Sunday, March 31, 2013


APRIL FOOLS!!!!!!!!!!!!!!!!!

I did it again, whored myself out for blog traffic!!!!! I know if I just put a solid positive headline nobody will come here, so sad but true. I thought for April Fools I would try the ole' bait and switch move. If you are mad you got duped hang tight, I am going to cover the ES today, just not first.

Regular readers can see the familiar pattern I often show here. The commercials have become heavy buyers of this market after a big down move. This in and of itself does not necessarily mean we should be buyers here. I have a video that is going to be in the new web site that covers this type of thing. However, in this case there are some things I use that are not shown that lead me to conclude this is a buy setup. Newsletter readers should have picked this out it is in last months Trading School section that has been so popular in terms of the feedback I have gotten.

 I also warned not to go Hog wild no pun intended with that setup just stand alone. Here we have a basing pattern happening that accompanies it so this has a bit more going for it. My wish list has this consolidating a little bit more first before I will try to buy it but who knows that may or may not happen. I try to remain patient and not force things. I don't always accomplish that but I try to anyway. This one is on my radar.

There is a noteworthy "expert" calling for a major sell signal in the stock indexes right now and I am going to cover what I think is the basis for that reason. I can't stomach reading his details because he specializes in revisionist history in his claims on his signals. Nonetheless, he has had some good sell signals over the years he just happened to have blown the whole rally off the 2009 lows telling subs including me prices were going to 5500. The revisionist chart he markets shows him with a buy signal at the lows which is a complete lie, he had no such buy signal in his writings at that time. In any event, here is a chart that is likely to have some commonality with his call.

The net commercial short position has really gotten large here with the ES. You can see it has been clearly declining sharply during this whole rally since October of 2011 so knowing that has been of no value. I talk about this all the time that using this is an art not a science. We have now gotten to a pretty extreme level and it has increased sharply lately. The real trick with this market in particular is that we don't know how the unprecedented manipulation by the FED of this index specifically is being categorized in the report. I think it is showing up in the Large Speculator category because you can see there was a huge net long at the major low back in 2009 and Large Speculators do not trade that way, they scale in and scale out. As a result it is highly unlikely the normal Large Specs would have had major longs down there. All else being equal they would have had major shorts, just study some charts.

What I think is likely is that the FED is not actually making the trades, they are instigating them through intermediaries who they are giving a pass to in the way of no position limits. We know they tell anyone to piss off when they are asked for their books, so we have no way of checking any of these things. As a result what we are most likely seeing is the Large Spec big long being the FED and the normal hedger types being the commercials. The Large Specs are able to fight off the commercials because they are being allowed to have unlimited size to keep the game going.

This makes this a tricky call as to how much credence to give this situation. My feeling at this point is that if we get a price pattern that is a sell it is worth a shot because of all of this. However, I don't consider it to be as high a probability trade as it would have been a few years ago before this manipulation got really out of the barn on us.

This is all conjecture on my part based on experience of reading this report. I am making some assumptions that could be incorrect. However, I think the world has accepted as common knowledge that the FED is manipulating the stock market and nobody cares because the average Joe is benefiting. Remember what we have learned through Cyprus, nobody cares about bad things until they themselves are hurt by them. As long as it is someone else who is getting screwed it is ok and it is for the greater good.

Here is another example of misguided logic with good intent.

Here is our newest free agent signee Gus "The Bus." The name comes from his sheer size which does not really show in this picture, he is 180 lbs. If you keep in mind that the opening he is guarding is a double door dining room you can get an idea of how big he is. The opening he is covering is about 8 feet wide and he basically covers it all the way across. He is a retired champion show dog that my wife drove 26 hours in total to get from the Breeder who was retiring him. Since he was a show dog he is used to an environment where the female that is being bred is kept separate in a caged off type of environment. In our house that he arrived at we had one of our dogs Leo ( a dude ) is in this pen area because he just had knee surgery and has to be confined while he recovers. Gus the bus assumes Leo is a female so he is protecting him from the rest of the crew like he is his girl friend. What he doesn't realize is his girl friend is a 170 lb dude! His heart is in the right place but the plan is actually flawed. This reminds me of some things economically that are going on right now.

I hope you are enjoying your Easter for those US readers.


Anonymous said...

How are both of your trading service performance for March 2013? I am not yet subscribe to any of your service because you posted you were facing severe drawdown for the past month.

John M said...

A warm welcome to Gus, hope that knee gets better soon. I outweigh him, but not by much! Would definitely want to keep him on my side in a brawl...ha ha

klh said...

Chris - look at grains - a lot cheaper to fatten a hog today vs last Friday morning!

Chris Johnston said...

Macro I will be posting those results today we made a good comeback in one of them with the Crude trade, so close to even for the month in the Swings and we did take a loss in Bonds. As has always been the case following a loss has been a good idea we have a big winner on our hands in Bonds today to start off April

John - thanks yes he is also kind of an alpha personality so even though Vinny my younger pup is bigger The Bus is going to be in charge. His pays are so big it is incredible. I am used to big dogs having Saint Bernards but Vinny and he are really big boys. I like having one enforcer out here just in case someone sees my place in the hills and has a bad idea or two about visiting etc.. I have one now

KLH - we were considering a short in the grains when the report came out but decided not to put the orders in on the report day and it is good we did not the way that move happened they would have cancelled them anyway due to fast market conditions.

Kurt said...

I joined recently and so far the bond system is doing very well. However, you do have to realize draw-downs will happen.

Chris Johnston said...

Kurt you are right those who started using it when I first offered it are up over $11,000 per contract if they took all the trades in spite of the recent draw down. That is a pretty darn good result in my opinion and I know of no better one out there. We did have a bad streak last month and if someone happened to have started in the middle of that they did have a draw down to begin, that is the luck of the draw. The benefits of it play out over time, draw downs are guaranteed to happen and when they do I take the hit also since I do the trades myself as well