higher prices, read everything I have on both sites on risk management and if you need help please email me. When this market breaks you do not want to be scrambling to get yourself positioned. We have been doing this since the SPY was well above $112-$114. You need to get caught up. Take a look at the core ETFs, it is what I am using. Also you may be able to buy a little UNG right on the open at market but only 25-30% of your intended position. It's already moved, the rest you'll probably need to wait for the first pullback to the 10-day m.a.
If you have questions, email me at BT46n2@Gmail.com
Silence is the sound of dignity, patience is the mark of a successful trader. Time to be still....
unless this market goes the other way in a big hurry. Remember, we are with the probabilities, not the fortune teller's crystal ball so RISK MANAGEMENT (new people, read the "2% rule" and both "position sizing " posts at Trade Guild under "Resources and Concepts" on the left side of the site.
