Friday, August 17, 2012


We have gotten back into this quiet creeping mode here, a wet dream for the PPT. They can control this thing on an almost hourly basis with volume being this light. It is rare to have it be like this at this time of the year, this is more of an early summer type of feel. You can see the Presidential Cycle stuff down at the bottom here, and it is clear that this year we are following the 4 year Cycle more closely. Note that both of these cycles indicate a downward move is coming here.

In the old days it used to be that these slow creeping moves would all of the sudden out of the blue, just waterfall downward with no warning at all. In recent years although we have seen that a couple of times, more often than not, those waterfalls are quickly contained by the PPT. That was the original reason it was formed, so this is not a surprise. Also keep in mind it was formed by a Republican president, so we cannot blame this on those that may have different views politically.

The challenge with cycles like this and forecasts as well, is that although they give us road maps that often wind up working out pretty well, it is tough to know at any point in time, when they will kick in. It is certainly a tough proposition to short a market like what we have now just because we think a cyclical influence is about to exert itself. I would not do that. The best way to play this in my view, is to wait until whatever tools you use line up with the cycles. Once that happens you have the combination of both together, which should make for a better trade. 

In my view, the way this is looking, the coming decline forecast by this stuff most likely sets up a buying spot at my bands now that the trend is back up again. I doubt very seriously I will try and cherry pick this top. However, if my patterns happen to give me high probability sells, when the cycle is due, I will take a swing. One thing we have to keep in mind here, and this is an opinion on my part, is that we probably have more at stake in this coming election than at any time in the last 100 years. As a result on both sides, there is going to be a lot of manipulation of just about everything you can imagine in an attempt to sway the public one way or another.

We are going to have the Dems hawking the stock market to try and get the focus off basically everything else that has gone completely south during Barry's regime. The Repubs will be doing their schtick. The PPT is going to be balls out to support any decline that happens. As a result, I expect any drops to be quickly contained. 

All I have is some long positions that are short term trades in grains. I was looking to short Crude today if it broke, which it is not. I was also eyeing Silver on the short side, but the stop was too big based on how big yesterday's range was.

One other comment I wanted to make is on the subject of Segregated Funds. As I have been able to get a little less emotional about all of this and look objectively at all of the things that have happened in the last few years in regards to this, I have a few thoughts.

1) The courts are supporting the illegal use of such funds by the brokerage firms
2) The courts are consistently putting banks at the front of the line in the distributions
3) It is completely incumbent upon us to protect our own money, the system is not going to do it
4) There will be much much more of this because of items 1 and 2 above.

My plan going forward is as follows. For every 100k I make, it will be taken out of where it is and divided in two, then sent to new brokerage accounts I will open. The goal is to never have more than 20% of my trading capital in any one place ever again. I would bet my life I will have all of my Seg money stolen again at some firm as yet unknown. This way it only will be 20% of my trading stake.

I will also monitor rating services very closely. If any parent company shows any kind of trouble, POOF my money is gone. I did that with Knight, and just did it with Tradestation with some of my equity money. Their parent company has a very low rating at one of the services I reviewed. The FCM there is rated well at Atlas, but if the parent gets into trouble, that is when the money starts getting stolen. We have seen this over and over. Also, I am looking mostly at firms that hold a good portion of the seg money at the MERC. These are about as prudent a safeguard as I can muster. Please keep in mind as we have seen, even doing this will not assure anyone of anything. With judges constantly putting the banks in front of us which is illegal, even if your money is at the MERC, it will go to the banks in all likelihood in a bankruptcy proceeding, and you will be left holding the bag.

The other thing I am going to do which I don't want to but feel I have to is this. I will keep the balances in my trading accounts smaller, but view them as a larger amount in terms of risk. Here is an example. If I have 1 Million dollars to trade like I used to, I will put 200k of it in brokerage accounts and keep the rest at banks. If I want to risk 2% per trade, which would be 20k of the 1 Million, that will wind up being actually a 10% portion of my brokerage account balance, but only 2% of my total. My brokerage accounts will be more volatile, but they are a portion of the whole. I will wind up doing a lot of wiring of money most likely, but I am not going to let another one of the MF's steal my money so easily.

The two things that could change this are insurance, if they establish it, and insurance, if I can buy it reasonably. Having all the money at the MERC is not enough of a safeguard. The bankruptcy judge can still give it all to the banks like they did in Sentinel. I am also not going to subject myself to another wacky decision by a judge who may be corleoned by someone or otherwise beholden to someone other than me.

I hope this all makes sense.

Have a good weekend and stay long, tighten stops come the first of the month in case the cycle kicks in.


Vikas said...

What grains are you long right now? I think Soybeans and Soybean Meal go higher from here.

Chris Johnston said...

soy complex

Michael said...

Appreciate the post...that is how I am managing my accounts and viewing Risk R/T total funds... not account size. Haven't had to deal with a 2% total funds draw, with a 20% account draw impact but have prepared mentally to deal with it, as I just switched too this two weeks ago... I view this as the best option at this time to manage the risk of theft. I was F'd in the construction and land development business by banks and Fed regulators while trading was a hobby...switched to futures trading as full time business and now this BS is going on...had to go back to my original education in health care industry to pay bills after my previous business went under... Regards and the Best of Luck!

Chris Johnston said...

Perhaps in time they will get insurance going but I am not holding my breath on anything these assholes do. I guess I am becoming another angry old man, one thing I never wanted to be. I am sure behind all of these shenanigans there is something that makes awful sense, that would appall all of us more than what we see on the surface of things. The way judges keep putting banks in the front of the line is very suspicious to me, and beyond the random chance of just being a dumb ass judge.

Michael the best thing we can do is succeed in spite of them, then use some of the resources we acquire to bring these bad people down. I fully intend to at some point hire a team of people to do my own investigation of things, and these people had better hope they never swore at a bunny. If they have one single skeleton, I will find it and then all bets are going to be off.

Love the guy from the CCC who is going after Corzine, he is truly a hero. This crony capitalism crap on both sides of the aisle has just got to stop now.