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Thursday, February 24, 2011

NOW WHAT?



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.

4 comments:

The Sound Center said...

Thank you, Chris.

I appreciate it.

Anonymous said...

Good stuff as always Chris ... I agree with everything and read look forward to your blog.LW has been a great teacher to us both.

Cheers

BQ.

K said...

Could you please tell me what does PPT mean? It appeared so many times on you blog...Thank you!

Chris Johnston said...

PPT is the Plunge Protection Team, surf the web and you will find detailed explanations of what that is and when it was formed.