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Saturday, May 01, 2010

SOMETIMES #1 SEEDS LOSE BUT NEVER IN THE FIRST ROUND

The PPT would of course be the #1 seed in any March Madness bracket comprised of market participants. As we all know there has never been a 16 seed who beat a #1 seed in the first round. The PPT will never lose in the first round but that does not mean they win every game, they were just upset yesterday by a hostile crowd and a lower seed. They had won 16 of their last 20 games and many in convincing fashion and were seemingly on pace to keep on winning. However with anything in life and I suppose the PPT qualifies, there are cycles. They cannot win every game. Yesterday after a mid day attempt at a save that was met by heavy volume selling, they essentially cleared the bench, sat down the starters, and then let the underdog run them off the court.


As I have stated repeatedly, they cannot pull their crap when volume stays high which it did yesterday. Recently watching them do what they do, I have to admit to having gotten very aggravated. This should not be allowed. However, you can bet some very strong "incentives" for silence are in place to keep things going. Alot of attention is finally coming toward this, so maybe it will reach a high enough level where something happens. I have noticed that one loud mouth Congressman who was investigating this has all of the sudden gone completely silent. In any event, at least for a day they let one go. If volume stays there this correction will continue but the minute it lightens up you can be sure the buy programs will show up and it will reverse.

I am short this market where I had the order displayed Friday. It is a position against the trend so I will keep a tight leash on it with a target probably about 20 to 25 points below here. There are not enough individual stock sell setups or divergences for me to think that this is a major top yet, but I will continue to watch that and see if it changes.

The other trade I have on is short the Canadian Dollar.



I do expect a dollar rally next week so I wanted to be short one of the currencies and this one was setup with my patterns pretty well. It had a nice day yesterday, but one day does not a trade make. I will be looking to either go long the DX or short the Euro which is basically the same trade next week. Take your pick.



What I don't like about this setup is the 3 point divergence in the POIV indicator marked on the Chart. This is very rare to see this and in fact I cannot ever remember seeing it before. It could trigger a big decline if we do not move back up right now. This will be interesting to watch over the next few days. The Euro is the next chart.



Again we see divergence in the POIV indicator although not as pronounced as with the DX, so I am not sure if I am doing these trades or not. I wanted to put them up here just in case I do them. I do not like to trade against POIV divergences. They do not happen often and usually as a result do result in market reversals. There is one thing that is in favor of this long, Larry Williams road map forecasts show the Euro rising and Dollar falling here.



Again, GOLD rallying on Small Speculator buying and Commercial Selling. This is not what we want to see for GOLD $3000. Think about this, you have two neighbors. One runs a big Mining Company that mines Gold. The other has a 16 yr old kid just beginning to get interested in stocks and investments from a high school business class. He tells dad he wants to buy Gold so dad gives him an increase in his allowance and he buys gold. The other neighbor who runs the mining company is putting hundreds of millions of dollars betting on a Gold decline.

This is exactly what you have here. Small speculators are buying and Commercials are selling at again getting close to record amounts. Now I ask you, who would you want to bet on over the long haul as being correct here? The 16 yr old or the President of a Mining Company? If you have a position leveraged for $3000, you are betting on the 16 yr old. Maybe he is the next whiz kid, but the probabilities are that the President of the mining company has a better handle on the long term supply demand situation than does Jr.

Good trading to everyone this week

4 comments:

daveM said...

Chris

Question please

Do you rely a lot on POIV

Thanks

Chris Johnston said...

I would not say that I rely alot on it but I do look at it before making any trade. I like to have a general idea of what is going on as far as accumulation and distribution in a market. It does not give divergences very often so that is why I pay attention to it when it does. It is really just a tool, but it is the best divergence tool there is for futures in my opinion.

When trading stocks it does not work there due to there being no open interest.

daveM said...

Thanks Chris, I had not seen the indicator before.

I will follow your blog to see what other interesting things you may share.


Thanks again

Chris Johnston said...

Dave

This is an indicator created by Larry Williams my mentor