Quick Market Update

I'll post some charts, but it looks like an intraday pullback is coming, I'll see if there's any way we can use it, but looks pretty standard right now.

PCLN Example Short Candidate

When we can, I prefer to find trade candidates in advance, lay out what I'd like to see happen if I think there's a good probability of that happening and if it happens, then we can enter the trade on our terms, the stock has come to us, we have a better entry and less risk.

I have kept my eye on PCLN for a number of reasons, but now I believe it may be getting close to an actionable position, especially if the market cooperates for a brief time.

 I like to start with a weekly chart, in PCLN's case, the tone of trade is relevant in this situation since about 2009, before that PCLN was advancing on increasing volume which is healthy, after it is advancing on decreasing volume, not so healthy.

Also in the yellow box PCLN has made it's first lower high, we found out how important recognizing the early changes in a trend are the last few weeks with currencies which led to this week's sell-off.

 With a pretty wide Linear Regression channel on a weekly chart, PCLN pulled a Channel Buster in the red box, these always seem bullish, but they are a change in character that often leads to a fast move to the downside.

 On a daily basis, my De-Mark inspired indicator has shown a buy spot and two sell areas, Bollinger Bands look to be narrowing and that may be for a directional move, I'm kind of hoping it's an upside move we can use to enter PCLN shorts, I'll show you that below.


 The hourly chart in PCLN has broken down and is leading negative on a very important timeframe.

 The 30 min chart has done the same in the same area.

 As has the 15 min chart which saw a small accumulation area, but so far no confirmation of this gap up, there are several charts confirming weakness and that gap being unsupported is a further sign.

On a daily chart, I'd like to enter a short here on price strength, the red trendline would be one potential head fake breakout area PCLN might try for, we see these head fake or failed moves frequently before major reversals, there are two inks at the top right side of the site explaining Head-Fake moves.

The second area would be above the linear regression channel around the yellow box.

Basically we want to see if PCLN can make the breakout move and confirm that it is a head fake using 3C to see whether the move is confirmed or whether there's heavy selling in to the price strength, if there's selling, then we have a high probability, low risk short entry.

Keep PCLN on your radar.

URTY/TQQQ - IWM / NDX Update

Yesterday's long positions in URTY (3x long IWM) and TQQQ (3x long QQQ) also seem rather well timed. With volatility picking up (which means the moves up and down are likely to be exaggerated), I felt a little less leverage would be a better solution right now to ride out consolidations, possible pullbacks, etc while remaining not only hedged, but also making extra money on top of the hedge.

Excess leverage and volatility can be a lotto ticket, but I'd rather have consistent winning positions than a lotto ticket.

Here's the update for the underlying positions, QQQ and IWM and what I saw yesterday that I wasn't sure about, but felt strongly enough about it to go with the 3x leverage over the options.

 IWM 1 min is in line so far this morning, putting URTY at over a 3% gain this morning.

 The 3 min IWM chart is leading so the near term looks good here for more upside.

 This is what intrigued me yesterday, but I wasn't sure if I could trust it, that's a pretty big positive divergence on a 15 min chart, but considering volatility, I think this could be a true signal; if so then I don't want options as they wouldn't survive the entire move and thus not work as well as a hedge. Additionally with the increased volatility, there's no need for the increased leverage which is selling at a higher premium due to the volatility.

 Longer term though, I'm not fooled by a 15 min chart, this 30 min leading negative divergence is the trend's back broken.

 The Q's look like they could consolidate a bit in the area, TQQQ is up over 2% this morning so far.

 Just beyond at the 3 min chart, like the IWM it looks like there's more upside in the near future (as in today).

 Again that 15 min positive divergence that wasn't fully developed yesterday and I wasn't sure if it could be trusted, today it looks much more solid.

Again, the 60 min chart shows the trend's back is broken.

GLD Update

Closing Friday's GLD calls yesterday for a 60+% gain (one for 600%) looks to have been nearly perfect timing. We have a pullback and I want to open a new long GLD/ Call position, but I think it needs a little time before we do that, even though I think it's likely we see some bullish looking intraday movement, I'd stay patient with GLD and I wouldn't short it here as you'd be betting against some strong probabilities in a market that is seeing increasing volatility and short term unpredictability.

Here's the update for GLD...

 GLD's 2 min chart gave a good signal for a tactical exit yesterday.

 The 5 min chart shows some stronger underlying short term weakness.

 The 15 min chart though is what really makes me say, "Hold on".

This 30 min chart is what tells me we'll be long GLD again soon, I just think it has more consolidation to go first.

Dull Overnight

After flipping through the overnight news and markets, there really isn't much that's exciting to report or even market moving except maybe that Bernie is in front of the Senate again today. Sure, Italy sold 5 and 10 year paper at higher yields as would be expected, but nothing that really wasn't already there, perhaps that's why the market is so flat since yesterday.

Even the futures look a bit boring...

 ES 1 min with a small negative divergence that already sent price a bit lower.

NASDAQ futures with a positive divergence around 5 a.m.

Tight now the 5 min chart are nearly in line with price, ES is just starting to diverge a bit to the negative side, that might actually make some sense if we get a solid bounce for a day, maybe 2.

Performance

Until the new website is up and I decide whether or not to trade a real money portfolio (it would be great as a model portfolio rather than a tracking one and would have much better performance) as a model portfolio or not, we'll have to stick with the tracking portfolios which are way too many positions, performance is diluted do to the number of positions.

The problems I face with a real money portfolio are : 1) My members' should come first before trades in that portfolio, as you know the market can change in the time it takes me to write a small market update. So in this respect I either don't pay attention to our hard earned money like I should or I don't give 100% to my members like I should. I have toyed around with the idea of a small portfolio of about $1000 because these are the hardest to manage, your risk management has to be spot on, but I think it would be an interesting challenge.

2)  Although I would NEVER do something like this, conceivably if I put out a trade idea and front ran it, I'd be making money at the expense of my members and I don't even want to be accused of something like that.

3) I have concerns that a model portfolio would be an endorsement of a specific position so long as it is listed and as you know, I only endorse a position at very particular areas that rarely last more than a few days, after that the dynamics of the trade and risk:reward relationship change dramatically and while I would hold the position, I would not encourage others to enter the same position unless it came up again as a new trade/add to position in the right place at the right time.

4) This is sort of the same as 3, I would not want members to feel the 5 or 6 positions I would trade at max would be the positions they should take. I put out a lot of ideas because we have an incredible array of different trading styles. I personally am very tolerant of risk, I wouldn't want someone taking the same trade I may have took based on nothing more than timing, thinking it is a superior trade to others put forth. It's important the trade fits you, best of all it's great when member's chose their own trades based on market updates and other information because they are really making the trade their own and trading is not about one style being better than another, it's about what works for you: your risk tolerance, your portfolio size, tour objectives, the time you have available to watch the market and your experience.

These are just a few things I have to consider as I'm deciding what the new website will incorporate.

If you have things you'd like to see incorporated, feel free to send me an email, but several things I'm looking at will include:

-Candidates list-these are positions I'm interested in, but the timing isn't quite there.
-Some sort of open positions, the problem I had with this last time with a Spreadsheet was updating it took hours every day, I prefer to update a position in a post which is more useful and at least I know someone is in the trade rather than updating dozens of ideas no one is in.
-Model Portfolio, however this is my last priority as far as my time goes as well as the issues above
-Specialized custom email filters, allowing you to pick and chose what types of updates and trade ideas you want in real time, the rest you can look over at the site or receive all.
-Risk Calculator so you can easily figure out position sizing
-If I can make the site more time efficient, than I might add a weekly live seminar
-A more complete collection of useful articles/links, I have thousands of posts, some very useful.
-Possibly a Trading system or trend classification system, this will cost a lot of money to do, but I'd like to be able to allow you to enter a symbol and get a 3C perspective of short, intermediate and long term.


There are quite a few more things, I want to avoid things like quotes as you can get them anywhere.

In any case, a new website was one of the New Year's Resolutions for this year, but we have grown so fast in the last 6 months and really exponentially over the last few weeks, we are literally out of space for new members on the Blogger platform. A few things I'll have to reduce like email support, for current members it will stay the same, for new members it will likely be an additional option with a limit per week, unless I can convince one of my longer term members who understands 3C to come and work for me-George, Sam?


Any way, we continue to do very well with the large tracking portfolio, I just looked as of the close today and really it doesn't matter to me all that much, but it tells me a lot about how other traders are negotiating this market and in a way, it's a sentiment/performance indicator.

While I think finding your own style is crucial, I also think there's a right tool for every job and out transition to weekly puts and calls and holding them for 1 to 2 days based on the signals was absolutely the right tool for this market, now that volatility is moving up again, that will change.

Here's the performance of the options portfolio which has been astounding, I think we are somewhere around 16 or 17 trades in February with only 1 loser of -2.5% and 1 possible loser that is still open, everything else has been a big success and I was doing some spring cleaning in there today and closed out 1 GLD option position I forgot about for a 600% gain.

The Weekly Rank is #8 with an overall portfolio return of 12%, that's better than most hedge funds did all last year.

The #8 position means we are in the top 1/10th of 1%. What this tells me is that our tactic of hit and run, not getting greedy, not staying in the game long enough for the house's edge to overcome our position and being selective about the positions we have taken, has been absolutely the right tool for the market environment, which is now changing due to increased volatility.

The Options Portfolio on a monthly basis which is funny, because I'm not a big options fan and I'd think on a monthly basis we'd be near the bottom for lack of trades, but we have had quite a few over the last 3 weeks, so we are at #19 with a nearly 25% gain on the month, boy would I like to annualize that performance!

At #19, we have a lot more competition in the monthly category, but are still at an impressive 1/10th of 1%

The weekly Equities portfolio is where we have been building positions in expectation of some of what we saw yesterday, these are longer term positions, but they have done extremely well over the last couple of weeks, we're at #42 of 1519 with a +6.36% gain on something over 25 positions that are in the tracking portfolio so that's pretty impressive for the week.

In any case, this just affirms that we have been on the right track both short term and long term, the longer term equities is just starting to come in to its own, 6 months from now I'd love to see where we are.

Again if you have suggestions or if you build websites, feel free to email me. If I don't get back right away know it is because I'm either overwhelmed with work or I'm taking an hour to eat with my wife.

The Reason for the last Entry (TQQQ Long)

First let me just throw out there the very real possibility of a larger base, rather than today's "U" shaped as we talked about this in last night's market wrap with regard to reversals being more of a process than an event, there's also the "W" shape which was mentioned last night and today many times; this would take a second day and look more like this.

Follow the green arrows to the right. If that type of base continued forward from here, as long as the 3C signals were growing in strength, I'd look for a break below the red trendline (a shakeout and a move to pull in new shorts) and I'd look to add to the speculative long in TQQQ/URTY because the larger base would have larger implications for a bounce. Wd don't have any evidence of that at this time, the closest thing to evidence would be simple market behavior.

As to why I decided to enter the TQQQ portion just a 20 minute or so ago, here's why (and this is more for those of you trying to learn 3C)...

 The intraday negative divergence that halted upside momentum started to end and go positive, with overnight futures having the ability to change the outlook dramatically, I'd rather enter before the close on the start of this new signal even though it's not quite mature.

In ES, we see the same thing and this is a bit more mature than NASDAQ futures, but that's the reason.

Entering TQQQ

This is the second half of the URTY/TQQQ speculative long position

More Data

This is just more data that backs up my position that we will almost certainly see a correction/bounce to the upside, the thing is, saying that or hearing that right now sound reasonable and most people feel like, "OK, cool, this will be an opportunity like he's been talking about".

However, Wall St. rarely does anything half-tooshied. When they wanted a low volatility melt up to drag dumb money back into the market with no pullbacks to scare them and a bunch of nightly news headlines, "This is the highest the Dow has been since XYZ0!" they did it and did it well.

When they want to scare people out of positions, they do it and do it well, you'll see a downside move like yesterday that sends longs in to a panic, shorts chased it and likely we'll get an upside move that may indeed make that all-time new high in the Dow that CNBC was talking about yesterday morning just before the market crashed.

The point is, be prepared for an emotional assault that is meant to touch on the two things that move the market, FEAR and GREED. 

This is all part of my market Pendulum concept, it swings way too far one way and way too far the other, don't fear it, it truly is a gift/opportunity.

To give you some proof to sustain you, although I doubt you'll recall if we get the kind of move I'd expect, here are a few charts....

 VXX which is the short term futures for the VIX, moves inversely vs, the market, market down, VXX/VIX up. This 10 min chart shows the positive divergence going in to yesterday's bloodbath and the VXX did well on that move, up nearly 14% yesterday.

However check out today's relative negative divergence at new highs, this suggests a near term pullback in the VXX (which means the market moves up near term).

 However if we look at the charts that really matter here, the 30 min VXX chart shows no sign whatsoever of any distribution, it is in line and positive, meaning the move should be short term only and the VXX continues higher after that, traders who have built a longer term long in VXX are not selling it, just some people like us trading around the market, market makers, specialists, traders, etc.

TLT-20+ year Treasuries-The Flight to Safety Trade

 We looked at this yesterday, the 1 min chart (intraday) shows distribution, but that's short term as TLT also trades opposite the market.

At a more importnat 15 min chart TLT is in line perfectly, no distribution. So if we get a very sharp bounce to the upside, try to remember these things (I've put a lot out there) and not react emotionally, but use the gift given as just that.

Going to Open Spec Long in URTY

I see some changes in the 1 min ROC and I really need to focus on the market more than positions.

This will be 50% of a normal position size, if we get some more weakness in to the close, I'll add TQQQ long (QQQ 3x leveraged ETF) at 50% to make 1 full size position between the two, I'm more than hedged on these positions with core short positions built.