SPEAK OF THE DEVIL

All of us should thank the good lord for the blessing he had given us to be free of the PPT for so long. They re-appeared yesterday out of the blue in the last hour. These are pretty easy to spot and obvious even for those who do not understand what they do. I will get to that in a moment. The above picture is just a screen shot of the stock shorts I have on. I have covered the sizes because I do not want people getting the wrong impression. I do throw out dollar amounts in trades here from time to time, just to give people a general sense of the size I trade. However, bragging about money is obnoxious and I will not engage in that. In general I trade anywhere from 300 to 1000 shares at a time in stocks, and like to put several of them on at once, spreading my risk out a bit.

One trade that was a complete home run was TIF. If you click on the chart it should enlarge and you can see that I exited that trade yesterday with the huge windfall. I was a bit lucky in that I got out at 62.01 very close to the low. Whenever I see a large expansion bar like that I take profits or at least partial amounts out. In this case due to the choppy nature of the indexes, I decided to take the full position off. The others I will use trailing stops and targets and see what happens. I am still unsure at this point if we are going to get the last thrust down before the rally that I have been looking for, but I want to be positioned to make some money if it takes place.

Here we have a Picasso painted by the PPT yesterday. We were on the verge of falling off a cliff yesterday and low and behold out of the blue in the last hour a "surprise" rally. When you see this type of thing you can rest assured, this was the PPT at work. They chose a spot to make a stand, and chose wisely. I don't think too many people saw a big buy program coming when this happened. It fizzled overnight, so we will have to see how determined they are today to prop it up again. I sure wish they would not do this, but it is what it is, so there is nothing any of us can do about it.

I really think completely free markets without government manipulation work better in the long run, but obviously "they" do not agree. The trend is still down, so when that is the case you, have to be prepared for erratic bounces due to these folks doing this. New readers please read up on the Internet about the PPT I am not going to keep explaining this in here other than just pointing out when I think they have done something.

Here we have one of the Bond Market charts. You can see my COT indicator here has reached the buy zone, and also how well that has timed recent rallies in this market. What I am looking for here is a rally, that sets up a right shoulder sell signal. Perhaps we will just take off again, but my plan is to look for a sell after this bounce here takes place. For now it appears to be a buy, we don't know if it will become a legitimate short yet. I have been short here recently but covered that trade for some daniero thinking we were going to bounce and I would get another entry.

In summary, I am short the indexes and some individual stocks looking for a decline. I have lighter than normal positions due to how choppy things have been. I am comfortable with that regardless of what happens, this market has been very tricky over the last month and a half. The Hogs trade I mentioned the other day I did take and it became a stop out loss immediately on that big range day. Oops I thought when you write about trading you never admit to a loss? Silly me!

Good Trading

CONFESSION TIME

I did say yesterday that I did not have any sell signals for the SP 500, but I will get to what I wound up doing in a minute and why. First, the above chart is that of a intra day trade I made this morning. Notice the trap pattern I talk about so much in here, where the bar broke out from a ledge type of pattern, then reversed taking out the low of that bar on the very next bar. This also happened at a time when my COT Synthetic was not indicating the insiders were buying on the way up. This was a divergence in my mind, so I shorted this market when that low broke. I did get out perhaps too early, but was trailing a stop down, and that is where it got picked off.

Aside from whether or not I did this perfectly, we need to celebrate the ones we did well and this was one of those. For the most part we are never going to get the exact highs and lows of moves even if we occasionally do get lucky here and there. Also, since I was already short this market based on the daily chart, I was looking at the initial up move as a retracement. Whether or not we go back up again now is another matter, but for the purposes of the day trade, I had to view that first bounce as a retracement opportunity. As I mentioned yesterday, it is time to start considering that we will not have another leg down, and a big rally could be brewing. I think that if we are able to hold here during this heavily seasonally down bias period, that would tell us there is underlying strength in the market. It is too soon to tell yet, but I do like the fact that the indexes are holding up better than so many other markets. This is a positive divergence so far.

Next, the change of heart I had yesterday. I had mentioned I did not have any sell signals, and that is true per se, but there was lower highs and lower lows on the chart, along with the seasonal down bias, so I decided to get short albeit with a smaller than normal position. Whether or not this trade works or not, I stand by the size decision. This was a marginal setup and a very discretionary call to take this trade. I do not want to risk my full amounts in such decisions. If I am right I will make some money, and if I am wrong the loss will be about 1%. I can easily live with that. I also read something this morning that claims the seasonal down bias that occurs on average at this time is due to the Jewish holiday. I have no idea if that is true or not and it does not matter. We just need to be aware of it regardless of why it occurs.

Here is the Aussie dollar again and it looks like so many other markets right now as I go to press. What I like about this is how much weaker it has been than many others. It looks like the indexes here over the last few days, but notice how much lower it is than the recent lows where the stock indexes are still in a trading range above the recent lows. If we close higher here today, selling a break down tomorrow seems like a good bet to me. You can take your pick though, there must be 15 markets that look just like this does right here.

The next chart is that of the Dollar Index. I have been talking about this being set up as a sell on the weekly chart. However, as you can see, we have not had any type of trend break on the daily chart yet. It is certainly possible that we will just take off from here upward if stocks do decline. In that event obviously there is no trade. This is simply a setup which is basically an alert zone to look for something. It is not a go in at the market and sell situation.

I am constantly picking up new readers, and I want to make sure everyone understands this. When I talk about a setup, it is just that a setup. It is not an entry. It is an alert to look for a move in a certain direction. There always needs to be some type of shorter term trend element to an entry, that is in line with a higher time frame setup. That is up to individuals as to how they get in and out of trades. At times I show exactly where my orders are, and at other times I do not until afterwards. I do this to protect my trading interests. I have seen too many situations where a guru has called out a trade, and tons of people just plowed into it messing up the fills and everything else.

When I launch my trading service again, subscribers will get exact entry orders on trades that I do if that is what they are looking for. I have still not decided when I am going to do this again.

Thank you to all the new readers that have come in recently. I am not sure how you found me. If you feel inclined, I would love to know how people do find this blog. Drop me a comment and tell me.

You are also not going to see any political commentary at all going forward. I have watched what the government is doing to silence dissent, and until a new administration is in place where free speech will be allowed again, I am just not going to risk it. They are policing the Internet very closely, and it is just not worth the trouble. I am sure it was annoying to some readers anyway and something I really should not have been doing to begin with. I threw it in because I did think it was relevant on some level, but it really has nothing to do with actually trading anyway.

Do not worry, this does not mean the PPT is off limits, I will still talk about them when I feel I see them operating.

Good Trading to everyone

Rush Rush

As I stated in yesterday's post, this is a time to be patient. We have had historic down moves in many markets and have just bounced a few days. These bounces are sells, but caution is needed. One of the biggest challenges for me that I constantly fight, is finding the combination between being aggressive and not sloppy at the same time. It seems the more aggressive I get the more marginal trades I find myself in. It is a challenge to be aggressive but at the same time make sure I am not just taking any trade just for the sake of having some action.

I find myself thinking that right at the moment. I am flat, not in a single trade right at the moment, and I am chomping at the bit to get short something. However, when I scroll through charts I see the same thing everywhere, bounces against down trends that at this point do not show any of what I use to trigger things turning back down, even if I project down closes. At times we have to anticipate these turns, but I do not think that is wise following such large thrust moves down. We are kind of in a spot like we were with the indexes after the big drop in August.

The top chart is that of the Russell 2000, the one I plan on shorting if and when this turns back down. If it does not, I will look the buy the NAZ which has been by far the strongest index. This chart is just a mess and I do not see anything for today I can't live without as far as a sell entry goes. We are essentially right in the middle of a trading range, and we are at month end which tends to have an up bias.

Here is the Aussie dollar, another market setting up a pullback shorting opportunity. This has been weaker than the indexes, and since the world is for the most part one trade, I am gauging comparative strength and weakness vs the indexes as a filter for trades right now. What troubles me a bit here is that the Dollar Index as I have shown recently, is set up to be a sell on the weekly chart. This is something I am keeping in the back of my mind. We know the buy season for stocks is approaching, and we have to consider that we will not get another plunge and the next trade could be a buy. This would sync up better with a DX sell.  Once again, nothing for today here, but I am watching this one.

Here is a market I have been talking about, Hogs. I have a sell order in for this market today where indicated, and an alarm on the chart to alert me in the event of a fill. I have discussed the reasons for this trade previously. Essentially based on the weekly chart we are in a down trend, and this is a bounce against that trend. At the moment it does not appear a fill is coming, but you never know.

There was a question in one of the prior threads about how I feel about that funny chart I showed a while ago that had so accurately predicted stock price swings. The answer to that is that I feel the same way now. I still think it makes no sense but it is calling for an October 7th week low, and it has been spot on over the last year at almost every turn. As a result, we have to consider that as a possible spot to look for a turn in the indexes. As I stated when I posted that chart, the one problem I have with it is that it is not conceptually correct. What I mean by that is that there has to be some logical predictive connection with tools to market action for them to hold up over time. For example, if you notice that every time your neighbors wife sunbathes topless the markets rally, you cannot expect that to hold up. There is no conceptually correct connection to market action with an event like that no matter how pleasing it might be. Of course it could also be frightening depending on the circumstances.

That chart plots something completely unrelated to stock indexes, even though I did not disclose what it was, so it is not conceptually correct. There is no reason why it should work other than random chance. However, that random chance has sure been regular recently. It is possible there may be an underlying connection I am not aware of yet. The hint I will give is that it is a Commercial activity from the COT report that is plotted in a unusual way, from an unrelated market that just so happens to turn at the right times. It is projected forward a lot of bars so that we can get advance forecasts. We will just have to see how accurate it is this next turn. It indicates up for the rest of the year beginning some time in the next week and a half.

Good Trading

NO MAN'S LAND

In spite of all the media hype the stock market has basically gone nowhere now for awhile. Yes we are having these up and down swings that are hair raising for some, but net net, we have been in a trading range for about a month and a half. This is often what happens when you get a really volatile move down like what we had leading into August. There are no absolutes, this does not always take place. However, long time readers here will recall that I had repeatedly said I thought timing the next leg down was going to be tough, and it sure has been. I have taken one shot in the SP 500 and wound up scratching it after I had a huge open profit at one point in it. We do appear to be nearing another potential selling point if today holds up they way it is in the pre US open trading. The Russell is the weakest link along with the Dax, so that is where shorts should be done in my view, if they are to be done at all.

This is far from a no brainer trade now to me in that we are in the midst of a large congestion pattern. They have just spoiled all the fun. What we do have to consider is the following. We know the buy season is coming, typically the mid to end of October. If we continue to hold up this well, the buy could be a rip roaring trade when it gets here. Strength begets strength. It is too soon to tell. However, if the sell that should develop does not, the market is speaking and we need to listen.

One trade that is benefiting from this recent rally is the short side of the Bond Markets. It is a complete inverse situation now, and has been for some time, between stock and bond markets. You can see above in the chart of the 10 year, that we are right at a possible seasonal down period, so that gave some added support to shorting this market. Of course if we happen to get an equity sell, this is going to cause this trade some problems. Notice the trap pattern right at the high where we had a false breakout then reverse the very next day. I love these.

Well I suppose I have to cover the Gold market after what has happened. You can see the incredible down move we have had here. There is something interesting going on here. We slaughtered the short term trend line, but we have now dropped right down into the weekly trend support and bounced almost immediately. This is the line in the sand. If we close on a weekly basis below that level, the game is over for many years in this market. Until that time there is still hope for the Gold bulls. We could even see a large move up from here. I mentioned over and over that we would see $100 down days when the top came and we have seen that. My feeling at this point here is that with it now being in a weekly buy zone, the long side is the place to look for the time being here. Once we bounce, it will be time to take another look. I have no short term buys here so nothing at all for me here at the moment now that the shorts in Silver have been exited.

In summary, I do not know yet if this is the top. It is certainly acting like one, but as per the weekly support, I am not ready to declare it yet. Silver, of course made what will likely be it's top for many years earlier this year, and has fallen much harder than Gold. This is where I told people to short, so hopefully some of you listened.

I did read an interesting study done by someone who studied hyperbolic moves in commodities, and what happened during the ensuing 2 years following. On average they corrected 86% of the up move. I know Gold bugs will hate to hear that, and will have some reason as to why it will not happen in this case. I really have no idea, but the numbers are what they are, that is what has happened historically. The gentleman who did this study is Steve Briese, and he also was laughed at when he told people Crude would go back down the $30 when it hit $140 a couple of years ago. He was wrong, it went to $32! Go find his site if you are interested in reading more, he is one of the prominent COT analysts.

The next chart is the weekly Gold chart, and the trend is very clear here. My gut tells me we bounce and then completely crash over the next several months, but I have been wrong before in this market. As long as that trend line is holding the trend is still up.

 

When we get moves like this indicators tend to get really out of whack, so be careful shorting bounces. It is often best to let the dust settle a bit.

Good Trading

Is this Armageddon?

Now that we are moving sharply down in many places, the "experts" are panicking. My question is as it always is, where were they before this started? This has been one of the most obvious down moves I have ever seen, I don't know how much credibility someone could possibly have going forward, that has missed it. I am just amazed that some of these high powered networks can't get top traders on to get them better views on things. Maybe the appearance fees are not enough? Maybe they don't want the exposure? It is surprising to me that the people that get paraded out for us to listen to for the most part are not even traders. Often they are columnist's who have no skin in the game at all. Fox had one the other night that was such a cheerleader, even my wife who knows nothing about this thought he was embarrassing. Markets go up and down, it is not a catastrophe when something declines. This is all part of the natural ebb and flow of life.

I think people should embrace declines because it gives them a chance to buy something on sale. The above chart is that of the Dow with the VIX on top of it in green. This is something I touched on a couple of weeks ago. Once we get a bit more oversold here, under 15 in indicator, we will be in an area to sell the VIX which will also be a buy for stocks. When I project a down week this week of 200 Dow points, which is nothing right now, we do reach that zone. Now we have to close the week under 15 for this to be setup. This trade is not based on intrabar readings. I am likely to wait a bit on this because I think we are going to decline for another few weeks. However, I might leg into this trade, something I do not often do. This trade has never lost, so it is a high probability situation. Maybe this will be the first loss, but we can never know that. It is a fundamentally based trade with a perfect track record, there are not many of these. When I find them they are must do trades.

The above chart here is one I often look at, it has all three stock indexes stacked up. I do this to determine relative strength and weakness. It is clear that the NAZ is by far the strongest of these, and from a longer term perspective, that is very bullish. The Naz does tend to lead, so when it is really weak often that can be a harbinger of things to come. The reverse is equally true. This is not perfect in that you can see at the highs this year, the Naz was also the strongest, it did not tip us off to what was coming. Nothing is perfect. The difference to me was that was a non signal, here we have a signal. If we get into the end of October when we should be looking for buys, and this condition is still in place, it can be a confirmation for them.

The above chart is Lean Hogs, a market that is set up for a trade right here if we break that trend line I have drawn in on the chart. Again we find my COT indicator is not in sync with this and it has been decent in this market. Maybe that means the trade is no good, but it is one I am willing to do based on the seasonal down bias here. Not many things are perfect that I know of.

Here again we have the Dollar Index, which is setup still for the same reasons I mentioned the last time I pointed this one out. We have a rally in a long term downtrend, pretty simple. The high percentage plays is always to sell rallies in downtrends and buy dips in up trends. When the trend changes, the last trade will lose, who cares? If you have played all the retracements along the way you will have made a good bit of money, so if you give some back to the house on the way out so be it. I do not have any daily entries set up at the moment, so this is something I am watching. It is possible if we see more equity weakness like I think we will, this will just take off and never give us a sell entry.

Here we have the Russell 2000,  a place I am looking for something this week on a bounce. I have it diagrammed out how it will need to develop for me to get a signal with the techniques I use. This is always subject to change, but this is what it appears will need to happen for my indicators to pull me in here. Maybe we will get a month end bump up, which will set up a short entry.

Overall the trends are decidedly down, and if you are short, just trail stops. We have had gargantuan moves in many places, so I do not recommend establishing new shorts anywhere without bounces happening first. Just as it was with stocks a couple of months ago, so it will be here. Trading small bounces after huge moves like this is pretty tricky.

Good Trading

EPIC MELTDOWN

Saying I told you so is a trite move for anyone to make, but it is appropriate today. I mentioned yesterday that the mistake the Fed has made is that they have artificially manipulated things to such an extreme, that they had set the bar too high. It had set the stage for a disappointment at some point and I thought that time was near. As I peruse the markets overall this morning, this very well could be the largest down day across the board in history developing. I had also mentioned that all of the recent setups I had discussed were still in place, so I hope some of you have caught some of these moves.

I exited my Soybean Oil trade I have been discussing in here yesterday at the nearer of the two targets I had displayed. Of course this morning due to the overnight melt down, it is tanking and is way below my 55.40 exit. As much as this is a bummer, that trade was still a good trade. When you use targets they are just that, and when price reaches them you get out and say thank you. I would venture to guess that 60% of my trades do not reach the targets and I get hit on my trailing stops along the way. The goal when entering the trade is for it to hit it's target.

Here is another setup I had alluded to that I was watching, Live Cattle. You had a number of opportunities up here to get short depending on what triggers you use to play ball with. This just like every other chart has moved a good bit since I captured the picture and is looking good for anyone who is short this market. For that matter you can short anything except the DX and Bonds in periods like this and make money.

Speaking of the DX, here is that chart and this market has also exploded much higher than this overnight. I had made the note on the screen that the POIV was diverging but might catch up. I suspect with what is happening now it will. This is an example of a market I had pointed out as setup market for a short. It still is in terms of what a setup is, but setups are setups, they are not entries. There has been no sell entry in my world here. However, if you wish to ding me on this as being wrong that is fine, guess what, sometimes I am wrong! I had also said that Bonds I thought were setting up a potential top which they still are but again, there is not a single sell signal on any chart I look at yet. I also mentioned that the flight to quality would be here if we got an equity crash. We have an equity crash now.

I also had mentioned recently that I thought catching the next sell was going to be tricky, and it has been. This chart has just been a mess, very choppy sideways action. Fortunately, there have been moves in many other markets, so you did not have to rely on just catching this perfectly. I am not short in the indexes at the moment. I do speak from the heart in here as readers know, and my time of grief over my loss has effected some of my trading. I have caught some moves but not as many as I normally would have. In the case of the indexes, there really has not been a good entry by the techniques I use for a short yet this week.

So what to do now? First, be thankful you are a short term trader and not getting wiped out with some of the moves that are underway that are likely to keep going. This is apt to get a bit scary here in the near term. We are on the verge of panic spot for many people. The economy is not doing well, people are out of work, and now another market crash. The Fed has set this up, so now they have to live with it. It is impossible to know what they might do next to try and save this, but with the volume we are seeing, they are not going to be able to stop this and there is no sense throwing away billions of dollars to try to. I think at some level they know that, but behind closed doors depending on how bad this gets, you just never know.

Next, don't chase these moves if you are not already in them. There will be very sharp pullbacks at some point which will provide entries. The stops are huge in many markets now, so be careful with your money. You do not want to throw caution to the wind. Although fortunes are made during times like this, more are lost. You can go through the recent archives to read the other markets I have pointed out where I thought opportunities were presenting themselves.

Good trading to everyone

THE WORLD WAITS

There is no comfort in knowing where we have come to, I still have a hard time accepting where we are in our history. The markets everywhere are sitting perfectly still waiting for the Federal Reserve today. We have fallen so far that the only hope we have for the markets to rise is for the Central Bank too manipulate prices. As a result people are waiting quietly in hopes they will announce something else to artificially stimulate the economy. I just wonder what great leaders of the past would think if they were forwarded in time to this moment, and witnessed days like this.

What worries me the most is that this is so evident now, that they have had to raise the bar higher and higher just to keep us treading water. The expectations are so high now, that at some point no matter what they do, they are going to disappoint. When this moment happens we are going to have a sharp sell off. Just picture storing up rain water for months and years in a reservoir, trying to keep the ground below it artificially dry. At some point when it does ultimately get released, it is a flood that wipes out everything. Had you just allowed the rain to hit the ground as it came down over time, there might have been so soggy conditions that were unpleasant, but the flood that wiped out everything would not have happened. This is where we are. Their refusal to let the natural course of things play out is going to result is an awful end game here. I have been saying this for awhile now and I am more and more sure of it every time they do something to "prevent" a decline in anything. Why can't prices come down?

They are over promising and under delivering, a bad mantra to have. When I just watch the markets trading as if nobody knew they were open an hour into the day, it is all the proof we need that something has gone horribly wrong here. Of course that is just idle chat by me, nothing we can trade off. I would suggest not getting tied up in trying to guess what they are going to do, and putting trades on in sync with your guess. That is roulette, you may get a few right but in the end you are going to get wiped out doing that. Stick to your discipline and your normal entries. If you happen to get stopped out on one of these reports so be it. There is no way anyone can guess the true manipulation that is going on, and it is a waste of time to try.

The first chart for today is that of SILVER, cousin of the world's favorite market. Although from a larger perspective I still think we are going to move up in general between now and the end of the year, this appears to be setting up a possible short term sell signal. This market has broken down from it's highs of the year quite a bit, and is much weaker than cousin GOLD. I am watching this market for a short entry each day right now.

The next chart is Crude Oil. Although Unleaded Gas is the weakest, this whole complex seems to be setting up for a tumble again. It all depends on what the Fed does unfortunately, since this is trading in general in the direction of stocks. However, be on the alert for sell entries in this market. Even if the Fed does something really bullish, my gut tells me it is going to be short lived in terms of the rally it creates. I just think they have painted themselves into a corner and the inevitable is coming no matter what they do. If it does come, the short side almost everywhere is going to be the place to be.

There are other setups I have mentioned recently, and I can't put them all in one post, so check them out they are still in play except Natural Gas. Natural Gas just went straight down and never gave any buy signals. Also, someone commented on Sugar the other day. That is why I said to straddle the market, it was setup to break out one way or the other.

Good Trading

THE POWER OF ONE

More taxes, now there is a shocker, the kid has one pitch and he just throws it over and over. A one trick pony if there ever was one. Please someone email that jerk Buffett the IRS address so he can send them the money he wants too. He apparently does not have a phone book or internet access to find them. He has sadly just become a political hack, which is a shame. I can guarantee and would bet my life, that he would find a way of sheltering his money from Barrys taxes anyway. I doubt anyone has sharper tax attorney's working for them than he does. Tax loopholes are not mandated, the law does not compell you to use them. Also, why doesn't he give his secretary a raise so she can pay lower taxes? Aah the simplest solutions are always the most elusive aren't they? There was a time in my life that I worked for a company owned by Bershire and he is a notorious cheap skate. He thinks 100k is a lot of money and at that time did not want to pay anyone more than that regardless of their title.

Today's action was fascinating to me for a reason that will surprise you. Larry Williams in his weekly video on market setups called for a coming sharp decline in stock prices based on a few of his proprietary tools he has developed. It was like clockwork, the minute the markets opened it was as if all his readers just started clicking the mouse. Keep in mind that many of his readers are significant traders, some managing large amounts of money. Larry is one of the all time great traders, and his ability to time markets is legendary and rightly so. I know him personally, and he is brilliant. I owe much of my success to things I have learned from him.

One of my challenges which is always one with anyone who has a mentor, is that nobody is right all the time, nobody. He is wrong at times, so all of his students have to learn to think and stand on their own. That is his wish, and from knowing him, I know he takes great pride in seeing people succeed with his teachings. I also know he does not want people to follow what he says blindly, and he states that publicly often. Further, he did not say to sell Sunday night!

The lesson to be learned from this is as follows. No matter how good someone is or no matter how well you know them, do not just blindly follow anything. You should always take things under advisement and make your own decisions. This is why I am at times hesitant to make stronger statements about things than I do. I do not want everyone who might think I know what I am doing to just blindly buy or sell right at the open, just because I say I think something is going to happen. I love Larry, owe a tremendous amount to him, but I would never just buy or sell anything just because he said so, and further, he would not want me to.

Please, please do your own thinking! He does not trade like that so neither should you.

This type of action also tends to mess up fills on entries, and it also often leads to exactly what happened today, a huge reversal in the price. You get an initial move that exhausted itself, then reverses. As long as you keep your stops far enough back, the bounce does not matter other than if you are death staring the screen, then it might be a bit hairy.

The next chart is that of a trade I have shown before that I am currently in, Soybean Oil. I have two potential price targets on the screen, one is a projection using Larry's target shooter, the other is a nearby low point. In the best case scenario, the lowest one should be the true target. Most of the time we don't get to these types of targets without chopping around enough to get stopped out. I have not decided which one of these I am going to use yet at press time. There is no magic answer to this, it is a judgement call. It seems when I take the nearby one, like I did in Coffee recently, the further point is reached. When I aim for the further one the markets stop at the nearby one and reverse. Murphy must have been a commodities trader to have made such a law that seems so true.

The next chart is that of the Dollar Index, a market I am looking for a short entry in. You can see what I have marked off here with my COT indicator. What would be ideal would be for us to muck around for a bit here, and have the indicator fall down into the sell zone like it did last time while it formed a right shoulder. Will it? I have no idea. However, if it does, it will be a green light special since it will line up with the weekly trend which is decidedly down. If the stock market crashes this may head straight up, but interestingly, that inverse relationship seems to have weakened a bit. Maybe both can fall together like in the good ole' days?

I am not short the indexes yet, but you can see from the top chart, that my COT indicator is now in the sell zone again, so it is time to be looking for an entry. I do not see one for tomorrow. I am sure those of you that have assorted entry techniques, might be able to find a way in before I will here. It appears to me it is going to be a few days for any of my patterns to develop here, so I may miss this one. However, I don't chase markets, if I miss a move I miss a move. I take trades on my terms when they come along, that is what works best for me.

Poof!!!!!!

PERSPECTIVES

This post is done on Saturday and will serve as Mondays entry. The topic I want to cover Perspectives, is just like what it sounds like. As I have gone through this turmoil with my animals this week, and I have another one in trouble now on top of the one I lost, it just reminded me of how all of our decisions are the result of our perspective on things. I am sure that some people who read here were probably completely annoyed by my loss, and others completely sympathized with my grief. I wish it were different but it is okay, we all have different values. What is important to one person is not to the next. So it is with trading.

I have my approach that I use that may or may not suit the next person, but it works for me. Although it was never my intent, I suppose it is true that I am trying to influence others perspectives on market direction when I do posts. In my conscious mind I started all of this just to try and get myself known to the public a bit more, and along the way help people make profits in the markets. I think I am doing both of those, but who knows. I know as I watch this story break about how the White House has tried to get this one general to change his testimony in a way that would help a big democratic donor, it makes me realize that they are trying to influence perspectives also.

The one problem we all have, myself included, is that we tend to seek out things that support our perspectives and stay clear of the things that do not. I think this is a mistake we all make. Think about the above scenario, since it concerns our national defense being compromised many are up in arms. It is in opposition to the masses perceptions of what is good for us. However, lets look at another conversation that we know has been going on for a couple of years between the White House and the Fed. We know and at this point the Fed has admitted as much, that they have deliberately manipulated the stock market upward. If you don't think the White House has not had some input here, read up on the web about the PPT. In this case the masses give this a pass because their perception is that they have benefited from it in their retirement accounts, so it is ok. In other words they are seeking out things that line up with their perceptions. I can assure you had the conversations been to drive the stock market down for political gain instead of up, this scenario would be different.

What politicians do is no different than what corporations do. In my corporate experience during my life I have come across one lie after another from an executive. Everyone is trying to cover their ass, so there is no reason to expect a politician from either side to be any different. Just look at how the rare few that are very straight forward are perceived. When Perry called Social Security a Ponzi scheme, many people freaked out. Are you kidding me with that? It is absolutely a Ponzi scheme and could very well be what could be put in Websters Dictionary to define it. Paying of old investors with inflows of new investors money, and not returns on the original investment, is what a Ponzi scheme is. This is exactly what Social Security does. Further people have been calling Social Security a Ponzi scheme for a very long time, is this a news bulletin now? It is the opposition to many peoples falsely molded perceptions, that is causing this problem. We all get very uncomfortable with the truth when it is against what we perceive should be happening. Afer all how could our own government be engaged in something like this? That perception clouds our judgement and gets in the way of many seeing that Social Security is a textbook occurence of this scheme.

Now that I have bored everyone and have them wondering when in the world I am going to get back to trading, here is the tie in. When we line up a trade to execute, we do it from the perception that our techniques we use will accurately predict future price direction. After all we spend countless hours researching, even paying for seminars, reading books, etcc, to try and develop a reliable methodology. Most of the time when our methodology fails us, it is due to us not perceiving something we should have.

Let's take an example from a trade I recently made that turned out to be alot of work for a $100, after I let $15,000 of open profits evaporate in the process. I had been talking about trying to short the SP 500 for a few weeks, when the bounce finally happened and setup an entry for me. I showed that trade in here when I did it. The trade immediately moved in my favor and my perception at that point was that due to all of the other perceptions that I had from cyclical to seasonal, to short term indicators, I had a big fish on the line. As I was waving to the crowd I missed something that in hindsight was very important. The market reversed right at a critical spot of support. I would argue it was the PPT but no matter, a huge bounce occurred right as we were about to implode.

What I should have done was move my stop down to the high of that reversal bar because that represented a higher short term low than the lowest low, hence market structure in the short term changed to bullish when that high went. My perception got in the way of good thinking. I was so tied up in my perception that the market had to tank, that I missed the obvious signal the market gave me that it was not going along with my plan. The moral of the story is, do not get too locked up in your predispositions of what should happen. One of the most humbling things about trading is no matter how good we are, we are still going to be wrong a good bit of the time. Do not be so sure that you are right that you lose sight of what is happening in front of you.

As we head into next week, here are my perceptions, and then it will be followed by reality. First, I perceive on a weekly basis, that we are still in a downtrend. This is hard to dispute. We also are at a time when the seasonal influence generally results in market declines. The cyclical work I use also points down. However, the short term trend is without question up at this point. There is a steady bid under this market. If you watch intraday charts, we are rallying at the end of the day every day recently. Here is how I am reconciling what my perception tells me to look for versus what reality is telling us.

First, although I am looking for sells here, many of my short term indicators are long now, so I am nowhere near a short entry on a daily chart basis. Second, even though the overall cyclical projections show down, they do indicate a slightly upward bias here for the next few weeks, then a move down in October. The Seasonal also calls down but we are rallying. This is pretty much the same as the cycles, there is an up wiggle in the seasonals here, so we are not completely off the reservation here. In summary, my perception is to look for a sell signals, but what is in front of me does not tell me to short this market right here.

You can see below a prior market pattern that I think is pretty similar to what we have going on now. This is pretty much what I expect to happen, although I think we are going to be sideways to up for a few weeks from now instead of going down starting on Monday like this chart shows. Notice how after a decline we then started a nice rally during this prior instance. This matches up with an October low in that we dip down during the beginning of October setting up a buy signal for a nice year end rally. I know there are many saying I told you so we are doomed, see how the Euro is falling apart etc.. We told you so they say, buy Gold, hide in a bunker etc.. I think these folks are just too rigid in the thinking they use. They are locked in one perception and ignore everything else.

They of course could be right, but the next chart also tends to line up with my above scenario. It appears to me the Dollar Index is setup to take a plunge. I emphasize setup, this does not mean just go sell at the market. We have a classic pattern here. First, a defined down trend, commercial selling on a rally against that trend. Open interest is rising quickly which is bearish, and Sentiment has gotten very bullish. This is a recipe for a good downward move, so I am looking for short entries in this market right now. The DX has tended to move opposite of stocks recently, so I suppose this supports a further stock rally. Since I think stocks look like they could meander sideways to up for a couple of weeks, a DX sell also makes logical sense.

Good luck next week trading, and I should be back on schedule now for regular daily posts. Have a good positive thought for me and my big boy Zeus who is having trouble right now. I think he is going to be ok, but I thought that last week about Reggie and he did not make it. I am not getting much sleep taking care of him so it is possible I might be too tired to post a day here or there.

THE SUN DID RISE TODAY

As I went to bed the other night I was not sure the sun would rise the next day, and did not care. I was as down as I have been ever in my life from the loss of my dog. One of the things we have as humans is resiliency and we live to fight another day. I have such a good life and many things to be thankful for, and I feel bad that I lose sight of that from time to time. I have exposed a lot of my personal life here which is never an easy thing to do especially as I have readers here from countries all over the world. However, the easiest thing to do in life is to be yourself, and that is what I do for better or worse.

Since the blog is somewhat of an inner monologue I guess some things just come out since I shoot straight from the heart when I post things. The chart above is a weekly chart of Sugar, a market I had been bearish in and it just has never really come down much. The cyclical period for a decline has passed which was also lined up with the seasonal, and we have barely dipped. Now we find ourselves in a seasonal up period which also happens to be in sync with some bigger picture cycles, and we do have a clear uptrend still intact on the charts. It is for this reason that I am now looking upward here. I have a trend line drawn in, and I think this market is basically a buy as long as it stays above it, and it short if it breaks down below it. I can argue this market in either direction, but I do think the preponderance of the evidence points upward. My short term indicators also have both buy and sell signals, so the market could be straddled to some degree.

I have to admit that I am unclear in my view here, so usually when I feel that way I do not trade it until it becomes clear to me. I am undecided here, but wanted to give this update, since I had been bearish here and the market never really went down. I made a small gain on a short I had, but not enough for my monthly dog food bill ( not a small amount ).

Here we have the Sp 500 Weekly chart which shows that even in spite of this significant rally, the down trend is still clearly in place. You can see that my bands are in the 1251 area which is why I mentioned 1250 the other day as a general area where I will be looking for sells if we get that high. I do not know if we will or not. Something interesting does seem to be happening here in that an inverse stock market trade is developing in commodities. For the last 2 years you could have looked at Soybeans, a currency, of Crude, and they all looked the same as the ES chart. The stock market was driving everything in the world almost tick for tick. It appears now that we almost have the contra trade to that going on, very odd in my opinion. This makes me suspicious of this stock market rally. If we are really inflating again, why are hard commodities deflating? This makes me think we are still in a sell the bounce in stocks scenario, but I do not have any short term entries that are even close to being there at the moment.

Here is a trade that is setting up, a short in Unleaded Gas. RB as it is known for it's symbol with Genesis, has gone from being the strongest of this complex to the weakest pretty quickly and now appears to be in a look for a short entry situation. We have the down seasonal period approaching, and the cycles that I study are very prominently down, so even though my synthetic COT indicator is saying buy, the rest says to sell. Net net, I am looking for shorts here.

Nat Gas got clobbered today further clouding that picture in my mind. I do think Cattle and Cotton are setting up sells potentially one day next week. I also think the Bond market is getting close to a big top here. It may be a couple more weeks for Bonds but something big is brewing here I think on the short side.

Good Trading and have a wonderful weekend

TOUGH TIMES

As weeks go I would be hard pressed to find one that has been worse than this one has been and this chart above is a fair depiction of the ups and downs I have had. Computer problems are always a pain in the ass and we all have had them so I will not dwell on that. We can see with the SP 500 chart above the brilliant save by the PPT the other day when it looked like we were really going to roll over. I was heavily short at the time, and kept my stop back because I was really looking for a big decline due to seasonals and cycles and my indicators all being lined up pointing downward.

Alas, our good old friends who have been conspicously absent in recent weeks showed up in the last hour that day and created the moonshot that we have seen. I wound up with just slightly better than a break even trade, except a few stocks that I saw this reversal developing in and front ran the exits and made some money. I just never saw a logical target in the trade even though at one point I was up over 50 ES points per contract. Some trades just are no good, what can I say. I did say I thought getting that next sell was going to be very tricky, and that turned out to be correct.

Once they established that floor there has been a steady bid under the market on the intraday charts. Every time it looked like we might break, the market reversed back up again. I don't really see that as the PPT, they just had that one appearance in my opinion. Every up move is not the government manipulating prices, it is obvious when a huge decline out of the blue reverses in the last hour of a trading day. That is the CSI teams evidence they look for. When a day just stays strong right from the get go or meanders around then goes, that is generally not our good friends playing. We now find ourselves on the verge of a very nice looking upward breakout on the daily chart. It was interesting today that we were comfortably above that trend line until the very end of the day when we dropped off to close back below it. If we get clear of it we could have a good 50 SP points before we hit my resistance levels which are in the 1250 area at the moment. I do not think sells are lined up at the moment, so I am on the sidelines waiting to see if we get to 1250 where I will be looking.

I mentioned that I was short in the Grains, and here is a Soybean Oil chart showing one of those trades. I am surprised with the big stock reversal we have seen that the Grains and a few other markets have stayed very weak. Copper in particular went down a good bit while stocks rallied today, which is somewhat unusual. Maybe we are finally reaching a point where individual complexes will trade on their own, but I am not sold yet. We have had a couple of decoupling attempts that have failed, so this is in a show me situation right now.

Sadly, the next picture is that of the greatest loss in my life that I have ever suffered. Although this is a trading blog, it is also my forum to put out my thoughts, and occasionally I feel compelled to stray a bit. My puppy Reggie died tragically out of the blue this week at the age of 2, and this puts a hole in my heart I cannot describe. I will try and stay on top of my game here for this blog but I cannot promise anything. This is going to take me awhile to get over his loss if I ever do. He was such a sweet soul and was completely fine one day and gone two days later.

Please take the time to smell the roses, none of us are guaranteed tomorrow, so enjoy those who matter to you as much as you can every day of your life. If you are so inclined say a prayer for him, he was a special guy whose life was cut tragically short. I will love him forever.

Sorry for the somber thoughts but I owe it to him to do this. I am thrilled to get some of the emails and comments that tell me that some of you are really benefitting from my commentaries and making some very good profits. In a down moment like this that tells me I am making a difference, and that is all I ever wanted to do.

Good Trading to Everyone

I STILL HAVE COMPUTER ISSUES DUE TO HAVING TO SPEND A LOT OF TIME WITH MY DOG IN THIS EMERGENCY. I HOPE TO HAVE THINGS RESOLVED BY TODAY. I DID GET STOPPED OUT FOR A SCRATCH IN MY INDEX TRADES, AND THEY NOW LOOK VERY CHOPPY TO ME SO I DO NOT SEE ANOTHER ENTRY IN THEM ON THE SHORT SIDE HERE EVEN THOUGH OVERALL THE TREND IS STILL DOWN.

WE HAVE SEEN SOME PPT ACTION FOR THE FIRST TIME IN QUITE AWHILE IN THE LAST COUPLE OF DAYS, I HAVE NO IDEA WHY THEY LET THIS GO FOR SO LONG BUT THEY DID SHOW UP AT A VERY TIMELY MOMENT THE OTHER DAY WHEN IT LOOKED LIKE THINGS WERE GOING OVER A CLIFF.

HOPE TO BE BACK FOR TOMORROW. GOOD TRADING TO EVERYONE.

MANANA

Due to a emergency with one of my dogs last night I have not slept so it is going to be another day before I get things up and running with the new computer and get back to normal posting. I hope to be able to get all of my programs working today or tonight, check back in later tonight or tomorrow morning. In spite of the late day heroics yesterday, I do not see anything that has changed my overall view even if it means we bounce again here. The overall trend is still down in most markets. I did short some of the Grain markets yesterday ( not Wheat which needs a bounce for me to short ).

TECHNICAL DIFFICULTIES

I am having computer problems this morning and am trading from my laptop. As a result I am going to do something a little different today.

Below are just comments of things I observed this weekend across the board on the weekly charts. These are more along the lines of setup types of comments to then go to daily charts to find entries from.

Natural Gas - I have been talking about looking for a long entry in this market. In looking at the weekly chart there is nothing at all in the normal scheme of things that would justify a long except for a couple of little things. First, we are at the time of the year for the seasonal low to occur. We also have a significant accumulation going on with those types of indicators, diverging quite a bit against the lows. This tells me that we should be looking for some type of trend change to occur to get long.


Soybeans - The grain markets have been a bit stronger than the stock indexes but there is what I consider a big fly in the ointment, a very big Small Speculator long position. This is not something I want to see when I am looking to go long somewhere. It tells me to look for shorts in this complex somewhere. It appears to be that Soybean Oil is the weakest, so that is where I am looking within the Bean Complex. I also think Wheat is a sell candidate.


Silver - This market has the same situation as Soybeans, a big Small Speculator long position. Gold is the much stronger of the two here, so just in general if you are bullish that is where buys should be done, and if you are bearish, Silver is where your sells should be. There is a bit of a seasonal down influence toward the end of the month, so maybe that is where the sell will come in. I am not sure other than to say that this is a market I am looking for sells in.


Stock Indexes - readers know I am short in these markets right now, and harped on this move being a good sized one when it came around. We do not know if that will be true yet, but I noticed something pretty unusual in the COT data here. Even after the big decline there is a relatively large Small Spec Long position in the ES contract. I say relative because that is how you always have to look at these types of things, the absolute readings just alone do not mean nearly as much. It is a big unusual to see this and it could be quite bearish as we would expect them to be moving quickly to the short side being the band wagoners that they are. It seems hard to believe they could be bullish here, but in general when they are bullish it is bearish for prices.


There was a question in one of the threads about the COT reports, I do not recall who asked it. The answer is that yes they are released on Fridays and reflect positions from the prior Tuesday. This is not perfect, but it is not a daily indicator anyway. This information is more for bigger picture direction, so it lagging by a few days means nothing. This lag is why I have created my Synthetic indicator, which is designed to tell us with no lag what they are doing. I do not think the difference of live vs 3 days delayed means much.

I hope to be able to show some pretty pictures here in a few days, but the Geek Squad at Best Buy F.....ed up my hard drive transfer from the old to the new Tower Computer, and it is an Easter Egg Hunt trying to find anything right now. If there is any good news, I think the "conversation" I had with them will ensure that they think twice about copping an attitude with any customers when they have erred in the future.

The world is a short right now with a few exceptions, so nothing has really changed. Some markets are moving a bit away from being directly driven by stocks, but it is far from being back to the good ole days when everything traded on it's own.