As things wind down for this year, I thought it would be fun to start doing some live stock trades here to lay the ground work for my website going forward. I think most readers are probably futures traders, and the larger amount of my trading income certainly comes from that arena, but I do also trade stocks quite extensively. The above is a chart of COO and a very specific trade for today that we will follow live if it fills, just for kicks. The parameters are that if the close is greater than 70.20 and less than 72, I will sell this short at the close (MOC). There is not really an order you can place like that so you just have to be watching in the closing minutes to see if the conditions are being met. If they are, I will just execute the trade in the last few minutes. If you miss it you can always try and place a limit order for Thursday at the closing price if it is in the parameters.
This trade will not carry a live stop. It will be exited based on conditions present at the close similar to those above. The general idea here is to sell strength in a down trend but there is a quite a bit more to this signal than that. I have a list of many of these most days, and choose a few of them. You have seen two trades like this I did recently in the SPY's that both worked quite well. I wanted to do one in here live just for fun. You have the above rules, and this is a trade I am doing if the conditions are met.
Getting back on the theme that I don't think the year end rally is going to go far, we are potentially nearing a short term sell signal in the VIX. We do need some more weakness in it, but it is getting close to the zones I monitor for sells. Days like yesterday have a lot of back slapping, but it is just one day as we all know now. Big days often get followed by days in the other direction in this climate, so we just never know from day to day if any follow through will happen. I loved hearing the bullish spin, "it looks like Europe is getting it's act together." Are you kidding me? What exactly changed in one day that un did hundreds of years of socialism? One bond sale went better than expected. Aye Carumba, some of these people should be tarred and feathered! I am not 100% sure of many things in life, but I am 100% sure that Europe's problems won't be solved in one bond auction.
All the politicians think they can solve problems by making everyone happy. I have news for them, before this is over some people are going to have to take some losses. Some bankruptcies are going to have to happen. We can't just make people feel good all the time for doing the wrong things. If you do the wrong things you suffer pain, that is what teaches us not to do them. Then as we become adults we are forgiven for murder, theft, you name it. In this case, people that took on inordinate risk are going to have to be allowed to go bankrupt. Those entities can be countries as well as individuals. Until that is allowed to happen, and we get a washout, we are just going to move sideways in the mud like we are now.
As the world turns, here is the Russell here and low and behold, we now appear to have another meaningful divergence in POIV. I was just talking yesterday about paying attention to the big picture with this, and now we are back into one of these significant areas. Price last night traded up to the highs, and you can see how POIV is lagging by a huge amount. When I try to balance this with my thought that the government will not allow this to rollover before years end, here is what I come up with. If they are in fact out there keeping this propped up, and I do not know if they are or not, they are not moving it up much are they? I have not seen any obvious PPT action in the market for months except that one day I showed the chart in here where the last 30 minutes was a moonshot out of the blue. Maybe the result of this will just be a stalemate. The market wants to move down, they stop it so it goes sideways? I really do not know, but I will just go to my short term indicators, which are now once again leaning to shorting this in a day or two. We will have to shoot up strongly here to nullify this setup, which we could do. Trying to call one day at a time here is pretty difficult at the moment.
You can see the seasonal in this market is more bearish than the other indexes. This is because it has fewer years of data, and the January decline tendency has developed in recent times. As a result it skews this down a bit more. One thing that is remaining constant here each day is that my short term tools are bearish and the seasonal and cyclical tools are bullish for the rest of the year. The best trades do come when these two things are in agreement, but we can't always have it all, we rarely do.
I hope I have not seemed contradictory on the stock market here. I have been talking about the seasonal bias here for a month or more and that is still here. What has bothered me is the short term weakness I see in some of my tools, which is causing me to consider a short term trade on the short side. That picture has been changing a bit day to day, but that is how the indicators I use work. They are sensitive to short term price action and can show a long one day and a short the next. That is the challenge in using them. If and when I take a trade here I will post it, then my money will be behind my mouth, and hopefully my foot will not wind up in it! There will not be any I told you so's here, I am conflicted on the next weeks direction here overall.