Saturday, August 27, 2011


I am traveling for the next 3 days so no promises on posts. I hope to find time to do them but I do not know if I will be able to. Everything is basically the same as the posts for the last few days. I am looking for a Bond decline somewhere here. I feel bad here in that my mentor showed almost this same chart today, but since I have been talking about this for a couple of weeks, I was here first. I would ideally like to see another day or two up, I do not know if we will get them or not. My short term entry stuff needs that for a trade. Also, if we were to rally a little the COT Synthetic Indicator might come down some which would be better than the way it looks here. We can't always have it all so if you are aggressive you could take a shot right here. if we break down.

I am still looking for the next short trade in the indexes, but do not see anything for the next few day here. The short term trend is up, the weekly trend is down, so selling rallies against the higher time frame is generally the way to play ball.

For the most part, markets are currently in short term up trends. The one trade that could be a biggie coming is Sugar.

We have both a cyclical call for a top, not shown, and the seasonal tendency for a decline. We also have huge divergence at the highs here accompanied by a quick price reversal. If we get follow through to the down side, this is one I will be playing. I do not see a trade for Monday, but one appears to be coming.

I am also watching Natural Gas as I have mentioned for a buy, and have been flirting with Hogs on the long side. The Hogs are just one I keep coming back to even though it has some issues and it not perfect. I have had orders to buy this market a couple of times recently that were not filled.

That is all I have today, time is short and I will do my best next week to point out something if it comes up.

Thursday, August 25, 2011


At one point I was one of the few publicly talking about the PPT and how they manipulated the stock market. Although those in the know that taught me about this were way ahead of me on this, I was still in a minority a few years ago. Now as I listen to the speculation about Comrade Ben and his speech tomorrow the following shocking consensus is out there. The question is will he decide to raise the stock market again or not. It has become publicly accepted, and it should be the facts are there, that the FED created and maintained this whole rally. How sad is it to listen to a money manager who is going to decide to buy or sell stocks on Friday based on whether Ben says he is going to raise the market again or not?

What the hell ever happened to free markets? Have things deteriorated so badly that we can only rely on the FED printing more money to raise stock prices? Had you put me in a time machine 10 years ago and forwarded me to today I would have just never believed this. One man is going to decide whether the stock market rises or falls. I do believe long term cycles are what really determine direction, but in the short term there is no question this type of manipulation does effect magnitude. I would argue that you turn off the news and study technicals. Here is what they are telling me right here. Overall, we are without question in a down trend on both daily and weekly charts. The larger moves should then be down not up as long as this condition persists. Cycles and Seasonal patterns say it should last into the fall. On a short term basis, the real timing tools I use do not have sell signals right here. It appears the way they move that probably another week or so possibly more will have to go by before they could move into sell positions. They are closer to buys than sells right here.

Since I require the two to be in sync, that leaves me without a trade for the indexes tomorrow other than day trading them which I will do. There is no question when Ben gives his speech we will see some movement intra day. I do find it interesting that I have not really seen one suspicious buy or sell program for quite awhile now. They are trying to make a point, they want us to come begging. I don't think there is quite enough public concern over this yet for the majority to beg the FED to save the stock market yet. If we were to roll down in line with what the cycles and seasonals call for, we could get to a level where the public will cry uncle. This could very well be in the fall, when the cycles will likely generate a rally anyway without going through all the brain damage this analysis causes. That could very well be a great scenario for a big rally, QE3 coming in right at the end of October right when the seasonal low normally occurs. Who is to say? We could have the natural cycles in price pointing up along with government manipulation accelerating it in that direction. This combo could bring a very big rally.

For me I do not have an index trade for tomorrow, so that is that. Hopefully I can get my apples lined up correctly when he starts popping off, and make some money intra day. You can see in the above chart that my COT index is in limbo and it was also in limbo a year ago when QE was announced. It is no help here, onward.

I do not really have much for tomorrow. Lets look at the Dollar Index, and Rice.

The Dollar Index has completely decoupled from the stock market, and what a coincidence, that happened right when QE2 ended. This is how it should be, the stock market moves should not determine where the dollar goes, that is absurd. To be clear, there obviously is a relationship there, but it should not be tick for tick inversely the way it has been. This is a good development, but unfortunately this chart is just a mess to me. We are just consolidating in very choppy range bound action. We will break out of this at some point, and I think the boundaries I have drawn are about where the critical areas are. My strategy is likely to be wait for the break and play the first pullback, but that could change. I just do not see a trade here right at the moment.

The next chart is a thin market, Rice. If you look at the huge divergence in the POIV at the highs, it is very much like what the Aussie Dollar looked like before it plummeted recently. I think this market is a sell here and have indicated about where a break could be shorted. This is one I am watching closely.

I am still looking for a short in Bonds as I mentioned the other day, but have not shorted it yet. The strong seasonal pattern still says up but there are some divergences creeping in telling me we are going down here. The Aussie also appears to be setup for a rally as well.

Enjoy the show tomorrow.


Before we get to today's main topic, the $100 spot that was laid on GOLD yesterday, I want to go through a few setups that are at hand. First, Sugar is now once again in play, and aggressive traders could certainly be short coming into today here. What I like about his now is the new high with the huge divergence in the POIV index, right at a time when both a seasonal decline is indicated along with a longer term cycle high is projected. We also had my COT Index spike sharply down right at the right time here. How you find your way into this trade is up to you, but this is one I have been talking about to short for a downward move. It does appear that now we may have started that move. You would have had to have been pretty sure about this to have gotten short already, but are we ever really sure? Trading is about probabilities and making money, not about being right. The older I get and the more trades I make, the more I realize this.

Here is another setup that I think is in play here, Natural Gas. I have been talked about this market for a couple of weeks saying I was looking for a long. We are still a week or two away from what would be the ideal seasonal low point, but we are close enough where in general history has begun upward moves. We have a nice clear trend line we can draw on the price chart. My COT index is not in the buy zone yet, but again we know this thing is far from perfect. There are a few other things I use that are not shown that support this trade if we were to break out from here, so this is one I am looking at.

The coux de gra was laid on the world's favorite market yesterday, following a prior day where it had also moved down heavily. In my never ending diatribe about this market, about which at times I have been admittedly dead wrong, I mentioned that we would see $100 down days once this market topped. Yesterday we saw one of those, at one point down about $110. Is this the all time high? I do not know.

It certainly could be, all of the elements are perfectly lined up for this to fall 50% or more, but they have been for a couple of years now. As I constantly say, bubbles are very difficult to time and this one has been no different. I do recall talking to a friend who is in real estate who reads here occasionally about the bubble in real estate popping, and how I caught it so perfectly. I had mentioned that in my studies I found a few things that were 4 standard deviations above the mean, which is a statistical certainty or close to it, that a big reversion will take place. If we carry that forward to this market, you may recall the comparative analysis I did with the DX in a chart the other day. It showed that at levels of 30 in a particular way of measuring this, that declines typically occurred. We were at close to 200 in that measure on the chart I showed, so more than a multiple of 6! I do not ever recall ever seeing anything anywhere near that extended in price.

The next chart shows 4 Standard Deviations on a 60 day basis and what has happened historically when we have had these levels of extension. If you look at the second chart you will see the former all time high was made at these levels. In each of these cases we had meaningful declines.

The second occurrence on this chart even though it worked, I do not consider to be valid. The reason for this is when you get extraordinarily large moves like this once the trend changes, there is a reset period required before indicators get back into "normal" mode. We had not fully recycled at that point even though had you referenced this it would have advised you correctly.

Now that I have shown just raw statistical reasons as to why a decline should occur here, lets talk about some other things surrounding this market. This is without question anecdotally, the most over hyped trade I have seen in my lifetime. The biggest issue I have with that hype is that it is based on a false premise. There is simply no consistent history of this store of value concept. It makes sense logically when it is argued, but it is not in the data, PERIOD. Times of crisis have resulted in both rallies and declines in GOLD prices over time, about an even bet.

I am sure people will come out of the woodwork with you have to buy now, this is a great buying opportunity. It strikes me as strange that most people will accept an argument based on statistics until it is applied to their favorite field of interest. When that happens they create reasons as to why it is different this time and the reversion will not apply to their market. The real estate bubble and the stock bubble of 2000 are both perfect examples of this. It was going to be a new world revolutionized by the Internet and that was why companies with no revenue should be valued in the billions. They sure aren't making anymore land is what they cried in real estate. Now it is we have this financial crisis, so Gold is a store of value. Even though we are 4 standard deviations above the mean, that means nothing because of their fundamental argument which is based on an idea and not precedent. The long term cycles still call for a January top, so we could move higher again, or that could be a right shoulder type of situation.

Folks just go look at the charts during prior crisis periods, this relationship is just not consistent. We have had a monster bull market here, and with all commodities, there are reversions. There will be one here and it appears to be under way. I am not short this market yet, I don't try to fade moves like what this one has been it is suicide. If we calm down some and get a valid retracment pattern for a short entry I will be a player here but most likely in Silver, since it has long since put it's top in. Sell the weak and buy the strong.

If you are a GOLD bug don't bother with the comments arguing this, it is a waste of time and I know I cannot convince you until the price drops to $600, so let's just move on. These are my thoughts so let's just agree to disagree. You have been right so far, I did not think price would get this far, the question now is whether or not it is has peaked. For the record, I am not sure at this point. This above discussion is based on a reversion being underway, I do not know if this is going to be the all time high or not at this point and neither does anyone else. I could care less if it is or is not the all time high, that is not what will make me money.

Good Trading

Wednesday, August 24, 2011


One of my favorite lines out of Caddyshack. As we sit here and wait for Comrade Ben to tell us whether or not he is going to raise the stock market again or not, we have to find other things to do. It is odd that the world's most powerful man is not our President, he is the chairman of the Fed. Since everything revolves around money, with religion coming in second, this one person essentially controls the world. To think that there is not really a regulatory function with them is shocking. I guess on paper the house has some type of authority, but nothing ever happens. When they ask them questions, they get obtuse answers. When lawsuits for disclosure of their activities are filed, they simply ignore the court orders. Sound like an ever par round to me.

The above market, Copper, is giving me fits. I just cannot decide what the hell to do with this market. This market is setup fundamentally on a weekly basis to rally, we have commercials buying in an uptrend, and the small specs heavily short. Here is my problem with this trade, and I hate it when thoughts like this come into my head. This market has a strong down seasonal just about to kick in, and it is also tied very closely to the stock market. I ask myself in dark hours, why would I want to be long in a market that is very closely tied to the stock market, which I think it is going to continue down for a month or two? Also, when I add the seasonal here, this just becomes a debate. I want trades to just be automatic go now types of situations like Coffee was recently. When I start himming and hawing over things, I then have no conviction once I get in them. You have to have conviction in your trades to stay with them through thick and thin. I do not have it here. I would be playing this trade for just a few days pop, and even though that can still be alot of money in this market, I think it is best to pass. Also, yesterday when the Dow exploded higher, this barely moved up. I consider that to be a negative correlation. Copper should have risen more than 10 points yesterday, and it did not manage even half of that. We are also not seeing any real accumulation here, so even though this may move up, it is just not an obvious trade to me now.

This next chart is RB ( Unleaded Gasoline ). This is kind of the same scenario, although you can see with the purple line, we have quite a bit of accumulation going on here. The projection tool does show a small rally here. The stop is big, over $4000 so not for the faint of heart. This one is the strongest of the energies, so if you want to be long that complex this is the market to play. Once again though, we have that really bearish seasonal lurking right around the corner. Seasonals as I have stated many times, are not the gospel, but I think when we have a market that is following the seasonal pattern, we need to pay attention to it until the time it strays off the path. We should look for approximate turns as it indicates, until we see one that does not work. Since the seasonal has been " dead on balls accurate" for months here, I think we have to pass on the long and look for an upcoming short. I am against my mentor in this market, which is never a comfortable place to be given his track record, but I call them like I see them and suffer the embarrassment for being a dumb ass like a man afterwards. I may rethink that, it might be best to be a coward and hide when I make a blunder?

Here we have the worlds market, the Bernanke 500. The projection tool interestingly enough is showing about what I am looking for now, makes me wonder if I should not be looking for it now? Rarely does everything play out perfectly, and it seems when it does, we should pass on those trades because they lose! In all seriousness, we have my COT indicator down into the sell zone here and you can see how good the sells have been recently in this market. They have been "money."  Using the same logic as I just discussed with the seasonals, I heed the words of this tool until it is wrong once, then I tread more cautiously. In this case it has really been in sync with this market, so I want to trade in the direction it is telling me. It is not saying sell yet, but it appears to be setting up to move into the sell zone.

If we happen to trace out the pattern shown in red of up for a few more days here, the indicator should drop back down into the sell zone confirming we want to be short here. Time will tell if this happens, and this indicator does not always drop on rallies and rise on declines. That is my main problem with the Commercials Proxy Index that someone asked about the other day. It seems to just always rise on price declines and drop on rallies. That is not truly emulating commercial activity. Although that is what they do most of the time, they do not always do it and therefore I want something that gauges it a little better which this seems to do.

In summary, although both Copper and RB are setup very nicely fundamentally, I am passing on these longs due to the seasonal influences and what I feel is the risk on risk off nature of the stock indexes. Since I see them as setting up for another decline, I do not want to be long in markets I deem to be heavily correlated with them just to catch a few days up. This may be bad logic and it is always risky publicly stating things like I do in advance, but this is what I am doing. For those who are more aggressive traders, these two markets are setup for advances based on weekly charts.

Good Trading

Tuesday, August 23, 2011


We have all written off this market now as DOA, and it may be overall, but markets have a way of throwing us a curve ball here and there. They do not like following scripts, preferring ad libbing most of the time. I think we may have one of those scenarios now. I have been steadfast in stating that I thought the correction to this move down would be complex, and that spotting the next sell signals was going to be tricky. That does seem to be playing out now. If we look at what is going on in the above chart, there are some contradictory things. First, the Commercials are heavy buyers, the red line at the bottom. This is normally bullish, but in the indexes, the COT data has not been very accurate the last few years in spotting market moves. Nonetheless, old habits die hard and I still look at it.

Next we have the seasonal tendency to decline here for the next month and a half. We then have my synthetic COT index, which is in middle ground, not giving us a buy or a sell signal. I have mentioned the achilles heel with this indicator of mine is that it switches too early at times to the other side of the market, I have labeled a few of those situations. However, as you can see for the most part even the early reads turn out to be correct even if we have to wait a few days for them to work. Keep in mind this is a tool for determining direction, it is not an entry technique. As a result, I don't consider the early signals problematic, because there are no entries in those until after a few days anyway. If you just use trend lines for confirmation, these readings have not been wrong much. Here at this moment we are in middle ground telling us nothing at all. What I am looking for here is for the market to creep up here, which should drive this indicator down into the sell zone confirming the next short entry.

I have been reading that the talk of our fearless leader comrade Ben signaling QE3 is increasing, and he has the correct forum this Friday to announce it like he did last year. I don't know or care what news item might be that would coincide with a bounce. If we do bounce, and this indicator gets back down into the sell zone, we will have alot of things going for us on the short side to enter on a breakdown. We will have the seasonals, long term cycles, the trend, and my COT index all in agreement. If that happens it will be must see TV. Maybe it will not and we will just take off. If he does announce QE3 it will be interesting to see after the initial rally from it, if it sticks or not. I have my doubts it will stick, but as we saw last year, fighting the FED when they decide to raise the stock market is a losers game.

Next is every one's favorite market, GOLD. This chart is an example of why I am fascinated with this little creation of mine. If you look at how accurate it has been here, it is amazing. If you look at the COT Commercials at the bottom, it has been heavily into the sell zone the whole move up here, yet my indicator has given several buys, all that were accurate, with one sell that was wrong. This is the main reason I constructed this beast, to try and get around this tendency in big runs, for the hedging nature of the commercials to flash one false sell signal after another. The one signal that interests me the most, is the buy when the market was screaming higher already. If we get insiders buying when price is already that strong, it is time to get aboard with both hands, and look at how the move accelerated from that point forward.

I am going to plow back into the best way to use this indicator, I have not done much recent work with it. I will not reveal in here what it is, but I may decide to give it up to subscribers to my newsletter if I decided to do it again. One thing you learn in this business, is that innovations are hard to come by. The market participants are incredibly sophisticated, and they can arb out any new tool pretty quickly. This is why mechanical techniques only work for short periods of time. Some wise ass from a hedge fund will figure out some way to trade against them, and poof, they overpower it and it becomes ineffective. As a result, this is going to be my secret but I will use it here to show setup trades as I have been.

Before everyone gets worked up about my statement I am not sharing this, look at the above Natural Gas chart. Although the majority of the signals are very good, there are 3 in a row in the middle that were wrong, way off. This is what has kept me from betting the farm on this tool.  The first wrong signal could obviously be ignored since it came after a market sell off, but the next two seem to make sense other than they were incorrect. In any event, it is time for me to start spending more time with this. This is a market I have said I was looking for a long entry in. If you are really aggressive, you could be long now when yesterdays high was taken out. You have a higher short term low than the lowest low. I have not gone long yet, I am waiting for the seasonal period to kick in. Maybe I will miss the trade. Also, the COT Synthetic indicator is in middle ground not signaling in either direction.

Overall, for the next few days, I think it is the long side or risk on trade in most markets. If we rise, we will then have to see if the larger picture seasonal tendency for declines kicks back in or not. The exceptions of longs the next few days are GOLD and SILVER, do not chase these markets right here.

Good Trading

Saturday, August 20, 2011


I am going to spray to many fields this weekend so bear with me. I hope that I give out some useful information for Monday. First, one of my favorite DA's ( Dumb Asses ) is on Fox and whose name I will withhold. He is one of the token liberals they have on almost every night. This poor kid would not know a clue if it stabbed him in the eye. He more or less represents people who will support a liberal no matter what they do, from murder to just being an idiot, he is on board. He was mentioning on Fox recently what a wonderful thing we did saving Gm and what a great success story it represents. Does the above chart look like a success story? Had you bought the IPO you are down over 30%. He mentioned stock holders were making money, really? Which ones would those be? It is not illegal to be an idiot like he is, but it is shameful to just push an agenda when people are actually hurt by it. The bond holders got wiped out and the union was given a mulligan and a half in what they did. I am sure when the IPO took place, the union raked the public over the coals with some type of internal tracking price that is still in the green, while any idiot who bought this IPO is getting rolled. Let's be honest, this business model does not work and you are a dumb ass if you have not figured that out yet. Unions charging exorbitant rates to make average products, is not a successful business model. You can loan them as much as you want, the movie ends the same way every time be it VHS, or CD. This company will just go back into bankruptcy again at some point.

The beauty of being a trader is that you know people like him are either lying or stupid, take your pick, and you can avoid being caught in frauds like GM. This is going to sound like a very harsh statement, but I am not running for office, so here it is. We should be thankful for stupid people like him, they are how we make money. If everyone was brilliant we would have quite a battle on our hands trading. Fading idiots like him is how we make money. We just need him now to get into the funeral parlor business so knowone will die.

The next thing I want to talk about is these supposed market mavens that are paraded out for us in the news. I always wonder as I listen to them whether or not I am listening to a politician who has signed on to the talking points, or whether I am listening to someone who actually is giving us an honest highly researched view on things? On Friday during my workout, I was listening to CNBC roll out these "experts" and ask them whether we should be buying here or not. They rolled out the usual suspects, whose names I will not mention. What a surprise, every single one of them was bullish.

One general rule with the stock market, and one that I hate, is that when you are under the 200 Day Moving Average you sell rallies and when you are above it you buy dips. As you can see above, we are clearly under the 200 day MA, so rallies are sells. Statistically, this gives us about a 75% edge, and that is one heckuva an edge. I am always surprised when I listen to these panels of people on the weekend that discuss the markets, some of whom have good trading records, that none of them ever reference any statistical evidence to back their positions. I guess they want the appearance fees to keep coming. My question is, if you are just wrong one time after another, as a major investment advisor, doesn't that hurt your business more than the appearance fees make up for you? Aah, there is the political aspect of things, silly me. It is better to lie to the public, to have the "administration" look favorably upon you, than it is to shoot straight with your clients. All of these advisers I heard today were bullish of course. This bias is not party biased, it does not matter whether the president is conservative or liberal.

Here is my question to these advisers, how much short selling do you do in your funds? Do any of them trade their own money? If so what are their track records? I know I am really going out on a limb here, but I bet they are long only funds across the board. Is it then surprising that they are bullish? It is no different than the short only funds who are always bearish. One of my favorite quotes was "we look at the market from a different perspective than most." Of course they do, they are getting fees for losing money while risking none of their own capital. I would have a different perspective also if I were in that position. I would walk down the street every day with cowboy boots on and nothing else flipping everyone off if I were making millions in management fees without risking anything at all! You need to listen to the people who have no agenda, who trade in both directions....... like me!

Here is the update on the VIX, we are not quite to the zone to sell the VIX. You can see the last two times we reached this level we sold off heavily. This trade is not based on an absolute value of the VIX, it is based on an oversold level of the stock market. We have not reached that level but we are getting closer. I am not going to reveal what that indicator at the bottom is so no questions or emails on that. Just suffice it so say, that once it reaches a level just a little lower, it is a sell signal for the VIX. Perhaps what we will see is a bounce up into the sell signal I am looking for in the Indexes over the next week to 10 days, then a plunge which will take us into the zone and also stocks into the seasonal buy zone in October. That would be a great buy signal if it were to play out that way.

The next market Cocoa is really setup well for a rally right here, which then should be followed by a pretty good sell signal in September.

You can see we have pretty good commercial buying here at a time when a seasonal trough is due. We also have a seasonal high then to follow in a few weeks, so this should be good two way action here. Sentiment also got pretty bearish recently at the low a week back, so we should move up some here.

Here is an updated Natural Gas chart, showing we are really getting close to a very good buying spot. In particular notice how negative the Small Speculators have gotten, selling heavily into the seasonal low point. The Commercials are also buying. We still are in a huge downtrend, so we can't get too excited just yet but this buy is close.

The Wheat market which has been rallying appears to be setup to continue to move up, although the Sentiment is getting a tad too bullish to be perfect. We do have commercials buying here, and the seasonals call for a continued rally. I am not long this market yet but am looking to get long this coming week.

As for stocks, I still am of the same posture that we bounce or go sideways into early September, and then down again. I may be wrong, but that is what I am sticking to until proven wrong. If we just crash right into September, then maybe that will be the low all the people who "look at things differently than most" are looking for. We certainly have alot going on in the world right now and it seems as though things are at a tipping point, but remember, it is tough to trade when emotion is driving the decisions. You have to set all that crap aside and look at the charts. As for the Gold market, no matter how I view that none of the things I use has been anywhere near accurate in that market, it is breaking all the rules other than the seasonal pattern. Since that has been decent and calls for higher prices now, we might as well go with that for now.

Good Trading

Friday, August 19, 2011


I start off today furious because my whole post that I had composed got deleted by Blogger and I have to do it all over again. Blogger is very frustrating at times, although it is free so it is hard to complain too much.

Here I have two trades this week that are examples of why sometimes it is so difficult to do everything right in this damn business. I was in the Hogs market on the short side, I had told everyone in here that I felt this market was setup for a decline. Since I foresaw a large move down, I wanted to try and trail a stop down with this sucker. I did notice last night after the market closed, that there were some short term divergences setting up that were bullish against the low of a week ago. In the meats specifically, I have seen these little divergences spark big rallies out of the blue. I contemplated exiting right there. However, since from a larger perspective I thought we were heading down, I decided to put my stop above Thursday's high when it's low was taken out last night. My logic was that we should not go back up there today if we were really going to break. When we reversed back up I got stopped out. In this case had I followed my gut to exit based on the divergence, I would have made an additional $6000. Crap!

In this trade, I exited based on a short term exit strategy that has served me well that I explained yesterday, and of course we keep going. So I wait too long on the marginal trade to take profits, and take them too soon in the good one. Such is the life of a trader, it just seems at times you never get everything right. I tend to be very self critical like most traders probably are. This business just lends itself to that. However, you have to take positives out of things like this. I normally do not like to throw dollar amounts around and I only do it every so often. In this case it will help to make the point. Between these two trades that I seemingly mismanaged completely, I made right around $40,000. If you would have told me at the beginning of the week that I would make $40k this week, I would have been ok with that, so I need to be.

In order to really make big money trading, you need to catch big moves. You can only do that by giving trades some room to breath. When you do this at times you will get picked off at the wrong spots, give back more than you want in profits, and also at times get them dead on correct. Overall, this is what you have to live with and know going in that is what is in store for you. For all I know next week Coffee tanks and Hogs fly, validating these exits. Maybe they will do the opposite. It does not matter, I got some money out of this so I have to move on now. I will study these over the weekend to see what I can learn from them, I always do that. There are always ways of improving and you need to continue to look for them.

This chart above of the Dollar Index, is a trade I had been contemplating doing today. When I looked at this more closely, I noticed that my exit target was awfully close to where I would enter this trade. It was closer than what my stop would be, so that ratio was less than 1 to 1. When I see that I pass on the trades, just poor money management doing trades like that. The Euro is of course the inverse of this on the long side. The seasonal pattern as you can see still favors down, so I was looking for a way to get short and be in sync with that.

I still continue to look for the indexes to fart around here for another week or so, then form a selling point that should be lower than the recent high from 8/17. If we get a good short term setup there it will be a sell with both hands.

I will post on Sunday what I am looking for next week in other markets. Sorry for the late post it is Bloggers fault. See I am learning something from Barry, always blame someone else. Another teachable moment from him.

Have a good weekend

Wednesday, August 17, 2011

Groundhog Day

Not much has changed in a day. I did exit my Coffee long today at the close where indicated. I know some of the readers are in this trade as well, why did I exit? You can see where I had the target orders today, and we almost got there but not quite. I had intentions of holding this trade longer, but when I get 3 days in a row like this with expanding ranges in a row, and we are close to a target, I generally take profits. This could very well be a big fish the way it has started, and we certainly have seen some big runs lately. Interesingly enough we still have not made a higher short term low than the low point on the chart, even though we have rallied quite a bit. This is unusual. It could mean many things, but it tells me a pullback should be coming here. I was not trying to guess in that regard, my exit was strictly due to what I just stated. If I were still in trying to ride this further, I would be carrying my stop below today's low. I wish we had not had those quick three expanding ranges, so I could have held this longer, but this rule has by and large with some exceptions, gotten me out at some good places in the past. I do not have any expectations either way on this one, it is over and I am moving on. If it keeps going up or declines, I do not care. I gave everyone ample warning a rally was coming here so I hope many of you caught this move.

This is a chart I find very interesting. It is a weekly chart of Gold with a Larry Williams indicator called Will Spread at the bottom. This indicator measures levels in the Dollar vs Gold the way I have it setup here. Historically, the level of 30 indicated almost right on the number, declines in this market. The dotted line I have marks the 30 level. This is just incredible to me and shows how unique in history this move is. We are approaching 200 now! It is "different this time here," no question about it. When emotions take over during runaway markets, you can throw fundamentals out the window as far as timing goes, they are completely ignored. There is a theory being propogated that in times of strife GOLD rallies. The following chart shows the DOW and at the bottom the price of GOLD. I have marked off the 1987, 2000, and 2008 crashes, do you see rallies in Gold during those periods? If you do get your eyesight checked.

I just showed these because I want people to realize that this alleged relationship is not there, that is all.

Here is what I am looking for. First, a dip, then a bounce setting up the next sell for stocks. It appears the Dollar is setting up for a sell Friday at this moment. I would not be surprised to see Crude decline here since some of my indicators have far outraced price on the upside, telling me this bouce is overdone. That pattern is also there in the stock indexes and Copper. I am looking to buy Cocoa if it dips, and also watching Natural Gas for a buy setup. I am unsure about Bonds here, I have minor buy signals from a couple of days ago, but this market is really extended to the upside, so I did not take them.

I do have a few trades still on and they are in line with the directions I have been pointing out in some of the markets I have discussed.

Good Trading to everyone


One thing I constantly contemplate is to what degree my whole life should be dedicated solely to trading as opposed to mixing in other things. As to the question Don asked in regards to this, all I can tell you is what I do and also that I do not think I have the correct mix. I will get to this in a bit, but first a few market setups.

Sugar in the above chart as you can see is setup very well for a sell signal. We have a down seasonal and also my synthetic COT indicator is well into the sell zone. I have marked off the other times in recent history where my indicator has indicated sell. If you just look at the one that was incorrect it occurred at a time of a seasonal low spot. All the others worked and had a seasonal bias to go with them, which is what we have now. I have orders in below to short this market today which at press time do not appear to be likely to be filled, but you just never know. The setup is there, so I am there.

Here is the Wheat market, one that is setup bullishly with the COT data and also has the seasonal bias upward and also obvious accumulation going on via the POIV indicator. I have not been in this trade yet, so I am waiting for a pullback, whether or not we will get one or not I do not know. I suppose you could have justified via a trap pattern being long the day after that plunge down below a couple of weeks of lows, where the market immediately reversed the next day. The other triggers I use were not there so I did not take the trade. Trades are always obvious afterwards, but you need some type of framework to use for trading otherwise you chase your tail all day long with second guessing. If you are long you are looking good in this one.

This last chart is the NAZ 100 formerly known as the Bernanke 100. You can see we are deeply in the sell zone with my COT Synthetic. If anything this indicator has tended to be a day or two early in this market, but still more or less spot on. The trick with huge plunges like we had recently is always how and where to short the bounces. I mentioned a week ago that I expected this to be a little tricky, and that is turning out to be the case. We are having a pretty good sized bounce now that is gaining steam. It is certainly not out of the question that we have seen the low and we ramp back up, I never rule out anything. The seasonal and cycle patterns suggest we should have more down side action left, so that is where I am leaning right now. I do not see a sell signal yet, so from a short term perspective you should be long which I said at the lows if you go back and read prior posts. I did mention for nimble traders longs where the place to be the day before the low of this move down.

Since Don brought up the topic of the balance of other interests to the primary trading business, this is what I do. Trading as we all know is a very challenging business, we never know when we will have draw downs or big windfalls. What we do know is that it is not like a salaried job where you make the same amount every month. There is always the challenge of how to smooth out the cash flow. This is the main reason I have moved back into doing some day trading, it helps bring in some money almost every day which helps with the monthly bills. Since I live in San Diego, the markets close for the day by 1 pm with many closing by noon or earlier. This leaves me with half a day on my hands. Also, I don't like to sit in front of the computer all day long every day, so I do have the flexibility to mess around with some other things. As a result, I do that for the main reason that it helps cash flow. I do not want to get specifically into what those things are in this forum. Once I start writing a newsletter again which I will likely do next year, I will divulge those types of things since it is a bit more intimate than just blasting out to the world in a blog.

For now, what I would suggest to those who debate this same thing is that you do need to step away at times whether that is hours or days is an individual decision. Trading is a very isolated business so I like having contact with outsiders, I just think it is healthy. Most of these people have no clue about trading or what it is, but I do get the stock tip questions all the time. My favorite tip is "never listen to tips." One thing I do feel more and more strongly about as I get older and hopefully wiser although I am not sure about that trite phrase, is that to be really successful, you need to give what you want to do everything you got! I know of no famous success stories where the persons Mantra was hedging his or her bet. If what you want to do is trade, do it, and then fill the off market time if you have it with something that gets you away for a bit. Of course off market time should also be spent studying the craft to find ways to improve.

Trading is a tough gig and is not for everyone. Sometimes after bad streaks I wonder if it is for me. However, I am pretty sure if you don't dedicate yourself to it you probably won't do well. I do have my own gym here on my ranch, so that is always a good get away for me since I am really into fitness and working out, but sometimes even that is not enough, I need to get off the reservation for a while. The extra money "doesn't suck" as someone once said.

Don I hope that answers your question.

Tuesday, August 16, 2011


The above chart is that of Coffee and a long trade I am in and I think a bunch of you readers are also in. Sometimes keeping it very simple is best. If you just look at a basic trend line here, and a break of it at a time when a seasonal low is due to be made, you get a reasonable probability trade. Of course this could roll over and take us out, that we never know in advance. The longer term trend is still clearly down here. One thing that seems to have changed at least for the time being is that highs and lows seem to be made on a dime now without much screwing around. If we wait for basing or right shoulders so to speak, many moves take off without us. The only remedy that I can see to this is that you have to be aggressive in the direction you think moves are going to go. At times it can make you feel like a fool but remember that this is a numbers game. You have to take the trades that meet your criteria and sometimes you just lose, get over it.

The biggest challenge for me personally is always how to be aggressive but at the same time not careless. I have yet to find that zone completely, but I keep trying. We do have reason to suspect that Coffee might rise here, so time to try and trail this with a stop and see what happens. The next chart is that of Natural Gas. I had mentioned recently I was looking for a decline, then a buy. We are in the midst of the decline now, and we are heading into a time zone here in a couple of weeks where the seasonal and cycles favor a rally.

The one thing to keep in mind here is that overall this market is in a huge down trend on a larger time frame basis, so it would not be a surprise to see it continue downward. My view on this is that I am looking for my shorter term techniques to give me a buy signal in the next couple of weeks.

The next chart is that of the VXX. I had mentioned as we were dropping like a stone recently, that a sell the VIX trade might be setting up. It never did by the rules I use even though we have had a bounce in index prices, this has not declined much. As oversold as we got, we did not get oversold enough for my entry to trigger in this, so I suspect on the next leg down we might get there. I will be watching this one closely once the next selling wave hits for a reversion type of move once panic sets in. For now it is no trade and on the radar.

I still expect we are going to drift upward here in the artists formerly known as the Bernanke's ( the stock indexes for new readers ), for a couple of weeks, then........clank! Remember that I have said I thought this bounce was going to be a bit messy and make the timing of the next sell tricky, that seems to be playing out right now.

Good trading to everyone

Sunday, August 14, 2011


Here is a chart I posted in here quite some time ago which portrayed a certain map for the market to follow. I seem to recall I put it up in May but I do not remember specifically. This whole map is based upon something that makes no sense to me as far as why it should be this accurate. It is the map of another market and some internal things with it. It does have some relationship with the stock market, but not one that should serve as a predictor. Ironically this has been incredibly accurate, so as a result I am going to keep watching it. It currently shows a projected low for stocks on October 7th of this year.

 No matter what I look at from seasonals, to the maps that project price, to cycles, they all predict continued weakness in stock prices at the very least through the end of September. This is just more confirmation that we should be looking to sell rallies here in the coming weeks. How you look at individual entries is up to you, the way I see things we need at least another day before the short signal for the Indexes is lined up on a short term basis. I am expecting this correction here to be a little choppy due to the huge down draft we had to get down here. We all know that the political fate of many is at stake with keeping this somewhat under control, and Comrade Ben is making his case for the public to beg him for QE3.

I think his strategy of completely backing away and letting people see how much they need him for stocks to rise is a good one. I hate the idea, but he is playing the hand of cards very well. My feeling is there should be no hand dealt, it should not be up to the FED to artificially manipulate stock prices. However, it is where we are so it is what it is. He does not need my approval to do it. Once he does launch QE3 we may see a rally, but it is all speculation at this point, and for all we know he will do it at the beginning of October which will line up with the cycles and seasonals, and that could setup a big rally. Until then, look for more downside action.

This is the Coffee market which I feel is setup for a rally. I have been talking about this in recent days, and it appears ready to go right now. We can see we are at the seasonal low point give or take a week or two, and we have quite a bit of COT buying indicated by the red line on the middle graph. We also have had a good bit of Small Spec selling and open interest has been declining. This is a pretty good fundamental setup, worth a shot on the long side.

Here we have everyone's favorite market, GOLD. One of my sisters was just in town and I found out she had bought some gold coins for her kids and has been indoctrinated as a cult member. I heard the store of value argument etc... For all I know the cult is right, I have to admit that I have never seen such a frenzy in my lifetime that has lasted this long, and I do not see any obvious reason that it will stop any time soon. However, I do see a possible short term opportunity here.

If you look at where I have my red arrow, it is showing the sentiment reading has now reached a reading of over 90% bullish. If you look back at most of the prior readings at this level, we have had retracements following those readings. We also has a possible seasonal inversion here in that the seasonal has been declining while price has been rising. Inversions are always tough, most often they are clear long afterwards but not at the time they happen. If we are to accept that a possible inversion is happening and we combine it with the COT position declining back down to a low level again, we do have a case for a short term selling opportunity. As I have said repeatedly, Silver is much weaker, so that is where the sells should be done. They are not the same market, but they do generally track together. Net, Silver sells this coming week.

Just a few other things, it appears Dollar buys are in play and also Cotton on the long side and Cocoa. I still think energy bounces are sells overall,  look at Crude there. I am also watching Natural Gas for a sell, but we are also approaching the seasonal and cycle lows in a couple of weeks. If a sell does not show up this week I will likely be looking for buys going forward.

Friday, August 12, 2011


It seems my little Posse that is forming is doing quite well in their trading. Since we are on the internet I have no idea what my Posse looks like, so I hope it is not as motley as this crew above! This is FANTASTIC NEWS. The whole reason I bother with this, is to help others succeed. Congratulations to all of you. From some of the emails I have gotten some of you are doing very well in your trading. Since many of the trades that have worked out seem to be ones that I have talked about setups in, that makes me feel even better.

Here is one market I am watching for 2 trades. First, I am looking to enter this on the short side here for a ride down into the seasonal low at the beginning of September. After that I will be looking for a long entry to try and take advantage of the seasonal rally that typically happens. As per what I always say, I have no idea if this will happen or not, but it is my plan. I do not have any orders in for today in this market.

Here is another market I have been stalking, Sugar. I do have orders in for today to short this, but it does not appear we are going down to where they are sitting. I will stay after this one. This is setup pretty well now so it is a must look for me each day to find a way in here. For those who might be bullish, you could certainly justify this as a pullback buy on the weekly chart as well. It takes two to tango, and two to make a market so choose your poison. I am looking down here.

Here we have of course the artist formerly known as the Bernanke 500 which has reverted back to it's former identity, the S & P 500. It remains to be seen how long it sticks with this name before Comrade Ben intervenes. We are seeing the bounce I have been talking about. Aside from missing the start of that by one day, my calls here have been pretty much dead on. Trading times like this are another matter entirely just due to the huge ranges and the very large stops that are required. Now we are back up enough where we have to contemplate the flag entry. This is a retracement in a downtrend, whether or not it goes farther than this we never know. However, when you get retracements in trends, they are generally the best trades to look to get into. You have the wind at your back in these.

When you get these huge moves, trading the retracements is a bit tougher, but just look at them as any other trade. This one could very well require two swings. It would not surprise me for this pullback to be a bit complex, but that is just an opinion and not based on anything technical. Technically, we are in sell the pullback mode.

Good Trading to everyone and have a nice weekend

Thursday, August 11, 2011


So many people at this point are just in shock over what is happening. I know that during these times the average person who does not study the financial markets get very scared about what might happen to their retirement accounts. This is understandable, the volatility we are seeing right now is extreme. Even stops on tick charts for day trading are more than $500 per contract which is incredible. However, one just general concept to keep in mind right now is a very basic market tenant, trade with the trend.

Readers of my blog knew back in early July that the trend turned down. It may not have looked like it on the charts, but I did show graphically the rationale behind this conclusion. I did not go into exactly what the bands I used were, and will not divulge that. However, I did show how they told us to sell rallies and that the trend had turned down. Surprises usually come in the direction of the trend. The trend is down, so do not be surprised to see a trend go farther than you think. We just saw that happen on the upside for 2 years. At this time we are seeing it to the down side in the direction of the trend.

What I want to get straight is something very very simple. The cause of this is not the debt fiasco. If you want to look for a cause for the huge up trend ending, look to what created it. The FED moved all these markets up almost on a daily basis, with what they did. It was one of their stated goals, and they accomplished it. I told people over and over for 2 years that if we left everything in the world exactly the same and just changed the first two numbers in the DOW from 12 to one number, 6, everything would be different. We are now seeing the proof of those statements. Now with a Dow dropping like a stone, people are all of the sudden more worried about everything than they were before this started. This does show the wisdom of the FED on one hand, in that they fooled 300 million people for 2 whole years. Now that they stepped away at the end of June, the trend changed just a couple of weeks later. This is so obvious it is hard to believe that someone of note has not stated this on a talk show. The devious nature of the markets gave us that quick rally right at the end of QE2 to fool us into thinking everything was going to be fine without them. Of course some of us knew better.

This does not mean that the debt problems are not real, but they are not a reason why the SP 500 dropped 20% in a flash.

This drop occurred because the primary buyers for the last 2 years stepped away from the table.

We do not need to know that and it is really irrelevant, but I just wanted to be on record as succinctly stating that in here. The trend is now down so even though the seasonal indicates still a brief flat period here of a week or so, we should continue down overall for a bit here. How far and to what level, I have no idea. I did state over and over and over, that when this drop came it was going to be big so I think this would qualify as GRANDE. Net net, look for sells on bounces. If you are really nimble, look for short term longs down here. The sell the VIX play is not quite here yet, we do need to go down more for that still by the rules I use for it. If we close this week down below the current weekly lows, it will be setup for next week.

The next chart is everyone's favorite market, GOLD. We are seeing a flight to quality here there is no doubt about that. Let's just say for a moment, that we were not all brilliant water cooler economists who think the dollar is doomed and we can trade GOLD for water or plant seeds during the coming apocalypse. If you just look at the seasonal pattern, you can see that typically at this time of the year this market rises. Although at times seasonals can stray from their paths, when you see prices following them closely, pay attention to them. They are there for a reason. In this case, had you just followed that alone, you would have done quite well with GOLD, and been on the right side of most of the moves this year so far. As much as I think this is the biggest bubble of all time, and still think that, I see no reason to short this market. The trend is up, so longs are overall the way to be looking there. If you want to try and short it go to Silver which has a much weaker chart pattern. The seasonal is still up there as well, but it is not as pronounced as that of GOLD.

Here are a couple of other trades I am looking at. First, short the Euro and Sugar and Natural Gas, then longs in Coffee and Cotton. Corn is also potentially setting up a sell here. There are setups not entries, so that does not mean go enter these trades at the market. It is always up to individuals how they trade, those are just directions in the next day or two that I am looking. I may not trade any of them, but I am looking at those specifically.

Good Trading