Understanding 3C

Well I received a lot of suggestions this weekend, but by far, the most popular request was an article on 3C, what it is and how t works. In the past, I've pointed people to Trade-Guld.net to read some of the articles about 3C and have always said, "If I were to write a handbook for 3C, it would probably take me a week." So I'm going to start an article, which I will link and continue to add to until we have a really good composite picture of 3C.

First, what is 3C? It is a proprietary indicator, meaning I created it and you won't find it in any charting software anywhere, which is probably one of the reasons it works. As I have mentioned, I am a long time Worden/TeleChart user and I Don Worden who is the father of the Worden Brothers, is a pioneer n money flow indicators. His Tick Volume was one of the first and sold to and used by Wall Street firms several decades ago. Tick Volume led to others creating similar indicators like OBV and MoneyFlow, so Don has impressive credentials in the field of money flow indicators.

When  started using Telehart, I analyzed each of his proprietary indicators, Balance of Power, MoneyStream and Time Segmented Volume. I found TSV to be the most reliable and it gave frequent signals. In experimenting with a way to make TSV more user friendly, I crated the first version of 3C, which I named after one of Don Worden's mantras for technicians, "Compare, compare, compare"-the 3 C's.

After an hour of creating the first version, I realized I had something that I didn't intend on creating, but had shown incredible signals that were, well almost fool proof. However, they lacked details, it was more of a "Big picture". After tinkering awhile, I found the answer. TSV and many other money flow indicators provide raw data, but discerning a trend from the raw data was like looking at 1's and 0's. Worden's answer was to average they data to create a trend in the indicator. However, whenever you average data, you lose bits of sometimes very important data. My solution was to use the raw data, but to create the trend, I didn't want to average it and lose precious data, so I decided instead to compare it to a certain number of bars in the past. 3C asks the questions, is the raw data money flow higher or lower then it was X-number of bars ago and then 3C would move up or down according to the answer. Because 3C does this EVERY SINGLE BAR, it creates a cumulative line that forms the basis for the trend and no raw data is lost to averaging, this is why I believe 3C not only works better then TSV, but gives more signals.

In looking at the trend of 3C, it is compared to the trend of price, like many indicators such as MAC or RSI, 3C has the power to contradict price and create divergences, which are the basis of all 3C signals. However, unlike MACD and RSI which can contradict the momentum of price, 3C is contradicting the money flow within price, thereby showing whether institutional money is buying or selling.

Institutional money doesn't trade in 100 or 500 share lots like many of us do, they trade in much larger volume. If I want to sell 500 shares of SPY, it's not going to effect the supply/demand equation of price, however f Institutional money did the same and sold 5 million shares of SPY all at once, they would shoot themselves in the foot by altering supply and demand and sending pries much lower, causing their sale to perhaps be a loss. So 3C is perfect for the job of tracking institutional money which must sell in smaller units in to price strength, this is distribution and 3C can sniff it out and show us when institutional money is distributing or accumulating by simply comparing the price trend to the 3C trend.

That's it for tonight, I'm still capturing charts for the market analysis that will be posted tonight, but I will continue to ad to this article and link it on the site so you have a comprehensive understanding of 3C.

Some Changes on the Site

This isn't a market post, I like to take a day off from looking at the market to clear any subconscious biases I and all traders are subject to. Sunday I do my analysis with a fresh perspective and Sunday's post will be a pretty large one as I will cover many timeframes and the hints, clues and opinions of what is coming.

However, I will be working today, mostly on the website; so if you have suggestions about anything from the font to content and links you would like to see, let me know.

I keep Wolf on Wall Street clean and free of ads (Google Adsense, affiliations, etc), however I am adding two links,  Worden's TC-2000 and StockFinder. I have had a lot of questions about software and I have used Worden products for over a decade now. I'm even an affiliate for Worden and I take my affiliations seriously. I use to be an affiliate for some other services (Trade Triangles, Stock Ideas, etc) and I didn't find them useful so I took down their ads at www.Trade-Guild.net and cancelled my affiliations, even though it was a little extra money. I believe that if I don't use it, I'm not going to represent it.

The reason many people ask me about charting software is because they want to use my proprietary indicator 3C. I have many other proprietary indicators, such as my Trend Channel, my Crossover Screen and custom indicators, scans, etc. but most members ask because of 3C.

3C will only run on Worden products and right now, specifically only TeleChart and StockFinder-not TC-2000 yet, although I do use TC-2000 and especially love their real time charting software that has all of my indicators, scans and watchlists right there on my I-phone for when I'm away from the computer. So you will see links to Worden on the right side of the site...

I use to share 3C with anyone who signed up using my links or telling Worden that Trade-Guild.net sent them, I don't anymore. The only people who can use 3C now are WOWS members because the indicator is that powerful and it is complex and only WOWS members see it every day and start to understand how to use it properly. If you sign up using my links or tell them Trade Guild.net or affiliate #335 sent you, they pay me a small commission, which costs you nothing extra. If you don't use my links/affiliation, just as well. I use Worden products because I believe in them and I'm happy to share my indicators with members.

Other services that I would recommend, and I am not an affiliate for these, would be Briefing.com, it's an excellent resource that is unbiased, just pure market news as fast as you will find it anywhere.

I also think it's a good idea to have a copy of the "Stock Traders Almanac" for the current year, there are abundant resources in each volume and it WILL give you an edge.

I also added a translate feature to the site for our many worldwide members, I hope it is working well. It can be found at the upper right hand corner of the site and translates in to many languages.

I'll be adding some links to commonly asked questions and some past articles I wrote that I think may be beneficial. So keep your eye on the site, I want to add things that will enhance your experience at WOWS, not to clutter the site.

As always, suggestions are appreciated.

ENJOY YOUR WEEKEND!

Portfolio Performance

As you know, I keep a portfolio to track WOWS/3C signals and trade ideas. I don't get to trade it much because I'm busy with analysis, updates, emails, fixing broken email systems, etc. However, when I do trade it, it's only the ideas and updates from WOWS posts and only after they have been published here first.

Here's the WOWS ranking for the week and month. This is equities only, NO OPTIONS, but I'm thinking of seeing what kind of performance options would produce.

 This is the performance vs. the S&P for the week and month along with the rank against all other portfolios.

 This is the monthly ranking, placing # 32 out of 9827 portfolios

This is the weekly ranking at #19 out of 8304 portfolios.

Now if we can just get a managed fund together and support some charities, one of my favorites is 4Kids of South Florida which I am a member of the development council. This organization does incredible work with foster care in South Florida and has the highest success ratio in the counties they work in, so much so, local governments have asked them to work in their counties as 4Kids provides a network of support not only for the kids, but the Foster parents as well.

If you live in South Florida, check out the great work 4Kids is doing. To me what religion someone is isn't what's important, it's results they produce.

There are many other fantastic charities, but one of my main goals is to eventually help people who need and deserve it, but fall outside of the system's that provide help. In other words, people who need help, but an't get it through the systems in place. I know it's not good business from a tax deduction standpoint, but these are some of the people who need the help the most. I'm blessed to work doing what I love and helping my members, hopefully one day that can grow.

A word on the Wolf Pack real quick, I don't know what it is, if like energy attracts like minds, but I have some of the greatest members I could ever imagine-GREAT PEOPLE. I was always concerned with what kind of people the site might attract. I don't know how it happened, but I'm blessed with some of the best people in the Wolf Pack I could ever ask for. I appreciate EVERY ONE OF YOU!

Have a fantastic weekend!

Ill be posting a big update this weekend to update the bigger picture. We have been concentrating on the short term because the markets have been so choppy and while I use to teach my students to just stay out of choppy markets and stay in cash, I know the strengths and potential of our membership and today I saw that the Wolf Pack is nimble enough to make good money even in this difficult market.

Could it be?

The big afternoon tease, could it be getting ready to materialize in to the close?

 FXE to rise-knocking the dollar down and sending stocks higher? I don't see why the Euro would be discounting next week with all of the uncertainty in Euroland.

The dollar showing distribution, again equity positive?

 Late improvement in the IWM

 And SPY

And the TICK chart starting to trend up?

Could the big tease actually happen in the last 30 minutes?

Market Update

Well this is a confusing mess. All I know is the longer term charts look bad, so I took partial profits on my shorts and will hold the rest , even if we are setting up for an end of day bounce or a Monday morning bounce.

 DIA 1 min is not acting well, but not off a cliff either

 Same with DIA 5 min

 IWM 1 min looks better

 But the 5 min isn't showing the accumulation in to the test.

 QQQ 1 min looks pretty good here.

 The 5 min doesn't look as strong as I hoped for earlier, but not bad either.

 SPY 1 min is still in the area of a possible bounce, but just hasn't added the strength we usually see on a test of resistance.

The 5 min doesn't look bad, but it did not add the strength I hoped to see earlier for a bounce.



As for those longer term charts I mentioned...

 IWM

 DIA

 SPY

QQQ

All suggest this market will see lower lows before this is through.

For Example

Here's a possible head fake in the Q's

Market Update

 I don't use this tool often, but on the 5 min chart, it is showing more accumulation at the second low or the test I mentioned in the last post.  The 1 min chart isn't holding up as well.

 However, the 1 min is still in the range that a bounce could still pop from here

Now that we have a very well defined region of support that every trader is watching, don't assume a break of support is a move lower, remember, HEAD FAKE!

Market Update

We have one more chance for a bounce here...

 DIA 5 min, probably 50% of the time we get a test of the first positive divergence and then a move up, this looks like it could be that situation, although we still could use Euro support, yes I'd like to see a bounce to add shorts. Besides, it's healthy so we don't get an oversold condition.

 The IWM needs to see 3C move up a bit from here to bounce on this test.

 QQQ 5 min-looks the best thus far

 The 1 min SPY also needs to see 3C move higher on this test.

The 5 min still looks decent, but the market will be discounting the German news I posted more then likely, before the EOD.

A test like this would suggest a decent intraday bounce rather then a single positive divergence.

Consolidation

This "bounce" is starting to look more like a consolidation and that's entirely possible based on the signals.

TLT is showing signs it wants to start moving up again as a safe haven trade and if the Euro can't rise, there won't be much more upside.

Bad to Worse For Greece

I couldn't title this article any better. We know there are legal issues dealing with the European bailout mechanism, we also know that Angela Merkel has thrown her political career on the pitchfork over this issue, it is HIGHLY UNPOPULAR with the German people and why shouldn't it be?

Now, there's a potential issue of a referendum and we know how that will go down with the German people already fuming and ready to send Merkel packing.

You have to read the story for yourself, it is very, very bad for Greece and probably the market as well.

Maybe the G7 will pull a rabbit out of their collective hats?