FUTURES TRADING PART III
There have been a few questions regarding the new site and some of the services, that I will cover after I make the point I want to make today. I think most people are aware of the tremendous run the Bond market has made in recent days. We did catch some of this in our Bond System but not as much as I would have liked. However, it is a mechanical system and we have to live with what it brings. It will never be everything to every market condition. If it were, it would fail. The over optimization of systems is a common problem and one I have been guilty of at times. The point for today is along those lines.
You can see I have labeled the 8 consecutive up closes on the chart. I think most people would assume this is a great time to short this market. After all when something has gone up this far it has to come back down doesn't it? I would be willing to bet some of you are thinking "I know this will come down it can't keep going like this." Let's see what the computer says about that.
Since 2002 we have had 6 occurrences of 8 straight up closes. This shows buying at the market on the opening of the next day, using my standard Bond stop, and exiting at the first profitable opening. Although this is not a stellar pattern to run to the computer and click the mouse over, it is different than what most people would expect. At times the markets are completely counter intuitive and you have to roll with what is not what you think should be. In this case a huge short term burst like this is not bearish. This does not mean run out and buy but it certainly is not a sell pattern.
We can reason to ourselves that this is the result of QE Infinity and that may be true. However, we also had that huge decline after the program was announced. Rarely can you time a big market move directly to a fundamental event precisely. I told readers here at least 6 months ago that QE 3 was coming, even when the FED was denying it. The economy is so much worse than what they are leading on, it is worrisome. I had dinner with one of my best friends last night to catch up since I had not seen him in awhile. He is an incredibly successful guy, one of the very best at what he does in the US. We discussed for a brief time the political situation in this country and both agreed that we have serious serious problems if BO wins. Ironically he has been much more of a democrat than a republican, but shares my concerns about the long term problems BO is creating for us. I don't want to get to into politics here, it always gets me into trouble. However, the point is don't put your head into the sand. When it comes to voting this year do your research and be sure you understand what each guy represents. Forget about the media and their biases. Make your own decision and be comfortable with what it brings. It could very well bring us to a spot we can't recover from.
I think there is too much apathy, and that is allowing the sea change that is being orchestrated to happen. It is a numbers game. If 50.1% go one way that is basically it. I would be willing to bet that about 20% of the public pays no attention to any of this and does not care. Folks that is what they are counting on! DO NOT BE THAT GUY. Some day we are going to wake up and not recognize where we live any more. What the FED is doing now is going to result at some point in a crash for the ages. It will not be tomorrow, but it is going to happen. I see Gensler is now trying to get the Libor rate raised way up. This SOB just keeps giving gifts to me. I have an adjustable mortgage based on the Libor. First he presides over MF and PFG and says sorry even the police don't catch all the criminals. He indirectly there takes away hundreds of thousands of my dollars. Now he wants to kick me while I am down and raise my mortgage payment. I am not sure who I want to go into the Octagon first with, Wassendorf or him. As Gordon Gekko said, "if this guy owned a funeral parlor nobody would die."
We may not care about politics, but elections have consequences and this idiot has to go. The commodities markets represents trillions of dollars collectively and we have this guy overseeing them.
Here is my model for stock swings that I will be using throughout my newsletter to give directional bias. I am not going to fully explain it here, that will be for those readers who subscribe to it. What I do want to show is what is says at the moment.
What I am looking for at the moment is a similar pattern to the one I have marked on the chart. My first look on this dip is a buy once we get into my zones marked with the green line. We know that typically October is the month to buy stocks and this could play out very nicely if we decline into that time zone. Once that rally begins it will be time to watch to see if my COT Indicator shows selling on the rally. If by chance we were to rally into the end of November and get a sell indicated with my tools, that could be a very good sell signal. The reason for that is that our weird Euro chart shows that time frame as a possible significant top. You can see that by and large my indicator does a pretty good job of telling us what side to be on.
The main question that seems to be coming out is in regards to the Swing trades in the new web site. The best way I can describe those trades is that they are the trades that I do and have shown periodically in here over the last couple of years. You have seen me catch some big moves like Coffee, Hogs and Natural Gas. There have also been losing trades as well. The biggest difference between these trades and the Bond System is these attempt to catch larger moves and use trailing stops and targets. The Bond trades are designed to catch very short term moves and exit quickly. The average stop loss in the Swing trades will be lower because I trade all the markets with them. A stop in Bean Oil might be $600 - $800 per contract. There are others like Gold where the stops are much larger, but you can trade the mini's to get the stop down. Historically I have made much more money in the Swing trades because there are more of them. The last time I did this in 2007 they made over $40,000 for the year. I have been trying to find the records for them and can't seem to. I have crashed a few hard drives and I know I have it backed up somewhere but can't find it at the moment. That amount is not a promise it is just a fact of the prior track record of it. I cannot guarantee anything as everyone knows.
The Bond System has just been on such a great run, it is out performing what it has done in the past. This does not mean you should just chase the hot hand. I point that out because I don't think you should compare what that system is currently doing and assume it will always be that good. I hope it is I use it myself. However, I know systems have equity swings also and the subs have caught a great opening run who have been using it. I just don't want everyone to think we won't take losses, we will I guarantee it. I am going to limit the number of subs in the Bond System. I am not sure yet on the Swing trades, I have to get a feel for the interest level to make that determination. So far the interest has been strong.
It really comes down to an individual choice, they are two different approaches. For those of you who cannot watch the markets intraday, the Swing trades are probably a better choice since they are not designed to exit quickly. The last time I offered this type of thing back in 2007 I did free trials and that was a nightmare. I had hundreds of people coming and going who just took anything free they could find. Trying to administer all of that was very difficult. I am sure many of them did not even know what they were signing up for. The reason I made both the trading services monthly billing is to enable people to leave quickly if they want to and not be trapped having paid for a whole year. If you are unsure you can sign up for a month and see if you like it. If you don't just cancel it and you have spent either $75 or $100. I can't make it any cheaper than that.
This whole thing only works if I have a happy stable base of clients and that is what I want. I am not going to be a Vegas ad telling everyone how great I am and create a merry go round. That is no good for anyone. I am going to have a comments section in the Newsletter and I will publish both good and bad to be fair. I know there will be bad so I hope there is some good to mix in with it!
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