Saturday, February 26, 2011


How you play this depends on your overall orientation to things. If you are bullish, Friday was a buy opportunity above Thursdays high. You can see a quasi exhaustion move in the momentum indicator on the downside with price holding up pretty well. This could very well have been a great buying opportunity. If you are more oriented to thinking the market is due for a correction ( yours truly ), you would be looking to short the rally here. It was a no brainer that the PPT was never going to allow this thing to roll over on a Friday. They are well aware of the history of Mondays following very weak Fridays, when a market is on the verge of rolling over. This was a good spot for them to draw a line in the sand. Whether or not they were behind the rally on Friday, I cannot say. It was not an obvious PPT save in my view, the market was strong right from the get go and did not have any mysterious buy programs that I could see at suspicious times.

The one thing that has me a little concerned is the similarity to 1987 that we have going on here.

You can see that we had the same type of scenario brewing, stocks going up on light volume, creeping up day after day, while bonds crashed. You can see we then broke the uptrend, moved sideways for about a month, then boom. I doubt we will see anything like this, but I keep coming back to his for some reason. I think it is mostly because the big bond selloff got me worried a bit about the stock market. At the very least, we are taking a breather here and valuations are very high now, so it is not time to be aggressive on the long side.

If the Fed's plan is truly working we are going to 20k or more in the Dow in the next several years, so there will be plenty of time to get a piece. If this thing can really run on it's own after they back away, we will truly have confirmation of the biggest bull market of all time. I have my doubts to say the least, but never want to be close minded. I could easily be long from Thursday's high on Friday, but chose not to take that trade. Time will tell if that was wise or not.

I am flat except for a few stock shorts I put on last week, and do not see a futures trade anywhere on Monday. I am going to be traveling next week through Wednesday, so my posts may be brief. I will try to post regularly, but the times might be off a bit from my normal. I also have different software on the laptop, so the charts may not be quite as good.

In general, I am looking for Crude to come back in a bit. I am also watching the metals closely to see if Gold and Silver are setting up buys or are rolling over. Copper also, I am looking for a short on this bounce, it has already bounced back up to where I shorted it and it is the weakest metal here. I am also watching the Grain markets for sell signals on this bounce.

This will serve as Monday's post.

Good Trading to everyone next week

Friday, February 25, 2011


Light Sweet Crude Oil is not too sweet when this type of thing happens. I think everyone is aware of the spike we have had in reaction to the Middle East turmoil. Now we have the T Boone Pickens crew out again giving the $200 Oil predictions. Does anyone remember how bullish he was on Crude at $150? How bullish he was on Natural Gas, which also tanked? Of course he is bullish, he has a vested interest in prices rising. He is just an awful prognosticator, but an all star cheerleader. I guess he can afford to be as wrong as he is with the money he has made from owning these things. The smaller fries like us need to be more accurate to make money trading.

The one day on the chart I have marked as ridiculous, featured a daily range from high to low of almost $8000 per contract. You do not want to be wading into any market when this type of volatility occurs as tempting as it might be. If you look at the purple line, the POIV indicator, you will see that it does not really confirm this move. It seems to be telling us the pros are not buying this, although when something this sharp happens out of the blue this can lag a few days. As a result, we have to wait and see if it catches up because it could.

If it were not to catch up, I would use that as a filter not to buy this market on a pullback. However, if you are bullish on this sector, the market to be a buyer in is Unleaded Gas, it is much stronger than Crude. Crude is the laggard of the 3 major energy markets. Natural Gas I don't count because it goes it's own way. If you were to count that, it would qualify as the weakest by far. It is the crazy uncle.

This is Unleaded Gasoline. This is where you should get long on a pullback. It is amazing how different this chart looks than Crude Oil.

The next chart is the COT picture on Crude.

You can see from this chart that the Commercials have been heavy sellers recently, which had led to the selloff we saw before the Middle East strife break out. Interestingly enough, the bottom pane which features something I am trying to develop, shows a different picture. It is a spin on the COT stuff I am experimenting with, it actually said we should have been buying into the recent decline. You can see from the other Red arrows, that most of the Buys with this have been pretty good. I am not going to divulge what this is so please no emails or posts asking me to do so. For now we seem to have a standard type of pattern going where Commercials are selling the rally. This all else being equal, should confirm what the PIOV is telling us on the daily chart, this could be a false breakout.

It is amazing in this world now how everyone jumps on the bandwagon after a move happens. I tend to do the exact opposite which is also not necessarily good. Even if this were to be a false breakout, the pure momentum the small investors have generated here could carry this forward a little. We have seen an unprecedented period of moves driven by small speculators that have carried on for very long times ( Gold and Silver ) to name a couple. Historically, fading the small speculators has generally been the best way to trade, and we will return to that time soon enough. I have suggested that the Government might be messing with the COT report in terms of who they are classifying where to hide what they are doing. This is one possible explanation for this extended period of apparent small spec home runs. However, that is pure speculation, there is no evidence to prove such an allegation other than circumstancial. There is certainly plenty of that on many fronts right now which is why this thought has occurred to me.

Be careful chasing this move.

My spellcheck is not working so I hope there are no typos or blunders in the post today.

Thursday, February 24, 2011


We have had a pretty sharp break now, more of one than we have had in many months. I have diagrammed out what I think will happen next. At this point we have done nothing really other than shake the tree a small amount, the long term up trend is still clearly intact. It certainly would not be a shock for us to just rocket right up out of here to new highs again. It is my feeling that we need a bigger retracement to shake out some weak longs, before we move higher again. Of course in reality there is no rational reason why we are anywhere near these price levels, but that is another topic. We are here and the trend is what it is.

What I would like to see is the oscillator get weaker than this, than rebound sharply higher while price lags on the rally. That would be the ideal setup for me to short the bounce. However, you have to remain flexible in this business. If the PPT does their thing and contains this right here, life will still be good. The emperor will still have no clothes, but as we have learned, that is really irrelevant anyway.

It has been interesting the watch the dollar and the stock indexes begin to track each other, breaking away from the strong inverse relationship they have formed over the last two years. This is more in line with what has historically been the case. One of the great things about the markets, is that if you give them time, the out of line relationships or price movements do move back into line. Even with all the intervention we are seeing, that will still ultimately be the case. We have seen that the last few days. When volume shows up the PPT might as well leave the sandbox, take their toys and go home. They can't stop moves that have volume behind them..

There is one thing I am absolutely sure of at a time when many things are very unsure to me. WE WILL NEVER SEE ANOTHER RALLY WHERE THE MARKET WAS MANIPULATED TO THIS DEGREE BY OUR GOVERNMENT. When this does come crashing down, there is going to be enough of a public outcry, to get the FED exposed. They are not going to be able to skate on this one. They have created another monster bubble that was needless, and the consequences will be what they always have been as we saw time and time again with the Bubbinator ( Greenspan ).

My plan now is to wait for this bounce, then see how things look at that time. This should be 3 or 4 days. I hope to see a short pattern show up, but I will not know until it gets here if in fact it is developing or not. The next chart is something that I have had happen more than a few times since the electronic markets became prominent. I was filled with a buy on the exact low tick of the day, my exit order in the COPPER trade I showed. This was a beauty and I calculated where I wanted my near term target to be, added a few ticks to it so as not to be greedy, then placed the order Wednesday at 425. The exact low of the day was 425!

In the old days you could never get a fill like this, but now in the electronic markets you do every so often if you have limit orders resting, get the exact high or low tick of the day. The pits used to always require price to trade past by one tick. I am glad this happened although there is really no reason to think this won't just keep falling. I had identified where I wanted to take profits, we got there, I am out, next. I did not expect it to happen in two days, but it did. I am looking now for a bounce to short this market again

I am watching now a couple of different things for possible trades. First, the BOND market has taken off here finally, most likely in reaction to the stock sell off. If we get a pullback there I will be looking to add to our current long position. We are long this market in our contest account from about 2 full points lower than where we are now. As a result, we have a good open profit already of about $2000 per contract. I do also like the Yen on a pullback as well as potentially Natural Gas. Natural Gas has some work to do to get me in, but it does appear it might be in the process of setting up a turn up.

I have also been debating where to get short Hogs, we are currently short there in our contest account right now. I have not gone in with my personal trading account yet. I am perhaps being a bit to picky on this one, time will tell.

As to the spammers who have to check in and register to try to post their crap, you might as well give that up. I am sure you must have noticed I block all this stuff. Also, for my foreign readers, you have to post comments in English or I cannot let them go through. Their is not a translation tool in this software that I know of. I speak some Japanese from my martial arts days, but other than that, I am a gringo.

Tuesday, February 22, 2011


After the world had a good kick return as I mentioned which took place over the holiday, a funny thing happened. The world went on to make several consecutive first downs on the way to a scoring drive against the PPT. It reminded me of the scene in the movie Independence Day where the President was rallying all the fighter pilots, saying let this day be the day we fought back! Against the never ending efforts to prop up seemingly every 5 minute bar that closed lower for months on end, enough volume showed up today to reverse the PPT's save attempt that was launched right after the US opening. It did appear to be in process to being saved, then all of the sudden, boom a big selling wave rolled it over. This has been so rare I cannot tell you, virtually non-existent in this rally. Two way action used to actually be normal intraday.

We knew there would come a time when some type of correction would take place and I told you all it would come out of the blue and be a V type of formation. Hard to imagine more of a V than what that chart above of the NAZ looks like. Now I did not say it was going to be today, I did not know. I do now think the plan has to be to short the bounce when it occurs. Some markets just cratered today, COPPER, the Grain markets to name a few of them. We are seeing now some markets finally trading on their own fundamentals for the first time in a year or so. Is this the end of this incredible rally? The dollar acted very strangely today, so maybe it is going to trade on it's own merits now as well. Recently it has been so closely tied to stock prices in an inverse fashion, it would have flown on a day like today. It went nowhere, very interesting.

I have absolutely no idea as to whether we recover quickly and move on to new highs here in the indexes or not. This has gone so far beyond anything reasonable already, that it is really impossible to even venture a guess. All you have to do is trade off your signals, and that spares you the misery of constantly altering an opinion to try and get in sync with what might happen. When you get artificial markets, reactions are going to be violent. I also mentioned the weakness in the BOND market and showed graphically how that has presented problems in the past. This is what has happened during those past formations I showed. Due to that being in place, I have been hunting individual stocks trying to find those that are showing relative weakness against the overall market.

Below are a couple of trades I got into today. I had been talking about COPPER in prior posts based on the COT picture there. It finally setup to my liking yesterday, so I got short last night.

This market had been lagging a little recently having shifted from the strongest metal to the weakest in the last two weeks, so that was my cue to start looking. The next chart is one I have just been dying to play ball in, Goldman Sachs, the evil empire.

This was a little different entry, I really thought it was setup on the weekly chart. I am shifting to trading stocks more off weekly than daily to try and catch bigger moves and get less chop. This is how it looked on the daily when I entered. Although being short this stock with the close ties to the PPT is not big picture a great idea, the pattern was there so I took the trade. Goldman is rumored to be one of the houses that executes the PPT trades and hence why the government always takes care of them. I did short a few other things today, mostly stocks.

I really have no idea if this quick burst is all there is to this or not. It certainly would not surprise me if this got reversed. However, if sell volume happens to stay strong, the PPT will not be able to stop it. If it dries up, the PPT will be able to reverse this whole thing right back up. For now, at least the world had a day where market forces worked. Time will tell if it is just one touchdown in a 62 - 7 blowout, or whether we can make a game of it like we used to be able to. If you are not short anything yet, don't chase today's move, wait for a bounce even if it comes from lower levels. We are already very short term oversold in a monster up trend, so odds do not favor entering new shorts following a day like today.

It will be interesting to see how many readers I get after today. For some reason my blog always gets heavy traffic after big down days. I always wonder why, perhaps it is people scouring the web trying to find someone new who can give them some type of explanation.  Sometimes there is no explanation even though the media concocts one embarassingly ignorant reason after another to try and explain every move. There is a great deal of random action, it is what it is. Today was a long time coming and there will be more even if it is not tomorrow.


As it was with Tiger Woods, so it will be with the PPT. I think to myself constantly that I am so glad I watched all of those brilliant performances by Tiger when he was in his prime. I have said from the get go when the story broke, that I thought he was finished, and I have seen nothing that tells me otherwise. It is so rare that someone gets in the "zone." It is this sweet spot that everyone tries to will themselves into once they have experienced it, and it just cannot be forced. For me I will be able to tell younger people when I get older, that I did watch the greatest that ever played in his prime.

In the world of investing the PPT makes Tiger Woods look like the biggest hack of all time. If they were a football team, they would be going on two years without having allowed the other team one single first down. However, the difference is unlike an athlete, they have the ability to fix the game in advance. This enables them to be in the zone constantly. If they fall out, they change the rules to allow them to get back into it. These bogus holiday electronic sessions, where news events happen, and investors try feebly to sell are like a decent kick return against the PPT. They got a bit lazy, but now that you have the ball in good field position, they are not letting you go anywhere. If you looked at all of these sessions, they play out incredibly similar in the bar patterns and the timing. It does make trading very difficult. The market is so one way there is no balance at all to it. With the Congress now in control of the Repubs, it is possible that this whole can of worms might get opened up.

I maintain that it is better if they don't, but there are a few people who I think are ignorant to what is going on and are bound and determined to take a deep look into the FED. If they do, this whole fraud is going to get exposed. I think almost anyone now gets it that it is so unnatural for there to be only ebbs and no flows. There needs to be some two way action to have balance. Unfortunately, when the pendulum swings this far in one direction, it will swing back in the other just as far. That will be a difficult time when that takes place. As I have said many times, volume is their enemy. They cannot manipulate price like this when the volume stays strong. We have had such light volume that it has been easy for them to guide this market.

This is the darndest run of this type of manipulation I have ever seen by a country mile. However, as I stated the other day, I still have no sell signals. Also, I trade very light around these weird electronic session only days. They tend to have this one day move then immediately reverse the next day type of action like we are seeing in so many markets today. It is clear, if you are a short term trader, just look for buy signals only and ignore the sells. I would not worry about missing the "big one." Who is to say you might not lose 50 in a row before it shows up.

We have had an incredible explosion in the price of Silver, and those metals bugs continue to rake in the big bucks. It is now the time of year when typically these markets make their highs for the year, although in recent times it has not been the case.

This is just an amazing run no matter how you look at it. We now have a potential blow off top although hardly any justification for taking a run at shorting this here. You can see the oscillator has blown up to it's highest reading ever which is what you would expect for a price move like this. We have had a monster outside bar now formed here. The only way to trade this in the near term is on intraday charts, or if you are a long term player, just holding it and turning off the computer. The stops on daily trades are absurd and not prudent risk. You can trade the mini's, but I would not recommend doing anything right here. We need to let this calm down a bit first. We had an explosion of buying when the old highs cleared as you can see the last 3 large range bars. Old chartists would tell you that if we pull back to those old highs, you can buy there. I like that concept and have seen it work at times, but have also seen it fail, so I don't know if there is any edge to doing that. Let's face it the doomsayers have been right all along in this market so I guess follow what they tell you to do.

For today, I think it is best not the do much and let the smoke clear and the PPT do their work reversing that electronic session that they were pissed off about coming into today. In a day or two we could have some things to look at here.

Sunday, February 20, 2011


In the "Good Ole" days when a 5 minute chart was what I was glued to all day long, one of my favorite tools was the $TICK symbol. I don't really feel like explaining what this symbol is. I assume that readers of this blog have some trading knowledge, and therefore know what this is. Looking for divergences in this which corresponded with entry signals, often formed very powerful trade setups. I decided to check in with my old friend to see if he would have been any help during this recent run. As you can see during this above snapshot of several days, there are only 2 readings of either + or - 1000. This is incredibly unusual. In the days I used to watch this index, often multiple times in a day you would see these levels exceeded. We have to go back decades to find times like this. Net net, he would not have been of much help.

This just confirms what we already know, there is very little volatility in this market right now. The low VIX readings also tells us the same thing. The old adage of never shorting a dull market has certainly been wise advice here. This is about as dull a market intraday as you can have. I did find it very interesting to say the least, that even with this incredible up bias, we did not reach the + 1000 level. Institutional buy programs typically drive the tick readings past 1000. What this tells us is that for the most part, institutions are not initiating buy programs. For the conspiracy theorists this ought to raise a few eyebrows. That has been standard protocol for a very long time, now it is not. Hmmmmm......

I have my feelings about what this means and why this is the case, but they are purely opinions, not based on any facts I can present, so I am keeping them to myself for now. I think when we look back 10 or more years from now at this time, someone will break the story of what really went on behind the scenes. I think that story will be one of the most shocking stories ever broken when it happens. It could also be why it won't ever leak out. Time will tell.

As I have used a few genesis tools to project future price likelihood here, almost all of them are telling me the same thing. This appears destined to continue here for awhile. New all time highs would not surprise me at all. If a big inflation wave is upon us, the DOW could go to 20K for all I know. There just are no sell signals in my tools developing here, no buys either, so I am flat in the indexes. My tools don't generate signals during blow off runs where 80% of the days are up closes, so be it. The next chart is something that could give us some insight as to what might happen. This is about the only thing I have found that indicates we could decline from here.

This shows the percentage above the 200 day moving average we are, and it is currently a little over 13%. You can see it is by far the furthest above this average we have been. I am not a huge fan of this type of thing but it is literally the only thing I can see that indicates any chance of a pullback. We have a runaway bull market here, and you would expect this type of thing to be happening here. Also, 13% by historical standards, is not really that much. I just threw this out for fun.

We do seem to be having some separation from the stock market finally in other markets, with Crude being very weak, and also the grain complexes seemingly in some difficulty at the moment. I am still watching the DX for a long, the Euro for a short and the Bonds for a short. The first two probably have to turn in the next day or the setup is going to be gone. Bonds I am still debating. My dilemma there is that the Notes are weaker hence where I want to sell, but the Bonds are where the sell signal is. It is not a perfect world is it?

It is perfect in the stock market though right now. My comedy career based on my one joke is alive and well.

I will say it again just to get more laughs, " The Dow will have a lower close one day than the prior day."

Friday, February 18, 2011


Here is the price of Cotton, a monthly chart. Cotton as everyone knows is used to make things we wear. It could not be more clear, that right when the QE process began, this and many other commodities just completely launched upward. If you think this is not going to present some type of gargantuan problem at some point, you are living on another planet.

Here is a monthly chart of Soybeans. Once again you can see the meteoric rise once QE started. I could put up one chart after another, and with the exception of Oil, they almost all look the same. Now we go to the Inflation reports from our good "trusted" friends, and are told inflation is on the very low end. Are you bleeping kidding me? These people are so arrogant it is just beyond belief. The tweak the reports to exclude everything they are deliberately inflating, so they can tell us there is no inflation. Instead of CPI ex autos, food etc, like they tell us, it should be report as CPI ex everything that is rising. With wages not keeping pace with these types of increases, most if not all people, have less disposable income, if they have any at all.

Now we shift to what is going on in Wisconsin, and beginning in Ohio. I have stated in here that I saw no reason why what happened in Greece could not happen here. We are seeing a poor man's version of it right now. Maybe we are too soft to get a real protest going. To think we could have a situation where people who are so specially treated, that they have to pay very little or none of what the average American does for their health care or pensions, reacting like this to these small changes should tell everyone who is asleep at the wheel to wake up. This is a powder keg. Just the verbiage I hear and the anger are to the point where this could erupt into something very scary.

I personally am about ready to go there and drop a couple of these ingrates. They are not even ingrates, they are privileged citizens getting my money taken from me and essentially given to them, and now are complaining that I don't want them to have quite as much of it anymore. Then in the middle of it the state legislators do a late hour duck out to another state?  Net net, the crux issue as to whether or not our way of life continues or not is this exact issue. Are we going to be an entitlement society for the minority of the people, while the majority suffer terribly? It is my feeling that the collective will of the people will ultimately decide this be it peacefully or otherwise, and the otherwise is not out of the question. As individuals we all have our principles, and can only be pushed so far. Now is a time where hard decisions and conversations have to be had by politicians who live to avoid them. I heard on a radio show yesterday a woman asked the following question from the host. After he explained that with federal, state and local taxes, he was paying a total of 55% in taxes. He then asked if that was enough, or how much more was enough for her to feel good about them taking enough of what he made to satisfy her. Her answer was " well how much do you have." She felt it was up to her to decide how much of his money to take away from him! It is just shocking to realize a fellow american actually thinks like that. This class warfare is not just talking points, it is here and brought by the great divider, Barry. I am sure his plan was not the create a war over it, he probably felt people would complain some but just go quietly. He was mistaken.

All the while the stock market sails merrily along upward. The P/E ratios are off the charts so from a value standpoint alone, odds do not favor a huge up move from here. As I have said, my indicators do appear to be a long ways away from any sell signals also. This is why I have suggested tightening stops but not getting short. The political commentary above really has nothing to do with executing an actual trade at all. What it does do is factor into the bigger picture perspective on where to have your money. I think people need to be aware of what could potentially happen here and also why it is happening. With all of these things going on this is why the FED is doing what they are. It is one thing to be frustrated but have your retirement relatively safe here with the DOW at 12,320. It is another to have these problems brewing with the DOW at 6500 and half of your retirement vaporized. This is why they have done what they have and are fighting on a daily basis to make sure the stock market does not decline, even a small amount.

These potential conflicts would be a whole lot worse if people had alot less money. This is why getting aggressively short now is a mistake. You are fighting the greatest rigged hand in history and are not going to win. I also would not be suprised if behind closed doors, some of the politicians that want to illegalize shorting are all for continuing this push. They will clean out every short seller who ever read the word if they keep pushing this along. They won't have to outlaw it.

Keep your powder dry here there is going to be good opportunity shortly to make some good money.

Thursday, February 17, 2011


After exiting the dx, euro and meal trades the other day I am flat. I do not have a single trade on in futures or equities right now. The above is one I contemplated doing and did not due to it being the strongest metal. I always want to sell the weak and buy the strong, and there is no doubt that Copper has been the strongest metal. At this point today, Silver has taken over that position. This is an example of one of these trap type of patterns, where you got a new high, then an instant reversal. I like these because they trap the breakout players. Once it becomes clear the move was a fake they head for the exits in droves. What is also very interesting about this is that this metal is the one that has historically tracked the stock market the most closely.

I know I know, I keep talking about stock market problems and the market closes higher every single hourly bar basically. This is just another example of the underpinnings of what normally gives you indications on stock price direction, that has not as of yet been accurate. We can add to this VIX readings, severe bond market divergences, % move off lows over a period of time, et all. There are just so many things about this current market that say we should reverse here that as a long time trader, it is very hard for me to ignore them. As I have said, there is not a sell signal here, but there are alot of reasons to look for one. This Copper chart is just another chink in the armor. Let's face it, this is the highest staked hand of Liar's poker in history, so it is not an easy play. If our stock market were to roll over the whole world rolls over with it, this includes economies not just stock markets, and the central bankers around the globe are well aware of this and are doing everything they can to make sure it does not happen. This is why we have not corrected thus far.

It does appear to me that tomorrow could be another opportunity to get long the Dollar and short the Euro if we hold where we are this morning in those two markets. My read on my indicators that I used to exit those trades that I mentioned in here was accurate, I saved myself from giving back some decent money in those two trades fortunately. Calls like that are not always prudent, it was somewhat of an odd one as I explained. However, at some point you just have to take into account what is happening whether you agree or think it should be or not. You just have to go with some things. The FED is manipulating the indexes, so deal with it. If you have a trade that is correlated as highly with the SP 500 as the DX is, and it is reliant upon a decline in the SP 500, you better darn sure be ready to hit the eject button quickly.

We have a little unconventional setup I have recently found developing in the DX now that could make for a powerful long if today's high goes tomorrow. It may not, and we may slide too far today for the setup to still be intact, so we just have to wait. I mentioned I was looking at shorting the interest rate markets, those orders were not filled. We have been too strong the last few days there. We are approaching a key momentum level in my way of looking at things ( indicated on the chart below ).

If price were to remain weak and we were to exceed these momentum levels, that might be a setup for a short entry. It is too soon to tell yet, but this is something I am watching carefully. Other than that, I am flat and waiting patiently for a few things to come around here.

Good Trading to everyone

Tuesday, February 15, 2011


Here is the completion of the Soybean Meal trade I discussed the other day, the price hit my target. I expect a bounce here somewhere for another short entry, but who knows if we will get one. If we do I will be looking for another short entry. The line gone haywire is the POIV ( purple line ). I have no explanation as to what has happened with this in the last 3 months, it has just been awful, yet has been so good for so long prior to recent periods. Here you can see this line just tanking, might be time to just take this off the charts. It could be that the open interest portion of this is not being reported correctly and that is what is causing this, but I have no proof of that. You would think this was going to zero based on the way this looks.

This is the Dollar Index trade, which I also mentioned along the with Euro ( short ) that I also had on that was exited. Here we just had 3 consecutive unconvincing bars and my read on my indicators was that they appeared to be telling me we would retrace to setup another entry. That was a discretionary call so I have to live with the results. What I did not like is the fact that this and the SP 500 rose in tandem 3 days in a row, unheard of in the recent times. Since I know the FED is manipulating the SP 500 furiously right now, almost on a hourly basis, I reasoned it was likely this would be the one that would give. Completely off the reservation in terms of logic, but the decision is made and now I will wait.

I would sure like to see a sell signal of some type in the SP 500 to get really excited about Dollar strength. I just do not see one in the near term setting up. I did come across something today that was very interesting which was a commentary on P/E levels and that they had only been this high 3 prior times in history, 1929, 2000, 2008. This is based on the 10 year average of the SP 500 P/E ratio being at 24. This is another somewhat dire reading that tells us how extended in price we are once again. I know I keep harping on this but this stuff does matter. I would not commit new money to this market right now in spite of how incredible it looks. You have to stay disciplined, and it is not easy right now with almost 65% of the days being up closes. It almost feels like you are the only person not making a killing. Believe me once this turns, you will be glad you were not all in. This will turn on a dime when it does.

I am looking at shorting this small rally in the Bond Market tomorrow depending on how things play out. I have to be brief today since I am short on time.

Monday, February 14, 2011


Here is the market that I have traded well and prognosticated terribly, GOLD. We are at an inflection point here in that the momentum appears to be turning back up, yet we have also outraced price in momentum by quite a bit. This basically leaves a market that can be traded in either direction. Certainly if you want to go long, Copper is by far the strongest metal, with Silver coming in second, and Gold lagging the bunch. As a result, if you are bearish on metals this is the one to sell and if you are bullish Copper or Silver are the ones to buy.

I am not sure on this one right here so I will not be placing any trades tomorrow here. I could argue equally in either direction here, but I also do not like the bar pattern that much. It does appear to be more of a continuation pattern for further upside if I had to guess, but it is not a high probability one. Commercials have been buying this market during this decline, so that should be bullish.

You can see the red lining climbing during this recent pullback. This is an ideal situation as far as COT stuff goes. They are buying on a retracement in a big uptrend, a textbook buy setup. This makes me again want to lean to the long side. Silver and Copper already took off upward Monday, so this laggard has some catching up to do.

Stocks.... Ho Hum etc.. another day another up close, 53 of the last 84 days have been up closes in the SP 500, a 62% clip, and 13 of the last 17, so obviously we are extended. Of course we can get more extended just as easily as we can retrace, and we know with a wink what the Wizard of Oz wants here, soooooo. It is certainly time to look for shorts, but I see almost no patterns in any of the things I watch that tell me to short this pig here, so I won't. If we have a big break day and I miss it so be it. You can get your back broken shorting markets like this. One of the best timing setups for markets like this is the Tom Demark Sequential, and that signaled a sell quite a bit ago that was wrong. We are left with air to stop this, so the best strategy if you are looking to the short side, is to wait for some type of break and a retest. We had that not too long ago, but the test just blew back through the highs again giving no entry.

This is what bull markets do. I would not get tied up in that jargon of secular bear market, etc.., this is a bull market period. All that other crap is just cocktail party fodder by people who don't trade. All you have to do is start pulling up individual stock charts and see many of them look like pork bellies, that does worry me, but they are far from sell signals except for the very brave.

Sunday, February 13, 2011


As I sat up in my game room today looking out at a beautiful sunset with the cobalt blue ocean and San Clemente Island in clear view, I began to wonder if this all going away? Do the ducks in my pond at the back of my property that I was looking over to see the ocean have it really figured out. They were just cruising around in circles having the time of their life staying in the moment. Maybe I should just stay more in the moment and not sweat the big stuff? While I was standing at my pool table drinking my glass of wine, a thought came into my head. That thought was of how fortunate I am to have enjoyed what I have in life thus far. I never dreamed as a kid growing up in a small town in Michigan, that I would have the life I have now. One of the great things about life itself is the endless possibilities it presents. Of course they can be both good and bad. As hard as we try to always make everything work out well, that does not always turn out to be the case. As I pondered all of this I wondered if some of the doomsayers might be right. Might all of these great things we have enjoyed as Americans be in jeopardy now? Could all of this go away? I always like to consider the opposing views. It is way too arrogant no matter who you are to assume you have it all figured out, and people who do not agree with you are wrong. I have been wrong too many times in my life to ever have that type of attitude.

Life is good right now, we have what I would argue is either the greatest stock rally in history, or perhaps the second greatest one. I have been wrong a good bit on this rally. I did not think it was going to develop into this moonshot. When the low in 09 was made I thought we still had a little more to go. Then once we got going and it was obvious that low was going to hold, I did not think we would go this far this fast. I am going to show some charts in a second, of the prior periods that most closely resemble this type of moonshot action, with virtually no pullbacks in price. Let's set aside the political backdrop and why this is happening. Let's just focus on the price action itself, and what has followed when we have had patterns like this. It is somewhat subjective I guess as to what is similar and what is not. What I looked for was mostly straight up action for about two years with very minimal pullbacks. Just straight up matching the price action, nothing else. The Genesis software allows such a search.

There is a wide breadth of optimism spreading quickly now, and even I have to admit as I watch intraday price action, it becomes almost inconceivable to think we might ever have two consecutive days that close lower ever again. I have launched a professional comedy career all based on one joke suggesting we might at some point have a day that closes lower than the day before. The VIX is tanking, indicating complacency, and every sell indication imaginable results in a bad trade. Is there any chance this might not be as rosy as it appears? The unemployment rate is declining, our wonderful stimulus plans are working. We are getting ready to now bail out individual states, what is to worry about? The government can do it all for us! In the world of contrarian thinking, this would all else being equal, be the perfect storm for a major top.

What we seem to have here in these prior periods are corrections and in some cases reversals. Of these 4 there is one that just continues going, this last one. Maybe that will continue, we just never know. What I do find when doing this type of exercise is that when I can find one or two examples that are virtually identical, it is uncanny how accurately the future follows what they have done in the past. With that in mind I consider the first two examples to be the most closely correlated to the current price pattern. It is why I listed them in this order. The computer also gave them the highest percentage match in the search and rightfully so.

These are just graphic examples of why I have been telling people to tighten their stops on longs. We may well sail on into new all time highs, nothing at all would surprise me at this point. If we do trailing stops will not be hit. However, for the most part these past searches have shown us that these types of runs tend to have severe corrections to them. I know when I read some well educated folks talking about the coming food crisis and inflation, it all seems a bit scary. Could we really see riots in this country? I do not know why we could not. After all we have union workers with no high school educations making 6 figures in the auto industry and crying bloody murder when they hear other people don't think they should be exempt from Barry Care. This is a large part of our society that is so used to having it so much better than most people, they are not prepared for even the slightest change in their way of life. With that being in place don't you think they would be the first people to cry if things got really rough? Of course they would. The government knows this so they subsidize them, the new American way. One other thing to consider here, the FED is on a mission from God to try and ramp up inflation. There is only one reason no matter what side of the fence you stand on, that they would be doing that. They fear a big deflation wave that could be very difficult on all of us, and they are fighting off that possibility with all that they have.

When I listen to the news and hear an attorney criticizing an Arizona rancher who is protecting his property for the type of gun he has, instead of criticizing the illegal aliens who endanger him, it makes me realize we really do need a reset. We need to get guys like this crying for help. Of course this guy will be the first guy to call for help if he ever gets into trouble with illegal aliens. These cowards are all the same, and to me they typify what is wrong with America today. We have too many soft little punks like him rooting against the average good citizen, trying to make money from it. Just anecdotally this tells me we are going to have a period at some point where this type of thing gets weeded out to some degree and that can only happen during a crisis period. As long as things are good we will always have guys like him.

Of course I am talking philosophically here, but this is just a general post on what could happen. The FED has rallied the stock market artificially to try and jump start everything else, without ever allowing all the problems that caused our crisis period to get resolved. They are inflating a massive asset bubble that when it starts leaking oil, it is going to be something most of us have never lived through before. As long as the stock market is rallying everything is good, if it were to turn down, you will see things change dramatically very quickly in this country.

The common theory I hear now is that stocks will trade down and commodities will sky rocket causing runaway inflation. I have seen some arguments that make sense that support this but history does not. It is hard for me to imagine during a depression that prices would not also decline. The logic for the commodity price rise is that producers cut back due to lack of funds and therefore supply gets limited, driving prices way up. It could happen, but it has not been the historical pattern. The FED has rewritten rules of the markets that have stood for decades, so do not dismiss any possibility. All bets are off. However, one thing to keep in mind, in the past during difficult economic periods, commodity prices have declined not rallied. This is always what bothers me about these arguments. As much as they are founded on logic at some level, they all call for something that has not happened before. They are "it is different this time" arguments.

One characteristic of market movements that has remained constant is that markets tend to come out of moves the way they came in them. We had a V bottom in 09 when almost nobody called for that. We came into that on a sharp decline, then turned on a dime literally one day. Since we are going virtually straight up now, we will likely turn on a dime when we do reverse. I think the best strategy for even those who might be bearish is to draw a regression channel on prices, and just keep a close only trailing stop on your longs below the bottom of the channel. There is no telling how far this could go. I will say the one thing I am sure of is that when it turns, it will do it on a dime, not over a period of time. When air pockets/bubbles get inflated this far, they crash when they do finally turn. We may do it from 16,000 DOW or next week, I have no idea. Trail your stops and rake in as much as you can, this is a once in a multi decade type of run we are having. If you look back to the 90's and the Internet crash, the market pulled back many times on it's journey, that has not happened this time. This rally makes that look like a blip in terms of the internals of the move.

Regression channels just like most techniques, have their shortcomings. However, when you get in runs like this I think they work pretty well. You can see how well it worked at the 09 lows in terms of just telling you to get out of your short positions. Here it would have you carrying a pretty wide trailing stop since we have extended out into the top of the channel. Who is to say we don't correct a little at some point and go to 20,000 in the DOW. You really have to keep an open mind to all possibilities. You cannot let an emotional view on what "should" or "should not" be happening, get in the way of how you manage a trade. What is happening is all that matters.

As I always do, I will attempt to point out when I think we have sell signals in the indexes to give us a fair warning of a top. There are no short term sells out there in most of my indicators. I did show the megaphone pattern in the vix the other day, which is not really something I trade with. It is something I monitor to look for entries in my other indicators. Since none of them are here yet, there is nothing to do but stand up and applaud.

I am in the process of developing the PNJ Advisors web site, in a couple of weeks it will be up and running.

Good Trading to everyone this week

Friday, February 11, 2011


After watching all the Grains have large down bars yesterday, I decided to wade into the Meal trade I covered yesterday when it bounced a little during the night session. I have to admit that I took smaller size than normal on this trade due to how strong this trend is. This is far from an obvious pattern, but that divergence is so strong I wanted to have a small position just in case. As with almost everything, if the stock market does not decline, this won't either as ridiculous as that sounds. I have covered ad nauseam in here why this is the case so I am not going back into this again. It is annoying but it is what it is. The powers that be are reversing the 5000th overnight down session in a row in the SP 500 as I type this, so odds on this trade are probably not very good.

Here is another market that is flying, aren't they all? However, we have a possible trap here that could be sprung today.

I have to say I am not completely thrilled with this one but it was close enough to be worth pointing out. If we were to trade today below yesterdays low it would indicate the breakout to new highs was a trap. If we combine that with quite a bit of divergence, it is a trade worth considering.

The last chart for today, is that of Bonds. Here I have also indicated the places where another once very reliable indicator, POIV by Larry Williams, has just become worthless. You can see where it indicated strength just to watch price collapse. Historically this has been the very best indicator of all for divergences, and yet it has steered views in the wrong direction over and over during the Ben Rally. I have no explanation for this at all to be honest. I just know I have kicked it to the curb now except for very special situations like that which I pointed out the other day in Unleaded Gas. Bonds are bouncing here and possibly setting up a short entry. I don't see in what I watch anything supporting this being a low here yet. If by some miracle we had a small decline in the SP 500, this market would rally. However, short of God intervening to stop the Fed, the odds on that even with all the reasons why it should happen, are not that good.

See you on Comedy Central! It does not appear I need a second joke yet.

Thursday, February 10, 2011


Just when I get myself into contention for a TV gig on COMEDY CENTRAL this had to happen! My joke does not look so funny now, and fewer laughs are coming.

We have another attempt by natural market forces to knock the market down and the dollar up. Soon we will have the monsters vs the aliens situation once the PPT gets to work at 6:30. They don't want even a down 5 minute bar, so this again is must see TV. They have not allowed the other team even a first down in the last several months. Will they get lazy and go into a prevent and let the other team move down the field a little bit?

Robert asked a question about a strategy of just buying 1 to 2% dips and using a volatility stop. That has absolutely been the best way to have traded this market the last year and a half. Just using a %R type of situation is always a great way to trade runaway markets. The losses of course come when you either get deep pullbacks or the trend changes. No strategy is perfect. Keep in mind that even doing that you would not have had many opportunities. Really strong or weak markets do not pull back much. This makes them tough because we get used to more choppy action, then along comes a trend move and you have to be a little less picky on them. Of course we don't always know when a trend move is here or over do we?

Many of the traditional ways of looking for reasonably accurate reversal patterns have completely been blown up in the last year. If you are a Fibonacci trader just try and get a dollar for every resistance level that has failed, and retire.

The main indicators I use to trade, are not giving me a sell entry in the indexes yet so if we are going to have a decline here, the way I will be in will most likely be on a bounce after a break. I am playing it though via long the dollar as you can see above. I am also short the EURO, but that is basically the same trade. I have the bet split up between the two. If the SP 500 is going to decline, the dollar will rise, and I did have a valid buy signal in the dollar overnight so I took that.

Here is another market I really want to short but have not as of yet. The one thing people can learn from me is that you should not be too overly excited shorting against big trends. The situation has to be just right. You have seen many trades in here where I have done this successfully especially in the metals, but it is very difficult to do. This next chart of Soybean Meal has the makings of a top, but in my view the price action does not match the technical stuff yet. Do not force these types of situations. If you miss a big drop right off a multi-year high so be it. I have been run over too many times in my career trying to step in front of things like this. However, this has a 3 point divergence so if I do get some type of a false breakout trap type of pattern, I will go after this one. So far there is not one.

Many of the grains have this triple divergence pattern here, but the trends are so strong. This pattern is very powerful and often leads to big moves, so I am watching this closely to see if it comes into line with the divergence.

Good Trading and hopefully the PPT will save with COMEDY CENTRAL negotiation.

Wednesday, February 09, 2011


I am in the process of trying to strike a deal for my own show with the Comedy channel after a joke I made yesterday went viral. My joke was " Stocks will have a down day." I just meant at some point in history, they will actually have a close that is lower than the prior day. I did not identify a specific day. That joke got so much laughter that it went VIRAL.

Obviously I am kidding, but it certainly seems that every single sell signal I have ever known of that has been a viable technique has failed to even generate a 2 day pullback. Here above we have yet another "joke." It is another sell signal. This is the megaphone pattern I talk about from time to time, and it now exists in the VIX. One thing to keep in mind with these patterns is that they work best at extremes. I know Bernanke would not consider this an extreme based on what he is doing, but most people would have before the stock market became a punchline and not real.

There are a number of ways to trade this type of pattern and you also have to keep in mind, it is in the VIX not the stock market itself. Although there is a strong correlation there, it is not 100% by any means. What this basically tells us is there is somewhat of an indecision in volatility here. The fact that it is occurring at an very low level is what makes it a sell signal. Even though I am laughing out loud looking for sell signals on the intraday charts today, it is what my signals tell me to do.

There are times like this that are incredibly frustrating. I am hard pressed in my mind to think of a time in my career where the markets were more difficult to trade than they are now. You are just damned if you do and damned if you don't. The market is so ludicrously extended in umteen different ways, yet it keeps plowing forward. If you are a newbie to trading, just be careful with how you are trading this. The way to trade these types of situations will only work about 10 to 12% of the time. That is roughly the percentage of the time we get runaway trends. Many a friend of mine pissed away incredible amounts of money during the Internet crash because they did not understand that just buying every minor dip no matter what, does not always work. In the last 3 months you could have literally bought the first 5 minute bar that closed lower and made a ton of money. This market condition although it seems to be never ending, will end.

Determining when it is ending is always a challenge. I would say that one good way to do it might be if you get 3 consecutive losses trying to buy dips. There is no magic to that, but it would tell you something is changing. It is hard to imagine how you could have lost 3 in a row doing that for the last year, so it would tell you things have changed.

I wanted to talk briefly about market correlations. It is my belief now that these are here to stay. The one thing that has changed in the world is the way the large funds operate with technology. They are incredibly adept at programming their trading to moving very quickly to what is moving. This is why you get these light speed moves. It is my belief that early on they tuned in to what the FED was doing to manipulate markets, and geared their programs to it. Why not after all they are in business to make money not pass moral judgements? As a result, since the fed is trying to create inflation, and reduce the dollar, their programs are all set to trade everything in the same direction. A declining dollar would in general be bullish for many commodities and currencies. Once they key in on another fed manipulation, the buy orders get thrown in electronically and off we go. This is all mechanical, so I do not know exactly what the tip off levels in anything are. I am sure they are different with different funds. The point is that trading most things in the same direction is going to stay with us for awhile.

See you on the Comedy channel!

Tuesday, February 08, 2011


I think most people get that interest rates effect stock prices. I am going to display a few charts today that show graphically this actually playing out over and over again. The above chart has the 30 Yr Bond in Green over layed on top of the DOW. If you look at the recent panic low in 2009, you can see the huge interest rate decline which shows as a rally in the price, of the 30 Yr Bond. At the far right of the screen we see the sharp decline in price, jump in rates, on the 30 Yr Bond. This is happening as stock prices are flying. In general this type of situation has led to some brutal price declines. The timing of this is another matter entirely. This type of condition as you will see in other examples to follow, can drag on for some time before the effect hits home.

What is the effect? People like the safety of bonds so when rates get high, investors will trade off some potential superior returns stocks offer for avoiding the risk of stocks. However, when Bond rates drop enough, investors will then drift back into the stock market willing to take on a little more risk to get the much higher potential returns. There is no magic number, it is always a relative decision depending on many other things that are going on. We cannot say that once the 30 Yr hits X %, the shift will occur, it is just not that simple. What is simple is just watching this relationship, and understanding that the air gets a little thin when we have a sharp stock rally and sharp decline in Bond prices like we are seeing right now. Once this condition is in effect, you had better have an exit strategy for when the market breaks. IT WILL EVENTUALLY.

Here are some additional examples.

You can see in both directions how this worked during these years. I have marked out what I think is likely to happen this year. With all the government manipulation of stock prices, I seriously doubt we will have a huge decline. What is more likely is a sharp shorter one like this that then takes off again. That is just an opinion, this pattern is not opinion based I just threw that in there as my two cents based on the current condition.

Of course the infamous 2000 top was telegraphed as clear as could be with this and it is how I knew to get out of all my stocks in December of 1999 and I did. The second example on this chart is a bit more tricky as we got some very sharp tradeable counter trend rallies before the actual low was formed. However, even in that case, a major low was formed pretty much right where this chart is cut off.

In summary, it is a basic fundamental that stock prices are driven/influenced very heavily by interest rates. In the past when the two instruments have diverged sharply like what we are beginning to see now, stock price reversals have taken place. There are a number of way to study this and I suggest you do this for yourself. For short term trading, this is not really of much help since you can see that these divergences can carry on for awhile. The reason they do is the collective masses don't make a decision on a dime. Money allocations take time. It is never perfectly clear what is happening until we look in the rear view mirror. This gives us a little bit of a heads up on the coming rear view mirror picture.

I expect this to very soon trigger a sharp counter trend move, followed by a massive government save of the decline. This could provide a very good short term buying spot. I am adding in one last chart for your viewing pleasure.

Good trading to everyone

Friday, February 04, 2011


Here is something that has just recently developed that is a big problem. If you look at the ADX on this chart it is going down dramatically during the last few weeks during which we made new highs. This is a very surprising divergence. It you study ADX historically, this type of look has told us the trend is losing it's steam and due to reverse. Of course there is always the one wild card here in that this trend of course is by government intervention and not natural market forces. I do not know if that makes this invalid or not. I try not to factor that into my decision making but I have to admit it is very difficult. As I have said time and time again, what we are seeing now has never happened before, and I have seen across all markets thousands of sell signals ( includes individual stocks ), that have historically been good that have all failed. It does make me think that all sell signals should be ignored until Bernanke announces the end of QE. At the very least, sells better have perfect patterns, and have tight leashes and probably managed on a day trading basis until we get some type of break.

However, that announcement would guarantee a multi-thousand point DOW decline almost immediately, so I doubt it is coming any time soon. For my purposes fortunately, there are no signals in either direction here at this juncture, so I do not have to make that decision. Today of course was NFP day, and what a dud. It is amazing to think about how this report used to move the market compared to what it has done lately. It is of course because the FED is controlling everything, so other reports are meaningless. There seem to be more and more inconsistencies in this report every month. This leads me to believe that someone is artificially playing with the numbers and is not doing enough homework to make sure the fake numbers jive with the real ones. This is so painfully obvious. It was interesting to listen to the CNBC all star panel try and debate these inconsistencies. I think they all would like to have said what I just did. If you are going to cheat, get it right for god sakes! For now I would just completely ignore anything that comes out of the government, the mustard is way off the hot dog now. If they say it is going to be sunny, take your umbrella, etc..

What to do about what I have shown above? This may sound ridiculous with all the moonshot rallies going on in stocks right now, but I would tighten my stops up alot here. This type of prominent divergence in the past has marked reversals, especially when it has come from a very high level in ADX preceding the divergence. In this case the peak was 56, pretty high. I would not jump right into a short trade here yet, that is really pushing a string right now. I would not put on any new longs here if my life depended on it in stocks.

I mentioned we were bullish on the dollar the other day, and here is a trade we did in our Robbins contest account. My partner Mike did this trade, and caught it perfectly.

We were bullish on the daily pattern I showed in this blog, so he went into the intraday tick charts to see if he could find a way to front run a long entry. Please no questions about why we entered where we did. There are certain things we are not going to divulge here. The point of this is that we found a setup, then found a way into a trade in that direction. There are alot of different entries you could have used to catch this trade depending on what your individual style is. I guess once our fund is launched, that is what people will pay us to do, be the ones who catch these. So far the trade is moving along nicely still up about $1000 per contract. It is still my view that we are looking at further dollar strength, and individual currency tops in the near term.

Wednesday, February 02, 2011


Although the dollar has plummeted due to sky rocketing stock prices, this index is continuing to diverge very strongly. We are now getting into an area where I am getting tempted to take a swing at the long side. I do need more than what we have in this chart, but I am watching this very closely now. Stocks are now at a key time zone for a potential short term turn. If that were to occur, it is likely the dollar would rise since their inverse relationship is very tightly woven right now.

Many individual currencies have burst out upward, then stalled the last day or so. Since we are also at some cyclical and seasonal spots for them, I am hesitant to get aggressively long there. However, let's be honest, shorting almost any market has been a quick way to ruin in the last several months. As a result, I am keeping my powder dry and trying to be patient. This is not easy for me, I need to generate a good amount of money to live each month. Even with that being the case, dumb trades are dumb trades, and shorts have been darn near impossible in most markets other than on a day trading basis. There will be a time when this changes, just as it did when everything was a short and longs were impossible many months back.

For now I am staying flat in the currencies, but looking for longs in the dollar and shorts in the other currencies. I have no trades for tomorrow here.

Here is one market that does go it's own way, Natural Gas. This does appear to be setup for a short entry here if Wednesdays low gets taken out. We are trading higher tonight and this has a long way to travel to fill this, so maybe this is not a likely trade but it is worth pointing out.

I have really been grinding trying to find a trade in the stock indexes, and I just do not see one. We did move down slightly today as I said I thought might happen. We did not move anywhere near that megaphone patterns entry spot. I do not see a buy or sell pattern for tomorrow, or see one for Friday no matter what happens tomorrow.

I want to get back to Crude Oil. This market has been on a wild ride. I had called for it to decline, and it fell out of bed just a day or two later. Now we have sprung back up very strongly on the international turmoil stories. I noticed something tonight that is very unusual. The next chart is that of Unleaded Gas, the middle child of the three in this complex.

The POIV indicator is showing a huge amount of divergence, a classic 3 lower peaks formation with three higher highs. This is exceptionally rare, I do not recall the last time I saw this. I know there is an over abundance of bullishness on the energy complex, yet this tells us the professionals are not accumulating longs at all. This is a market to watch for a sell signal for a large move down. it may well be that the next short term signal is a buy I do not know. However, this is a market speaking very loudly here and it is time to be on guard for a move that surprises the public here.

I had to post this a a different than normal time due to other business conflicts. For those who check in from overseas, go down one post to see the one you would normally view for today since this is now the second post today. It is really an advance post for tomorrow.

Robbins has been behind in their updates of the contest. We are up about 20% at the moment, so I do not know where that leaves up but it is certainly on pace for a good year. Remember if you missed the post it is under PNJ Advisors. I will be launching our web site shortly so you might want to check in for it in a month or so.


I have discussed these patterns in here before. First of all, they are not the holy grail by any means. However, you will find these patterns at many key turning points in markets. We have a broadening pattern here with very good symmetry, the first requirement. It has to have expanding pivot points, requirement # 2. The safest way to enter them is a close on the day following the formation above/below the last leg of the pattern. In the case of today it is a long travel to get there and very unlikely to happen. It if did get down there I would wait for a bounce to get short. If it travels that far it might be exhausted by the time it trades through the low. If you front ran the entry intraday at the low, which I do at times, it is likely you would suffer an immediate draw down.

I need to have other things going on to support these trades, and I do not see anything else to support this short at this point. I am drawn to this pattern though simply because of it's symmetry and the trap nature of how this looks. The last few days were very interesting, my mentors up seasonal call in the end turned out to be correct. Now you know why I have a hard time disregarding his views. Nonetheless I still should have taken that trade it would have been exited with a big profit during Sunday's night session due to what I explained in advance has been the tendency on month end declines.

This type of pattern shows up often on intraday charts so is really a better day trading pattern anyway. I just wanted to show it here because it is such a clear one. It is my view with any pattern that it should not be forced. It should be obvious it is there or it is not a trade. Also look for at at key retracement areas or extended markets. It is not a pattern to be used in consolidation periods. Now if today forms and inside bar, it messes this up a bit for the next day. The entry point would still remain a close below Tuesday's low, ignoring the inside bar. For me it is such a large stop, and against one of the greatest trends in history, so it is not a trade I am going to be doing. There is also a seasonal top due here, and also some bigger picture cycles coming due today, so I am still looking for things to turn down in the near term. That is not enough though for me to take a trade like this. The overall rally won't end until the FED decides it will.

I know I am picking up some new readers as the word is out on the PPT and what they are doing, and people are surfing to read about this manipulation. As I watched the San Diego open and the artist formerly known as Tiger Woods hack it around the course, it reminded me of what we have happening in the markets here. It has been my contention that ever since the story first broke on Tiger over a year ago now, that we would never see him regain his form. My reasoning behind that view was that it was such a rare combination of things all in one person ( seemingly ) that there was a reason we had never seen it before. It was a once in a lifetime period that we won't see again. He had one year he did not miss a single putt inside 4 feet! Even a machine putting the exact same put on a green would not be able to do that. He was the perfect storm, although as we know now there were flies in the ointment all along and they finally came out. That will also be the case with the stock market rally sponsored by the FED. They are creating a massive bubble in asset prices here, and the flies in this we all already know about. It will end how Tiger ended for the same reasons, what we are seeing is a manipulation not a portrayal of reality. These illusions do not carry on forever.

I for one as a scratch golfer myself, ( .5 index to be precise ) feel lucky to have been alive and been able to have watched him in his prime. He was the greatest of all time even though he is probably not going to break all of Jack's records now. Watching the combination of nerves, power, and delicate touch he had in his prime was something I will never forget. However, now it is over and I doubt it is coming back even though he is trying as hard as he can to get there. So it will be with the FED once they stop pumping money in like they are now. Enjoy it while it lasts, it has never happened before, and it will not last forever, but now is a great money making opportunity.

Here is a market that is talked about often, and is just a mess right now, the 10 YR Notes.

Many of my friends along with me have been looking for a rally in this market, and you can see this sucker is just flat lining here. At this point without a stock market decline of some type, this market is not going to rally. Here is a perfect example of where manipulation is not working. The FED is trying to move rates and equities and commodities higher, and the dollar down. They are getting most of that done, but they are not keeping rates down. I always tell people rates are determined in the free markets, not by the FED. This is a perfect example, interest rates have risen during QE2 thus far.

I do not see a much out there today other than possible declines in the ES today. There is marginal sell in Silver I am watching. I also was looking at a long in Cocoa, but that appears to be off the table for today now.