THE WORLD IS A SELL
Above we have the Russell 2000 and you can see there is a trap pattern set up for today. If we were to take out yesterday's low after closing above the prior highs yesterday, this would be a classic trap and reversal pattern. This is one I am going to play if it happens. Of course what this also means is that virtually every single other market in the world is also a sell if this happens except Bonds and the DX.
This is really starting to aggravate me, but for all I know this could go on for a decade so I have to deal with it. As I went through my trade list last night I literally had a dozen markets that all were sells, so I had to pare down the list some keeping the correlations in mind. I guess what the correlations mean is that as traders we are not able to make as much money as we can at other times because it is not prudent to put all your eggs in one basket over and over. I know that I won't do it because I know better. We just can't put on that many positions whose outcomes are independent of each other, hence we make less money.
We are at the time when the goofy market predictor I showed last year is telling us a short term top should form.
I still marvel at how well this has worked especially since it was made public by the gent who discovered this more than 9 months ago. Since then the highs and lows have rolled out so accurately it is really quite hard to believe. I will give readers a hint since I have shown this a few times, that it does have to do with the EURO. It is easy for anyone to see that when news about the EURO breaks, it effects our markets here. It certainly makes sense that there should be some way of predicting prices with it. What is unusual is the variation of that idea that this guy came up with. It makes no sense to me, but for now I am still considering it because it has been so accurate. You savvy surfers can probably track this down on the web if you try hard enough, but I am not going any further for risk of being held responsible for revealing this.
One thing I did yesterday as an experiment whose outcome has yet to be determined, is I went back into SHAW at a higher price than the original short I entered, that I exited against the rules for a profit due to a tee time. I guess I will no refer to that exit strategy as the Tee Time Exit.(TTE) I reasoned that since I still should have been in that trade, if I could get back in at a higher price it made sense to do it, so I entered it again on yesterday's open. I also considered that in general I am looking for a short term pullback in the overall market, so why not take another shot since I had house money to play with in that one.
I have labeled the entry and what today's exit would be if it happens. Other than that it is sit back and let this one play out. The next chart shows the one problem with the new stock trading technique I am using.
This certainly appears destined to be the first loss so far, as it is just running away upward against me. I do have an uncle point of about 5% of the total margin, so this is not there yet. I do overlap a couple of completely independent techniques to arrive at these trades which is an attempt to eliminate this scenario. Unfortunately, there is just no way I can find to completely stay clear of this occurrence. As a result, I just am using a close only stop point of about 5% of the total margin as an exit. Barring a total meltdown day on Wall Street, this trade will wind up being exited at a loss by the time it is done.
For today, it is take your pick of what to short if the indexes take out yesterday's lows. Unfortunately, most of the entries will already have been triggered by the time the indexes move that far if they do. I do not expect a big break in stocks if we get one at all, but I am looking to the short side. I never know in advance if a move will be big or small or even if I am right about the direction to begin with. If you know that you don't need to read anyone's blog.
Good Trading and be careful with the correlations