Wolf on Wall Street

Monday, March 11, 2013

Financials

Negative momentum in Financials is picking up

Here's the strange, almost short squeeze looking price pattern. I'm sure volume and algos are responsible.

XLF 5 min trend-it's actually worse zoomed out, but the recent activity is the point.

FAS is seeing the same

A closer view of XLF on the same chart.

I can't add to the position because of risk management, but I do like FAZ long here or XLF short

Keeping UVXY Trading Position open

No positions have changed, just added the IOC short.

There are so many things happening it's ridiculous, the IWM looks like it's about to come down, the same for the R2K futures.

The Q's have a little more support intraday because of AAPL, but not beyond intraday.

The SPY/SPX/ES is also looking very bad with sharp divergences, I'd say it's coming down.

I believe the same true of the Dow and specifically transports.

Financials have one of the craziest prices moves, almost parabolic, very short squeeze looking, but I suspect it may be a function of algos and volume, I personally wouldn't close FAZ here, Financials /XLF also gave the same monthly sell signal in the SPX from last night's post.

Credit is starting to come down, the Yen looks like a shakeout, almost double bottom.

More in a minute.

Dow Volume

I can't pull up the other's daily volume in a custom indicator until after the close, but this was one of the issues mentioned yesterday

The volume situation as of yesterday was not good, I know the day isn't over, but...

Today it's looking even worse.

Beyond that...

Intraday 1 min

Intraday 3 min

At the Institutional level 5 min

And I trust the concept of confirmation and non-confirmation of a price trend is understood on this chart as it shows both, ironically right at a natural False Breakout/Head-fake area.

IOC Charts

This is a 5-day chart, I'm not going to call this a H&S top because it's not, but other retail traders will look at it that way and our rule is we never want to short the first break of a neckline, the only places we want to enter before the neckline is broken is the top of the head or a decent shoulder.

60 min chart

15 min chart

3 min chart.

I like IOC Short Here

This is an Energy play, I think I'll try to add some to this one as it was a core position that was traded around.

Charts coming-be careful not to have too many correlated Energy assets

Remember the Transports...

I mentioned them earlier, funny how they seem to be pulling in to today's strange market, I said I was expecting them to lose more ground so that's not strange, I'm just trying to figure out hat the angle is here before deciding whether or where to make commitments.

I really don't see IYT as being worth a trade, but I do think it is an important sign post along the way here.

Charts

Today is a very strange market, I can't put my finger on it and it's not standing out except some moves in currency.

Lets start there.

The Yen with an intraday positive and the 5 min chart is still very strong, no damage done there at all, I'd think the Yen heads higher.

The Euro just took off, sending the Dollar lower or vice versa, however both are already showing divergences and the start of moves back in the other direction.

$USD falls, but has a positive intraday chart.

As for the futures, the SPX and R2 futures look even worse (3C) now which is only minutes after these were captured.

ES intraday leading negative and it's even deeper now

The NASDAQ is in a weaker relative negative, it's the weakest of the 3 signals.

The Russ 2K is showing a worse signal now too.

So far this looks currency driven, but it seems obvious volatility was tried first to move the market, then desperately even AAPL was used, I'm not sure what the polar opposing forces are about, but there's something working against the market (longer term that's not a mystery, but intraday I can't find it).

Strange Day-FX rules apparently

First the Yen down, then the Euro up and USD down. However I don't think these prices are going to hold, I'll get charts up next.

Still all about the Yen

This is the clearest correlation, still...

The only point the market gained any momentum with some ease rather than push/pull is when they Yen dropped here (red).

The Q's and IWM are still stuck in a rut and can't get above the gap.

Whether the SPX and DIA can hold any gains, even these with those two on their backs is doubtful, if the Yen changes course I'd say very doubtful.

What is still puzzling is there seems to be something clearly acting as a weight on the market, I just can't find it, other than perhaps the Yen as we see what happened when it gave some ground, but still the Q's and IWM weren't able to do anything with that and to make it worse for the Q's, it looks like AAPL's chance to try to run toward the gap is fading

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.