FINAL INSTALLMENT OF THE FORECAST AND HOUSEKEEPING

Just to get this out of the way, the final standings in the World Cup show that my 6 month venture brought me a bronze medal. I discussed this recently, so I won't go too much into it beyond just showing the final standings. A return of 52% for 6 months is not bad I guess. This is the only contest that has people trading real money, that is why it is the only one that matters. Trading in a CNBC simulated trading contest is nowhere near the same thing as trading real dollars. I wish I had been in the whole year, since all of my competition was, and doing this in half the time is what makes me the most satisfied with it. Of course, my other botched business venture is what caused me to enter so late, so that is on me. Readers know that the entry in the contest from my venture was up 25% or so in the first quarter, before I pulled the plug on it for extraneous reasons not related to trading at all. Onward.

As to the rest of my forecast, I want to mention something about a market I have already covered, GOLD. If you are of the mindset that the bull market there will rage again, and no matter what happens you cannot be persuaded to change your mind, it is clear what you need to do. Do not ever look at charts of the price, EVER. One thing you don't want to do in trading and investing, is mix time frames and approaches. If you are bullish on Gold some of these reasons that people are putting forward about this new economic malaise etc.., there is no reason to look at charts or read comments from someone like me. You need to stick to your guns and just buy all the dips. Charts will potentially mince your thoughts. There is no reason to look at a price chart if you are not buying it because of a price chart. This is the same logic I use in reverse fashion about not considering these types of arguments when I trade off charts. I stick to my core approach which is charts not opinions. I hope this makes sense. Tune guys like me out, our approach is irrelevant to what you are doing. Who cares what we think or what we are doing.

I wanted to cover this because I happened to read an article about Gold on my Blackberry while I was waiting at the vets office the other day. It was written by a bullish writer, and it was so confusing. It was basically talking about a great buy coming but it was not here. He went on to say it could be anywhere from days to months! Good grief! That sure is a lot of help isn't it? Stick to your guns and don't mix approaches. Speaking of that I did mention I thought the take out of that low would result in a trap and short term reversal, and I was right about that.

CRUDE OIL

I do not have great vision for this market coming into 2012. We currently are in a solid up trend, and we recently had Open Interest get down to a low level not seen in years which is very bullish. However, we have seen the link between this market and stock prices. It is hard to imagine a big bull market in Crude without one in stocks. Due to my view on stocks, I think this market is going to rally some at the beginning of the year, but that rally is going to be tempered by stock prices being flat to weaker. On a relative basis this market has switched to being stronger than stocks, so it should remain so. 

The one wild card that is always out there is T Boone Pickens. If he happens to come out and publicly announce Crude is going way higher, we will need to shift to shorting with both hands almost immediately. It is perplexing how someone who has made billions of dollars in Oil is such a poor prognosticator of price direction, but it is what it is. The last two times he has come out and made big appreciation calls, this market has fallen off a cliff within a week or two. Barring the TBP effect, I am looking for higher prices during the first part of the year, but not a runaway bull move. I do think we will have a pretty sharp down move that will happen at some point, and my best guess is either May/June or in the late fall. These are just guesses based on cycles and really not worth anything to be honest. 

I do not have at the moment a clear short term signal, although as of today it looks like more of a buy than a sell.

The next chart is the CRB Index. We are at a point where the water cooler economists are going to have to be proven right pretty soon, or even they are going to have to give it up.

The theories are that all the "money printing" that is going on is going to cause a huge amount of inflation. You would think if we had a lot of inflation, that commodities would be rising. Do you see them rising on this chart? What they miss is the concept of velocity. The money supply does not mean anything, if it is not turning over at an increasing rate. We are at a point in time where the seasonal tendency is for prices to rally, and we have followed the overall seasonal bias very closely here. If we are going to have this huge explosion upward, this is the spot where it is going to come from. I am and have always been in the deflation camp. However, if we were to switch to an up trend here at this time of the year, I might change my mind. For now the trend is still solidly down.

This is pretty much it. I don't have time to summarize every individual market and if I did that would be a pay per view service. The recent posts have covered in a broad brush fashion, what I am looking for. I am a short term trader, so at times I will trade in opposition to longer term trends. I do not consider them in my short term trading unless they happen to sync right up with an entry, then I look for the move to be larger.

Happy New Year and thanks for reading in 2011

TURN OUT THE LIGHTS THE PARTY IS OVER

Here is the type of transaction the folks on Wall Street hate, and they penalize you for it. I do have some retirement money that I still have in an old 401k plan. I know this makes no sense, but I am not going to go into a full explanation of why. It has to do with my wife and her employment. I had mentioned when I bought into the stock market to try and catch a year end rally, and this was the buy and today's exit which will occur at the close today. This will be about a 6% gain, big deal. I am of the mind set now that we could have some trouble brewing and I want to have no long exposure going into January. We may well rally the first couple of weeks, but I think by mid January at the latest, we are going to turn down. I might be getting out of this a bit early, but 401k's are just so inflexible I am not completely comfortable with them.

I noticed when I entered the transaction this morning, they charge a .5% fee for positions that are shorter than 90 days. These people just never stop trying to take advantage of the American public. So I was able to make more in less than a month than these geniuses make in a year, and I am penalized for it. The game is so rigged it is just beyond belief. I say I go into the Octagon against the guy who created that rule and whoever walks out gets his way. As Spock said in a Star Trek movie to Captain Kirk, "what do you think of my solution?" I don't know what it is going to take to reform all of this crap, and I doubt I will see it in my lifetime. As long as they get their fees, they could care less what happens to anyone else. I wish I had a solution, but this just goes so far to the core of the real problems in our society, that the only thing that will cure it as another depression. All the bad has to be wiped out completely, and the government is just going to always kick the can down the road. I do believe though at some point, and I don't know where that point will be, that the market forces are eventually going to overcome the interventions. Once this happens, and the sharp downward move happens, everything will be cleaned out and we can start anew and build something legitimate ( that is where my dream ended and I woke up! ).

I seem to have created some controversy with my new indicator and the stock trades I have been showing. I base this on some emails I have gotten. The problem I got into in the past is beginning to show itself again, but it is the nature of the beast. I know it is tempting when readers see good results like some of what I do, to want to jump all over that and I urge caution with this. There is the old "past performance does not guarantee future results" phrase. This is never more true than it is with systematic approaches. I show these trade results at times mostly to support ideas that I am discussing, so that readers can see they have some merit. I rarely if ever, just blindly mechanically buy and sell anything. Even with the stock trades I have been discussing, the entry is discretionary. Once I find something in my zones with my indicator, I then run them through several filters before I narrow down to a smaller list  It could be mechanical and it would still work, but when I have these trades on my new site, the odds are that the actual trigger prices are not going to be exact numbers my system spits out. It will be me taking those and making the best judgments I can about where to actually get in and out. 

I have had a few people request that I show all my trades and I am just not going to do that. There are a couple of reasons. First and foremost, it puts too much pressure on me. If I were to get to the point where I was not trading freely enough because I was too concerned about how everyone was viewing my trades, that could literally ruin my life. I have a lot of people and animals that depend on me, I will not risk their well being for anything in the world. I enter the Robbins contest, so that is at least some semblance of trading in the public eye, and that is as far as I am going to go with this. It proves I trade profitably. Second, there are always legal issues, and I am quite sure some jerk would try to sue me if I showed a trade I was doing, they did it, and lost money. In our litigious world that is a lead pipe cinch. If a subscriber of a pay service does that at least I have some money from the subscription fees to put toward a legal defense.

I try to show trades both good and bad to make my point. I do show more wins than losses, but I have more wins than losses, so of course that will be the bias. At least I discuss and show bad trades, that is more than anyone else who does this is doing.

For now everyone is just going to have to be patient until I have this methodology fully dialed in. Once I do, I will discuss how it can be accessed moving forward. I am always messing around with things like this and some just never wind up working as well as this appears to be doing. I have been tracking quite a few of these stock trades that I have not actually done, and I will post the results of how they turn out once they are all closed out. Most of them have won, but there are a few that appear to be heading into losses.

I have been contacted about doing an interview at some point in the near future, so please email me or post topics you want to be covered. I cannot guarantee they will be, since I am not the interviewer, but I will see what I can do to cover things as best I can that are of interest. mktwzrd1@gmail.com is my email address, feel free to send feedback for the interview there. I prefer general comments be made in the blog for the most part just in case any others might be interested in any answers or replies I give to things.

I am having a hard time finding anything really compelling in terms of a new trade for today. Copper is a market I am looking for a buy entry in.

There is a trend line that can be drawn in, that we are just breaching as I go to press here. I am not in this trade as of this point. I would like to see my indicator pick up a bit here, it is actually close to the sell zone. It may not get there, so if we consolidate a bit more over the next week or so, I will be looking for higher lows and a way into this one.

I still have not finished all the installments in relation to my forecast, that will be completed this weekend.

Happy New Year

GOOD NEWS AND BAD NEWS

The Good news is that the first trade I went live with here with the new tools was closed out with a profit yesterday. I have posted my exact fill prices on the chart, it yielded .91 cents per share or 1.3%. My exit prices were slightly different than the actual MOC price, I made a discretionary call to exit a bit sooner since I was leaving to go play golf and was not going to be in front of the screen for the close. That call wound up getting me a few more cents out of it than it would have brought had I been here. I am glad this trade turned out like it did because this is typical of how these trades seem to be.

What I have tried to dial in here is the following. I am trying to spot very short term trades, that are very extended in price, that are also in zones that my tools tell me the insiders are betting in the opposite direction of the current move. In this case, my indicators were telling me we were very overbought in a spot where the big guys were looking down. The bad news is that I am getting a lot of emails from folks wanting a lot more on this. 

I am going to be a little patient with this. I need to have some trades under my belt with real money, both wins and losses, to reconcile them with how the system says they should work. I have to be sure that this methodology will work consistently with real money, before I go to the next step with it. One other thing to keep in mind here is that when one of these trades signals, there is not a magic price to get in. What you want to do is try and find the strongest momentum on a short term basis that you can find, then go against it. You do this with the idea that we are at a short term turning point, and a reversion should happen very quickly. There is also real danger in this method, there are no stops. Some of the trades will go against me quite a bit before a reversion happens. That reversion may only take me back to a place where the exit is just a smaller loss, and not actually a profit. The next chart is just such an example. I mentioned I put a few of these trades on. All of the closed trades have brought in a profit, but there is one that is still open, that is likely to be a loss.

You can see from the chart, that if the trade were to be exited today which is unlikely the way it looks now, it would be a loss of .09 per share. This trade is a likely example of one that by the time the short term oversold condition gets here, it will be above the entry price which was 61.10. Let's watch this bad one live now together to get a good idea of the downside to this method. I do worry that less experienced traders see good trades in here and get too eager to jump into the game without making sure they have their ducks enough in a row first. Trading is a difficult profession. As you progress you will come across countless seemingly incredible discoveries. Most if not all of them will be proven to be no good in short order. If it were that easy, everyone would be doing it etcc...

This tool I call the Kitchen Sink, is over 10 years in the making, Tennnn Yearrrrs!!!!

I cannot emphasize this enough. I have no idea how many hours I have spent studying, typing code, thinking until my ears hurt, trying to figure out the best way to get around some of the COT data limitations. There have been countless things that seemed very promising, that did not turn out to be any good at all. This one is different. No matter what market I look at, it works. However, how to best trade signals on a short term basis with it is not complete. I know I have a functional method, which is the one I used for the COO and CPT trades, but I think it can be improved. Here is one of the other trades I have done with it that worked out quite well and indicates how good it can be, whereas the COO trade was marginal.

This is an example of one where the method just dead nailed a great short term move. I believe this will happen quite a bit, but I also believe the other two scenarios will as well. One thing to keep in mind, there are countless trade opportunities, the markets will be here tomorrow. Of course I have to qualify this with as long as Douchefett does not get his way, we will be able to trade them. Let's just be sure the approach is the best it can be before hard earned money is put at risk.

In summary, we have 3 trades I have shown, one was a small gain of about 1%, one is a losing trade, and the other is a big win. This if it were to be representative of a large group, would be quite promising. As soon as I am comfortable that this will be the case, I will release more trades. Until that time I am going to cherry pick them. In this case it would have been best had I cherry picked the last trade, but we never know in advance which ones will be best. The very first one I did, was COO so that was why I posted that one. I posted it when I did it.

I always generate a lot of energy, probably mostly negative, when I make bearish Gold comments. I know the world wants this market to be their savior. I missed a recent short here, and you can see alas the new indicator is not perfect after all. It did not signal a sell other than at the very top of the last few months price level.

You can see it gave us the Sell at the top, then a good buy zone after that. It has not gotten into either zone yet, but is close to the buy zone. This is why I mentioned the other day that I was looking more to the long side than the short. We are closing it appears on a weekly basis below the key support levels. This could be a short term bear trap, but overall this is an ominous sign. I did have recent short term sell signals a few days back, but I passed on them due to my seasonal bias which was up. A blunder obviously. It always seems so easy after the fact. The bottom line was it just did not meet my rules the way I like trades to so I missed the trade.

I am not trading much this week, I just have a couple of trades on, I am mostly gearing up for next year. The markets are very quiet intraday right now, so don't push things.

Good Trading and thanks for the interest on the new tools, just be patient.

PSEUDO FORECAST PART DEUX

Here is the next market I want to cover, the Greenback. However, I want to mention the COO stock trade again that I have been covering live. The exit for today on that would be any close <= 69.98. The entry was 70.59 so if this happens this will not be a great trade, but it will be a profit. I have done a few others that I have not mentioned in stocks with this new tool, and all of them have been closed profitably so far. I just mentioned this one since it was the first one I did, and it was somewhat of just a live experiment with an actual specific trade called out in advance. I guess I am wetting every one's whistle with this, or at least trying to!

I think we are going to see an up year in the Dollar this coming year, or at the very least the larger moves being up, at least during the first half of the year. My tools do not give me much vision beyond 6 months out, so I would just be guessing at that point. I am a terrible guesser so I stay clear of those types of decisions. Of course when I am being a loose cannon and running my mouth at times, I do step outside a 6 month window from time to time. I am taking a contrary position of what most people expect here, so let me explain why I think this will happen.

Most currencies are in downtrends on a weekly basis, some more pronounced than others. The DX is in an up trend as per where I marked it on the chart. Although I never gave the specific rules, the daylight you see above those bands where I have the arrow, is a trend change in my world. Once we see that pullbacks are buys, and you can see the first pullback here was a dynamite buy. They usually are. We have a strong seasonal tendency for the Dollar to rally at the beginning of the year as I have drawn on the chart. If you look at the bottom of the chart, we can see that the new toy is almost in the sell zone. What this tells me is that we will have a pullback in the first month of the year, which will be the buying spot for this market, and the selling spot for the individual currencies.

As with any forecast, I am anticipating things to some degree which I don't often do when I actually trade. When you are looking out 6 months you have to do some of that. The other reason that I think this rally will occur is that I am expecting weakness at the beginning of next year in the stock market. The total lack of any meaningful rally here to close out the year in stocks, tells us we have some problems. Since we know that the DX trades opposite of the stock market, I have to be bullish there if I am bearish for stocks during the first half of the year. There is so much government intervention now that I think things might be choppy. They have shown no tendency to back off in any way, they are actually ramping up the moves now. It is an election year, and a stock market slide is going to doom Barry. I expect the Fed to begin to be active again if we start to decline. This should be good for us short term traders, but it is going to cause long term holders fits.

This next one is sure to be a crowd pleaser.

I know I have readers that think the Bond Market is a bubble, you may be right. I do not have that opinion simply because bonds prices should and always have moved higher during crisis periods. This is where the Gold people miss the boat. It is alleged that Gold has always also done so but if you look at charts, it has not always risen during crisis periods. It is argued that Gold should rally being a commodity with intrinsic value, during crisis periods. However as some astute people have said, it is just not in the data. Bonds rally during these times for obvious reasons, rates are lowered to try and save the day when things get bad. We certainly do have now and have had, this situation for some time now. This is why the Bond Market has rallied. However, this market is setup as well for a sell as anything I have seen in a while.

We have a pretty bullish position with the small specs, indicated by an arrow on the chart. This is accompanied by the commercials selling. We are at the time of the year with one of the most reliable seasonal patterns in all of the markets. Bonds very often decline in January, as I have marked with the arrow on the chart. We are also approaching the short term sell zone with my new tool. I showed a chart the other day demonstrating how well that tool works in this market. In summary, on a weekly basis this is setup very well. The next chart is a daily chart, and I think a sell entry is here any day now.

I mentioned recently that there was quite a bit of divergence in the POIV indicator developing in this market. You can see on the chart how prominent it has become. I think at this point with a potentially lower short term high forming any day a prior days low goes, that this is a short the first low that gets taken out.

We also know that there is a pretty reliable low that typically develops in the June/July time frame. As a result it is not too much of a reach to expect Bonds to decline for the next 6 months overall. The one variable that has to be considered of course is the potential for QE3. If the stock market does happen to get into some trouble, you can be your sweet .... QE3 will be announced. At some point though I fear that all of this meddling is going to fail to move things much. I think at some point the market is going to almost become immune to the manipulations. We have not reached that point yet. As a result, my call is for lower bonds for the first half of 2012. The weekly uptrend is still intact, so nothing really bad happens here until that changes. I also think for those who think this is a bubble, it won't pop until the stock market has a huge rally.

More tomorrow

2012 WHAT WILL THE NEW YEAR BRING?

I have just read through Larry Williams 2012 Forecast, and he appears to be in agreement with me about most of what I think is going to happen. He is my mentor, so I do tend to look at things in a similar fashion to him due to that, so it is not a huge surprise. I am going to do a quasi forecast over the next several days, with just a few things each day. The first market to discuss is of course Gold. It has been my position recently that the trend in this market has turned down now, and that we are going to begin a huge decline in this market. I have showed the reasons why I think that in previous posts, so I will not rehash those. These reasons were all based on trend lines and my bands I use to identify trends. Whether or not I think it is a bubble or not was not part of that rationale. Bubbles can go on for long periods of time. There is no reason to short a market just because you think it might be in a bubble state, that is a sure way to get run over. My bubble comments are just observational, they do not dictate my trading.

I was pleased to see that Larry in his forecast also is forecasting mostly downward prices in the Gold and Silver markets. For those who want those details, go to his site and purchase the forecast. These are great tools to have at your side during the year. It will be the best $200 you will spend. What I would most like to see is for a bounce to occur here and to have my new indicator get into the sell zone. I do worry that this market is so weak now this will not happen. However, if it does, bet the farm on this one to move back down. This is the trade of the year, maybe of many years. As readers know, I think there are a lot of weak hands in this long trade right now. When we reach the point where they realize they have been hoodwinked, it will be one spectacular decline. I hope I am short when that happens.

What I really like about my new indicator is how well it picked the top not being too early. Most of these darn tools always fight trends, and this one seems to pick pretty much the right times to fade them. That Gold top this year was impossible to pick any other way that I know of. I do not have a position in this market right now, but I am looking for a short. This has been an incredible trend that has made a lot of people a ton of money. However this types of moves in commodities do not go on forever. The game is over for now here.

For the stock market, it does appear to me that a sell signal is coming very soon. This total lack of a significant rally at a time when everything that "should" influence stock prices upward, is lined up, is a very negative overhang to me. That mystery chart that I have showed does show down into June, and I think that is about what we are going to see. Larry's forecast shows things a little different, but not too far off. I won't discuss it specifically other than to say when it supports what I am looking at, because it is a great product. He puts a lot of time into this, and I will not compromise it by telling everyone what it says specifically. If we take into account the big picture of all the stock influences we get the following overall view.

The European mess is just being kicked down the road, nothing that is being done over there is doing anything to solve the real problem. Socialism does not work. When you look at China, the worlds savior, and the reason Gold and Gi Joe's and everything else in the world will rally in price, is in reality a house of cards. We also have a bear market in commodities going now, just look at the CRB chart if you are not sure about that.

If we look at China you can see this market has been in a downtrend for 2 years now, hardly what a boom economy should look like. When you read about all the accounting fraud that goes on over there, and you couple that with the shocking stat that about 70% of their GDP is real estate and construction, doesn't that make you wonder how real the "boom" is or more importantly, how long it can last. At the top of our Bubble in Real Estate, I think out percentage was about 40%. That tells us that this bubble is expanded far more than ours was. Jim Chanos is right in his bearishness on China in my opinion. We will see this talk about how China's currency will become the new world reserve currency disappear this year when the dollar soars. What a ridiculous idea that is anyway, I wonder who the pinhead was that started that one? You can say what you want about our problems we have here in the US. When the "sh..." hits the fan, the best safe haven in the world is still the good ole USA.

I also forecast that I will stay on the top of the comments better now that I know what the problem was before. That forecast is likely to be accurate! I also had a few typos get past my editing due to being in a rush a good bit of the time I try and crank these out. I will try to catch all of those next year if possible. I just think it takes away from the professionalism when there are grammatical errors.

I have tried my best to put out a good product here every day and I think I have for the most part accomplished it. There have been times where I have been very accurate and others not so much this year. However, overall I have had a good trading year, and been pretty good about my market calls. That is all I can hope to do.

Enjoy the holidays, more coming tomorrow

I OWE MY READERS A BIG APOLOGY

Before I get to what I want to talk about today, I have to offer a huge apology. Comments are supposed to be forwarded to my email for review and approval. I do this just to keep out spammers and the occasional unlock i phone stuff. I still can't figure out how you make money commenting on blogs about how to unlock an iphone? I have blocked hundreds of those attempts. However, today when I went in to do my post an avalanche of comments was waiting in Blogger for my approval. There are so many good comments that I have to respond/talk about a few of them today. I guess I have learned that I need to go to this section each time I log in. Trying to troubleshoot blogger for things like why the comments are not coming to my email address is like falling into a dark abyss.

Chris, Really enjoy your articles, except when you slam gold all the time .You keep saying gold is in a bubble . Despite the fact that precious metals has been the #1 sector over the past decade, it represents approximately 1% of the holdings of the average investors’ portfolio. Arguably, there has never been such perverse under-ownership of an asset class in market history. This is an absolute rebuttal to all the nonsensical babble of “gold bubbles” and “silver bubbles”. Obviously a sector cannot be in a “bubble” (which by definition is a market mania) when the asset class remains a secret and/or mystery to the vast majority of the investment community. How you can kep calling gold a bubble makes no sence, the facts just do not support your claim

By Robert on LIFE'S GREATEST IRONY So many people are crying... on 12/19/11

Robert, I guess you are right maybe I do slam Gold too often. I think when we debate whether something is a bubble or not, either side can find statistics to support the view they have. I would not consider 1% of an average persons portfolio to be a very good measurement to look at. How is an average person defined? I would think the average person probably does not have much of a portfolio of any kind, so what is in it probably does not matter much. I am not sure how this could be objectively measured, and then compared to what that same percentage might have been at prior peaks and troughs?

That aside, I think what keeps me pointing this out is the same thing that kept me warning people about the real estate bubble. I have told the story in here a few times about the party in my old neighborhood I attended and was shouted down and called an idiot by many attendees when I told everyone why I had just sold my house and that the RE market was going to drop 50%. All of the know it alls that berated me went on to bankruptcy when the crash happened. I have since had a couple of realtors contact me wondering how in the world I knew it was going to happen? This situation in Gold to me is even more obvious than that was. The emotional attachment people get to things that are in bubbles is amazing to me, maybe I am just cold hearted? What especially worries me is all the creative arguments that come along to justify something that is obviously way out of whack. In real estate my favorite was"they are not making anymore land." If I had to pick a favorite for Gold it would have to be "it has never been worth zero." Here is a monthly chart of the cash pit contract of Gold. How anyone can look at something like this and expect it to continue is just beyond me, but have at it and go all in if you are so sure I am wrong. I also fail to see why this puny little retracement we have going on now on a monthly basis, makes it a double fisted buy?

We just recently touched 4 standard deviations on the Monthly chart over a pretty short time period of 12 months. That should be as close to a statistical certainty for a reversion as there can be. The way I nailed the real estate bust was finding it had moved 4 standard deviations in a couple of categories.  However, to have markets we have to have people on both sides of the argument. I am never so arrogant to think I can't be wrong on something. You Gold bulls may be right. However, what you do need to realize is that you are betting on something that has never occurred before in any market in history, if you are calling for $5000 here. My view is to bet on the favorites not the long shots. This means that I will never catch the long shots, so when they happen I will always be wrong. If this long shot comes in I will be wrong. Everything I study tells me a reversion is highly probable event. It is not here based on fundamentals, that is the biggest problem with where the price is now.

There were a few comments about Briese and his gold views. I do not have a link to that report he put out, but you should be able to find it on the web somewhere. It is really just a numeric analysis of bubbles, and by the way he defines them for the study, Gold falls into the category. I seem to recall it is certain percentage moves over a certain period of time, but I do not specifically recall the details. If there is enough demand in here by readers let me know and I will see if I can find that report. I might have a copy somewhere.

I find myself in general agreement with your market evalutions and, as usual, in disagreement with your political views. Pretty amazing, in a way, I suppose, but to think that Obooboo is or wants to take us to socialism--which still is wrongfully discredited as a general idea and is just as generally proven in almost every rational country that has adapted major portions of the philosophy--I stress the word rational--well, to think that Obambam is of a socialist bent is to completely and willfully misread this incredibly malleable and ideologically uncaring politician for something he is not. This kind of misunderstanding of the dangerous, centerless person that he actually is, will only help ensure that he continues for four more years. Which, considering the alternatives on display, may not be the worst of all choices, even if I gag while I say that.

By John M on LIFE'S GREATEST IRONY So many people are crying... on 12/18/11

I am not so sure we disagree John, I just think he is stupid to be honest with you. Maybe it is blind ideology and not stupidity? I think intelligence is proven out in what you do, and by that measure he clearly is not very intelligent, even though he can read teleprompters with the best of them. I don't think we truly know what his real objectives are or what he really believes. I do know that he wants to take money from people like me and give it to unions basically, and that is not acceptable to me. As to the alternatives, I will vote for any Republican except Ron Paul who is just out there on Pluto. I don't really like Romney he is just a typical politician to me, says what he thinks you want to hear, looks good etc.. Gingrich is brilliant but I doubt he is electable. I would love to see him in a debate against Barry. The problem would be that he would embarrass him so completely that it would probably work against him in the election. He would be perceived as a bully probably. However, Barry just has to go so anyone short of Ron Paul would be better than him. I do worry about 4 more years with him, he could do immeasurable harm that could take years and years to fix. I think all of politics is so corrupted now on both sides of the aisle that the whole process makes me sick to my stomach. If I hear John McCain one more time, I might jump right through the TV set and strangle him myself. He is so annoying, and he gave us Barry to boot.

Anyway, I should probably keep my political views to myself, I know it costs me readers who don't agree with them. I have tried to keep them out of my posts recently, but I am somewhat of a loose canon at times so these comments just slip through my defenses I guess.

Chris. first of all, GREAT blog. i like the honesty. you are like the Howard Stern of trading blogs (that's a compliment). can you post an updated chart of stocks compared to that weird index that you said has nothing to do with stock, but has been a remarkably accurate for no explanable reason? are stocks still tracking reasonably close to it? thx

By Anonymous on WHAT "SHOULD" HAPPEN My father is in town for a... on 12/16/11

Oh boy do I love this comment. I was a huge Howard Stern fan for many years. His old TV show way back when before he got really big, was one of the funniest things I had ever seen. It was made funnier by the terrible production quality. His episode where they went to the Planet Lesbos and Captain Kirk beamed down to the surface and his toupe was beamed down separately and crooked on top of his head I think might have made me piss my pants. Here is the updated weird chart. I will give you a hint, it has something to do with the Euro.

Here it is. The general idea that is behind this chart which is something gaining some traction, is that the Euro is determining which way our stock market is going. However, this is a twist on this idea that is really strange and that is why I don't feel at liberty to reveal it exactly, since it was not my original idea. By this map, we kind of go sideways from here with a little up into March. We then would have a decline into about June 22nd, then straight up for the rest of the year. I think this is entirely possible especially with rates being this low. Corporate earnings will continue to increase with interest rates basically at zero. This chart is incredibly intriguing but due to it's bizarre composition I just have a hard time placing a lot of trust in it. However, it's track record speaks for itself at this point.

Buy Low Sell High or Sell High Buy Low! On a somewhat philosophical note, would you agree that most trading systems are trend following? Maybe that is why being a contrarian has yielded better trading results?

By Anonymous on LET'S RAISE SOME EYEBROWS After yesterday's com... on 12/15/11

I think I agree with this when it comes to the large funds and how they trade. You can't move large size as easily taking other approaches. This is why you typically see the Large Specs positions always increasing as trends move along. They are basically the trend drivers, wrong at the turns, but right in the middle of them. As far as individual trading systems go, there are a lot of ways to skin the cat there. I tend to prefer fading market extremes with those, but that is also not an easy road to go down.

Hi Chris, I appreciate your honesty and that you are not afraid to admit when you miss some trades. Especially during these days when it seems to me that everybody was correctly predicting fall in EURUSD and making a killing on the short side. Of course they never mention their losing trades. During the weekend I read on the Bloomberg that the surveyed analysts were the most bullish since November 11, which unfortunately happen to be the area of the intermediate term high. What a joke these analysts.. I don’t have access to LW sentiment index but this Bloomberg indicator performed quite well during recent time. I didn’t short gold, I was very hesitant after the sharp decline on Monday. Anyway, always looking forward to your commentaries. Good luck!

By Matej Marek on NOW OR NEVER Here I have the chart of the Naz a... on 12/14/11

Thanks for this comment. I hate to take on other commentators, but we all are wrong at times, you just have to admit it, what is the shame in doing that?


Someone also asked about inside bars and how I use them. I just have them highlighted so I can see when ranges are contracting. I don't really focus on them too much. I do at times like to trade with them just because the stops are really tight, but I don't think they are any more accurate than any other type of bar. I got stuck in the wrong font for these two paragraphs and can't seem to fix it.

I have been spending quite a bit of time with my variation of my COT indicator. Here is a chart of IBM and look at how good this has been here. You may ask why would it work on stocks when there is no COT data on them? The answer is that it does not use COT data, it uses inputs designed to mimic what commercials would be doing if they traded stocks. This is not an idea I pioneered, but the way I am going about it is unique as far as I know which is why I am keeping the calculation of this to myself for now. It is amazing to me as I look at one chart after another, how accurate this indicator is turning out to be.

I am working on the trigger for the trades. Even though in this chart you could have just entered at the market every time the indicator got into the zone, there are charts where that does not work and the markets continue in the opposite direction. Once I figure out the best trigger I will discuss it here.

I think this week will be quiet with an upward bias in stocks. I am likely to exit my long stuff at the end of the week, since I am looking for a short term sell signal to show up at that point in the indexes. I had stated here that I did not think this rally would be very explosive, and so far it has not been. There is too much at stake politically now for them to allow this to fall at the very end of the year. Also, funds will try to make this as good of an ending as possible. The COO short stock trade using this new tool is still on. I will post the exit for Tuesday tomorrow morning. That trade currently has a small profit in it.

Thanks for reading, and my apologies on missing so many comments. I did post all of them to their appropriate threads and just highlighted a few here today that I wanted to discuss. If you have made one that I missed or did not discuss today please resubmit it and I will promise to respond.

Happy Holidays to everyone

I MAY HAVE SOMETHING WITH MY NEMESIS AFTER ALL

I mentioned that I would play around with my COT indicator to see if I could improve it over the holidays, and I may have stumbled onto something very quickly with it. I have not studied this enough across all markets to see how well it holds up, but it certainly is fantastic in the DX market above. Of all the signals it indicates here only two did not have a tradeable move. There were 13 signals, so 11 out of 13 were correct which is hard to beat with something like this. I will keep working on this, but it looks like I am on a good path to making this a bit better. What I really like about this new look is how well it picked major highs and lows. I am not in the business of trying to pick high and low points, but if we can have something that gives us an idea of where they might be occurring it could certainly be a big help.

Here is another chart with the signals market, again awfully good.

What is really remarkable about this is how many signals it generates considering it is based on fundamental information. As it always seems to be the case, I should have thought of the tweak I have applied to this long before now. It always seems obvious after the fact doesn't it? However, I have lived the Euphoric runs with new discoveries time and time again and later had the discoveries been busts, so I have to study this further. For the time being, I am going to be displaying this in lieu of the old one for analysis purposes. It did tell us stocks were a buy last week on the dip, so we should be long based on this for now.

For those monitoring that stock trade in COO, the exit price for that today is a close at 69.57 or lower. If it is anything other than that it is a hold overnight situation. We are really swimming against the tide trying to short something here, I am really curious to see what winds up happening on this one.

I was mentioning that the Bonds were setting up a sell, here is what the newly configured COT stuff says. It tells us it is coming but not here yet, so we can watch this as a live example and see how this works. I have labeled all the signals on the chart above 75 and below 25. With these signals 16 out of 20 gave at least a 3 week move in the indicated direction, impressive.

The reading is still in the 30's right now and needs to get under 25 so that means it is likely we need at least another week of action to get down there if we do go down there at all. I am very anxious to see how this plays out. It is way to premature to talk about what this change is, and if it will stand the test of time and scrutiny. If it works as well as it appears to, I doubt I will publicly reveal it. I will be willing to tell people if it is saying buy or sell for any specific market. I may even do a weekly summary on the weekends in advance of what it is calling for in which places. If it holds up I will probably incorporate this into whatever I wind up offering through my web site.

For now it looks like trend up into the end of the year for stocks, the short term sells are there but I doubt they will be triggered.

Good Trading

OK WE GOT ACTION

The stock trade I mentioned yesterday for COO was filled at the close, I got in at 70.59 today on a limit. I had mentioned yesterday if you missed the close to try and limit in today, and I was on the golf course yesterday at the close. I placed the order today pre-open at yesterday's close of 70.48 and was filled at 70.59 since the open was higher. Now that the trade is on we do nothing at all but check back in at the close. The rules for today would be if the close is at 68.77 or lower, exit MOC. This number will not be the same tomorrow, it changes day to day. I will check within the last few minutes and if the price is there I will get out. I will not nit pick this, if it is vacillating in the neighborhood, I will take the profit. This is a strategy based on fading short term overbought and oversold conditions, and taking the first reversion to the mean you get.

The above table is just based on trading 100 shares every time the condition presents itself in this stock. Many stocks have much better numbers than this one. Obviously to make any money trading you have to trade quite a bit more size than that, but it is just a good baseline for running the tests. What I like the most about it is the accuracy being decent along with the payout being greater than 2 to 1. This is a non optimized strategy. Overall, the stock market does seem to be making it's year end push higher, so we are really swimming against the tide here. This is really a good test of this theory. If I can make a profit on the short side while the market overall is this strong, that will be a good accomplishment. There is nothing else to do on this one but check back in at the end of the day, ONWARD!

Prepare yourself for my disclaimers here, the next chart is not what it seems. For those who have read here regularly, you know my drama with the company I formed with a friend earlier this year called PNJ Advisors. We entered the Robbins World Cup under that name and were in third place with about a 25% RETURN through the end of March. My partner then notified me that he was having some difficulties in some other businesses he was involved with and at that point I made the decision to disband our company and shut it down. I did not want to get involved in any ancillary things that might develop as a result of those other unrelated ( to me ) issues. Of course it was disappointing, but my friend was so forthright with me, that it was a great testament to his integrity. I have more respect for him now than I ever had before with how he handled this.

After we withdrew our funds I mentioned this story here in the blog in case anyone had been following us. I did not want people to think we had lost a bunch of money and that is why we disappeared from the leader board. I am sure there are some that think we did, but what are you going to do, I can certainly prove otherwise. I then debated what to do, and wound up re-entering the contest just on my own in June. Keep in mind this is a year long contest, so I was spotting everyone else 6 months. Of course I will never get the chance to have that as an asterisk in the standings, so it is what it is. The standings below are where I will finish, I am not going to make any more trades in this account this year. My father is in town, is 83 and requires a good bit of attention, so I am trading very lightly right now. I also have to chase around my "little" rug rat Vinny my Saint Bernard pup. He is 3 1/2 months old and is already 60 lbs, so I have my hands full. He seems to think he can take on the 175 pounders we also have, so I have to save his ass multiple times a day when the big guys swat him.

When I enter things like this I do not go hog wild like many do in these contests, throwing money management to the wind, and having huge swings in equity. I trade them the same as I do my other accounts with the one exception being that I pass on some trades where the stops are too big. This results in this account under performing some, but when you go out publicly with these things you have to be careful. First, it is a lot different when so many people are watching you than it is just trading in isolation where a few dumb trades are invisible to the public. Second, if you have huge returns and later manage money, people will sue you if the results are not as good. This has happened to Larry Williams and he actually lost the law suit incredibly in another fine testament to our judicial system. Just as a side note, the woman who sued him had a huge return on her money when he traded it, but it was a lower percentage than his astronomical contest returns so she sued for the difference. Un.....believable. I can only hope that she went on to be run over by a bus at some point.

So what you see here is the results of basically 5 months in this contest, I have not made any trades this month in this account. As a result, over 50% for 5 months is not bad. I cannot say that I am proud of this, it is not that great in all honesty. However, it is what it is, it is out there, so I thought I should discuss this in case any readers came across this. There are plungers out there, so who knows I could get passed by a few people who put max bets on one trade at the end hoping for a big payoff. The last time I entered this I was in second and was passed by someone who had never been on the leader board the whole year until the last week. He obviously bet everything on one trade and wound up passing me knocking me down to third. Just in the event that happened I wanted to have my results posted here.

There is only one reason I enter this contest, and it is different than you might think. It is to get an independently audited accounting of real trades made with real money. It shows indisputable proof that I am a profitable trader. Some of my personal accounts have better returns than this, some ( my stock accounts ) have smaller percentage gains. I just feel that is important in this world of BS that we live in, to have proof of that by an outside body. I put myself out there in this forum as someone who has a clue, so I feel I need to have some proof other than just "my word for it." If you add up the first quarter of 25% and this 51%, that totals 76% of actual gains accomplished in this contest during this year. Of course it was done in an interrupted fashion, and represents only 8 months of actual trades. I am not sure what I am doing in regards to this next year at this point, but that is enough on this subject.

I do not recall exactly what day I mentioned that Bonds were looking like they might be setting up a sell signal. In the above chart you can see that we now have several things working together that may be lining this putt up for us. First the POIV divergence is huge here, these are the types of looks in this that matter. Second, we know that Bonds have a pretty good tendency to decline in January. The seasonal shows that pretty clearly. We also have my COT Synthetic clearly saying sell. That indicator has been good at times here and not so good at others as I always mention with it. I plan on spending some time with this thing over the holidays to try and make it better. I also have some of my short term tools not shown, telling me if we were to bounce up a little here, a sell signal could be there with them.

Net net here, I am looking for sell signals in this market in the next week or two. There actually is a seasonal buy trade on a short term basis about right now. I am hoping that lifts us up for a few days here to set this up a bit better. My short term tools are showing a potential marginal sell signal for tomorrow in the ES if we close up today. I doubt that is a trade I will take.

That's all for today, Good Trading!

LIVE EXPERIMENT

As things wind down for this year, I thought it would be fun to start doing some live stock trades here to lay the ground work for my website going forward. I think most readers are probably futures traders, and the larger amount of my trading income certainly comes from that arena, but I do also trade stocks quite extensively. The above is a chart of COO and a very specific trade for today that we will follow live if it fills, just for kicks. The parameters are that if the close is greater than 70.20 and less than 72, I will sell this short at the close (MOC). There is not really an order you can place like that so you just have to be watching in the closing minutes to see if the conditions are being met. If they are, I will just execute the trade in the last few minutes. If you miss it you can always try and place a limit order for Thursday at the closing price if it is in the parameters.

This trade will not carry a live stop. It will be exited based on conditions present at the close similar to those above. The general idea here is to sell strength in a down trend but there is a quite a bit more to this signal than that. I have a list of many of these most days, and choose a few of them. You have seen two trades like this I did recently in the SPY's that both worked quite well. I wanted to do one in here live just for fun. You have the above rules, and this is a trade I am doing if the conditions are met.

Getting back on the theme that I don't think the year end rally is going to go far, we are potentially nearing a short term sell signal in the VIX. We do need some more weakness in it, but it is getting close to the zones I monitor for sells. Days like yesterday have a lot of back slapping, but it is just one day as we all know now. Big days often get followed by days in the other direction in this climate, so we just never know from day to day if any follow through will happen. I loved hearing the bullish spin, "it looks like Europe is getting it's act together." Are you kidding me? What exactly changed in one day that un did hundreds of years of socialism? One bond sale went better than expected. Aye Carumba, some of these people should be tarred and feathered! I am not 100% sure of many things in life, but I am 100% sure that Europe's problems won't be solved in one bond auction.

All the politicians think they can solve problems by making everyone happy. I have news for them, before this is over some people are going to have to take some losses. Some bankruptcies are going to have to happen. We can't just make people feel good all the time for doing the wrong things. If you do the wrong things you suffer pain, that is what teaches us not to do them. Then as we become adults we are forgiven for murder, theft, you name it. In this case, people that took on inordinate risk are going to have to be allowed to go bankrupt. Those entities can be countries as well as individuals. Until that is allowed to happen, and we get a washout, we are just going to move sideways in the mud like we are now.

As the world turns, here is the Russell here and low and behold, we now appear to have another meaningful divergence in POIV. I was just talking yesterday about paying attention to the big picture with this, and now we are back into one of these significant areas. Price last night traded up to the highs, and you can see how POIV is lagging by a huge amount. When I try to balance this with my thought that the government will not allow this to rollover before years end, here is what I come up with. If they are in fact out there keeping this propped up, and I do not know if they are or not, they are not moving it up much are they? I have not seen any obvious PPT action in the market for months except that one day I showed the chart in here where the last 30 minutes was a moonshot out of the blue. Maybe the result of this will just be a stalemate. The market wants to move down, they stop it so it goes sideways? I really do not know, but I will just go to my short term indicators, which are now once again leaning to shorting this in a day or two. We will have to shoot up strongly here to nullify this setup, which we could do. Trying to call one day at a time here is pretty difficult at the moment.

You can see the seasonal in this market is more bearish than the other indexes. This is because it has fewer years of data, and the January decline tendency has developed in recent times. As a result it skews this down a bit more. One thing that is remaining constant here each day is that my short term tools are bearish and the seasonal and cyclical tools are bullish for the rest of the year. The best trades do come when these two things are in agreement, but we can't always have it all, we rarely do.

I hope I have not seemed contradictory on the stock market here. I have been talking about the seasonal bias here for a month or more and that is still here. What has bothered me is the short term weakness I see in some of my tools, which is causing me to consider a short term trade on the short side. That picture has been changing a bit day to day, but that is how the indicators I use work. They are sensitive to short term price action and can show a long one day and a short the next. That is the challenge in using them. If and when I take a trade here I will post it, then my money will be behind my mouth, and hopefully my foot will not wind up in it! There will not be any I told you so's here, I am conflicted on the next weeks direction here overall.

Good Trading