Thursday, March 31, 2011


One of the things that I maintain you get in this blog that you do not get elsewhere is reality. I talk about the good the bad and the ugly, of what I do. I do not read other trading blogs, but I have been around long enough to know that most things in this business are hype and marketing. There is neither of that here. This is just a straight forward commentary about my trading with a few smart ass political or otherwise relevant remarks thrown in. It is my style and it is all I know to do. With that in mind, I mentioned a couple of trades recently that are now closed so it is time to cover the results, Crude and Gold. The above chart is Crude, and there was a comment by someone in one of the other posts about they thought it looked like a buy and wondered what the update on the trade was. You can see above where I entered and exited this trade. Genesis displays the little arrows when you trade through their platform showing where the trades were made so it stops people from giving you some false story about what you did.

As you can see I entered this trade right where I indicated my orders were, I got 4 ticks of slippage on the entry. The first day we got a nice down close below the low of the day before. Once we get bars like that the market should get moving in that direction. I had moved my stop down to above the high of that day due to that for the next 2 trading days. When I reviewed this last night during the night session I noticed that yesterday had made a higher short term low than the prior one, when it took out the prior bars high. This made me uncomfortable with this trade. I also noticed that the market had then settled back down for the day, giving us a reversal bar down. These are generally more buy entry bars than sells as I have written about in here in the past. Some of the other things I use appeared to be turning back up, another dagger in the trade. When I then stepped back and looked at how strong everything across the board was, I reasoned this was just not a time to be short anything once again. I did not have a buy signal, so I decided to just go flat and went to the market and did so.

Obviously this was a good judgement call in that I wound up with a tiny profit instead of a loss. The loss had I kept the stop in the original spot would have still been less than the original stop, so it still would not have been a disaster, but this trade was just no good plain and simple. Trading is about making judgement calls like this that are not emotional, and are based on market developments. For the most part I exit on just stops or limits, but when the tide changes while I am in something and it is clear that it has done so, I at times make decisions like this. They are not all as good as this one was circa my GOLD trade which is next.

Here you can see I entered this trade on the same day as Crude, but never even got one really good close in my direction. All I did here was move the initial stop down to the 3 day high once the trade progressed for a few days. There was no judgement on exiting like that of the above example in Crude. I wish there had been, but I don't force that type of decision. In my judgement coming into today had we traded down below the low of yesterday this trade would have still been in good shape. If we went above the prior days high which had become the 3 day high now, the higher short term low would be confirmed and it would be time to get out. You can see with this one I traded the mini contract instead of the full sized one. I took smaller size by far than I normally trade with on this one because it is a new pattern I am experimenting with so I did not want to risk much to see how it worked. I entered this after 2 consecutive down closes which I have not done ever prior to this trade. I did it because there were some internal things not displayed, that showed this could be weaker than it appeared on the surface. The experiment failed I guess.

Some of my tools still tell me this is a short up here, so I am watching to see if one of my traditional core patterns shows up here. If it does I will wade back in here again. If it does not I won't. The next trade is a market we traded recently in our Robbins contest account, and also one I have traded some emails with a couple of readers on, the Swiss Franc.

We actually kind of botched this trade by exiting where we did as indicated above. However, coming into today I noticed my COT index had been moving up pretty nicely, actually flashing a buy signal. We would have been out today at about the same price as we did exit anyway, so nothing lost in the early exit. I added this to my list of potential longs for today. I did not wind up taking this long entry today for a few reasons. First and foremost, it is amongst the weakest currencies, and I never buy the weak. It is weak ( on a short term only basis ) because it is the flight to quality vehicle vs the stock market. Now that we have the stock market back in lift off mode once again, I just found it hard to believe this would rally. This is the same logic I used for not going long Bonds today which was another buy setup that at the moment is looking like it is taking off.

When we get into these pullbacks against the larger trend then they bounce back in the direction of the trend but are still below the highs, we always have a decision to make. Is it a resumption of the trend, a continuation long trade, or is it a failure pattern indicating a reversal. I wish I could tell you how to always know which of these scenarios is true. I do not know any sure fire way of knowing this. It I did I would keep it to myself probably since it would be worth millions of dollars. You just have to make your own judgements as to which you think is happening. The above logic is what I used to not take these two longs and to wait to see if the failure patterns come along to short. Time will tell if that logic is any good or not.

As to the overall market, my stance has not changed. The Russell made a new high for the year yesterday and I expect the other two indexes to do it as well by the end of the week. The bull market is back in full flight mode once again. I had a talk with a long time friend of mine the other day who is an excellent trader. He is equally perplexed by what we are seeing in this market. However, we both agreed that you have to go with it until it isn't happening any longer. It really is that simple. You may or may not think this market move makes sense or is justified, but the fact of the matter is that we have the strongest up trend in the history of the stock market at hand. Don't fight it. If and when the trend changes it will be obvious. We were on the verge here recently, but the key levels held. Key support levels won't hold when the trend changes, and it will be as obvious as it can be when it happens. Until then don't fight the FED who knows how many years they might push this thing.

Wednesday, March 30, 2011


Of course what I am referring to here is trading the stock index futures. I have to admit that most of the indicators I use have been absolutely worthless in trading this market lately. Even my COT Synthetic never quite got up to the buy zone on the recent decline, and it usually moves up quickly on declines as you can see on this chart. If anything it's tendency is to be early not late in signaling buys when dips occur. This is just another example of how artificial influences in this market are making it tough sledding.

Fortunately for me and my credibility as a prognosticator, I did not rely on my indicators alone to tell readers that I was looking to the long side as we started to move up off the lows recently. I displayed that one forecast that indicated up and that is the exact path we have followed. I also displayed the 1987 chart when the drop began and said I felt it was very similar. I then brought it up again and told you why I thought that we are not following it after all. This is part of trading, reading what is happening. You cannot be so locked into a view that you miss what is happening right in front of you. If you look at the Russell, we are very close to making a new high on the year. Of course since this is a broad measure, that is pretty bullish. For those of you who either had signals to go long at the lows, or for whatever reason did so, GOOD ON YOU as my Canadian friends would say.

I have not gone long, I have pretty much used my view to not go short. I still think if by some miracle today we took out yesterday's low, it is a short entry opportunity. I think the odds of that are almost nil, this seems to be solidly back into buy the first down tick in anything mode again. However, you just never know so I have orders down there just in case we get there. If we do I plan on taking a smaller than normal position, then adding if it bounces. I need to break one of my rules and watch intraday in just the indexes just in case I see us starting to reverse back down so I can catch a few stocks also on the short side. I doubt this will happen. I fully expect new highs for the year on the NFP report this Friday. The only remaining logic at all for a short is just that this has raced up so quickly that it is possible it is overdone from a short term standpoint.

If you look at my COT Synthetic index, the last time we got to this much of an extreme there we did have a sharp pullback for a couple of days which really setup the best buying scenario. I have no idea if this will happen or not but I am just pointing this out as my logic as to why I am watching just in case this happens.

It is interesting to me to hear the talk about how undervalued stocks are here. Of course there are alot of ways of determining this. All of the ones I use they tell me exactly the opposite except for one thing, Sentiment. I did drop down quite a bit on the recent decline, which was bullish. There are so many things you can look at that will bark out different things to you at different times. I suggested the other day not to try and mix together different approaches. I am practicing what I preach. What I use primarily did not give me buys here and tells me today is just about the last possibility of a sell, so that is what I am going with. I missed the move due to how I trade so I am accepting it and moving on. One thing I can tell you that I am sure of, this is the oddest move in the markets ( this last year or so ) that I have ever seen. I doubt the people that traded stock indexes well prior to that time are also trading them well now. None of the tools I know of have been effective with this market. We will never truly likely know exactly what is going on and how if this move is being created as I allege, how they are doing it. There is really no sense in trying to figure that out. The tape is just odd is all I can say, I wish I could put my finger on it more than that. The weekly trend is your friend so just be careful trading against it except for very short spurts.

For now unless we get a big move down today I mention above, the sky appears to be the limit once again.

The mirror image of course of stocks is BONDS and below is how they look now. This is pretty much the same story in reverse. We are on the verge of rolling over and here my indicator shows a buy. You can see the other times it has gone there except for one, we have bounced. Will we here? I doubt it if stocks stay strong but I am watching here. Again the logic here is just a really oversold market that appears to still be in an uptrend, albeit it hanging by a thread to that trend.

In summary, although I recently predicted this was going to happen, I did not trade it due to my tools not giving me entry signals when they needed to. I stuck to my guns and came up empty. Sometimes this happens. I know from my experience that I don't want to tailor my whole approach that I have developed over the years to this market condition. It is a once in a lifetime occurrence. Once the Fed stops doing what they are doing if you have adapted completely to trading this way you are going to have some problems when we return to reality. However, who is to say when that might be? Maybe we will get a dip here which will trigger a long entry for me but it is not on the horizon yet.

Good trading to everyone.

Tuesday, March 29, 2011


I tried to capture this chart when it was up for the day, and wound up with unchanged as it ticked right when I did it. We are now officially at ground zero on this inflection point. We have retraced a good portion of the decline, enough that if we get much higher, new highs are coming. If it is going to generate a sell signal I think it will do it right here. My modified commercials indicator does show selling on this rally here, it normally does ( moves opposite of price it is still a work in progress ), so that is not the end all. However, there are a few other things I watch not discussed in here that tell me that if we were to close higher today and then tomorrow take out today's low, it is a sell signal. Will it be any good? Who knows. With the FED apparently having gotten a handle on this decline, I think the odds do favor new highs again until the QE stuff stops. However, I don't trade based on the FED I only discuss what they are doing in here. As a result, this is a trade I will likely do if it plays out this way.

The other problem with trying to trade the FED is that we don't really know what the buy triggers are for the buy and sell programs they are launching in the futures markets are. How can we trade off them if we don't know? They do not seem to be indexed on the disparity between the cash and futures markets, what we call the PREMIUM/DISCOUNT. Most institutions launch their programs off those fluctuating values. The brief time I have spent trying to figure out when they are coming in has not revealed any obvious patterns. The only one I ever found was the fade Barry trade, which was one of the all timers that I wrote about in here. This was not the FED since there were sell programs every time that imbecile in the white house spoke. They are only operating on the buy side. That trade does not work anymore but what a run it had, I think 18 straight wins before it stopped working.

Net net we know what they are doing, but not exactly when or what their triggers are. All you can really do is keep very tight stops if you are shorting anything once you get one big day in your favor. They have reversed so many moves after just one day, that I think it is prudent to keep stops closer than normal if you happen to get big down days in individual stocks or the indexes. Normally this would be the wrong thing to do, but as we know things are not normal. It is generally prudent to give the markets room once you get one good sized day in your direction, so they can consolidate then continue moving in your direction. NOW this is the absolute wrong thing to do.

Here is another chart that is equally well setup but also at a point where the move needs to happen right now or a rollover is coming there.

This is the 30 Yr Bond chart. It is basically the opposite of the stock market and you can see we are on the verge of really rolling over, and we will if stocks keep climbing. However, if this day were to hold just as it is now, going long above today's high tomorrow is what I will likely be doing. The alternative scenario for both markets is if they keep going to buy the first pullback in stocks and sell the first pullback in bonds.

The obvious big picture view is to look for sells in stocks in the June/July time frame when the QE is supposed to stop. There are long term cycles that also indicate high points there, meaning declines should occur at that point. The $64,000 question is of course, will the Fed stop QE at that point in time or not? My gut feeling on that is that they won't. I suspect that they think things are much worse than they are telling all of us, and that this can't run on it's own. I think the recent trial run they conducted where they backed off a little to see what would happen and we cratered, told them they need to stay active. One thing to be aware of is that the only difference between the PPT activities historically, and what we have seen in the last 2 years, is them publicly telling us they were doing it. There is nothing to stop them (NOTHING), from propping up things when they feel it is necessary. They have done it for many years, why stop now. They trash talked telling us what they were going to do, then went out and did it.

In sports the comment when the opposition complains or mouths off while you are rolling them, is "SCOREBOARD." I had some idiot in a blog a few years ago challenging my trading results, so I showed everyone some of my statements from the Robbins entry I had going that year, then also changed my handle in the blog to Chris Scoreboard Johnston. Basically an F U to that moron. The FED has pulled the biggest Scoreboard play in history so don't expect them to go away quietly.

Must see TV the next couple of days

Monday, March 28, 2011


Trading is such a challenging profession and it tempts us to do all sorts of things that are not in our best interest. There is no other endeavor I know of short of climbing Mt Everest or some task like that, which gets is more exposed to who we really are internally. Your flaws will be exposed in trading no matter how hard you try to avoid it.

There are so many different ways to go about doing this trading stuff that it is hard to settle on one approach. All have merits, all have flaws. It is tempting to try and combine approaches to get a kitchen sink type of strategy that works in all types of environments. To this I say........NOT!

You have to go to battle knowing what the limitations of your techniques are. Some people are just naturally contrarians, some are natural followers. For these two types of people, the former should be reversal traders and the latter trend followers. Both of those approaches have flaws. Reversal traders can get absolutely wiped out during periods like we have now where the trends extend seemingly endlessly in one direction. On the other hand trend traders can get wiped out during consolidation periods, or trend reversals. One of the very best ways to trade stocks is to buy weakness in strong up trends just at the market once you get to a certain level of oversold using no stops. You then buy more as the trade goes against you legging into your full position. Once the underlying trend reasserts itself like this past week, you rake it in.

I personally cannot trade without stops so even though I know that is a dynamite way to trade and can be statistically proven to be, I also know that when the trend does reverse, you will get absolutely clobbered. I don't like trading a style that I know at some point many months of great trades profits will certainly get wiped out in one fell swoop. As a result, I choose not to trade that way even though I know even after the beat down, you still wind up ahead. I went into just this one example to make it clear that what ever style you choose just understand the weaknesses of it and plan accordingly. If you are a reversal trader you just have to "know" that during periods of time like this you are going to lose money, so you need to be strict in your discipline so that you will be there when the inevitable "big one" comes along. That style is very low win percentage, but pays off big eventually.

The temptation then of course comes in to try and combine reversal trading and trend following. I am not going to say this is impossible, but it is very very difficult to do. You have to completely different mindsets that require you to completely detach yourself from any predispositions, and just read what is happening in the markets at any given moment and make a decision. This can get you chasing your tail so many times that you will bite if off in frustration if you ever catch up to it. Let's look at the chart above and discuss the COT stuff for a minute.

I have marked on the chart where the COT data and indicators tied to it told you to take action. You can see there were some fantastic calls, and some lousy ones. Guess what, that is reality. Nobody buys every low and sells every high in spite of all the bogus advertising people do. When I first learned of the COT data many moons ago, I thought it was the greatest thing since sliced bread. Now at times I would far prefer a loaf of sliced bread to it, but at other times I love it. During very strong trending periods the COT data often shows heavy counter trend positions by the commercials due to the basic nature of what they do, hedging. If you just look for them to be net short and sell you are not going to do so well. During big trends you will be carried out on a stretcher like the Duke brothers were. However, you can also see where the indications of their positions are quite timely.

This is an example of knowing the limitations of your tools and what they are and are not good for. You cannot take the COT data and be a Chameleon with it. It is not all things to all people. I am sure most people know that "guy" the kiss ass who blows with the wind at the office and tries to make everyone happy. He sells you out in a heartbeat to get on the right side of the discussions. You cannot be that "guy" in trading. You have to stick to your guns, know your limitations, and deal with what they bring knowing your strengths will ultimately give you good results. The COT data above is an example and a hard learned one for me, of me trying to make this do something it does not, pick the end of trends. I accept that at times this is going to make a trend look like it has to end now when in reality it might go on for several more months. Can you say GOLD last year. I got fooled into thinking that market had to correct based on the COT data. Although I did trade that market profitably last year, I missed some longs I should not have due to the COT stuff influencing my thinking. I accept that as a limitation to how I trade even though I don't like it. There are alot of armchair quarterbacks who know jack about trading, that were right about this market and I was wrong. It is what it is. I can blame the COT but it was really me not fully accepting the limitations of one of my tools that led me astray there.


Here are a couple of trades I am looking at for today. I do not watch live quotes intraday so I do not know what is happening with these as I type this entry. I know my limitations and know that watching every tick tempts me too much to not honor stops so I just do not do it.

This is GOLD and you can see where I have an order in to sell short. This has been far weaker than Silver. Silver also had a pattern to sell but as I harp on constantly sell the weak one not the strong one. The next chart is CRUDE OIL. This market has an incredibly bearish COT situation, the most in history, so I have been looking for short entries. Here we may well have one of those instances where the COT is leading me astray. Since we are at such a historic amount of longs with the Small Specs I just felt it was worth a shot.

I will tune in this afternoon to see what happened on these potential trades. We also have other things we are in but as I have said, I do not disclose every thing I do in this blog for obvious reasons.

Good trading to everyone

Friday, March 25, 2011


It appears now that we are back again to buying the first 5 minute bar that closes lower and the market has successfully held the critical levels I mentioned. First a couple of housekeeping items. Going forward some of the oscillators I used to show on the charts are not going to be there anymore. Why?

First and foremost, they don't work in runaway trending markets like we have across the board. I had them on there mostly just as a reference, decisions were rarely made based on them. I don't care how good you construct any oscillator, when you get these monster trend moves they give you just a ton of bad signals. At times like these you don't need indicators, just buy every little dip. Just a basic %R type of approach from the Larry Williams school of trading is all you need. I should not have had those on my charts in here as long as I have. Yes there are way of using them just like there are ways of using the COT data that are effective, but don't get married to them. I don't want new traders to get the false impression that oscillators are the key to success, they are not.

You can see why I have not referenced the COT stuff for the stock market much in recent times, it is just worthless. If anything the commercials in this market act like Large Speculators, scale up buying and scale down selling ( indicated by the arrows). However, there are also times when they are just in the middle doing nothing, a function of all the cross market hedging that goes on. It is what it is, no sense in crying over it, the COT stuff jumped the shark here, done. I will say this just in general, this stock market run is so peculiar on so many fronts, I just have never seen anything like it. It does not show up so much in the daily and weekly charts as it just does in the "action." I can't put numbers to it but it is just the way prices move intraday. I have quite a bit of experience watching intraday charts and there is just something very weird about this. I feel like I am watching some other foreign market with less volume.

What you really have to do is what I have done in the recent commentary, look at the bigger picture trend and don't get caught up in opinions about why prices "should" go up or down. I have been a bit too bearish on stocks overall just because of how extended the prices are, but I did say the other day that we were at a critical spot and should see a good sized move right from there. Of course I guess it was up, and that is where I was leaning as I indicated. The projection I have did not indicate straight up like we have seen, but it was decidedly up. That is about as good as things like that are going to get. It stopped me from trying to short the indexes which would have been a losing proposition. I always love it when extra analysis saves me money, it is time well spent.

So with the up trend now having re-asserted itself, what next? I think the 1987 analogy is off the table now. Here are the charts that I still think are eerily similar but there is one dramatically different item here that is the deal breaker for this being a repeat of that now, the advance decline line. Larry Williams reminded his students the other day about watching this, and once again it was a great piece of advice.

The advance decline line on the bounce in 1987 was showing a ton of weakness diverging with price on that bounce before the big rollover. In our recent scenario, it is showing strength. Also you can kind of see it in the price with this rapid rise in the last week, that prices are much stronger in this current instance. Even though overall the formation is very similar, I think this tells us the internals are entirely different and that matters. So it is likely up up and away again here. The only red herring is the recent low. As I said the other day when discussing this being a critical juncture, that low needs to hold. It is a long ways below now. In the event we happen to dip, we need to hold that price level or there are bigger problems. Until then let er rip.

Here is a trade I have orders in for that is unlikely to fill today, Heating Oil.

You can see when one of my quasi COT synthetic indicators declines, it has led to either declines or sideways action at worst on this chart. I will grant you some of these sideways moves were not worth trading and would have resulted in losing trades. No indicator is perfect, and this is something I am playing around with now, so not going to bet the farm on it. However, it is based on trying to dial in on what the commercials are most likely doing on a daily basis. This seems to mimic it pretty well. We sort of have a right shoulder type of situation going here, and if we were to break the low of yesterday's reversal bar up, to me this is worth a shot on the down side. You can see where my orders are resting, but they are not likely to be filled.

I am looking to short the energy sector here, and this has been the weakest daily chart pattern in my opinion in the energy sector.

Just one housekeeping item. I did exit my evil empire short in Goldman Sachs for a $5 per share profit yesterday. Big deal, kind of a marginal trade, but I just don't want to be short anything now that we appear to be lifting off again.

Everyone have a great weekend and thanks for checking in.

Thursday, March 24, 2011


I always shy away from interviewing 5 year olds because they are tough, every answer is one word. However, sometimes the simplicity with which they see the world can help us adults get a clue. The smarter we are the more we think we can create all these fancy techniques that will predict the future more accurately. Very few people are more guilty of that than I am. We have the COT data on the Silver chart above giving us all sorts of information to act upon. It certainly has been right at times and wrong at times. I bet if you asked a 5 year old at any point during the past 2 years to just look at the chart and tell you which way we would go next they would have told you up.

Unfortunately for me my 5 year olds are Saint Bernards and they have no interest in giving me an answer they would rather chase a coyote with all they got to see if they can finally get one just one time. That plight, that desperate raw instinct they have to want to shred one of those little dudes is like trying to fade big trends like this. We know it is crazy to do it but somewhere inside of us we get some faint hope that we will figure out a way to short the top of a move like this. Make no mistake about it when the top does come here be it tomorrow or in 5 years, the fall will be like nothing the world has ever seen. There is not one single commodity, not one, that has a long term chart that looks like the DOW average where it has just gone net up for that many years. Commodity markets swing up and down. They do have spectacular up and down moves, and those are what we as traders live for. The net price over time tends to be a median type of price.

I would not suggest anyone try to pick a top here it is just simply impossible. When it does happen to turn down find the closest 5 year old and ask him what he thinks. If he tells you down, get out of your longs. We are long this market currently with a trailing stop underneath. This market is just running so we will see where it goes, on to the next trade. We make lots of trades and they will never all be discussed in here, but here is one market we are looking for a big move in.

Here is a weekly chart of the Dollar Index which looks quite interesting to me. Here we are basically at the bottom of a massive trading range. As a counter to all the water cooler economists who think they are so smart popping off about how the dollar is getting killed, print this chart out and hand it to them. Net we have gone nowhere in 2 1/2 years here. That low on the left is August of 2008. The dollar index is at the same price as it was 2 1/2 years ago, hardly a massive slide. We have the commercials buying into this dip which you can see they have done when we have been at these levels before. Also what is interesting is we dipped just below that August 2008 low and reversed on a short term basis. It is way too soon to tell, but this could have been a trap.

I posted a daily chart recently showed this market and said it was setting up as a buy if it held. It did not hold at that level, and moved down to where we are now. Once again I will say the same thing, it is time to watch the daily chart for a long entry into this market. The COT data is overwhelmingly bearish in the individual currency markets here also, so although their up trends are still intact, it is time to look for the next big move to be up in the DX and down in individual currencies. The trick that is delaying that is the insidious inter market relationships between these markets and the stock markets. You can watch the tick charts and see them tick up when the SP 500 rallies. That may delay this move from happening, it has so far.

However, stay on your toes here.

As for the stock market, it appears as I stated yesterday that we are going to go sideways to up here in the near term. I think dips are buys again now.

Good trading to everyone and thanks for checking in. I have noticed the readership has increased quite a bit recently.

Wednesday, March 23, 2011


Having a blog is great because it allows you to just run your mouth constantly within a few normal bounds of decency. However, I am always accountable for what I say and "predict." With that in mind here goes a prediction of what I think is going to happen here. Above I have displayed how I think things are going to play out over the next couple of weeks. My indicators just appear to me to be in a mode where they are working themselves out of sell patterns and into a buying situation. This above chart features matches that I think are pretty close to what we have at hand and averages them out showing what transpired going forward.

Here is something else that is eerily similar. If you look back at the 1987 scenario it did feature an initial drop followed by a sideways to up move that lasted 2 to 3 weeks very much like what the red line is showing. Then what followed was the big drop. I have absolutely no idea if we are retracing out something like that here, one step at a time. I did initially think and stated as much here that the first bounce should be a sell and we are in the first bounce scenario right now. However, the indicators I use are really giving a marginal read as to whether or not they support that type of scenario. It will take a very big move to turn them back down today and that is why I did not get short the indexes last night. Time will tell if I will regret that move.

The above scenario shows a minor dip here that works into a buy situation, so that is now what I am looking for. If for some reason during the dip we take out last weeks lows all bets are off and this call is wrong. At times this software is uncannily accurate, but not always. It has been dead wrong on enough occasions where I view it as a supporting tool and not the end all. The next chart is the weekly Bond chart that appears to be setting up a sell signal. This would also make sense if we are going to get a stock rally.

You can see my modified COT indicator has moved into sell territory on this recent rally, and we are clearly in a down trend in price. This is generally the best way to use the COT stuff. The regular conventional COT has not moved down much yet, so this is not perfect. My own indicator is a work in progress, so it is not something that I have enough faith in yet to solely base a trade on. However, it appears so far to be better than the original COT signals I have used for so long. You can see that in general it goes into the same zones as the old one, but it moves a little faster. I am trying to figure out a way to get one that is more responsive on a shorter term basis than the old stuff. If and when I get it I will likely keep it to myself and use it to benefit me and my partner and future clients. I am not going to give away something like that free on the Internet. I did want to display it to make my point that I think we need to be looking for sell signals now here.


I showed a chart the other day of a long we had on in Natural Gas and we blew this one to be honest. Yes we took a nice profit and it was more than double our risk, but we got out of this one too damn soon. When we got the two gold colored bars that indicate indecision and looked at where the trailing stop had to be at that point, I did not want to risk giving back too much so I pulled the plug on this one. This is a frustrating business, even a trade like this that was in reality successful, I blew. It seems that at times you can't ever get anything right in trading. I also am my own severest critic and it will always be so. I suppose I should feel good about a win like this since I had many contracts on at the above gain per contract, but you never want to let the big one get away and that is what I fear I did here. I am hoping for a pullback that meets my rules, to get back on this one but I may not get it.

You have my above prediction now for a brief dip of a few days that does not take out last weeks low, then a rally for the stock  market and stock index futures. It is out there for public consumption and ridicule, so let's see what happens.

Tuesday, March 22, 2011


This is chart above is the emini Nasdaq index. This is displayed because it is the weakest of the three major indexes. I am about to show you a different chart than this which will give you a different perspective on this whole rally. However, for the moment we find ourselves at a critical juncture in my world. It may just look like a garden variety flag pattern and I suppose it is. However, my oscillators both displayed and those not displayed, are showing underlying strength greater than that of price. This leaves us in a tight spot. It is my feeling that whichever way we go right from here, will determine a decent sized move in either direction. I say that because the underlying strength could very well be supporting the underlying uptrend. That trend has broken on a daily chart, but not on a weekly chart. It is going to take a pretty good sized move to turn the oscillators back down tomorrow, but a small one to keep them rising.

We could very well be working ourselves into a few different scenarios now, so patience is the key. I will most likely get short again below today's low if it goes on Tuesday. I do not have a buy signal to go long on if we get a break upwards. In that scenario, I will have to wait to see if a buy signal develops on a pullback. As much as this whole rally seems awe inspiring with net change from close to close being very impressive, check out the next chart which shows just the pit session prices.

This is the SP 500 pit session but the Naz pit looks similar. I have marked the recent gaps with arrows. Just notice how many there are and how many of those days actually do not even close past the opening price. What this means is that net during the US session, many of these days actually closed lower than the open. Net net, the move is being driven by the overnight sessions gap openings. This is a very odd situation, and it has been going on for awhile now. It is significant because if you are trading stocks unless you are holding them overnight, trading stocks on the long side has actually been very difficult, they have made very little net progress other than the prior days close to the next day's opening. Most of their progress has been on overnight gaps.

There are several explanations for this. One of course is the PPT, probably the leading candidate for the Oscar. What is not known about how they operate other than by a select few, is exactly how they consummate their transactions. It is suggested by many yours truly included, that they operate at times when the volume is light so that they can get the most bang for the buck. The night sessions are such a time. I can't imagine how I would feel if I had been amongst the group of suckers that has been shorting these brief downward moves that happen during the night sessions. They must have reversed 75 of those by now I would guess.

There is another possibility that needs to be considered and I have also alluded to this in here from time to time. The large hedge funds and their complex algorithms may very well be involved in this. They are very adept at taking advantage of short term imbalances and inter market relationships. With the power of computerization now, their programs designed to do this operate at light speed. They are also automatically triggered based on a wide variety of things that may or may not be the same as what has traditionally triggered these buy and sell programs. These algorithms are also a possibility to consider in analyzing the incredibly tight inter market correlations that we have seen develop and stay in place for so long now. Maybe they saw them developing, theorized that the Fed was behind it so it was likely to continue. They then created trading algorithms to take advantage of it which have just perpetuated it. This could also be an explanation for the metals rally that has defied traditional fundamentals such as the COT data. Never has an idea with no historical basis driven something so far. However, it got wheels from somewhere and it could very well be these funds. The problem with that theory of course is that the COT data would have to be wrong for that to be the explanation.

It could also be these same players being wise to what the PPT is doing and mimicking their trades. There are a ton of possibilities to consider. For trading purposes it does not really matter. The net result is that there is a very strong bid underneath the market that supports prices on even the slightest pullbacks. It has created a tremendous amount of complacency very similar to the late 90's. As nasty as this recent break in price was, there was virtually nothing made of it at all in the media. Since the media thrives on negative energy this has struck me as particularly strange. I don't think there is any conspiracy, I just think most people are not even thinking a larger decline is even a possibility. That worries me in all honesty. However, it is not something to trade with, it is more just discussion.

What all this means is that these patterns are likely to continue and we need to assume they will until they stop, seems simple enough. That means keeping short leashes on shorts until we get a break of a major support point such as last weeks lows. If they hold we could well be off to the races again in short order. I think the way to trade this current setup is to go with the direction we break out from right from this spot.

Here is another market that now may be telling us we are going to move up in stock prices, BONDS. I had been hoping to buy a pullback here but it appears to me now that we have gone too far and my indicators are turning back down. This rally was driven by the flight to quality that always goes on when stock prices decline sharply. I did tell people in advance that this market was ready to rally and showed a projection of upward prices that has been followed almost perfectly. I do not see a similar setup at this point here.

That is all for today.

Sunday, March 20, 2011


The more things change the more they stay the same. Here we have 3 charts in markets that would normally be unrelated to each other in terms of intermarket influences. However, as we have seen for the last couple of years with a few minor breaks, almost all markets are trading in the same direction. Miyagi in the karate kid taught wax on wax off, this is kind of the same thing. The three charts I have are in order, Crude Oil, Gold, and Coffee. Risk has been off for awhile, but I think it is about to be back on.

We can argue here that the incredible influence the Dollar is having on everything is the explanation for all of this. I would argue it is actually something different, although my argument is related to that. It is my feeling that the artificial upward price movements engineered by the FED to ward off the deflation wave that would have otherwise happened, is what has caused all of this. Part of their plan is to deflate the dollar to make our whole we are digging with debt less of a problem. So I guess from that standpoint the common argument is similar to mine. The difference is that I think deflating the dollar is the result of what they are doing and not the primary goal. Either way in the end, it is what they are accomplishing by what they are doing. They are trying to inflate their way out of this mess, while at the same time telling us all there is no inflation. Any idiot who was born yesterday could look at these three charts and see there is inflation. All 3 of these commodities have been going sharply up. However, the report that basically measures inflation in all things that are not inflating, shows no inflation. What a coincidence.

We are really at a very important inflection point right here. You certainly could have justified getting long across the board a couple of days ago when the high of the low day in these retracements was taken out, because we are still in long term up trends in all of these markets. If you have done that you may get a major lift off again and you will once again be rewarded. When I project my oscillators for Monday, they all show the lines continuing to rise even on a down close, so that tells me that we are likely to get another up close Monday. However, that is not a precise prediction, if we start to roll over strongly, I might very well front run the oscillator movement and get short some things, it will be a game time decision. I really want to get short GOLD again.

If you are bullish, stops should be under last weeks lows pretty plain and simple. If those lows get taken out in the SP 500 or any of the above markets, or any others, we got big trouble on our hands. It might not be a bad idea to watch volume. As we have seen and I have stated this many many times, the PPT cannot stop volume. If we happen to get strong volume going on a big down day, look out. If we get light volume on a day that is moving down, look for the PPT to reverse that back up. They certainly know how critical this spot is, they are basically very short term traders with what they are doing. They are well aware of the danger of last weeks lows breaking.

It is imperative that you understand right now that almost all markets are once again the same trade. You have to take this into account when determining what to trade, how much, and when. A short in Crude is the same as a short in the Stock Indexes, which is the same as a short in Gold etc.. These correlations are so high, that if you were to be long all of them or short all of them, you need to expect the moves to go in the same direction. If you risk 2% in trades in each of those markets, you are really risking 6% in one trade.

It is my feeling from looking at the COT data, that the odds favor the next big move being down in several markets, so that is why I am leaning in that direction. The Small Specs have gotten historically heavily long in many markets, and although in recent times thanks to the PPT they have gotten away with it, historically this has been a recipe for downward price movement. The artificial market manipulations have warded that off, but they will not be able to control everything forever. As I have stated in here, there are going to be big consequences for what they have done at some point, and if last weeks low does not hold, we might be close to seeing some of them.

Here is one trade we have on in both our personal accounts and our Robbins contest account, Natural Gas.

You can see that I was within just a few ticks of being stopped out on this trade at one point. We have now started to move up some. This is a crazy market that completely trades to it's own theme song. I am glad I was not watching when this sucker dove down that one day close to where my stop was. If you don't have to watch live ticks, don't. There are alot of people calling for the industrialized countries to start using this for energy, and some of them are saying this little spurt here is proof that is starting to happen. I tend to think not, this market has been beaten to a pulp for years and has had many false starts. It is way too soon to tell if this little move so far is anything or not. I do have an exit target that is well above, and I doubt we will get there but you just never know. Plans may not always work, but you need to have them in case they do. I have my stops above where I am in now, so worst case here is a small profit, with the potential for a big one.

It looks to me like Tuesday is going to be the day to look for shorts in most places, unless we get a monster up day Monday, which could take some of them off the board. As per usual, we have to let them turn the machines on and see what happens. Must see TV coming to be sure. Speaking of TV, there was a great joke I heard last week. Barry's wife was popping off again about fat people ( she apparently gives herself a pass on this categorization excluding herself ), claiming all the out of shape people are a danger to our national security. Our armed forces are diminished by this. There was a comedian that suggested that we then have a fat army and a regular army. The fat army only fights on level fields, and the other one goes into the hills. I kind of like that idea! Could you imagine the sight of the fat army plowing across an open field heading towards an enemy? Classic! Maybe we add a new category to the COT report, fat traders and regular ones? The Fat Golf Tour and the regular one, where does it end? We could have a lot of fun with this idea, kudos to Barry's wife for getting this started.

Good Trading

Friday, March 18, 2011


I heard the above line on a comedy channel on satellite radio the other day and could not stop laughing. Steven Wright one of my favorite comics used this joke. It reminded me of the stock market right here. I did say yesterday that we could bounce at any time and that we were at a short term extreme. I also said that we were in a rollover danger spot. Those were the two scenarios at hand. I did not think we would get a small down or small up day. I was kind of right, we got a big day up, but the comments were really not definitive, so no pat on the back for me. Now we see that we are in bounce mode. I do not expect this bounce to get too far. If we were to mimic the 1987 scenario, that would call for a sideways to slightly up drift for a couple of weeks, then a washout. What I think will happen is another day or two maximum up, then another move down. So I guess what I am saying, is that we are not going to mimic on a short term basis, what happened in 1987. I just was referencing that because it was in a prior post before the breakdown, as to why I thought a break was coming.

It is interesting to me that most commentators are just writing this off as an anomaly caused by the earthquake. Of course they could be right, but they are not even considering the possibility this could be the beginning of something more. I find that interesting to say the least. Even though I have my view on it, I also am considering that we could just move right back up out of here again upward. When you hear comments like that you know you are listening to someone who does not actually trade their own account. As a result, I just don't give much credibility to people that tell us how to do things they themselves cannot or do not do.

Alot is being made about how we broke the 50 period moving average in the indexes. I personally have not found that to be significant one way or the other in all the years of research I have done. However, the key to any tool of the trade is how you use it. With a Caddyshack type of approach, it may well be that a 50 day break mixed with the correct batch of other things might be significant. I do not know, and this is not something I pay attention to. The way I see it in simple terms is that my momentum oscillators are in down trends and the short term price movement is up against those trends. This to me is a short on the retracement setup plain and simple. If the retracement move carries up enough to change the trends, then I will look to go long. No Caddyshack analysis for me. I am bearish because my tools are, not because I have any grand view of economics that I am submitting for a Nobel prize. I will let them give those for Barry for continuing to do nothing. One funny comment I heard about Barry yesterday was that it was nice he took a break from playing golf to fill out his March Madness brackets.

Here is the GOLD trade I entered that I got stopped out of last night for a gain of $1300 per contract. As I stated when I entered it, I did not know if that big day was the start of the big one or not. I mentioned it was just another trade. I did manage it as such. I am hoping for another short entry in the next day or two here.

This turned out to be a marginal result, but we never know that going in to a trade. You just have to take them when they come along, manage them by your rules, and let them play out. I do feel that even though I could have taken way more out of this had I exited the first day, you are never going to make big money cutting short trades that start off gangbusters really quickly. For all I knew this could have fallen hundreds of dollars, we just never know. The only reason I am showing this is that I mentioned the trade setup the day before, took the trade that next day, and now show the exit. The purpose of this blog is to show what I do, so that is what I just did here. I will not ever show all the trades I do, just some so I can accomplish a couple of things.

1) Establish credibility that I know what I am talking about.

2) Show that I actually do trade and trade profitably.

3) Develop a following for those interested in my commentary and work and the work of my firm PNJ.

4) Develop interest for potential clients in the future for different things I might get into such as PNJ Advisors or the hispanic translation of it apparently by Robbins, PNJ Adviors!

Here is the latest standings and our hispanic version of our company ( I hope you get the sarcasm in that ). I am being hard on Robbins, they just made a typo and are in the process of correcting it.

So we are up 22% not great, but let me ask you how many other advisor firms do you think are sporting that type of return not even 3 months through the year?

Look next week for the website to be launched., PNJ Advisors.com

As for today, I expect an up close in most things but not a runaway up day. This should setup some sells for next week in several places. Good trading and have a nice weekend.

Thursday, March 17, 2011


Just strictly conceptually speaking the idea of fading extremes is attractive. We can peruse any chart and see a huge spike up or down in price, then the monster reversal from that price movement. It is enticing to think about how much money you can make from timing those correctly. That is a correct view, you can. However, when you get into the actual act of doing this, it is very very difficult. Our current situation I would say qualifies as an extreme. We are already into standard deviations ( plural ) down. By mathematics this move is extremely oversold right now. We had a more extreme move to the upside over the last 2 years that was far more overbought than this is oversold. There are several measures you could have looked at that would have told you long ago to short the overall market.

So we have two moves both extremes, yet look how incredibly different they are. I would be impossible to tailor an approach to effectively fading both of these extremes. They are entirely different.  Standard deviation analysis is somewhat helpful, but then you have to decide what time frame for the deviations to use. That is similar to Fibonacci analysis. The ratios are great, but which points you view the magic .618 level between is completely subjective. Do you take it from the last pivot, the lowest pivot on the screen, the lowest pivot going back to the March 09 low? There are hundreds of magic numbers. We can be sure the market will stop at one of them, but how in the hell do you know which one?

Here in this example you see the main difference between in general how prices rise and how they fall. They tend to creep slowly higher in rallies, and plunge during declines. This is what attracts so many people to the short side of the markets. It is not being negative, it is the fact that the returns are bigger over shorter periods of time when you are right. It has been my experience learned from getting run over, that fading slow creeping upward markets is not a good idea. It is also not a good idea to buy markets that look like the current market does. The slow creepers tend to just keep creeping. The above type moves often accelerate down to a crescendo low.

There are certain tools to use to attempt to time some of these moves, and I have covered them throughout the last couple of years in here. The VIX is exploding higher now which will always be true in a situation like this. Keep in mind if you use the VIX, look at it on a relative basis and not an absolute basis. Where it is in relation to recent price levels, not where it is historically.

Currently we are in a very dangerous spot. We could very well bounce at any moment. We could also very well completely roll over for a big wipe out. The momentum is tough to reverse during a slide like this even by the PPT. It requires hundreds of billions of dollars. I suppose they have that at their disposal since they can print whatever they want. They can launch their buy programs, but when they move things up like yesterday for awhile, they often get met with big volume sell programs, which overpower them. We know behind the scenes with their beloved banker friends they are "suggesting" buying not selling here. However, if you are a fund manager at some point you do have to look out for your clients. If you suspect something larger is at hand, you are still going to exit longs regardless of what "suggestions" might come your way. We also have foreign money which the PPT cannot control.

We will be able to see if the PPT has both hands working on buys if we see the Large Trader position go up during this decline. We know "real" Large Traders trade on momentum, and sell on 20 and 40 day lows, so their positions would be going down during a decline like this. There is only one group that would fall into the Large Trader category of the COT report that would be buying during a time like this, the PPT. Let's watch that closely. I still think we have more downside here in the near term, but a bounce can happen at any time. I told you yesterday that I thought we would close down since the prior days reversal would likely be undone and it was. Score one for me there. Today I am not sure. Once again I have my trades on and my live quotes off so I have no idea what is happening overnight at all. I do think there is a risk of a sharp rollover for a couple days then a very sharp bounce and I would weigh the odds in that direction. However, an oversold bounce could come at any moment. That bounce is a sell when it comes.

The Dollar Index above has interestingly enough not exploded higher here. The correlation between stocks and the Dollar that the FED created, appears to be unwinding here. Remember in the past they generally traded in the same direction not opposite directions. We do have a nice buy setup here if we hold at these levels. That would also mean sell for other currencies. I think the Swiss is the one exception as that seems to be the flight to quality place along with Bonds right now. Watch the Dollar Index closely for buys down here.

Good Trading to everyone

Wednesday, March 16, 2011


Here is a perspective on where we are versus the 1987 scenario. Just to restate why I think this is so similar. First, we had very strong stock prices, virtually no corrections, and at the same time sharply declining Bond prices. Then we began a minor trend break. I have marked where I think we are in this cycle, in the initial downward move. There was also a great amount of optimism back in 1987 and a general complacency as we have now. Brokers during that time reflect the same type of feeling they do now. They were surprised at how far it had gone, and had given up trying to short it having gotten their butts kicked trying to do so. Wondered how far it could keep going and when it was going to end. They watched clients doing all the wrong things and still make money doing it because of how strong the market was. Also kinda like 2000 now that I think about it. Sound familiar?

Fast forward in time to today. I am not going to get into the subjective part much other than to say that the general feeling in the brokerage community is exactly the same even though publicly they are not stating it. It is heresy to publicly state "sell." They make their money on the long side. I am a believer and my historical studies tell me that the largest moves do come when the least number of the general public is looking for them. That would tell us a GOLD, OIL, and STOCK decline is coming and a DOLLAR rally is coming. Will they happen, who knows. Do not get carried away being too much of a wise guy just constantly taking the divergent view. The public is almost always right in the middle and end of moves, so timing is awfully important being contrarian. Often moves go basically until the very last skeptic fighting them capitulates including the last contrarian. Once the very last player is left to pile on, the moves reverse.

Timing that is impossible unless you have incredibly deep pockets. The Elliott Wave people have been off now on the short side for more than 2,000 Dow points, that requires incredibly deep pockets. They no doubt will come out and say I told you so if we really rollover here, but you can hardly take credit for being off by that much. Getting back to the above example, your timing did not really have to be that great to dodge the wipe out of the famous crash of 1987. No matter how you look at that chart, the trend had turned down when the crash came for all other than long term holders. Today, the trend on a daily chart is without question now down, the weekly has not broken yet. If you are a long term player and we do happen to see a rally develop over a few weeks like what happened in 1987, you can just move your stops up to below the lows it launched from. If they were to then break, the trend on all time frames would have changed. If they were to hold, then the longer term trend will have held up. Pretty simple from that larger time frame perspective.

What are the odds that we have a similar type of drop to October of 1987? On a percentage basis I think they are slim, on a points basis a lock. Prices are so much higher now that massive down day was only 500 some points, we have seen several of those in recent years. The main thing to focus on is that we have a market that was incredibly overextended on the upside. Now we are getting the reversion that is long overdue. We were able to find a very similar technical situation that served as our guide as to what tho expect, and it delivered. Whether or not we will overshoot on the downside I don't know. We have far more intervention in the futures markets now by the government than we had back then, since Bernanke is a day trader now. This influence should temper the fall. You can bet your ass the Fed's books will never get opened if a big drop occurs. You can think through why I state that on your own.

For now, we are in a sell the bounce mode until proven otherwise. I for one hope we don't see a wipe out, but the play is in the playbook now. It has been for about a year, but the game conditions were not setup in a way that it could happen. They are now. Know your style, follow your rules. As long as you do that and have decent rules, even if we go down big, you will be ok. That would mean you have stops set on longs to get you out if we really roll down here. We are short term very oversold here now, so a bounce should be imminent, however I expect today to be a down close based on the reversal yesterday. They tend to get undone the next day when we close in the middle of a large range like that.

Here is a 5 min chart of the pit session for the SP 500 yesterday. This is not an obvious PPT save to me. When we have huge gaps down like that many day traders will buy those opens. The PPT generally operates either in the night session, or during the end of the day periods where we are down and volume is light. Neither of those seemed to be in place yesterday. We will never know if the PPT was the buyer on the open, but I doubt it. Natural market forces worked yesterday...oh wait a minute, they cannot be trusted to work haven't we learned that recently? We cannot take the risk that they won't work. We are supposed to intervene and bail things out aren't we?

The last chart for today is that of the British Pound. Most of the currencies are setup for a decline here, this is one of the weaker ones where shorts should be done on any bounces.

Take you pick in the currencies they all look basically the same although the Swiss seems to be the flight to quality spot right now so maybe pass on shorts there, even though there is a nice trap pattern setup there today.

Tuesday, March 15, 2011


I know I will probably have record traffic today, so this needs to be a vintage performance by yours truly. Fortunately for me I have been on record in here saying that what is happening here is exactly what was going to happen. Recently, I posted the 1987 chart with the Bond Divergence stating this current pattern was eerily similar to that chart. I posted examples of what has typically happened when we have gotten large divergences between Bond and Stock prices. Bingo, history does repeat itself doesn't it?

I have also harped in here ad infinitum about how when the government gets involved manipulating price, we get massive reversions to the mean. I have repeatedly said the campaign by the PPT to artificially raise stock prices could not fight off volume selling and that it would only continue to be effective in light volume conditions. I said the other day that even though I was not predicting it we did have conditions that could deliver a massive decline. Just yesterday I said that on a POMO day ( yesterday was one ) if the market could not hold there we were being given a powerful message, and not a good one.

I also talked about a Bond market rally, a Gold decline, and a general commodities meltdown.

How do you like me now?

The Bad news is that there was not a great textbook sell setup with the bar patterns to get short the indexes themselves. That is no surprise we have had historical price manipulation with the futures markets by the Fed, and they have made bar patterns very choppy with their late day saves to artificially mark things up to try and kick the can to the next day. Now someone could argue that we only sold off due to the horrible devastation in Japan. That was the trigger for today without a doubt. However, there is always a trigger that is unique, that is the whole point of looking at the markets technically and not with the Kramer type of Caddyshack approach. The Caddyshack approach is trading like the day they get loose at the pool in the movie where everything you can imagine is going on at once. A jail break to the water, skin to win, poop in the pool, booze, you name it. In trading I call it Caddshack when people subjectively analyze all these numerous variables and then apply weight to them. They then randomly come up with a decision to buy or sell. That is Caddyshack.

There is no way anyone could have known such a horrible tragedy would occur, but you did not need to. If you just looked at the PE of the DOW alone, it was enough to tell you this had gone way too far and would not last. You did not need some subjective opinion of what some favorite CEO you might listen to was saying about his companies prospects. What do you expect him to say, sell his stock? These guys have also been doing record stock selling in recent months, another major red flag. However, they won't come on Kramers show and bark out how much of their stock they have cashed in.

If you just kick all that stuff to the curb, and use technical analysis, you can stay ahead of the game. Isn't it alot easier to use basic technical analysis, than having to be the genius who predicts a massive earthquake to make money?

The FED will show up without question today to try and stabilize things, and this what actually what the PPT was formed to do, intervene during times like this. It was not designed for them to be day traders of the SP 500 futures like they have become. Providing stability during times of strife is what they should be doing. If volume stays strong the amount of Billions required by them to stop it will even be beyond what they have available. I do not know how the balance of the day will play out. I have some positions on, and I will not babysit them during the day. I have my stops in and that is that. It is too easy to get carried away with yourself or have emotions get the best of you on a day like this by watching intraday.

I showed yesterday the setup for shorting GOLD. You can see below my entry exactly where I indicated it would be.

This once again plays back to what I have repeatedly said. There is not a direct correlation between times of crisis and rising GOLD prices. That is an idea by precious metals coin dealers manufactured to sell product. There is no historical basis for this claim. It sounds like it makes sense and millions of people have gone for the pitch. They have gotten away with this false claim since so many small speculators have bought into it that they have literally driven the market up by themselves. That rampant speculation by small fries is what has set this market up for a decline. I showed this setup recently in here on a weekly chart highlighting the heavy long position by the Small Speculators. I have no idea if this is the start of something big down or not. At the moment it is just a trade based on a setup market, that had a pattern in momentum and price. Even if this is the $700 fall that I think is in the future, I would never hold it that long anyway. I am a short term trader so even the trades that work great I usually only hold for a couple of weeks, sometimes three.

I am not going to go back through everything in detail I have stated here recently that is playing out the way I have told you it would. For those interested, just browse through the prior entries in the archives. As it is with trading so it is with life. I will not always be as accurate about what will play out as I have been here. However, good solid approaches to market analysis to have a way of coming in handy every now and then.

I would suggest not getting too caught up in the news today. If we happen to continue down it will be a raging story. Stick to what you know to do, honor your rules. Times like this will test you like no other to do the wrong thing, don't give in to it. Do not chase this down if you are not already short and wanted to be. The PPT is lurking and they will make their run at stopping this. It could be a very volatile day. This is just another day, treat it as such. This could very well be a decline to buy into, but it is too soon to tell.

I will turn off the live quotes and the news channels and do research then tune back in to see what happened later.

Good trading and best wishes to anyone in Japan, we all feel for you.

Monday, March 14, 2011


Here we have the Naz, the weakest of the US Stock Indexes basically at a key support point. For you Eilliot Wave counters, we have a very clear A-B-C correction with good symmetry. Today we also have a big POMO day, which have been big stock manipulation days by the Fed. We got the good down move overnight on news, but will it stick with the PPT likely to be active today? This should be very interesting to watch. We are in a logical place for a bounce, and a logical place for the government to launch futures buy programs through their stock market manipulation. If they can't hold it here on a POMO day that really tells us something, and not a good something.

Just from a short term perspective, this is a key spot. There would be no question that if we were to close below the support level marked on the chart, the short term trend will have turned down. In my view it already has, and I am looking in the next day or two to get short the stock indexes on a bounce if we get it. If that bounce continues to carry forward to the upside, I won't get short. I will just have to watch the price action to see how it plays out, but I have a tentative plan.

I put the Wave count up just because it was so obvious, or is it? I have not made a trade based on Elliott Waves since giving up on that idea 20 years ago. However, at times the symmetry in waves is very interesting. The problem is always there are always 2 alternatives in wave counts, one that indicates buy and one that indicates sell. In this case we could have a wave 1 down where A is and a wave 2 up, and we are now in wave 3 going down. The question then is are you bullish or bearish? Net net, it adds nothing to the game. It gives you a coin flip option, as the waitress in Caddyshack said, "Tanks for nuttin."

The Oscillators I use are showing down, but they always will when price moves down this much. We are getting some short term divergence in the top one. However, ADX is increasing telling us this trend has some integrity since it is increasing, so I am ignoring that divergence. That of course is a judgement call, but so is life so get used to making them. In summary, I am looking to short a bounce Wednesday, now it is time to see if it sets up for me. I still am short several stocks, so I am participating in this decline even if I don't get in the indexes.

Here is one of many markets now setup for a short entry, GOLD.

We have been diverging in the momentum oscillators for awhile now, and we appear to be having a bounce or retest that is losing steam. I am looking to short this or Silver tomorrow or Wednesday depending on the price action. Siler has been stronger by far so I am leaning to GOLD, but the short term price action seems to be shifting a little back in the direction of more weakness in SILVER. That will be a game time decision as to which one to play. I like the price to drag me into the trade instead of picking points in space and entering there. I suppose if you were really bearish, you could play ETF's here and just work your way into the trades with market entries, but that is a bit dangerous against a trend this strong in my view. I was traveling recently and talked to a dude at an airport who was really bearish on SILVER and was buying the ZSL etf, which is the inverse SILVER stock ETF. It appears he has caught this well, although for all I know he bought in a month ago and is way upside down. I doubt very seriously he caught the high. In any event, hats off to him, he is about to cash in it appears. This could fall sharply if it gets going.

The last market for today is Bonds. I have marked on the chart where we were when I posted that chart showing we should rally, and we have.

If you have not gotten long here yet, buy the next dip, we could have a nice run coming here especially with the trouble it appears stocks are in.

That is all for now