NEW SHERIFF IN TOWN

It might be hard to believe, but little Vinny is 8 weeks old, you think he might be a big guy by the time he is full grown? I think we have our future center for our hoops team. My wife and I decided to get one puppy to try and get one dog to live a long life with us. That is what we had been trying with our youngster Reggie when we lost him, so we decided to try it one more time. We were fortunate to be able to get him from one of the top breeders in the country who had planned on keeping him and using him as a stud/show dog. They changed their mind at the last second, and we were lucky. We have also rescued a 3 year old from Vegas, so we now once again have a full roster of 5. Four rescues signed as free agents, and now a lottery pick. I will never completely get over the heartbreak of the loss of my two boys we just lost, but there comes a time in all of our lives that we deal with tragedy and we have to try and move on.

One thing I have learned as I have gotten older, is that moving on does not show disrespect to those we loved that are no longer here. It is part of the natural cycle of life, and losses are what make us appreciate those things in life that are important to us. I do not consider myself to be in any position to tell anyone else what they should do. I simply tell people what I do and what I learn, and those who read here can hopefully benefit from it.

These types of things are no different than trading. No matter who we are we will have strings of losses, and we cannot let them get us down when they come along. It is easier said than done, a string of losing trades can shake your confidence, and get you out of sorts very quickly. One thing you have to learn is that you have to move on and not dwell too much on bad trades. Study them, learn from them, then move on. I was actually trying to remember the one bad trade I made this month right at the beginning, and I could not remember what it was. I had to look back in my trading journal to find it. I guess I practice what I preach! It was only a couple of weeks ago and I could not remember it. I suppose it is always possible that was a senior moment, but I hope not.

I am still holding out some hope albeit minor at this point, that we get some minor type of retracement here to setup a long entry to hold for a bit. It is not that important to me, but for anyone who might have been waiting for the green light from me to get long, I blew the low point. I usually try and get a higher short term low when trading against a trend this strong, but we got a V bottom. These types of spike lows do happen at times, and I usually but not always, miss them. When I was younger I had all types of fancy formulas to try and catch them, and just never got it right. It is no way to trade trying to pick spike highs and lows. I implore newbies to pitch the efforts to try this. It is easy to craft systems to pick these based on past data, and I can tell you that it is virtually impossible to do it consistently.

Here is something I came across tonight during my prayer session for a pullback, and it is somewhat alarming.

The above chart is that of the weekly Naz 100, the leader in this recent rally. You can see we are almost back to the yearly highs with this already. However, look at the huge amount of divergence in the POIV accumulation/distribution indicator. The readings in it are barely off the lows! This is very surprising. If you notice just the last rally, this led the way as it typically does during trend moves. I have to view this as a major red flag, and under normal circumstances, it would tell me to look aggressively to short this move.

However, we have the PPT lurking along with the seasonal and election year tendencies, so the prudent bet is probably this will catch up. It does bother me enough to back me off on my long entries I was contemplating for the time being. I do not like trading against this even though at times I do it. The other indexes are still under their 200 day moving averages, and extremely overbought. I am still waiting for a pullback, and this tells me it might be bigger than I thought if it does happen. I think the PPT will aggressively buy any pullback here, so this could be very interesting. I am still leaning to the rally scenario in spite of this, but this cannot be ignored. Look how it telegraphed the decline in both May and July.

Here it is again in the Sp 500. I think it is telling us at least for the moment, that this is overdone temporarily. We are also seeing light volume on this rally, but the whole rally off the lows of 2009 featured light volume also. In spite of what is written and commonly talked about in regards to volume or lack thereof on market moves, and what that means for their staying power, there is no consistent relationship between these two. Do your own research and you will see that quickly. Of course that 2009 - 2010 move was driven mostly by the Fed and their buy programs during the last hours of the trading days. 

I do not know if that is happening now or not, but it is not as obvious as it was back then if it is. Sometimes it is blatantly obvious and other times it is not. Once QE3 is launched we can throw out all the technical stuff we look at and just look long. One great pattern after another that has worked for years broke down during the 2009 rally, so it gives us good precedence for the power of the QE programs. It could be that a sharp retracement could give them the footing to launch QE3.

Other markets that seem in play to me are Unleaded Gas, the meats, and Natural Gas might be setting up a buy here soon. I also think the 10 and 30 year and setup for a rally still so buy signals should be taken there if you have them. I am still in the Coffee trade with trailing stops and targets above, so time will tell where I get taken out of that one. My trailing stop insures a profit now so it just becomes a matter of whether this is really going to run, or if it is just a small little move. I guess I am the only writer who does not know, everyone else seems to always be sure and never be wrong!

Good Trading