Monday, November 12, 2012


Stock Market crash so many are calling, are they right? I don't think so. We do have a down trend on the daily chart there is no doubt about that. Also we are into the weekly support zone for a buy, there is no doubt about that. It is never an easy call to make no matter what various "experts" may tell you. I have checked out some of my competition on the web just to see what they are doing and came across one place where I am familiar with the people who run it. I think they are good traders so I wanted to see what they were up to. After digging into it there is an indicator they sell for a pretty stiff price and it supposedly is 55% accurate in the markets that it works well in.

The purpose of this is not to slam anyone else I do not believe in that. Trading is a tough business and we all need to help pick each other up when we go through bad periods. I have no doubt that the minute our trading services go through a tough period people will leave, it is the nature of the beast. I find most people are looking for the quick buck and no matter what I tell anyone, when losses occur exits will happen The reason I go into this is that here are these other folks who are good traders and the most precious indicator only works a little over half the time in the markets it works best in. Is this bad? NO.

That is plenty of an edge to make money trading as long as your money management is good. As to whether that is good enough to pay for that is another matter. I would not get too hung up on the percentage accuracy that is more ego than anything else. Getting back to the matter at hand here, COT analysis is probably only about that accurate or possibly even less until you get the hang of it. It will get you looking the wrong way often until you get the art of working with it. It has led me astray more than once believe me. When we get into declines like this often the pattern will be for the commercials and proxies for them to move into the buy zone. This does not mean we instantly go in and buy. We need to see some type of trend change action to support what is a somewhat bullish COT picture here. I don't see anything that could serve as this for Tuesday since we are just stair stepping down. We have not made a higher short term low yet.

As I pointed out the other day the commercials have not actually bought this market at all only the proxies have. It is impossible to know how the Fed shenanigans are classified in this market so that is where the proxies become more valuable. Since they are designed to give us a daily read of what we think the commercials are doing, it should help when the numbers are likely being gamed here. As a result I pay little attention to the straight COT data in this market.

Net net here, we are in a down trend but have some fundamental stuff that tells us to look for potential longs. We have had the BO sell off now so we could stabilize here. There is less of a sense of urgency for the FED to stop this slide since the election is over and they won. They still will perform the PPT function but it is not going to be as much on a day trading basis as what we have seen in recent years. If we do happen to start falling hard we will likely see them surface. I don't have anything in the way of divergences here in any of my proprietary tools so we could keep drifting down but I don't think we are going to see a crash. I am hoping for a rally to get short at the end of this month to the end of December. I want to be short come the new year but want a retracement entry.

Here is a market that I think has a shot at rallying, Crude Oil.

There are a couple of problems here. First this market is tied at the hip to the stock market and has been for a long time now. You can tell from looking at the charts they are almost identical. Since we don't have an imminent stock rally we don't have the obvious catalyst we need here. We also have the seasonal pattern being followed very closely here which is another impediment to a rally here. I think seasonals are much more important when the markets are moving in sync with them then when they are not and a magical date suddenly arrives where we are supposed to turn.

What we do have here is the COT data showing some buying with the big boys and bearish sentiment. We have the makings of a bottom here. If for some reason this starts to rise in advance of the stock market it will likely get a big kick up from any stock market stabilization.  This is one to put on the watch list.

PFG Update

There was a conference call with the CCC that I sat in on today and here is the summary of it. The matter of Forex from a legal stand point is as I represented in here. The law is fairly clear here and the CCC guys stated as much. Due to this clarity they have not filed any suits as a result thinking there is not much point to it. The law for bankruptcy and the paperwork that was filled out and signed when accounts were opened, clearly state the money is not segregated. As a result it is not provided the protection in bankruptcy that segregated accounts are. Forex holders as a result are general creditors and not preferred creditors. An argument can be made that they should be at the front of the general creditors line and one is being made. It seems that is the likely outcome. The problem with that is that there are not enough assets to satisfy the preferred creditors. This would mean that until the segregated account holders and any other preferred creditors are fully satisfied, general creditors will not see any money. This is a bad prognosis but it is what the law provides. Again there is always the chance a judge will ignore the law since we see that all the time.

Time lines seem to be quite a bit out in the future. I cannot for the life of me understand why in the world this is taking so long. The whole system is so corrupt I suppose that is the answer. There also does not seem to be any time line on when decisions on Forex will be made or when any other distribution of the money we know is there now will be made. It also appears they have not even begun to investigate any possible culpability on behalf of the banks. I also cannot for the life of me understand why nothing has been done in that regard. What in the world have they been doing this whole time? I hope their golf games are good they must be working on them and not this case. So it appears no more money for anyone until next year. In the end it appears the end game for segregated holders is probably in the 50 - 60% range. Anything beyond that will be dependent on law suits against the banks and or any other entity that has some assets that might be tied to this mess. Proceeds from that if they come will be years from now so don't hold your breath on that. 

Plan on a 50% hit net and move on. Take your fraud tax loss write off this year if it is appropriate for your individual situation.

Here is one other point I have to make. It turns out in all of the accounts transferred to Vision that I am the only one who has insisted on an equity account sweep, THE ONLY ONE IN 14,000. This is insane. Has everyone lost their mind? Does anyone remember PFG or MF Global? Has anyone ever heard of either of them?

How in the world could you have an account at an FCM and not insist on some type of insurance? It is now officially on you if your money gets stolen. You have seen one atrocious theft then one that followed that was worse, yet you do nothing to safeguard your money in the wake of them?



Anonymous said...

What makes you think the powers that be ,will not come up with a different set of rules as regards your "Equity Account sweep" ?


Chris Johnston said...

do you mean SIPC will cease to exist? These are equity accounts do you think the stock market insurance from the government will be taken away? This is money in a federally insured stock account that can be transferred back and forth between that and a futures account.

If the government decides they are not going to back stop stock accounts any more the markets are finished and so is the banking system. Am I following your question correctly?

Vision has a license as an equities firm as well so they offer both types of accounts. I don't see where you are going with this?