Wolf on Wall Street

Tuesday, December 7, 2010

Interesting Inflection Points Today

This is today's 1 min chart. The first area of interest was the opening gap, which showed immediate distribution (first red arrow). Then a zone of accumulation at the white arrow, did little more then slow the downtrend. The 2nd red arrow from the left showed a large leading negative divergence, the 3rd red arrow shows a relative divergence, but the longer 2nd red arrow shows where the real damage was being done. It seems there was an effort to unload at obviously higher prices during that 1 hour+ period. The rest is self evident.

End result, about 1% GAP HEAD START nearly totally erased.

Something's Going on

I can't pretend to understand why or who, but there's a major sell-off in bonds right now in some coordinated effort. Maybe a foreign government, China? I don't know, but it's UGLY. I'll look into more, for now take a look at ZH chart

http://www.zerohedge.com/article/tyz-bloodbath-commencing-543

TMV

At a 7.5% gain in TMV right now and it declining, you may want to take some profits of the table.

Tick Chart

Something just upset a broad spectrum of stocks in the market, the Tick Index shows at any particular tick how many stocks in the NYSE are up minus those that are down. I just saw a pretty extreme reading.

1 min chart around negative -1500 which you can see doesn't happen too often

Here's a longer 10 min chart, there's only 1 other instance at that low on 11/29

SPY Update

1 min

5 min

15 min

UNG Request

5 min

15 min

30 min

60 min

Chart Request

DIA 15

DJ-30 15

FAZ 15

IWM 15

QQQQ 15

SPY 15

SPY Daily

TMV puts in another decent gain

Our long in TMV (Inverse the 20 year bond-short) has put in another nice gain today after bouncing off support + 6.5+% today

For shorter term traders, watch resistance coming up around $45, for longer term traders, you may want to establish a trailing stop. If you need any help with the Trend Channel or an alternative stop, email me.

FXE Update-Request

FXE 1 min-the divergence has just made it to the 5 min chart, considering there hasn't been a price move, I'd anticipate there may be a bounce being accumulated now. Again though, the 10 min chart still looks bad and the 1-5 will have to strengthen to move into the more substantial 10 min timeframe. As of now, it just looks like a probable intraday bounce.

Update

This is the first sign of a reversal since the move up around 12 p.m.-SPY 1 min

3C Quick Start

Many of the charts you see here at WOWS are my proprietary indicator 3C which reveals underlying institutional money movements and often contradicts price. To understand the annotations made on charts, you must first understand that 3C has no numerical value, it is a pure divergence indicator. Positive divergences represent accumulation by smart money, negative divergences represent distribution by smart money and when 3C trades with price, that is trend confirmation.

The chart annotation system is simple; white arrows represent relative positive divergences, red arrows represent relative negative divergences and green arrows represent trend confirmation. When 3C is in a white or red box, that represents a leading positive or negative divergence, leading divergences are the most powerful.

We analyse 3C in multiple timeframes, the longer the timeframe the stronger the accumulation. 1-2 min timeframes represent intraday moves, a 5 min timeframe can represent a day or two and 15 min timeframes average trends of a swing trade nature. 30 and 60 min charts can move the market for a month or more and daily charts can be over a year.

You'll get use to seeing the charts and understanding how the multiple timeframe analysis works and works well.

Welcome to Wolf on Wall Street.

The trades featured here are meant to maximize returns with the least risk and highest probabilities. Unless otherwise mentioned, all trades are meant to be executed at market. I prefer long-term trending trades which perform well in rising markets, but really stand out in declining markets. However, we get occasional one day gifts 30,40,60% 1-day gains. I'd urge you to consider taking some or all off the table in such cases, the markets don't give gifts like that often or for very long. Most of the returns that make the system outperform so well come in short-entry trades. If you are opposed to short trades, this is not the system for you, unless you are ok with buying an inverse ETF. If you would like more information about the truth about shorting stocks, just email me.

Risk management. I recommend a specific and consistent risk management approach to all positions. In most cases we try for 2% risk money (2% of portfolio) unless such a position size exceeds 15-20% of overall portfolio in actual position size. Each trader is different and each has a different allowance of open trades. I like to keep the overall money in the trade around 10-15% of portfolio per position in case of gaps against you. Stops are generally executed at the end of day and I personally never place a stop order, all my stops are mental; remember, the middle man gets to see everyone's cards. When you are not in tune with the market or opportunities just aren't that spectacular, I take my risk per position down to 1% or even half a percent of portfolio value.

Each trader is different and must determine their own level of comfort with risk. I do have a channel stop which I provide to TeleChart/StockFinder users for automated stops, I appreciate you using my links to sign up if you do. The Trend Channel catches trends and works well as it automatically adjusts for each stock's volatility. Arbitrary exits based on nervousness about the markets WILL decrease the portfolio performance dramatically. This system will not ever get you in at market bottoms or tops. The recent 1 year performance against the Russell 2k buy and hold had the system beating it by 3:1. Ultimately it is up to you as to how you proceed, but I'm always available to help you determine what might work best for you.

I do use other scans and systems when market conditions warrant their use and may change strategy with market conditions.

The MOST IMPORTANT tool you have to bring you long term success is RISK MANAGEMENT. There are plenty of articles linked at Trade-Guild.net on Risk Management. We can be wrong 75% of the time and still outperform the market with solid, consistent risk management.

Position Sizing

The position sizes noted in the positions @ 2% risk of portfolio are based on a $20,000 portfolio-adjust as needed. Due to tight stops, there is the possibility, even probability that one position could take up the entire portfolio. You need to decide how many positions you want to trade and reduce the position size according to that. For instance, if you want to trade 5 positions in a $20,000 portfolio, no one position should be valued at more than $4,000-not risk money or 2% rule, but share price entry x shares.