Sunday, September 30, 2012


Stock Indexes, what up?

Before I get to the topic of the day which I will handle last, let's take a look at something interesting in the SP Futures. Whether or not you trade the DOW FUTURES the ES or any other index, the setup is basically the same. The COT data shows a shift to the short side here in the commercials and at the same time we have a major trend line being challenged. On a short term basis if we close below this trend line, we have a shot at getting down into a good buy spot for the end of the year rally. The one thing we have seen so many times in this FED dominated era is for a trend line like this to break and then have the market reverse course and rally.

I do have some sell signals in some markets for tomorrow and one is in the NAZ. However, it did not make it through my filtering process. Sometimes things don't line up perfect but that does not mean this is not a sell here. What bothers me about his setup is that it is just stair stepping down here and it is still above the last pivot prior to the high. This means that the trend is still intact but is living dangerously here. If I had to bet what will happen here I would say over the next couple of weeks we are going to work lower, but I do not expect a sharp down move. There is a presidential re-election at stake and we are starting to hear them use the stock market as a reason why BO has done such a good job. I think most of the public understands that a good portion of the rally off the 09 lows was directly created by the FED so they discount the stock market strength. I still will be very surprised to see a major break before the election. 

That is all opinion which I do not trade with, but I wanted to get it out there. From a technical stand point most of the trades I have on my roster for tomorrow are sells with a couple of buys in markets that are not correlated directly to the stock market.

Here is something I will call the battle of the bands. You can see really contrasting indications of commercial activity between my COT adaptation and the COT data. The Dollar Index has been in a steady downtrend ever since comrade Ben announced QE Infinity. I like the retracement here in price up while my indicator is declining indicating insider selling of the rally. However, the COT data shows very strong commercial buying here which would say not to sell the rally. My new tool says to look for sells soon and the COT says not to. Just buying a market that is going down like this because the commercials are now heavily long is generally not a good idea. You could argue that they are now at the same long level or higher than they were at the lowest low on the charts and price is higher and that makes this bullish. That would be a reasonable argument to make. That is what makes the COT stuff challenging, it is an Art not a science. It is the lack of congruity of this data that has led me to look for other things. I have covered this in more detail in the first edition of my monthly newsletter which I am just finishing up for release tomorrow. It will be interesting to see which band wins the battle here.

This particular setup would be better if price were to rally some more up into my red band area which would likely mean a stock decline. The VIX is also foretelling of some stock weakness, so the evidence on a short term basis, is for a decline. 


Thanks to all of you who have given some of my services a whirl. I am in the process of sending out introductory documents. If you have not received anything yet and did sign up for the Swing or Bond trades please email me at cj@wearefuturestraders.com. This is not a link just copy and paste it. The demand has been far more than I anticipated and I have fallen behind a little bit in all the back office stuff. If you signed up for the newsletter, I have not sent out anything on that yet. You will just get it via email tomorrow night. If you do not get one and have checked your spam email me. There have been a few inconsistencies between the email notices I get from Pay Pal and the spreadsheet I get when I log in. I am reconciling it to make sure everyone is accounted for.

The one comment I want to make here that I hope everyone pays close attention to is the following. The Swing trades are not the same as the Bond system in either duration or style. They are a different way of trading. I know some of you are excited about how well you have done in the Bond trades and nobody is happier than I am that they have worked out so well. However, don't assume that the Swing trades are just a straight path to a pot of gold. There will be losses and the winning percentage will be much lower. We will catch some larger moves which is what they are designed to do, but trading is not an easy business. I was nervous over the trades I put in for tomorrow, I have a lot to lose here and I want to urge patience. I think it is best to watch them first so you can see how they play out and what the stops and targets are. You need to be comfortable that this style is for you. This is why I made this just a month to month. I want to make sure people are not stuck having paid for a quarter or a year in something they don't like. For me this is about getting the right people and having them stick with this. I don't want to jam a bunch of people in and have them be unhappy.

The proper way to use them is to first watch a few play out and determine if you can trade the way the orders dictate. You need to take a little ownership from the standpoint of figuring out what the stop loss dollar amounts are, and what percentage of your account to risk. If you just blindly take all the trades you are not going to learn anything. If you are not sure for example what the dollar risk is for 330 points in Heating Oil you should not be trading Heating Oil. You need to get a little involved. Take the time to look this up yourself so you have a better feel for what you are doing. We will give you the entries and exits every day, but to learn anything you have to be a little involved. Over the course of time we will be going through the what and why of these trades. You need to invest something other than just the $100 to be successful. I think most of you want to learn so this is your chance. Please do not expect a winning streak like what we have going in Bonds.

I hope this makes sense. I will be sending out some emails covering some of the other questions that have come up so look for those in the next day or so. This has been a gargantuan task getting all of this organized but I think we are going to have some fun together even though we will take a lump here and there.

Good Trading


Anonymous said...

If you look at US dollar COT for the last few years, commercials are long when there is a continuation of a downtrend. When they go short, it usually means the downtrend will be ending at some point soon and when they go massively short, it means the buck will be going up dramatically--although the dramatics where somewhat subdued this last go round because of Uncle Bennie and the inkjets.

The recent US dollar rally starting mid-September has been extremely weak--its all FEDWORLD BS, but it is what it is!

Anonymous said...

Hi Chris,

I have not yet subscribed for the news letter. I will do that now. can you please send the this months news letter.
I have registered for the swing trading subscription. I want to trade at least 1+ months using paper account so that I can get accustom to mechanical entries and updating entries along with understanding risk involved for every tick and point moves in each future contract.

Hope, I do that job well and my personality fits this style of trading. Ultimately would like to understand trading futures in this style by reading your news letters.

James said...

Hi – Will you please post a link to your Blog/Article at The Day Trading Community at vorts.com? Our members will really appreciate it.
Members include: Other Day Traders, Day Trading Experts and Professional
It's easy to do, just cut and paste the link and it automatically links back to your website. You can also add News, Photos, and Videos if you like.
Email me if you need any help or would like me to do it for you. I hope you consider sharing with us.
Please feel free to share as often and as much as you like.
The Day Trading Community: http://www.vorts.com/day_trading/
James Kaufman, Editor

Chris Johnston said...

need your email James send it to me at cj@wearefuturestraders.com