Wolf on Wall Street

Wednesday, May 22, 2013

TLT Charts...

TLT intraday accumulation at a head fake move!

TLT 2 min leading positive

3 min leading positive

TLT 60 min

SPY Charts...

Jump to the last 3 charts for the most current intraday divergence, it's very small vs the big picture

SPY 1 m

SPY 2min

SPY 5 min-straight leading negative drop-that's nasty stuff.

SPY 10 min-again, it's very clear in retrospect that something was wrong, it's not so easy when it matters the most-selling in to price gains.

SPY 30 min in just a day

Current SPY 1 min

Current QQQ 1 min intraday, but as far as strength-look to the 2 min...

QQQ 2 min, not much behind this. This appears to be a very serious break, but not just today, it's been building for some time in a very extreme market.

The charts that have mattered, 5, 10, 15 , etc that have been leading negative make this move look like exactly what I expected, at least the start of it.

What is important intraday is to watch the averages, the levers , the sectors, etc.

Thus far, the only 1 min positive I see is in the QQQ and only 1 min which should be expected in the context of even a move like this, everything else so far is in line with the averages, I'm trying to watch everything at once, but it looks like what we have been seeing, the selling of risk on strength and buying of safety on weakness is playing out before our eyes now which will be explained in a 2 sentence statement on CNBC, but this is an underlying trend that has been building for days, weeks and months.

I'll try to keep you up to date as possible.

For options that are going green that expire near term, I'd take profits or reduce risk if you feel you need to in to this momentum and new positions can always be set up. Right now I'm not making any changes, not even to this week's expirations as of yet.

We suddenly jumped in to 8th place of 700 portfolios with a 15% gain today across all options, this obviously shows we were positioned in the right way, timing could have been better, but we wouldn't be in 7th place of 700 if we weren't positioned correctly vs the crowd.

TLT Accumulation looks to be continuing

Bottom Line on the Minutes

No matter how many F_E_D speakers come out, no matter how Bernie sounds like he's unaware of what every other member is thinking, all that matters right now is...

*SOME ON FOMC WILLING TO SLOW ASSET PURCHASES AS EARLY AS JUNE

HYG...

This is an institutional risk asset, I told you t started to fall apart from it's bounce within a larger move down. As a leading indicator, this is one of the negatives we look for re: a market reversal, these are some of the biggest dislocations in Leading indicators...

HYG selling off right at the top of today's intraday highs...

After the large sell-off- which is important as a leading indicator vs the SPX, it formed a small base, I told you BEFORE HYG moved at all, that it would bounce and in my view it would be sold in to any strength. I also feel like HYG as an SPY Arbitrage asset to help with short term manipulation was used specifically for last week's moves in the market, especially Thursday's failed triangle breakout attempt and Friday's successful one.

White is HYG short term accumulation, red is the second push higher helping the SPX to try to breakout of Thurs. triangle-FAILED. Green is HYG's push higher helping SPY breakout of a smaller triangle. Yellow is the follow up run as bulls came in to the market, HYG was under heavy distribution there.

HYG update vs the SPX

HYG breaking the trendline, there's always going to be some initial support there...

HYG 2 min distribution today at the highs

3 min chart showing the entire cycle from accumulation to the moves higher all being distributed.

5 min chart seeing heavy distribution and totally falling apart at a new leading negative low.

10 min chart is seeing migration, it never went positive, just in line, but it is seeing distribution so it is heavier than just a 5 min chart.

How do you play this, you can buy options for HYG, but I think it says more about the market and where smart money is going, a different direction than the SPY. HYG is to smart money what the IWM/QQQ or SPY are to retail.

TBT / TLT Charts

Here we go, I'm showing both TLT (20+ yr Treasury bond ETF) and TBT is the 2x leveraged short of TLT. I use both for confirmation as they are totally different volume, different leverage, direction and management.

TLT stop earlier- you know what the volume looked like, biggest of the year for a bar. The next run below didn't hit any stops, I'd say this looks like an accumulation range.

TLT v SPX

TLT v SPX longer under the recent support range, remember head fakes are typically seen right before a reversal (to the upside here).

TLT 1 min in line, now going positive.

TLT 2 min pos.

TBT (the short 2x of TLT) negative

TLT 5 min positive in an important timeframe.

TBT 5 min confirms TLT 5 min above

TLT 15 stayed very positive.

TBT 15 min is negative-confirming TLT 15 min-these could move easily by now and big, I'd say they are.

TLT 60 min positive

TBT 60 negative

TLT and TBT confirm each other. A VERY interesting day for TLT, it has been an asset that has been under accumulation at every little dip.

Market Update

I'm trying to get the TLT and Leading Indicator posts ready, but for now, there are sharp negatives in all of the averages, I mean sharp. Maybe because of the minutes, but we haven't seen any accumulation on the move up, we are seeing it now, sharp!

Went With TLT June (Monthly) $115 Calls

Again, speculative in size, but something is going on here, it has been for a while, today is insane.

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.