Friday, June 29, 2012


I think at this point it is time to come forward with my inner monologue. I have had a thought in my head now for quite some time and here it is.

It has become time to ignore the short side of the markets indefinitely

I am sure most people reading are going to think I have lost my mind by making this statement. We know the economic situation is truly awful, nobody can argue that. However, what also cannot be argued is that every time we get a brief down move almost anywhere, it is immediately violently reversed with a seemingly bad story that should hasten the decline. Releasing a story about how more good money is being thrown away to feed socialism, is not a good situation. The story out of Europe about yet another bail out is horseshit. This will mean that the place it comes from will now be at risk as well. This is not good news that should send the markets flying upward. We are giving money to people who will never pay it back, it just poofed! All else being equal, that should pummel financial markets, yet it does not.

What happened yesterday in the US court system was shocking, a very bad omen for the whole world. The previously last standing place in the world that stood for freedom, no longer does. Essentially re-writing the bill for the democrats, the Supreme Court has now said that there is no limit to the taxing ability of the Congress. This is much worse them holding up the law on the basis of the challenge, the commerce clause. What we are seeing in New York with the 16 oz soda stuff, is now spreading everywhere. I have never witnessed a fundamental changing event in my life until the last few years, so from that perspective this is all very interesting. I do remember asking my dad what it was like when we dropped the bomb on Japan? How did he feel? It was such a history changing event, I was just so curious to try and re-enact it for myself so see how I would have felt. The reason was that things were so steady here, that I did not think such a life changing event would occur in my lifetime.

I was wrong.

The governments are taking over on a level I just never thought could ever be possible. How could they ever hope to control our every move? They have completely taken over the markets now. I plan to just use these brief periods of dips that occur for a month or two as places to position on the long side  and basically forget the short side from now on. This is just in my bigger picture views, I will still trade shorts on a short term basis but with a lease that is incredibly short. Sometimes you just have to admit when your opponent is getting over on you. They are getting over now, plain and simple.

They are establishing a new order and it does not involve us. We need to fight via voting, but short of civil unrest, which is going to follow as surely as the sun will rise tomorrow, they are going to keep pushing us down as far as they can.

We do know at some point this whole thing will implode, and I think it will be obvious when that happens. Until that time, I think it is entirely pointless to look for the big one on the down side, it ain't coming. They can buy futures like they did yesterday to reverse the decline in the last hour, then again do the same thing in the night session when the volume is lighter. There is nothing we can do to stop this right now, so go with it plain and simple.

This is not really a bad thing for traders, we now have a deck stacked in one direction in a way it has never been, this gives us a tremendous edge we need to exploit. How to buy these dips is up to individuals as to how you go about it. Sometimes they get deep like the recent one we have had, where it takes big stones to hold on that long.

Maybe a down type of post, but I am a realist, and I have to admit, they are getting over on us right now. The Scoreboard does not lie unlike someone else who does it frequently to all of us, as affirmed by the court.

Thursday, June 28, 2012


I have been studying several new ideas recently trying to hone them in, and the one thought that always comes back to me is that no matter what I do to try and make them better, it does not work. One thing I have a hard time accepting is that things just are what they are. You have a basic idea, and if it requires layer upon layer of qualifiers, the idea is just no good. Make no mistake about it, good ideas in trading are hard to come by. If you find yourself tweaking something too much, chances are what you are tweaking just sucks to begin with and should be pitched.

The good news is that we don't have to be perfect to succeed in most things, we just have to be good. I am surprised this morning to see the Bernanke's this weak in front of the announcement from the Supreme Court, but that tells me the insiders think they are going to uphold the law. It will be interesting to see what happens. I would have a position in the ES if my methods had dictated one, but they are telling me there could be a sell tomorrow but nothing for today. As a result I am flat there other than some day trading I might do.

The above chart is the 10 Year Notes, just the school of simplicity. I have no indicators on it at all. If you could read price patterns alone well, you would have all you need to trade well. If we strip away all the crap, what is clear to see is the we have had a sideways consolidation move in a very strong up trend. In as much as I have been looking for a potential sell here, I see no reason to be short until the trend line I have drawn in breaks. Most of the time these slim jims break in the direction of the trend, and we are seeing that early today. My indicators I use are not indicating a buy, so I am not long on this breakout. If we fly up out of here I will miss the move.

Most of the markets are telling me to look for sells in the next few days, almost no long setups are in the making.

That is all for today, I will skip all the editorial crap I sometimes throw out which probably irritates some readers anyway.

Wednesday, June 27, 2012


We are seeing a tight wind up now in the Bond market that often leads to a good sized move. The above is the COT picture which is more or less business as usual. It does show commercials pretty heavily on the short side, but that is not necessarily that meaningful when it is against a strong trend. We are in new high ground, so this is just a basic hedge that is going on, it is nothing to hang our hat on that says hey look at those insiders and how heavily they are betting on the down side. This picture does not really tell us that. In addition you can see the small specs in gray are heavily on the long side. In theory this is also bearish, but as you can see that has also been the case for the most part in recent months, and prices marched onward.

One possibility I have thrown out there which has been my consistent theme for a while now, is that we are in a long term deflationary cycle much like what Japan has been in for 20 years. I think ours is only about 4 years old. If that were too be a correct thesis, we could see this market basically go sideways for a very long period of time. Again, that is a theory, and I don't have the knit tie shy of a first down or the unkept hairdo of a Stanford or Harvard economist. The next chart is the daily.

Here we have something a little more revealing. We have a sideways ledge type of pattern called by Kevin Haggerty, a slim jim. These can break in either direction, and are momentum based trades. You go with the breakouts. Yes at times they are prone to whip saws, and often the best entries are the second ones after you get an initial fake and retracement. I have spent years studying these types of things and there really is no magic to how to trade them. They are just narrow consolidations that often have sharp breakouts. You wind up taking a leap of faith when you play them. With potential market moving news coming tomorrow, the time might be here for a move. One other way to play these is wait for a fake break out on one side, then take the opposite one on the other side. Often news stories create these types of situations. Who knows that story may not cause anything, but it comes in front of a holiday, and light volume, so I am expecting some volatility after it's release.

At the end of the day I don't know what effect their decision really has. The Law unfortunately just like trading, is a judgement call at times, and biases of those making the calls effect the decisions. I remember a replay situation involving a San Diego State football game against BYU recently, where the one official reviewing the play which could not have been a more obvious call, was affiliated with BYU! Of course he made the call favoring them, and the conference had to later apologize for his "error" to SDSU. Then they made a new regulation that disallowed this type of thing. Sound familiar?

I am leaning toward the short side as of today on this breakout situation based on some short term things not shown. Whether or not that will change after today is not known right now. Just thinking out loud, it is hard to imagine a big rally in stocks, which is what a down side break here would most likely mean. However, you have to trade what is not what you think will be.

Tuesday, June 26, 2012


I am hoping for a bounce here back up into where the red band is to get short this market. Anything at that level or above would be good. I have the COT stuff displayed here on this chart, but I rarely consider that when it comes to the ES. I have discussed why in the past so no need to rehash that again. One thing we have on the horizon this week is the Supreme Court announcement on the health care bill. I would never normally even consider this, but seemingly the election might be at stake with the outcome, so it could be a market mover. I don't know when the announcement is due whether it is during our day session here or after the close during the night session.

I think it is a complete guess what will happen and how it might move the markets so I have no clue which way to lean. I thought before yesterday it was likely the bill would be ruled unconstitutional, but after the Arizona fiasco I am not so sure now. I noticed Kagan recused herself on the Arizona bill which of course she should have more surely done on the health care bill, which she did not. I think that tells us she knew they did not need her on the one where they might on the other. She was involved in the initial drafting of some parts of the bill, so it is hard to understand how that would not present a conflict of interest. Sadly even judges are now involved in politics. It would be nice if they could just decide the law without being influenced like politicians, but it is what it is in both directions. I don't think the law should be decided more conservatively at some times and liberally at others. It should be a neutral bias, but it is not as we all have seen over and over. Guess if you want to but I am not going to. I do think there are a couple of things in this new bill that make sense and most things suck. 

I don't see why every time a party has an idea that is good, they try to load up a bunch of other crap that is terrible to go with it, to shove it down everyone's throat. The pre-existing conditions aspect is something that should be in there. You are screwed if you have something major, and that should not be the case in my view. Lost in all of this is I am sure in some dark hole I never want to be in, there is some scheme for insurance companies to make a bunch of money, and that pisses me off. They jacked their premiums way up well before any new stuff ever even kicked in. They blamed it on the new law. I do sometimes see why liberals get pissed of at corporations, they do the wrong thing often if left unattended. There have to be some regulations, but the problem with regulations is power, and most politicians are in the game for power, not to do some greater good. There are of course some exceptions, I am generalizing here.

In spite of all of this, if going into it I do have a verified setup in either direction by my rules I will take the trade. I don't pass on trades due to my guess about what a news story might be. The ES appears to be more likely a sell in a few days by my indicators, than it does a buy for whatever that is worth. Maybe that means the bill will be upheld, which should be negative for the market. It is going to cause some severe financial problems going forward if it stands, and that should be in general a negative for the stock market.

I am looking to short the Dollar Index in here.

This is not rocket science here, we just have a break of a trend line and a potential lower short term high than the highest high forming. If we start to move down from here I will get short. Never mind the swing points on the chart, that is just a template from Genesis, I don't use them or even look at them. They show up after the fact, so not they are not worth much. If they are important to you, you just need to learn how to recognize them when they are forming. This is very simple and can be mastered in 30 minutes. Just look for bars surrounded on either side by either lower highs or higher lows. Once you see that just organize them and study their relationships. This is not the grail by any means, but knowing structure does help give a sense of where the trend is.

As luck would have it we had a huge pipe burst at the ranch yesterday and I had to get involved with that. In the process of sawing through a bunch of stuff I smashed my bad hand against something, essentially setting me back quite a bit there. Typing is challenging once again. You know you have trouble when you are trying to cap a water line, you turn off your main water supply, and the water does not stop! I seem to have some other water source as yet unknown here feeding into my pipes.

Looks like the weekend has a project after all, for a one handed poor man's handyman.

Sunday, June 24, 2012


Now that my hand appears to be out of danger, although far from good, it is time to get back to work. I posted a chart of this fabulous "success story" a while ago and some liberal commented about what a great thing it was that we saved them. He went on to say I was dead wrong about my comments. Here are some facts to back this wonderful looking chart. Please keep in mind it is and always has been my contention, that this company is heading right back down into bankruptcy again.

When the restructuring of the company was done they basically had a huge pension obligation strangling it, which was what was causing all the problems. Sound familiar? A corporation called the US has the same problem. When they bailed them out instead of doing anything at all to reduce that obligation, they wiped out the bondholders and gave the union 40% of the company. They erased debt other than that related to union obligations. I think we all knew this at the time, so I am just restating what everyone already knows. Here are some hard numbers. At the end of 2011, they had a future pension obligation of $108 Billion, after the bankruptcy! The cumulative earnings of the company in it's entire existence is less than that. In other words, even if you put them back into their heyday, there is absolutely no chance of them coming anywhere near making enough money, just to simply pay for the retirement of workers who no longer even work there! Further complicating this is the low yields on bonds that permeate the investment world now and are not likely to change much.

Not only do they have an obligation that can't be met by any means, they also have no way of getting anywhere near the assumptions factored into how to fund these pensions because they will never be able to hit the investment return assumptions in their models. As a result, what will happen is they will come to all of us and force us to pay for the pensions of retired GM workers. Keep in mind they also still owe us about $50 Billion, so add this on top of the pension obligation. Is it so hard to see how putting more money into a situation like this makes no sense? It is also why they will inevitably go bankrupt again. Liberals can say whatever they want about how wonderful it is that we saved all these jobs. How do we know that if we had filed a real bankruptcy and wiped out these obligations, that even more jobs would have been created by now. The company has been cash flowing decently, but there is just way too much headwind for them ever to overcome. Had these obligations been wiped out this stock chart would look the opposite of what it does now, the company would be thriving. The profits they are making are decent, and with normal balance sheet stuff, this could have been a great success. I could only have been that had they allowed a real bankruptcy to occur. Say what you want about Romney, but this is one thing he clearly would understand based on his business experience. Barry has none of course, so he has no clue about things like this as is painfully obvious.

They also have a doctored debt rating due to our financing the company. If you look at the private sector and what insurance on the debt costs, it is commensurate with a debt rating of two levels below where they are. We need to let this company go bankrupt and have a legitimate restructuring just like we need Illinois and California, and other states do as well. Giving money by printing to entities that have business models that don't work, makes no sense regardless of what your politics are. It is just plain insane. Just look up the definition of insanity for clarification.

The challenge as a trader is that anyone with half a brain knew this would fall off a cliff. However, just shorting things like that is another matter. I traded emails with a reader who asked if I was going to buy Facebook, and I told him I would short it when it went public before I would buy it and there was no way I wanted to be long there. I suspected that whole thing would poof, the valuation made no sense at all. The challenge is that there are so many things like that you can easily identify, but they don't always play out the way you think they should. Shorting or buying the "story" is really a difficult way to trade. You can have the story dead on but time it wrong and get whacked. What I would suggest is accumulate a story list, then look for when your trading techniques you use are setting up trades in the direction your list tells you to look. Then take action.

I also know Bank of America is going poof, and I stated that in here a while ago when I announced my mission to clobber this stock. The problem with shorting this is that it is just like shorting the indexes, since all stocks are almost the same trade as an ES trade now. I would rather trade the more liquid stock indexes than illiquid individual stocks. If the time comes when things de-couple again some this could change. Until that time, I have put my mission against them on hold unless I see something in it's chart that tells me it can trade differently than the overall market itself. Most stocks if you look at them now have all their ups and downs on the exact same days the indexes do, so there is no reason to bother with them at the present time. If you are short even a bad stock, but we get a 100 point up day in the stock market, you will get smoked on your short.

You can see we hit the zone I mentioned to look for sells this past week, so any rallies back up into that area and I will be looking to short this market. I don't have anything really clear for Monday at this point here. I have some short term buys in a new approach I am studying, but there are not confirmed by other tools, and the raw approach with this new method sucks. In other words if you look at all the trades it calls out, it is lousy. I am studying it because it does pick some I would otherwise miss by my current approach, that are dynamite. It remains to be seen whether I will be able to figure out a way to ferret out the good ones.

As has been the case so often recently, many markets look the same again here from the Bernanke's to the currencies, etc.. They are all the same trade to me here once again. We could very well have some huge market manipulations in upcoming months due to the election, so it might be wise to keep short leases on shorts in the indexes. If you get a big quick profit, it probably should be taken. I think we will likely see a huge rally if Romney happens to pull ahead significantly in the polls. I don't know if he will or won't but if he does, long will be the side to be on. It certainly would be interesting to see if Barry has the nerve to strong arm the Fed into selling futures in that instance to try and launch a campaign about how bad things will be if Romney were to win because the market is tanking in anticipation of that. I think that it is unlikely the Fed would ever be anything but a net buyer of the ES, but all bets seem to be off with politics right now. I think we have seen now through fast and furious, why we will never see the Feds trading account summaries. It will be classified as priveleged and protected. Alas, we will never get the proof we need unless someone wants to risk their live to be a whistle blower.

We are in the critical zone for the metals here as I stated the other day. If we don't hold here, this will be something to see that none of us will ever forget. If these levels are penetrated on a closing basis you could very well have millions of people realizing at once they have been conned, and the exits are going to be incredibly crowded. I am tempted to buy into these zone just assuming the powers that be will try everything they can to hold them here. It just might be a good risk to reward trade. It stocks happen to rally, Gold will come along for the ride most likely.

Good luck this week.

Friday, June 22, 2012


I have talked about this market (Silver) and Gold, until I was as blue in the face as my left hand is right now. The above chart says it all. Basic chart analysis 101 says when you get a fourth attempt at a bottom, price goes through it. The target and most likely destination becomes the lows over to the left. If you are still a bull, this would certainly be a great place to buy. Your risk on the trade is very small, and if you are right and this does happen to hold, you could have a monster trade on your hands.

The support and resistance approaches to trading are challenging. When you draw Fib numbers on a chart you create something that looks like what Galileo's maps probably looked like. Eventually something will happen at one of the lines, but which one? You can see the prior time we went down to this level and formed the third low ( triple bottom ), we got a great bounce from that. However, now we have gone back down again to that level.

It gives me no great joy to see this and to be able to say I told you so, many people are being wiped out by this just like they were in real estate, and internet stocks. What is important is to learn from bubbles because they do provide tremendous opportunity in both directions. The take away from this should be that whenever an asset class starts following the playbook I outlined about a week ago, get the .... out and be thankful for the windfall. Whether you consider going the other way with it once you get out is another matter. Timing bubbles bursting is very very difficult to do. However, it is very easy to spot them inflating. If you get out early but still make a big profit so what?

This is actually one good thing governments do for all of us. When they manipulate prices upward, it gives us all a free ride for a period of time. Do not get caught up in whether or not they should or should not be doing it. They do it and there is nothing we can do about it so why not take advantage of it? There will be another huge metals run in another 10 to 20 years, so just keep that in mind, the big ride now is down most likely. Catch the train if you can. I know we have already dropped by about 50% off the highs but we are probably going another 50% from here.

The other market that the bubble denial crowd in the metals points fingers at is Bonds.

A couple of things here. First, the rise has been much more orderly here contrasted with Silver above. We only have a couple of months right in the middle where there was frenetic type of action. However, the second point is much more important. There is a long and direct correlation historically between this market and economic conditions. It has been as consistent as any such relationship there is. The reason should be obvious, the cost of money via interest rates, does control the flow of money in and out of things. Rates create the flows. The alleged relationship in the metals does not exist consistently over time. The reason it does not is that they are commodity markets. They are not directly tied to economies.

It is true we have had a huge run up driven by governments likely manipulating the price of metals upward. However, if you look through time you will not see this relationship have any consistency at all. It is the flaw in the ointment for Gold Bugs. They allege something that sounds reasonable, yet it has no history. In the case of Bonds, as long as the US Economy stays weak, this market will stay strong. This is a fundamental relationship that has always existed, and still does. These are completely different scenarios. What I think not enough people are considering is that we may well have entered a Japan type of situation where we have deflation pressures that will go on for 10 to 20 years. If that is the case, rates will stay this low during that whole time just like they have there.

Forget the guy at the water cooler with the knit tie that is shy of a first down ( is not long enough to get to his belt buckle ), who has that Cal Berkeley or Harvard degree and seems smart. He does not know what happens in the real world. He is a paper champion. Yes he thinks Gold will rise and Bonds will fall. Give him a comb so he can straighten out his tossled hair ( they all seem to have that look ), then kick him to the curb.

Have a good weekend

Thursday, June 21, 2012


Here is the VIX which is drifting into the buy zone which is a sell for the Bernanke's. You can see that just stand alone this has been kinda lousy recently in calling swings having only been right half the time in recent periods. After having sat in on a webinar yesterday advertising another sure fire emini system that almost never loses, I contemplated my response to the follow up call from the presenter which I knew was coming. I have to admit it was painful listening to the presentation as they danced around what they were doing like they always do, enticing you to fork out several thousand dollars to find out. They should have named it the Pelosi, you have to pass it to find out what is in it etc..

They had some magic way of determining what side to trade that they would not reveal. The problem is they did reveal it in the email luring you in, it was the 50 period moving average. Above it do buys below it do sells. Makes sense, but hardly magic in my eyes. When they called I told them I wanted to see a real account statement that had traded this for 2 years in size, not 1 lots. Of course they did an immediate duck out on that because as I knew, there was no such accounting of things. This was simulated most likely using one lots. The problem with selling systems especially with the emini, is that you have a ton of one lotters that will trade it and not follow the rules correctly due to fear. It will result in the trades not working as well. As the seller you get to pocket the money, but as the consumer who is following the rules, it will not live up to it's billing. I have seen this movie a thousand times and the end does not change.

Be careful with stuff like this. You can see how I did things with the Bond System here, calling out real trades as they went along just in a free site, so we could see how they did. It has been profitable but not that great. There was a buy on the open last night, so that system is long at 148'12 for today exit first profitable opening. It is unlikely I will offer that up because it is not performing like I want it to. I know if I make it available people won't follow the rules, they never do. However, the Bond market trades with huge volume, so dumb decision by subs don't effect the trades. Also, it is not a scalping approach so not honoring a stop really close to the market is not part of the equation.

Getting to the matter at hand now, the VIX is indicating we are in a selling area now, so I am looking for sell signals. I do not have one for today. Even though the VIX is a good starting point for edges with the ES it is noisy, so you need other qualifiers to trade with it. I have some and they are not confirming this yet.

That is all for today, the hand is still making it tough to type even though it has improved some.

Monday, June 18, 2012


Speak of the devil, I was just looking at this chart today when a comment on the last post asked for the update. We are continuing to follow the path incredibly well of what the Commercials are doing with their position in the Eurodollar one year ago. This still makes no sense except for one possible explanation. This would go deep into conspiracy theory, but I don't know of any other explanation. Perhaps there actually is a Tri Lateral Commission? It is rumored to be headed outside the US. If it is in Europe, maybe they are manipulating things through Eurodollar trading? Personally I think this is implausible, but who really knows?

It certainly does not make any sense that the net Eurodollar commercial position would provide a path for the ES one year in the future no matter how I look at it. Anyway, for those inclined to lean to the bullish camp, here is more ammo. I just can't put any faith in this in all honesty, but it is hard to argue it's accuracy.

I am going to have to cut this off, I got a terrible wound from breaking up a dog fight today after we brought a new rescue in that initially did not get along. My left hand is swollen so much I can barely move it so I am typing with one hand here. I am kind of one of these guys that pain does not bother much, and I thought this was just a few scratches until about mid day. At that point this thing just inflated like a balloon and I had to go get some drugs to fight the infection off. I hate going to see doctors and that stubbornness almost cost me dearly here. It is a bad trait even though it makes for a good movie character.

Good Luck Tuesday, hopefully this swelling will come down a bit by tomorrow night.


I am not sure how I got these, but Saturday a desk top set of long term charts arrived at my mail box at Green Acres. I call my ranch Green Acres because I was a city slicker like Oliver for most of my life until we moved here. It just seems appropriate. As I was flipping through these charts I took a gander at the worlds favorite market GOLD.

It certainly is obvious isn't it that we should triple from here?

None of us have any real idea of what will happen in the future even though we all try to predict it regularly. However, does this really look like a situation you would bet the farm on the price tripling from? You really have to be a cult member to sign off on that take as many have. There is certainly no question we have one big ass uptrend here, that cannot be disputed. I would argue this is the greatest move in the history of the commodities markets. I have never seen one go this far in terms of statistical measures, without a huge reversion. The branches on the tree do get weaker as you get higher off the ground, and this is one tall tree. I will not rehash what I have spoken of recently beyond just posting what I have already done.


There is now talk of more stimulus, now that is a shocker isn't it? When in doubt, go into more debt, that is Barry's motto. When his henchmen talk they don't seem to even acknowledge debt, probably the most frightening thing about them. Also, I don't understand why he doesn't serve up Holder and just replace him with someone else who will discriminate against white people with impunity? There certainly are enough of them around. I wish I had been the guy those panthers tried to intimidate, that would have been a blast for TV viewers, just watching them fall. They would not skip a beat by replacing him, so it is quite peculiar. There is so much strategy that goes into these things, it is impossible to know what the real reasons for certain things that don't appear to make sense are. However, the distraction all of his shenanigans create serve as great cover for what most of us know, the economy is not in a good state right now. Hence, QE3 or some other variation of some type is likely coming. They are going to piss away any chance of Quattro mas if the stock market does not hold here, and this is a poker game they can stack the deck on. 

Living here in California, they just plan on continuing to raise spending and taxes, then use funny math to tell all of us we have a reasonable budget. I saw a huge increase in k-12 spending in the new budget in the paper the other day, why not? I think we should pay all the teachers on a scale with Lebron James, but even then people would complain we don't spend enough on education. The liberals have ruined California and I think it is just a matter of time before I leave. I can't let these douchebags take my money just to hand it off to unions. Oops I forgot, lifeguards do deserve pensions of 100k per year at age 50, silly me.

It is time to find a way to short California, and I am not quite sure how to do it but I have a few ideas. I will expand upon this later. It does seem it is in the Bond arena but you have to think the Feds will bail them out at least at some point, so this is a tough call as to how exactly to place this bet. Bankruptcy is a certainty but timing this is going to be very difficult. I don't think the trade is imminent, so I am not spending much time on it yet. If Barry loses, it will be time to look for this trade.

From a short term standpoint the Bernanke's are making a stand here, and the trend has turned up on a daily basis. We have made higher short term lows after holding at an important level. I still see the weekly trend as down and am looking to sell rallies at higher levels than where we presently are.

You can see just strictly from a basic market structure perspective, the trend has changed back to up. We took out the pivot prior to the lowest low, then made a higher short term low, then off we have gone. I am looking for shorts now in the resistance zone which is only about 20 points higher now. Maybe we will just power through it and the trend will change back to up. There is the future of the next few decades of our country at stake in making sure the stock market does not drop here, so it will be very interesting to see if they can pull it off. If they are truly going to change us into a completely socialist country, they need two things. First, a stock rally, and second for that to lead to four more for Barry. They have done some incredible damage to us, there is no question, but for them to complete the task, they need more time. In the other corner is the rational part of the universe that knows what they are doing is ruining us. That sector is fighting back, so this really is fascinating if you can detach yourself from this and observe from afar. There have undoubtedly been prior periods of time where landmark changes in cultures were either attempted and failed, or did succeed. Those periods are what makes history books worth reading. I think we are at one of those seminal moments.

I am currently studying several short term ideas with the ES, and it is interesting in spite of all of the changes on the surface to things, how some tools have stood the test of time very well while others have not. For now I don't have a trade I am looking at for the indexes, but overall I want to sell a rally at higher price levels at the moment. I am also looking to short Bonds up here, but they have held up too well thus far for any short entries. You may ask why I want to short Bonds and stocks due to their inverse relationship? The answer is I trade where my patterns take me, I don't trade off intermarket relationships ever. When it comes time to a setup being there, I take the trade and don't listen to noise like that. Perhaps for a period they will trade together? Perhaps one will move way more than the other and I will be in that trade, hence making more on one than the other loses? Perhaps I am just wrong? All equal possibilities so why bother trying to guess? I just take the trades.

Good Trading

Friday, June 15, 2012


I remember a Saturday Night Live skit a couple of years back where they were talking about being a Hot Mess. When I look at many charts right now, the same thought comes to me. The ES above you can see took out it's last pivot high made before the lowest low, so that is a short term trend change. It has now made a higher short term low, which should confirm the trend change. We have not as of yet taken out the high of that spike Sunday session, so it is not full speed ahead to the upside yet.

Overall to me this is just very choppy and I don't like to trade in pattern formations like this. One trend indicator I look at is the first panel under the price, which you can see confirms the down trend. This indicator is far from the grail, sometimes it changes trends right when the market bounces back when it is in a trading range. I don't give this much weight when it has the look it currently has.

I still want to short this market about 30 points higher from here on a weekly basis, on a daily basis this is just unclear to me here.

Natural Gas certainly went for a ride after I exited my short trade yesterday.

I was asked if I reversed and went long and the answer is no. One of the absolutely brutally hard things about trading is how different things look after the fact vs before hand. You can look at this chart and see a really small range bar in the vicinity of a major low. You could argue, well this is a test of the low and a volatility break out opportunity. Perhaps.

The reality for me is that no matter how this looks right now, there is absolutely nothing I have ever studied that performs even marginally well over a large number of trades, that would tell me to go long with a setup like this. If you just look at the chart I posted yesterday, which was how it looked right when I got stopped out of my short, there was no way of knowing if I had not just blown it by having a stop too close. There was nothing bullish at all about it other than it was an outside bar for the day at that time.

The trend was clearly down on all time frames, and the big money is made with the trend. I did make $1700 per contract on the short, so that was a decent trade. Certainly the really good trades make way more than that, but sometimes when you trail them down, you get taken out. It just is what it is. For anyone looking at this thinking you need to study to find a way to take advantage of days like this I will save you the time. THERE AREN'T ANY!

Even though the long would have made more than the short did if it were exited right here, ask yourself which trade was easier to see going in? Which one was easier to sleep at night with? Which one had the highest risk? Reversal trading is very alluring, but it is oh so difficult to do well. I look at new ideas every week to try and find ways of picking market turns. I am a very good idea guy, I can't come up with any. I have been looking for 20 + years. Almost all with a few exceptions, of my best trades, are in the direction of the prevailing trend in the market.

I am flat right now, my Bond and Yen trades have just rallied too much so there were no fills in any of those orders. Other than that I do not see much for today right here.

Have a nice weekend

Thursday, June 14, 2012


Here is the update on the Natural Gas trade. You can see my trailing stop had been pulled down really close today, and it was picked off when the outside bar formed. I was trying to exit this in the vicinity of the low point on the chart. Some may think I had the stop too tight and perhaps I did. However, once I get a good profit going like this, I really try to trap the market and squeeze it into the exit. When I saw the inside bar form, those often can be the beginning of sideways action or a reversal, so I tightened up and got picked off. I love trades like this and I find that most of the good trades I do are like this, they just go right from the entry and don't see saw or chop around. The best trades typically work immediately.

I had mentioned Cattle recently, and it broke to the downside yesterday. Anyone who shorted that did well. I also mentioned the Yen, I do have orders there to short that market but it does not appear they are going to be filled today.

I have my resting orders displayed here, and unless we get a huge stock rally, I doubt the Yen will move this much during the US session. The big currency moves are typically overnight. In any event I will continue looking for sells in this market for the next few days. Readers may have noticed I have not been discussing COT stuff much lately. I go through phases with that data between thinking it is of no value, and thinking it is really important. I am in one of the former phases right now. As a short term trader the reality is that fundamentals don't typically have a big impact. I do like to be aware of unique situations with the positioning of the big money, but often the moves can take months to happen in sync with that positioning. I do not find direct correlations to good trades I make and COT stuff during the times I study that relationship. I am also so skeptical of how the government might be messing with the numbers now on everything, that I see no reason why they wouldn't be doing it here also. They are burying what the Fed is doing somewhere, and there is no real way of knowing where.

I have a new short term trading model I am working on for the ES that is quite promising so far. It indicates a short position should be on from 1323. In this new approach I am entering in price zones at the market and not above or below highs or lows. I think the highs and lows in this market are not reliable entry points most of the time now. This is due to what the government is doing to intervene on almost a 5 minute chart basis.

I also think it is time to look at shorting Bonds now. I do have some orders in today to do so but they are under the market and I doubt we are going to go down to where they are resting. The last chart of the day is a pic of "little Vinny." These folks to the right are with the local rescue group here in San Diego, and this was a dog show this past weekend. The middle dog is a puppy who is only 4 months old. The other two on the right are two dogs that these two people just rescued. Of course on the left is the monster dog Vinny. Although the ones on the right on under sized for Saints, they still are pretty good sized dogs if you saw them at a dog park. Just look at the size difference between them and Vinny, who is only 9 months old. Walking around this show with him was like being next to Brad Pitt. It was one interview after the next. He was the biggest dog there including a few Great Danes and an Irish Wolfhound. I sure hope he lives a long and healthy life, he is a good boy. I worry about this because he is so big. As a parent you always want a big strong son, the star football player, not a poet. However the reality is really big people or other living beings don't live as long as regular sized ones. We donate money to these people to help them, like most rescues they have a record number of dogs right now on their hands they are trying to find homes for.

May we all become the big dogs of trading.

Tuesday, June 12, 2012


It is not only offensive according to Barry to be accused of something, it is more offensive to have committed that act of which you are accused. Being a moron is just not cute anymore, please vote this bad experiment back into community organizing. We had something equally offensive to everything that moron does in the financial markets yesterday. We actually had a PPT rally thwarted by reality that it was more bad news they were trying to spin as good news. I am sure if comrade Ben had done a press conference he might of called this offensive as well. What does seem to be happening in general now, is people are waking up and realizing things are somewhat dicey. They are not blindly accepting the lies from the government or their what should be illegal attempts to manipulate markets. As I have mentioned time and time again, manipulation attempts only last so long. Markets do eventually go to where they want to go, their equilibrium point.

I am sure readers notice I constantly post charts with different things on them. As a trader you have to be always looking for better ways to do things. You just never know when the next innovation in anything in life might come around the corner. I have shown the middle graph before, which is a tool I have been working on the trade the ES. The idea is when we get outside the bands, the market will reverse it's current direction. You can see the other sell signals, all of which have worked except the one I have labeled. I do not recommend having your whole plan be to spot reversals, that is a loser's game. Trust me I have tried playing it at one point in my career. However, what we seem to have here is a sell signal ( a reversal signal with the bands ), that is in sync with the trend. In theory this should be a good trade. We had such a big reversal in the VIX yesterday, that the market almost got too oversold too quickly to get short. Perhaps we back and fill for a few days before going back down?

That is just speculation as to whether we do that or not, and I do admit I do not have all the kinks worked out in how to use this new tool yet. Sometimes I get going in so many different directions on research and new ideas, I don't know what the hell I am doing with it. This is why I always have a core strategy and never change it until I am fully prepared with whatever new things I am working on. More often than not the new ideas do not pan out to be worth anything. However, this one I think is. I really am beginning to think the ES has to be traded differently than other markets due to all the reasons I have stated in here previously.

Anyway, this gives me a reason to look back to the down side here now. I also have the Taylor ROC pivot in here. Taylor wrote a book about a 3 day cycle in the markets, and this is one of the tools he suggested using. I have looked at this method many times over the years, and I am not convinced it has any real merit. I was just playing around with it again the last few days with a new twist that was a bust. Go ahead and study that method if you wish, perhaps you can find a way to make money with it.

I am still looking at the Yen this week hoping a sell sets up. Most other things are kind of in between at press time here. My filter tool for the Bond System was wrong yesterday, that trade turned out to be a big winner. As is the case with any tool, sometimes they filter good trades out as well. I moved my stop down again in Natural Gas since that marked is moving in my favor. We will just have to see if it goes to the target or bounces and picks me off first.

Good Trading

Sunday, June 10, 2012


I realize this image is fuzzy, I had to resize it and I felt it was appropriate for it to be fuzzy. Fuzzy math is what is the rule of the day now. Here we are again with essentially another socialist payoff, and zing a market rally is here. I read they have not agreed to any austerity measures. Why would they? The world is setup now as a battle between those who want to remain priveleged at the expense of the masses, and those who do not believe in that. I am of course in the latter camp. Let these damn people file bankruptcy, let our companies who can't make it file bankruptcy. Instead we make bad loans and leak top secret foreign intelligence information to get re-elected.

The reason this is all relevant to us should be pretty obvious at this point. The commercials for the stock market have become the central banks. When they want a rally to occur, one occurs. It is very different than the traditional following of the COT report, where often commercials can be on the opposite side of a trend for months before it changes. Now in stocks, when the central banks want a rally, they can make it happen in minutes literally. This does make trading the stock indexes and stocks very tricky on a short term basis.

I am working on what I am calling the bas ackward stock trading model. It entails doing virtually the opposite of what I would have done 10 years ago. Let's face it, this world is not the same and what worked 10 years ago does not work now. I will show some trades I make once I start implementing this ,and describe in general what it is, once I get all the kinks out.

There was a buy on tonight's open indicated by the Bond System, which was filtered by the one filter I am using, which is going straight down at the moment saying not to buy them no matter what patterns are there. Now it is time to see how far this rally goes. I hope it goes up into my sell zone for the ES, which is in the 1360 area at the moment. It could come down some since it is a fluent band, but that is where it stands coming into this week.

We are continuing our basing pattern in Gold, so I am watching there for a buy to setup. My short term tools are bullish there at the moment, so that is why I am looking up. These can change obviously after a few days action. Most markets to me appear to be in bounce, don't sell me right here yet mode.

One market that might be setting up a sell here is the Yen.

We have broken the trend line up now and taken out the last pivot, so a bounce could be a sell here. This one bears watching this week. It also might be telling us stocks are going up, because this has been the flight to quality spot along with bonds recently.

I am still short the Natural Gas market as per the trade I showed the other day. I have moved the stop down a little now. This is a wild market so you sure as hell never know where it is going next.

Cattle now has to break quite a bit for an entry on the short side but I am still following that one. If it breaks hard I will enter on a retracement. I think this market is just going to head back up the way it looks.

That is it for tonight

Friday, June 08, 2012


We are getting some of that basing action I was talking about here in Gold. This is going to sound overly dramatic, but it is my view that the battle to stop this from falling off a cliff is on right here at a theatre near us. As most readers know I think this whole move is probably the biggest scam ever perpetuated on the general public, and the mustard is very close to coming off the hot dog on it. There are governments and big money involved in manipulating this price up for this long. They cannot afford to let this thing go south. If were to roll over here people who have been burned, and there will be millions of them, are going to cry foul. Ironically they should have no legitimate complaint. Contrary to what people seem to think at times, there are no guarantees in investing. Some times things rise, some times they fall. We do see the government trying to pick winners and losers, and this is how these bubbles keep getting formed. They always want to have something rising to give people a place to go to have opportunity when other things decline in price.

One of the things that always cracks me up is the flawed logic people get suckered into over and over and over again. It is the same play call every time, just the players and teams are different. It starts with what often is a legitimate move in price caused by fundamentals. Once that starts we get a momentum phase where a few people start catching on, and once the investment groups see that the marketing campaign starts. At the beginning only the pros are in, they have to get the public in to really push price. This is where bogumentals are formed. These are bogus fundamental reasons why price has to rise forever. These are slowly disseminated. Of course the most common phrase that starts to travel around in sync with the bogumentals is the "it is different this time" comment. Usually there begins to be some push back against the marketing onslaught by people who have seen these things happen over and over, and know the ending. These party poopers are always early, but never wrong. In this case of course the bogumentals are that Gold has always risen during times of crisis and it is a great store of value. In real estate it was "they are not making any more land." In stocks during the internet craze it was "the internet has changed the world, company earnings don't matter."

The party poopers are pile driven right into the ground, and typically at this phase will give up and just remain silent. Once the marketing campaign gets into full swing and Joe Q Public has bought in, that is when we see the price skyrocket upwards. During this phases all sorts of newmentals get created. These are newly created ratios that have never been looked at in the history of civilization, but they have been curve fit to support an indefinite rise in prices. My favorite one of these is the percentage of people that own gold now vs prior times as a percentage of the public. Are you frickin kidding me? That is beyond funny to me, and I am shocked that anyone would be so stupid as to listen to this kind of nonsense. If I had any I would not want anyone to know. In the world envisioned by the promoters gold will be the only thing anyone wants in barter during a Mad Max era that is approaching. Of course in that instance people are just going to kill those who have it and take it from them to survive. These pinheads never think far enough through this crap they spit out. Unfortunately we all make it way too easy for them because we buy anything they say. If a loaf of bread is $2000 trust me having some gold is not going to help you much.

Just look at how often the President of the US lies to all of us. Why in the world would you think less important people aren't lying to you go benefit themselves? This might sound overly cynical, but just turn on the TV if you think the people controlling what is happening are all honest folks. I will never forget in my younger years I was working for a company when a rumor surfaced late one day that we had been sold. There was a long voice mail from the President and Owner refuting the story and telling everyone that everything was fine. The next day the formal announcement was made of the sale, not 24 hours later. He lied to us to make money, business as usual. 

During these manias, once you get enough people bought into the scheme, prices really extend. It is at this stage unfortunately, that some greed starts to creep in, and this is what ultimately leads to the whole scheme unraveling. They start finding other ways to invest even more money in the scheme. People see friends making a killing and want in on the action. Now we get advertising that is inescapable. We get over leveraged pushing price farther and farther. Everywhere we look it is the talk of the town. Sound familiar? At this point the smart insiders know the game is over, but they do everything they can to hold price up for as long as they possibly can. Generally this results in prices initially falling slowly, remember stocks, they did not just crash in 2000, go look at the charts, it took awhile before it happened. The same was true for real estate. I remember this very well because I sold all my real estate in September of 2005 and was surprised prices did not really roll over for about a year. However, what did begin almost right after I sold, was an under the hood deterioration in real fundamentals that matter. There are always those that see this early, but many do not want this getting out so they keep quiet. Those who do voice it are pummeled. I was clobbered I don't know how many times telling people to sell in 2005.

Ultimately things are done to try and manipulate the price to keep it from falling once we reach the crescendo phase. In this case governments buying Gold is one thing that comes to mind. If they can keep the supply tight, they think they can keep the price up. I think we are in this phase now where the initial fall has happened, and we are in the manipulate to stop the fall phase right here. We are on the verge of the falloff they can't stop if it begins. If other bubbles are any indication of what is likely to happen here, they will be able to hold the price here for awhile. However, if we also follow what happened after that, the price inevitably went where it was going to go all along, back down to where fundamentals dictate it should go. In this case that would be under $500.

That is just a winging it unedited review of where I think we are in the bigger picture here. If this is correct we should hold here for a little bit. If for some reason they can't hold it here, look out below. When the liquidation phase does hit this it is going to be incredible to watch. Scared money does not leave a pretty trail when it leaves.

Trust but verify folks. Look at the historical charts they don't support the marketing campaigns claims.

Have a great weekend

Thursday, June 07, 2012


Before I get to today's topic in the head line, here is the latest on the Bond System. The chart here has just all the trades that generate, Gross with no filters. I mentioned the other day that occasionally I would filter them. The first sell at the top was filtered by a proprietary method as was today's buy, even though the chart shows both the trades. The filter is not programmable so I have to do it manually. So there was a very good short trade that took place yielding 37/32's since the last update. We don't know what today's would bring but it does not matter either way, it would have been filtered. It is currently in the black had it been done. I am getting closer and closer to trading this again with real dollars. I need to do a bit more refining with it, should be done soon. I have been so busy I am having a hard time doing a post every day.

Here is why I said I had my suspicions on the one day wonder move in Gold last week. You can see now the whole move has been reversed. We still could move into basing action and wind up being set up well for a long, but chasing moves like that in a downtrend rarely pays off, and it would not have in this case unless you exited MOC that day. If you recall I stated at the time without knowing what was going to happen next that I would have done exactly that. I don't feel compelled to trade anything unless my direction is completely clear. It may be wrong, but it needs to be clearly by my rules for trading. This market does not have that in either direction here so it is a pass. The next chart shows one that is completely clear in terms of it being by my rules to be in. Natural Gas did set up for a short  a couple of days ago, and I was trailing stops underneath until today when the order got filled at yesterday's low.

The first target is the low to the left, will we get there who knows? I will just trail it down and see what happens. I don't see any trade in the stock indexes here either way. I did come across something very interesting in Chick Goslin's book Trading Day by Day. He talks about the PPT at length, and his comments reflect essentially my view on this exactly. If you can do it via viewing a couple of select pages at Amazon, it is on 258 - 259. It is the exact reason as to why the stock indexes are the hardest market to trade. You combine government intervention on only one side, the buy side, with a zillion one lotters trying to scalp $25 at a time, and you have a mess on your hands.

It appears to me that most markets have now bounced enough to mess up continuation short setups, so not a ton of things to look at. I am watching Live Cattle for a sell at the moment but nothing so far.

Good Trading

Monday, June 04, 2012


A famous quote by Colonel Troutman in the movie Rambo, but also my feeling today after Friday's action in GOLD. Here we have a significant down trend that has reached a level in price that has to be obvious even to the 7 year olds asking their parents how much gold they are buying. We have held this level that is so very important. We get this huge up move in Gold and Silver does not come along for the ride. It did rise but did not break out above the near term highs like this did. I am not long this market but if I were, I would have bailed out at the close Friday when I saw what to me looks like a short squeeze.

I also would not short this here right into this very significant price level. This price level is likely to determine the next several years in this market. If it holds and the Gold bugs can get this moving again, who knows how far up it could go. If it breaks the reverse scenario is true, who knows how far it could drop. This is basically what they call an inflection point. Readers know that big picture I think we are heading back down probably under $500 here just like any other commodity would revert back to the mean. I have absolutely no idea when it will happen, but I do think we are on the way now. As to the current state of affairs and what to do right here, this is unclear to me. If we were to base here some more and things start to turn back up, then we get a breakout like Friday, we could be in business on the long side. I certainly see no short scenario at the present time. I will not let my big picture view which is basically an opinion, cloud my judgement or in any way effect how I trade this market short term. I am thinking the odds favor a pullback, then more upside, but a day like this makes me very suspicious. I think someone had to cover a big short here.

One of my favorite readers posed a question to me this weekend that was interesting. Would I rather buy 30 year Bonds at these almost zero rates and hold them to maturity or buy Gold and hold it for the same amount of time? The answer of course is neither, they are both bad decisions. However, it does depend on what your goals are. If your goal is a speculative gain, and you are willing to take a very big risk, Gold would be the clear winner here. The upside for Bond prices is limited here mostly because once they were to get into negative yield territory, we would really have to have Armageddon for that to have any gain at all. Gold could go up or down without these same types of restrictions. Whether you are bullish or bearish on Gold, that market will fluctuate more in most circumstances.

If your goal is strictly preservation of capital, Bonds are the clear winner here. Unless the US Government disappears, your principle is guaranteed. You will likely lose some purchasing power due to inflation especially with rates this low, but your net amount of investment in dollars will be preserved. Gold on the other hand could go up or down a huge amount, so although if the world ends and history proves that the "different this time" argument Gold bugs are putting forth becomes reality, you could have a huge windfall. If history prevails and Gold does what it always has done, you will likely lose a considerable amount of money in that investment. It really boils down to what your objectives are for the investment, speculative or preservation of capital.

I hate answering questions with it depends, but it is the correct way to answer this one. No matter how sure you are that Gold is going to soar, there are no guarantees in life other than the referees screwing whatever team my dad is rooting for in a sports event. It is amazing to me that even in the instances where his teams lose by 30 points it is still the referees fault. That apparently is a guarantee.

I do think we are in a bounce zone in the Bernanke's here but I am not buying into this dip.

Good Trading