Wolf on Wall Street

Monday, April 29, 2013

Intraday and some longer term Leading Indicators Shaping Up

Meaning they are going in a way that is negative for the market. I wanted to make sure with this Put exposure, I feel confident. If I can get some charts out before the close I will.

SLV/ AGQ Long

I just looked at GLD and SLV, this isn't long term analysis of GLD or Silver like last night's post. I saw probabilities in GLD, but not high probabilities and a really nice set up. SLV had better probabilities and a slightly better set up.

I do not think I would use options for this trade (pullback move-perhaops a gap fill) and the AGQ long leveraged position was chosen exactly for this reason, it has some leverage, but can withstand some pullbacks without serious draw down, allowing us to capture most of the trend. Options do have their place, but that's in Very high probability trades with set ups with the trade coming to us.

Although I think a SLV pullback is high probability, I don't think it's worth messing around with the AGQ long that is already about 8% in the green.

SLV Charts

2 min intraday is negative here, there is a bit of a gap below and the market has been relentless in filling gaps since thee rise of HFTs.

5 min SLV also negative and looks like it will fill the gap, I think in that area either AGQ long will be a nice new long position and possible some calls.

SLV 15 min is negative, but not extremely bad/leading.

The important chart is the trend for now-note the distribution and the head fake move in yellow before the reversal, similar to what is going on today in the market and then the leading positive divergence, I suspect this may be part of a counter trend BEAR rally, but these are the strongest. I see no reason to close AGQ at this time.

SPY 5/18 (monthly) $160 Put

IWM 5/18 (monthly) $95 Put

Adding to both IWM and SPY Puts. ***

Except I'm going to add to them with longer expirations and in the money.

Update

I was thinking we were going to see a small interruption in this uptrend before it continues, now I am wondering if we see that at all or we just see this trend finish up, there are a lot of assets to look at, but I think it's very plausible.

SPY...

SPY 1 min has shown distribution in to higher prices all day, there's a very obvious level traders will be watching that I just posted for the SPX/SPY.

SPY 15 leading negative right here which started last week, that seems a little long for a quick pullback.

30 min is leading negative in a very big way.

I'm going to check leading indicators again, this may be why some of the currencies that should be moving and have the 5 min and longer strong divergences, seem hung up today on the 1 min charts like a record player skipping at the same spot over and over.

Not changing any positions, may add to some.

Yen Crosses

I think some of the Yen pair like AUD/JPY, EUR/JPY and USD/JPY are going to see downside very soon, this is not market supportive.

Remember the 2-part Yen article about 4 weekends ago (I spent about 10 hours on it), well the conclusions I came to look like they are coming to pass, the break out of the Yen will almost certainly correspond with a very nasty patch in the stock market.

Here are a few Yen charts...

Yen 1 min intraday, I think this alone will do some damage to the market, the positive divergence suggests the Yen is about to make a push higher, it will probably correspond with an afternoon break in the market.

Yen 5 min which is a more serious timeframe, is also in a strong positive divergence and has some fuel in the tank now, but this gets much worse.

The 15 min chart is just at a normal correction and ready to resume its move higher, the 1 and 5 min charts are the charts that will move it higher and the divergence will almost certainly migrate across the 15 min, but the positive is already there, I just don't have enough history to show you the entire thing.

Yen 60 min is a VERY serious timeframe, it shows the strong distribution just before the BOJ new QE policy was announced, that was about 8 hours of distribution before the announcement and Yen crash. The positive divergence at this rounding bottom is what I was thinking we would see when I wrote that weekend special, "Currency Crisis", so far everything I expected to happen has happened. It looks like the BOJ may have lost control.

Look at the size of the leading positive divergence on the 4 hour chart of the Yen

This Daily chart is EXTREMELY strong underlying flows of money, don't let the smaller divergences fool you.they represent huge flows. There's not a single positive divergence in the entire Yen downtrend sionce October of last year just as the carry trades were being put on for the Nov., 16th cycle low. Now we have a positive divergence in the trend and right where the BOJ policy announcement was. The sharp fall in price is like capitulation, all weak hands were washed out, accumulation started the next day and has continued ever since. This reversal in the Yen will have far reaching effects on all kinds of assets and few stock traders will have little if any idea what is really moving the market.

SPX Target-$1597.35 /SPY $159.71

UVXY & FAZ Charts

UVXY-short term VIX futures (leveraged long)

1 min intraday

2 min leading positive with a nice rounding bottom area.

Just to show you, this divergence goes out to the 15 min chart in leading positive position, I don't expect a long trade, but perhaps a couple of days.

FAZ 3X Leveraged Short/Bear Financials

2 min intraday

3 min intraday

Again, leading positive out to the 15 min chart, the last turn down did not see any strong distribution, I'm thinking this could put in an impressive move.

Also Adding to FAZ Long Equity Position

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.