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Thursday, April 25, 2013
STOCK MARKET SELL SIGNAL - ONE LAST
The above chart is the Bernanke 500 formerly known as the E Mini S&P 500. I have a very short term trading system I have been working on that enters at specific spots and exits on the first profitable opening. For Friday a trade is indicated one tick below today's low, it is a short entry. This system has no bigger overall significance, it is just a short term trade designed to get in and out very quickly similar to the Bond System. Most of my other techniques designed to catch more swing types of trades have turned up enough to negate a short entry. That situation could change in a few days but for now it is a no. What I am left with is just this short term system trade in terms of trading a short in this market.
We are getting nice relief rallies in the metals after the recent meltdown. One of the old adages is support becomes resistance, so if that is true the 1530 area should provide a good selling point for another leg down. It is a commodity just keep that in mind. Technical indicators have to re-cycle after you get a move as big as that because they get stretched to levels rarely seen. If you trade using them study what happens with them when these extreme short term moves take place. I think you will find that they give a lot of false signals following time periods like this.
Getting back to the trade above, you can see the momentum divergence that has been building with now a large 3 point divergence in place. There have been quite a few false setups like these since the FED took over the stock market so it is tough to have any strong enthusiasm about this divergence which in normal conditions would be meaningful. The trading patterns in this market are so odd now that I don't know what to make of them sometimes. We go through periods where the volume just falls off a cliff then out of the blue accelerates quickly. HFT they cry, perhaps, but that does not explain the periods of no volume in my mind. I wind up not trading this market as much as I used to because these patterns are so screwy my trades don't setup as much in the indexes.
Here is a general look of the Gold resistance setup.
Have a great weekend
Wednesday, April 24, 2013
STOCK MARKET BREAK OUT OR ROLLOVER?
We have bounced enough now where we have taken me out of my ideal setup for a sell in the Bernanke's. All we are is one more bad economic report away from a new high. How ironic is it that we need bad reports for stock rallies? If you keep in mind who is doing the buying it makes sense and we have to keep that in mind at all times. It does make trading the stock indexes very difficult, it is essentially a completely bogus market at it's core now. That flash down and reverse the other day on that twitter skit was really interesting. I think the complete lack of volume tells us that many people are just elsewhere where the markets are still somewhat free of direct manipulation. If you insist on being a 5 min chart ES trader best wishes, that is just impossible in this day and age.
What I am looking for now is for us to move sideways for a few days to see what happens. We could just take off again, the short term things I use are now mixed. I do have the one component above that is bearish still showing a potential roll over in the price momentum, yet basis the ES we are almost back to the highs. My other two things I use have both turned up too much for a short right at the moment. There is nothing for me to do here right now. I did get popped on my B of A short for $400 on 1,000 shares. The problem like I have mentioned so many times, is trading individual stocks is almost pointless, they all just match the Bernanke's and are less liquid. When you get an ES rally like this most of them just go up right with it.
There is talk now of this great GOLD SHORTAGE and runs on the mints etc.. Has anyone questioned this at all based on the fact that the futures markets have not moved? Who do you think these buyers are, Small spec types or Commercial insider types? This is akin to a huge buying binge by small speculators in my view. I suspect this is a pump and dump scheme hoping to ignite a futures rally so those who know now they are stuck can get out a little better. The whole thing just seems fishy to me, but I could care less I trade on technical things not this kind of stuff. My general feeling is this it the dumb money buying not the smart but who knows.
I am hoping the new web site is going to be up any day now so I am dual posting in it and the separate blog. One day this week you are going to check in to the site and viola it will be the new one. This has taken so so long I am going to get it launched and make it what I want it to be over time. It was supposed to take 6 weeks and it is now more than 4 months. I do not have everything exactly as I want it there since time is short for me at the moment. The pay for services section is not setup correctly yet and it is something I have to figure out and will try to do that ASAP. I do have some videos loaded which I will build upon over time. The daily signals are still going to have to go through Aweber like they are now until I can test the lists I have imported to make sure they are all correct. Once I have done that the signals will be in the web site each day so you will be able to just log in and get them. I suspect it will be a month before we get to that point, but will try to get it done faster.
At this point people have seen the changes in the Swing signals and how long we are staying in the trades. We have been in one for 14 days now and another for 7. The markets have been somewhat choppy and that is typical after you get sharp moves in things. There is a natural cycle that takes us from smooth to choppy and back which is frustrating. I try not to press too many bets and stay patient when I think the circumstances are not as favorable for runs. I do not always get it right
This would have to fall into the who gives a ... category. There is no news of any kind I know of other than what appears to be all sorts of people selling their claims to the bad debt firms. At this point it is probably wise to do that because there is no time table for any other distributions, a corrupt judge who is taking a long leave of absence, and a general who cares attitude about things. It does not appear to me any more money will come back to any of us this year. Waiting an additional year just to get maybe another 10% beyond what you could sell for now is probably not that smart, but it is what I am doing. I think this is what happens in most of these cases, you get an initial wave, the reporters go nuts, then eventually they move on to the next Brokerage firm Corleone caper. We have had 5 stories now since PFG of shenanigans with Seg money, FIVE! Some of them actually occurred at the same time PFG did, but the people were not caught until later, then fined. This should confirm what I have been telling all of you, this is going in everywhere and it is a matter of time before another one crashes. If you have not done so split your money up to protect yourself. Also look at the lag time involved in them being caught. Remember if they go down at any point even if it is a day after they do something, your money could be completely gone or tied up in court for years. Catching them a little faster means nothing for getting your money back. Once it poofs the process starts.
If you think Uncle Sam is looking out for you prepare to be disappointed.
Stay patient maybe the beginning of May with it's seasonal bias to the down side will bring us some action.
Tuesday, April 23, 2013
DOLLAR LOOKS LIKE THE INVERSE OF GOLD
While I was perusing the charts tonight I came across the Dollar Index and thought it was eerily similar in an inverse fashion to what Gold looked like recently. In this instance we have a triple top where Gold had a triple bottom. What this could mean is that if we get clear which normally happens on a 4th test, we could take off. There is however, one major problem that I see with that scenario.
We have a significant Commercial short position and high open interest, right at the triple top. We are also following the seasonal very closely so in those instances it matters. We have conflicting information here. The other development that is interesting is the way the Dollar has re-attached itself to the stock market. I say that because that is the way it used to always move. It was only in recent years that it developed this inverse relationship with the Dollar Index.
In situations like this I think it is best not to guess. It is also symbolic of this conflicting scenario that the price action on the daily chart is so choppy. I don't think there is any point in trying to push something in this instance so I am looking elsewhere. Even though this is similar to the Gold market flipped upside down, I don't think the level is as well tested as the support level in Gold was. As a result I don't expect to see the same type of break of it. I think if I had to pick I would prefer to see a sell setup on the daily chart as opposed to a buy.
I was thinking as one report after another came out today magically once again beating the estimates by 3 to 5 cents, what an incredible coincidence that is always is. I want to make sure I understand all this correctly. We went through a tough period where one of the outcomes is that the CEO and CPA firms had to sign off and take responsibility for the reports. We added all these regulations to make sure no funny business was going on. Now we get into earnings season during what should be the most transparent time in history and magically after the "full disclosure" conference calls where the result should be that the estimates closely match the earnings reports that so closely follow, yet all these wonderful magical surprises happen. As my cousin Vinny would say, let me ax you dis? How exactly are all of these wonderful magical events taking place at all these companies from different industries, where they all unexpectedly beat the earnings estimates while at the same time being honest throughout the process of discussing how their business is doing?
This is beyond a racket folks, BEYOND! There is not one single thing that has changed. Keep in mind Price Waterhouse did the books for PFG in the past, during the time the fraud was being committed, yet they are not investigated at all and are even hired by the bankruptcy court in the PFG case at outrageous hourly rates, to investigate whom exactly? Themselves? This insider game is never going to change ever.
The ES bounce today puts us up into an area where we are close to lifting off again. If the decline is going to happen it seems to me we need to hold in this area, then turn down
Monday, April 22, 2013
BANK OF AMERICA REACQUAINTING WITH AN OLD FRIEND
Now that I am in the process of building back up again it is time to re-start my quest against one of the dark overlords B of A. I have labeled via a rectangle what I deem to be a momentum rollover that is taking place in this stock and have labeled the sell zone I am aiming for. Since almost all stocks are basically the same as the indexes with a few exceptions like Apple etc, we are getting a little bit of a bounce in this stock along with the Bernanke's right now. I view this as a little weaker than the Bernanke 500. I have recently had another unpleasant dealing with these people so now it is time to go after them on the short side again.
I was never really able to mount my initial attack on them because of PFG and I had to use the money I had set aside to attack them to survive. I was very fortunate to have set that money aside and not had it exposed to the thieves of the world otherwise known as FCM's. It enabled me to be able to still pay my mortgage and bills while the money has been frozen, and also open some new trading accounts to start trading again. However, I was reminded once again of why I hate them in a recent exchange so time to go on the attack once again. I do think this is a pretty good setup, so it is time to get to work.
My short term momentum indicators are going up in the Bernanke's so I am looking for a bounce for another day or two hopefully setting up a short entry there.
I have spent the last few days copying and pasting the blog entries from my old blog to the new website and formatting and changing image sizes etc which has been a pain in the ...... What it means is I am close to game time. Once I launch it I want to do a webinar for existing clients just as a get started type of thing so I will send out a notice for that once I am ready. I hope I don't botch the technology the first time so cut me a little slack.
I think the Bond market is looking interesting right here.
We have momentum going up sharply here and a rising wedge pattern which can break either way. I am leaning toward an upside breakout because I am looking for stock sells and also the momentum is going up strongly here. However, some of my other tools show if we were to break down they roll over. I guess the net of this is a breakout in either direction can be played. I guess I can't come back and say I told you so on this one, but I just wanted to point this out. If we do happen to break out to the upside on this, I think it could really go.
The next few days could be interesting.
For those who got my video I sent out I think the consensus is that the audio level was fine? I had a few people tell me it was too low then come back and tell me the settings on their computer were off and it was fine. The volume sounded fine on my end when I previewed it.
Friday, April 19, 2013
I don't know how I got on the email lists but a few Gold bugs hit me with the Capitulation skit links last night. Is this Capitulation?
I think there is no question from a short term viewpoint it is. Essentially what this means is that there has been a huge climax of action with a dramatic price change, which this qualifies for without a doubt. Could this be the low? Sure it could be. Newsletter readers are going to get the full monty on this from me this month, so I will not get into too much detail here. However, since I am not biased one way or the other on this from a short term standpoint I thought it would be worth addressing this idea.
This typically occurs when the last remaining person throws in the towel and exits the trade, which results in either a huge wave up or down as people rush frantically in an emotional run for cover type of situation. I used to always lay in wait for these times and try to fade them. USED TO.
I like to make money just like the next guy otherwise I would not be trading. I found it impossible to be consistent trying to fade moves like this. You can see from the MACD how dramatically it fell to what has to be it's lowest reading in years. This is what you get at these points, so far so good. Often it will be accompanied by the other side who has been warning of this now chiming in saying I told you so ( yours truly included in this group ). Check mark number two. Here is what is missing with this whole idea from a longer term view point. The pushers of the original idea that has become jeopardized are typically the capitulators which has not even come close to happening. It is when the greatest promoters of the wrong idea give in that the true capitulation has taken place and these guys have not missed a beat. They are pounding the table about a generational buying spot. Buy the mining stocks, physical gold has record demand, this sell off is only in the paper. Huh? The spot price is not paper ladies and gentleman, it is the price you pay to buy a bar. It is when these people admit they are wrong and sell that the real capitulation will take place.
What we have so far are some of the weak hands realizing they are getting clobbered and as a result running for cover and taking their losses.
The other thing that normally accompanies a capitulation point which is not here is we are typically at multi-year highs or lows, not in the middle of a range of pricing like we are here. Net net here I think even though we certainly have very strong price action that resembles capitulation, it is not occurring at a spot where that would take place which would be probably $400 or less. It has to be at a spot where the Gold bugs are selling for true capitulation to be happening. From a short term stand point we could very easily get a big rally here but the trend is down and it is a selling opportunity when it happens. It may take a while because you have to give some time for a condition like this to work itself "off." There is no doubt we could rally way up and change the trend from down to up and the Bugs could still have their day I do not know the future. The COT data does show this as a buy more than a sell but as you will see in my video at the new web site, these are the COT setups that are not very reliable.
The other assertion is that the fundamentals have not changed. I completely agree with this take. The fundamentals have certainly not changed at all. If anything they are closer to being in line with price as it comes down. This move was a speculative move in a commodity, it never had any attachment to any fundamental of any kind. The fundamentals have been saying this would not last, so they have not changed. I agree with the Gold bugs on this one, although in a way they would not like.
It looks like we are going to get my bounce in the Bernanke's next week at least at the beginning of the week, so we could get a great sell signal right around May 1st which would be "extra good Mr. Coleman sir" a quote from trading places at the end for those who don't get that. Look for the point where the Gold bugs start crying foul and selling out claiming government manipulation etc around $400, that will be capitulation if it happens.
My web designer just told me I have to manually move over a number of blog posts to the new site so this is going to cause yet another delay, good lord. It is a small detail that they were supposed to do this. Thank god they caught the second scumbag in Boston. If I had my way I would torture this guy like nobody's business if he did not talk, but I am sure the pansies in government will recite poetry to him hoping to break him.
Have a great weekend
Thursday, April 18, 2013
I have been asked often about Psychology and what books to read. Here is a somewhat detailed reply to that keeping in mind obviously that all of our personalities are different and I am relating what works best for me.
First of all there is nothing I know of that tugs at your emotions more than the business of trading. Most of us are not conditioned in a way that accepts failure well and there is no way around failing during certain periods of time. As a result one of the things we have to do without question is check our ego at the door. If you can't find a way to do that you need to go elsewhere for your riches. However, at the same time you have to be confident in what you are doing to get you through the tough periods. How exactly to you achieve that balance?
I think it is helpful viewing this business like other businesses. For example, Many companies have loss leaders, products they discount heavily to get people to do business with them in the hopes that they will also purchase something that has better margins in it. A restaurant might offer coupons for free deserts etc, or maybe a combo meal. The hopes are that once you are exposed to them you become a regular customer and the whole process works well in the end. That is a sound business strategy but also you have to realize that during periods of time you are going to net lose money doing it. You undertake this with the idea of the bigger picture.
The way this relates to trading in my view is that often when we are watching a setup for a price move, we may have to probe a few times getting stopped out attempting to catch the move. When we do finally catch it we make up the money in spades. This is not easy to do emotionally because we are losing money in the probing process hoping for the larger picture gain. I don't see that as any different than the restaurant example. As hard as it is to do since we all trade to make money, you can't focus on the money aspect of this. You instill money management controls to stop you from losing too much while probing, and that needs to be enough.
If we think about our Bond System, it is a real life analogy of this. It was like opening a restaurant with a good buzz where many people come on based on the reputation of the chef ( yours truly ). The food was fantastic for a good stretch then all of the sudden there was a month where some of the specials were not as good. Do we just ditch the restaurant or go back to the menu items we have always loved? This may seem a little goofy and perhaps there are better analogies, but I think you get the gist of this.
I remember when I was studying with Kevin Hagerty many years ago, who is an ex-marine and one tough and rough character. When asked about psychology his response was always if you can't take the heat get out of the kitchen. He did not believe in reading a bunch of books written by people who don't even trade, trying to teach people the psychology of trading. I agree with that premise. I remember someone telling me after PFG that I should go see "someone" to help me get through it. What the hell is some pencil neck going to tell me that I don't already know? There have been times when I have been so angry about it the thoughts I had were almost shocking and it is fortunate that I was not face to face with anyone involved at those times. This is natural, why is that a problem? Man up sometimes you feel like kicking somebody's ass and sometimes they deserve to have their asses kicked.
I remember the other day a friend of mine telling me that her husband had been really sick for a few days and did not get out of bed, and she said "maybe you are not like that but you know how guys are." Actually I don't. First off I can't stand her husband he is a pansy of the first order and a complete tool. I have not even had a cold in at least 10 years because of my nutritional and fitness regimen, and perhaps genetics. However, the times many moons ago when I did get them I never missed a beat. I also broke my ankle in a martial arts tournament a long time ago and walked on it for more than a week before it finally swelled up so much it split a pant leg so I gave in and went to a doctor who greeted me with laughter calling me "one of those guys." My view is that you suck it up and get on with it. If you have to hack up some flowers like Bill Murray did in Caddyshack to blow off some steam.
When it comes to psychology I don't make a big deal of it. This business is very challenging but so are many other businesses. At times other businesses lose money also. I think drawing the analogy and keeping it mind might be helpful. It makes you realize you are not alone, it is part of the business cycle, and you have to learn to deal with it. You don't have to lay on a couch like Daniero did with Billy Crystal in Analyze This. I remember the one line out of the movie that is one of my all time favorites and one that applies here. "If I go Fag you die." There is also a line out of a movie called Old School with Will Ferrell and Owen Wilson right at the beginning that is similar. The point is you have to deal with adversity in this just like anything else, so just deal with it.
There is another story out there regarding FCM's screwing around with Segregated Money, The Linn Group. Here is the link:
Here is the most important thing to keep in mind. MF Global was a clearing FCM hence the Merc was involved and put money in to help make clients whole. PFG was a non-clearing FCM hence was not under the supervision of the MERC and the MERC basically said F you. When you have a non-clearing FCM like that basically one person somewhat outside of the process has control of the money. This is how the thefts can happen so easily. The head of the firm can order some employee to do something and chances are they will do it even if it means doing something that is not right. I think the best rule of thumb is to not use an FCM that is non-clearing. This will not guarantee you anything but it does put you in the best possible situation. I think Linn is a non-clearing FCM but am not 100% sure on that. There is another firm out there that people have been asking me about. I think if you check you will find they are a non-clearing FCM. This does not guarantee anything other than if they go down the MERC will claim they did not supervise them therefore screw you like they did with PFG. One of the big reasons MF Global worked out so well is that the MERC chipped in a huge chunk of money. They won't do this when a non-clearing FCM goes down.
Back to the Bernanke 500
Here is how things stand now as of Thursday evening.
I have mapped out once again my scenario I through out in the prior post with a different look added. What this shows is a long term measure of momentum and what it would look like if it rolled over and we got a rally against that roll over. This gives essentially a first retracement entry which can be very powerful. I always want to get in as quickly as I can once I identify a trend change. I am hoping this sets up like this.
Have a great weekend and thanks for reading
STOCK MARKET TEETERING POSSIBLY?
I will get to the Stock Market in a minute but first I wanted to show a setup in Natural Gas that is worth watching. What we have going on here is what I refer to as a COT Double Top. What this entails is a equal high in the price where the commercials have become heavy sellers trying to potentially contain the price level at hand.
What is also happening here is that we have a very sharp rise in Open Interest that is comprised completely of Small Specs and Large Traders. The commercials are not buying they are selling on a relative basis and heavier than they have in years. This tells us that basically the volume drive is not from the biggest players and as a result I am looking for reversal patterns up here. This is a setup not an entry. The trend on the daily chart is clearly strongly up, so I won't get into fading the trend until I see something telling me there is a trend change happening that ties into this weekly setup. We may not get it and could sail merrily along. If we do happen to break through upward out of this pattern we could see a huge run up here. This is almost the inverse of the Gold situation, where in that case there was huge support that held, held, held, then broke and the bottom fell out. This is that upside down more or less.
I just checked into Blogger to check comments and found my whole post for today disappeared and was not even in the draft folders. What I had talked about was the short term sell signal I twitted about the other day, how it had triggered and what I was looking for. Since this is now a bit late to the dance, here is the chart I had in here that disappeared somehow.
This shows an ideal path for us that we may not get but it would be nice if we did. We are getting the short term support break which does not necessarily have long term implications beyond just the next few days, but it is one small red flag that something bigger could be in the works.
For now the sell below the low of Tuesday with a first profitable open exit, is the quick short term profit trade I was mentioning. Any open < 1542 in the ES would be the exit. Let's hope we get this break and bounce scenario because if we do I will be a player. This market is the most manipulated market in the history of trading so the setups have to be just what I want to play them.
In the wake of the Gold wipeout as everyone scrambles to find an answer like the Keystone Cops this gem was on the web. Had anyone been reading here for the last year they would already have known this.
Here is a quote I had also put in the earlier post that poofed that I found amusing in a Gold Bug site: