I DID NOT MISS MUCH APPARENTLY

This is a shot from the mezzanine level of the CBOT last Friday. We were given our awards up there and then we turned and held them up and were cheered by the folks in the Eurodollar options pit. I took a picture with my Blackberry while we were standing there waiting for the awards. I also took a few others before getting spanked by the head of the exchange since they don't allow pictures! A few observations about the CBOT.

First, it was striking initially how many fewer people there are down there than there used to be before the electronic markets were introduced. It is relatively quiet most of the time down there other than frenzies right at the close. We caught a Trading Places type of close in the Soybeans that was hysterical. We were standing right next to the pit when the final 15 seconds came around. You could have heard a pin drop, until finally the one buyer gave up the edge and was bombarded with sell orders. Five just guys screaming right in his face. It was priceless.

Second, it is awesome to be down there with all the history that goes along with this place and what it represents. If by chance Chad or anyone else from Robbins happens to check in, thank for you a great experience. I enjoyed myself immensely.

Third, it is on the other hand sad in a way to see how this great bastion of capitalism has taken a hit. I wonder in 10 years if anyone will be down there filling orders at all? It was really interesting to be above in one of the conference rooms looking down after everyone had left at about 2 pm, and see all the little pieces of paper on the floor waiting for the clean up. It still reminded me of the good ole days down there. I never traded on the floor, but I am just referring to what it used to look like. Even the S&P pit was dead. It is certainly very easy to see how the Fed can manipulate a close now, by dropping in buy programs during these slow periods. The price has no choice but to zoom up, there is nobody there to take the other side. The guys might as well be looking at their nails to check their manicures out.

This elongated period of very light volume that started in 2009, is really bizarre when watching at home on the screen. It is even more eery watching it live. There was just nothing going on in many of the pits as we walked around.

I had a nice dinner with the other two contestants, and as I suspected, their styles were both completely different from each other and different from mine as well. This goes to show that there are many ways to skin the cat as I have always said. There is no "right" way to do this.

On the way back I stopped by Indiana to see my best friend from college Dave Morway who is the Gm of the Indiana Pacers. I went to a playoff game with he and his wife and kids. I can tell you this, going to a sporting event with the GM is a little better than going as a general admission fan! First, I did not need a ticket which was different. It is kind of like being President for a day. You go wherever you want, drink and eat way better than you normally would for free. You get complete access to the whole place form the locker room to the media area to you name it. I even got to go into the coach's office and talk some X's and O's with him after practice the day following the game. Just a great experience. I even got worked some by his staff whom he had obviously told that my award presentation was on Fox. They all told me they saw it. I had no way of knowing if it was BS or not. I was filmed live at the time, but I had no idea if it was on the air at that moment, or was going to be aired at a later time. As a result I was a sitting duck for getting worked on it, and they did work me a bit.

I will link to the footage and interview I had once I get the links. I think I did ok but I guess we will see once the footage comes out. I did not make any wise cracks, the mood was just not conducive to that. I had the privilege of being the only guy in the zip code who was not wearing a blue suit and a red tie, I guess I missed the memo. I don't wear suits and ties so they had to live with my standard attire upgraded slightly from flip flops to shoes etc.. The head of their security was one of the 4 FBI agents who captured Ted Kazinski, kinda cool.

The guy who won the contest Tim Rea is a complete systems trader to the point where the order entry is automated. He got me to thinking about getting more into developing more of those types of things again, which I am working on now. I am not a huge fan of systems, but they do take the stress down quite a bit assuming they work, a big assumption at times.

I think the stock market is going to make new highs now the way it appears. All of my sell signals are long gone. I am also looking at Heating Oil on the long side here. I am tired from the trip and crashing early. I will get more individual market commentary going again tomorrow. There is nothing that jumps off the screen at me tonight.

The Bond long was exited tonight on the open at 142'24 for a gain of 2/32's. No new signals there for tomorrow. This was a crappy trade in that we had to sit in it for a few days and be within one tick of a stop out at one point, before rallying to basically get a scratch. However, in systems all the trades are the same. This is no different than one that made 2k or lost $1600, and that is how you have to look at this.

Good Trading

Here I am back in Chicago gearing up for my gig on the floor of the Merc this afternoon. I am hoping to meet one of my favorite guys Rick Santelli. The folks hosting the gig know him well so if he is there and I get a chance to talk with him, I will relay his comments.

As it relates to the stock indexes, by the way I define short term trend, it is still down in spite of this lift off we are getting.

 

We did get an early notice of a possible trend change when the trend line broke here a couple of days ago. Sometimes these breaks can be false although generally they are pretty reliable. I would like to see a higher short term low now higher than the one 4 days ago for final confirmation of the trend changing to back up again. It certainly appears this is in the works.  Since I am in the "green room" waiting for an 11 am tip off here, I turned on CNBC for a twice a year check in. I do like Joe Kernan, I think he is a guy I would like to play a round of golf with. When they released the GDP numbers Bob Pisani made a very interesting comment. He said with the numbers the futures should have dropped quite a bit more, and the fact they did a quick 3 point dip and rally to new highs was QE3. 

In other words it is completely main stream now that the FED is manipulating the ES contract. It is mind boggling that this is so widely accepted. However, CNBC had a director from the CFTC on and they were discussing speculators manipulating the markets. They zeroed in on 10% as being a threshold that a speculator should not be able to exceed as a reasonable guideline for new regulations. This seems reasonable to me. Then Kernan asked why then the FED was allowed to own more than 10% of the treasuries and why they should have unlimited position size? He stated that it is basically we only resent people having large size and influencing markets, when they go in a direction counter to what we want.

This is the crux of the whole matter now isn't it?

This is exactly what I have been saying all along. If the FED were shorting the ES or otherwise manipulating it down, all hell would break loose. Since they are manipulating it up it is ok, every one's 401k's are rising, life is good. We don't have free markets any more is really the bottom line and it is sad. It is true that if the government got out of the way, markets would likely drop sharply initially. However, they would find equilibrium at some point and begin a natural rise based on fundamentals, that would be much more healthy. For those of you who think we should have everything based on GOLD, economic growth would be severely limited by that, you need to think about what you are asking for. I do not have the answer, and don't really care what it is. I trade short term, but I think just pointing these various things out is prudent.

If Pisani's comments are right, the FED is really day trading, and that is very alarming to me. However, it does tell us which way to look doesn't it? If we know they will move the market up even on a small dip like this, that means buy dips aggressively.

It looks like the trend is turning back up, so off we go again. I am still looking to short the markets soon, but just because I have cyclical things calling for a turn, that does not mean I can just blindly sell a strong market.

Have a nice weekend

Stop for the Bond trade is still in the same place and tonight was not a profitable open so the long is still on. Just for the record I puked out of my short for a loss early this morning.

I am busy preparing for my trip. The Bond trade with the system is still long, the stop was approached today but not hit. It is at 141'02 so it winds up one tick below today's low. When trading a system you just can't have opinions, so the trade is a long until stopped out or reversed.  Exit remains the first profitable opening.

If by chance we happen to trade below today's low tomorrow, much of what I have turns down sharply, so that would be a bearish development on a short term basis.

MOTHERS PREROGATIVE

As the creator of the Bond System I am it's mother, so it is my choice what I want to do with it. In this case it says to be long from the other day with a stop below. At the moment that certainly appears to be a bad trade, but as we know things can change in a flash in the markets. If that trade goes on to become a loss that will be two in a row, setting up a good time to start trading that system. We can perform a statistical exercise to measure the probability of certain outcomes, when you have an overall percentage that you know exists, and in the near term the percentage is off that mark.

An example would be that we know if we flip a coin 1,000 times, the distribution of heads vs tails will be essentially 50% of each. If there were a period of say several heads or tails in a row, that distribution is out of sync, and you would bet on it moving back to 50/50. It is the same with systems. This one has been generating about 87% winners. Now if we wind up with two losses in a row, the odds will be more favorable to start trading it than when it had several wins in a row, which was the case when I first introduced it here. It had a string of 10 straight wins, so a loss was likely coming maybe even two, just like we are seeing now. This trade is not over yet so we don't know if it will wind up being a loss. If this trade does wind up as a loss, the odds will favor trading the system going forward. Of course the other possibility is it is an early sign the system is breaking down. This is something that is impossible to know. You have to have an uncle point, and you just honor that if it continues to do poorly. Often running a moving average of the equity works decently. Once it breaks that you stop trading it until it gets back above it.

I said the other day that I did not take this long trade, and that I had decided to watch this before trading it live again. While I was busy not trading it, a sell setup developed that I thought was worth taking a shot at. I mention trap patterns often in here, and this seemed to be one to me a couple of days ago. When we had the breakout to new highs above the recent consolidation, I reasoned if it were to come right back down which it is doing at the moment, it would have trapped some breakout long players. Basically the stock market drives everything in the world, and with a bullish early move in the ES due to Apple, bonds declined and many other things rose. It just is what it is folks. I don't like this one bit because the FED basically has not only the nations finances on it's back, it basically has every individuals as well who has any investments. If they let the stock market go down, everyone will be hit. They know this and it is why they are not allowing it to happen. It will reach a breaking point, and that is going to be horribly ugly when it happens. It is going to be worse than 2008, but I don't know when it will take place. However, make no mistake about it, what they are doing can only end one way and it is not a "happy ending." Massage parlors are where you are going to have to go to get one of those when this starts.

The Gold and Silver action to me is interesting here. I do think they are setup on a weekly basis to rally, but the price action is very weak in both of them.

Gold is holding up better than Silver, and the COT picture is bullish. However, the price action is telling us we are still in a down trend. Until we break out of this down trend, then have a pullback, I will not be going long in this market. If for some reason the stock market heads back up again, and this does not come along, it would be a very bearish sign due to the high correlation this has to stock prices. It is too soon to tell at this point. For the moment it is setup fundamentally for a buy, price action is not confirming.

For those who say I am always bearish on Gold, I guess you will have to take a bite out of this one!

I will be traveling back to Chicago to accept my Robbins award at the Merc on Friday. I probably will not have time to do a post for Friday depending on what happens Thursday night. I don't know if this is going to be televised or not but I did have to sign waivers to the video footage rights, so perhaps it is. It is going to be done Friday afternoon. I am not sure what I am going to do spending a whole day at the Merc surrounding this event, but it should be interesting. I will probably be able to provide a link of the footage in here afterwards. I am usually good for a wise crack off the cuff quote, so hopefully I will come up with one or two on the spur of the moment when the time comes. I will have to gauge how serious everyone is, and whether or not there is a sense of humor in the house at the time.

Good Trading

REALITY OF A TRADING SYSTEM AND THE TRUTH FROM YOURS TRULY

This chart looks a bit funny to me but the new blogger platform is so god awful it could just be the way it is showing it to me while drafting this. You can see that the short was reversed to a long on tonight's open at 142'22. As a result the short lost 29/32's. The long could have been entered at a better price since it drifted a little lower after the opening.

So far we have one small win of 5 ticks and a loss of 29 ticks, so overall the system is down. For those of you who think you can just trade a system and just win on every trade, you really should just go do something else. There is nothing that has ever been or will be created, that will do that other than a time machine. I got an email from one of my favorite readers today and he made a remark about how large the stop was on the add on for the original trade I did was. What was lost in that was the add on was done at a price of 13 ticks better than the original. That meant the risk was considerably less than the original stop.

If you are intent on trading with systems, the one thing that has always been and always will be the case is stops need to be wide to get high accuracy. If you want to trade bonds with a $500 stop go to tick charts and scalp, or better yet just take half the money you want to risk and donate it to charity. That way you will have saved 50% of what you would wind up losing, and will have done some good in the process. I have seen so many trading systems that have failed including those concocted by yours truly. Wider stops give your ideas a chance to work, small wins condemn all ideas even good ones.

In the full disclosure department, I bailed out of the short Sunday night early when I saw that I was looking at a short in the ES. It was a judgement call, but it resulted in a small win with the add on and a small loss on the original, for a net scratch. I will probably never trade this straight up until I watch it live for a while to see how it does in live trading. I am not in this long tonight, I have decided to watch these trades for a month or so first. So I made a net 5 ticks basically screwing around with the first two trades, and basically not following my own rules on the second one. I like to think that my discretion at this point should help enhance results, but who knows if that really is the case.

It appears that my software is not predicting for the next day the correct price levels to enter these stock trades. I projected a close to the levels I posted and the software showed the trades were generated. Yet when I look at the levels in the indicators where the closes did meet the rules, the readings are not sufficient for the trades to be initiated. I have to call Genesis tomorrow to ask why this happened. I am going to have to figure out if I can correctly call these in advance or not, possibly not. The NSC parameters were correct, so that trade is filled by the rules. Also there was an annoying typo that I am fairly sure was not there when I proofed the stock trades. Did I mention how much I hate the new blogger?

The only trade I can see that excites me that is new at all is the Aussie on the long side, but it has to break out above the channel it has been in which seems unlikely tomorrow.

You just never know what is going to happen, but what I don't like about this long is how weak the POIV is, it is making new lows way ahead of the price.

Sorry there is not more, but I am not finding many trades right now. This is a very tough trading environment with a lot of sideways choppy action.

Good Trading

LOOKS LIKE SOMETHING MIGHT BE BREWING HERE

First of all for any readers who have their own blogs and use Blogger, I would assume you dislike this new platform as much as I do? It is impossible to find anything.

We have a classic triangle pattern here on the above chart of the Russell. I think we are going to break down out of this due to the heavy selling showing on this bounce here by the Commercial Proxy Index. You can see I marked the last two times this happened, so this should be the same outcome. The short term trend is down now, so the path of least resistance should be lower. The longer term trend is still well intact upwards, so I am not overly enthusiastic about trading against the FED. However, it is what it is. There is a legitimate setup here, and it could also be easily stopped and reversed to the long side, if we get a false break down first.

You can also see the new highs to new lows index I have at the bottom. This is something I referenced a few weeks ago as a reason to tighten stops and look for a decline to be coming.

I am kind of in a lousy mood due to a weekend long project from the wife down at the barn, that was brutal. One funny thing to mention was I was using cable ties to secure some material to a chain link fence as a smart part of this big project. While I was doing this I had the world's worst pick pocket, Vinny, constantly bashing into me and trying to muscle the cable ties out of my pocket. I could hardly get mad at him because it was kind of funny, but he has no future as a pick pocket. He almost knocked me over once and came close a few other times, he is pretty big now at 8 months, about 150 lbs already. He kept sneaking up on me that banging into me when I was not expecting him to.

I do have a new stock trading method I have developed that hopefully addresses some of the flaws of the one I had before. Here is what it has for tomorrow just to call a few out live to watch.

BTU - short any up close MOC

HAL - short MOC any close >= 33.29

NSC - short on a limit at 69.05 or better

There are others, but let's just watch these. No stops will be in place with these and they are very short term trades. The method only trades in the direction of the short term trend of the overall market which is down, so that is why they are all shorts and no buys.

The Bond trade still has the same stop and exit parameters. I also am looking at the long side in Cattle and Feeder Cattle for Monday if we start rallying.

Good Trading

WRITERS BLOCK

I am having a hard time finding things to write about with the markets as dead as they are. It is a good thing we have the Blind Man's Bonds system to talk about. You can see in the above chart the system is short still from 141'25 and I added to the short position yesterday at 142'06 where the arrow indicates. This was a discretionary call of course, but it is my blog and I can do what I want to, LOL! It was just my judgement for better or worse, that it was getting more and more stretched and I thought we were going to come back down some. The trade is not closed out yet so it remains to be seen whether or not this move was the correct one.

In the old days of using this system, I used to do this type of thing often since I knew the system was spitting out 90% wins. I felt that if I could get in better once already in a trade, that the odds were good it would work out. It did not always play out favorably. Often the good trades just roll right from the beginning, and you never have a chance to get on them this way. If and or when this is ever released as a service, it will be up to subscribers how they manage the trades. It will be my suggestion that it be done by the rules strictly and not to do this, but this web site features full disclosure, so that is why I showed this.

The stock market is controlling everything from the world economy to the presidential election, to the dollar. You read that correctly. Stocks are controlling the dollar it is not the other way around as so many people are writing. Just watch the intra day charts and see which moves first and which follows. I can't for the life of me see why so many people get this wrong. As a result, it will be necessary for stocks to stay strong for this short to work. Keep in mind that if the DOW was at 7000 now instead of where it is, people would be jumping off the nearest cliff they could find, and this knowledge is not lost with the FED.

Even though I am looking for a bounce in stocks into month end, if the market were to close right where it is as I type this, I would have a short term sell signal in the ES for Monday below today's low. The day is young so anything can happen.

I am now working on a short term mechanical S&P system that I hope to have done soon. We will also watch that live in here for a bit once it is ready, and see how it does. I have plenty of things that work but it needs more trades than what I currently have constructed. I have no time table on this one.

I wish I had more but I can't find a trade right now, perhaps the ES on Monday. There is one outside shot at something in the Aussie for today. If it were to get above yesterdays high I think it is a possible long up there.

Good Trading

REVERSAL

Bond trade #1 is in the books as a profit of 5/32's. The open tonight was 114'26 which was greater than 114'20 our entry so exit at the market, my fill was at 114'25. There was also a new trade generated on the opening so the system is now short at 114'25, I am in the trade. For the purposes of the blog some of these entries are going to be posted a few hours late like this. If this actually becomes a service, they will be posted in the web site in a timely fashion so subscribers can catch them in time. Most of the time you can catch them after the fact anyway as they typically go against the entry direction for at least a little bit even in the good ones. You can typically limit your way into them after the fact. I don't do this because you don't want to start out smarting a system, if you do believe me it will out smart you in the end. I take them just as they get spit out like a blind man would. You can see on the screen where the stop is being carried. Like every trade the profit objective is the first profitable opening unless we get a signal in the other direction, in which case the position will be reversed. Let's see how we do.

Ironically in my discretionary trading this market appears to be setting up for a sell although it is not ready quite yet. I have not bothered to study how often these mechanical signals sync up with my other types of entries, but it might be an interesting study. This system is just designed to catch moves on a very short term basis, whereas my other trading is designed to catch moves of 3 to 15 days or so. My old S&P 500 System has been a disaster in recent years. When I went back and looked at it, almost none of the old setups for trades in the mechanical system have held up at all. The ES is the toughest market to trade by far because it is comprised of a million people with $5000 accounts who have no business trying to trade. They get scared every time they are down $50, so the charts are just so choppy intraday it is brutal. I am not trying to be an elitist snob, that is just reality. You should have at least $25,000 in your account if you want to make a run at trading. You can do it for less but you are very limited.

My very short term indicators are looking very strong for stocks for tomorrow. Then depending on what happens, they could turn back down Friday on a decline, so we are at an inflection point here. I am leaning to the long side, but am not in a trade in the Indexes right now because I don't have an entry pattern. There just is not that much to talk about right now, the markets are horribly choppy.

One market to mention is the Yen. I do think that now this is setup to be a sell on a bounce of a couple of days.

We are in a longer term down trend, we rallied enough to trap some people into thinking the trend is reversing. Next we broke the short term support market on the screen. Now if we bounce up a couple of days then start heading back down, this will be an ideal short setup. If we just take off right here back up, the trend will have changed. It is in a show me spot right here.

DITTO

The Bond trade parameters are the same as in the last post.

I think it is time to go on the record here officially on the price of Gasoline.

This chart does get a bit messy but you should be able to click on it to enlarge it. The black line is the net position of the Large Speculators ( Funds Basically ). It is as clear as can be that they are the trend drivers both up and down. They typically are scale in on the way up, scale out on the way down or into short positions. This has been the nature of how they have traded for as long as I have been at this, and quite some time before that. This reality is what makes trading with the Commercials so challenging at times. They are constantly fading the market moves to hedge their bets. You have to keep in mind that the commodity markets were formed to allow producers to hedge their bets. As a result that is what they do now and always have done.

Along comes technology and large traders can trade somewhat mechanically and push trends up or down. There are multiple examples of both instances on this chart. In some respects it is true that the large specs are the trend drivers, so you can blame them on some level for prices being high. However, you also need to buy them a beer when prices are low. You cannot have it both ways. If they are to blame for rising prices then it is also appropriate to pat them on the back for low prices. Oops, I guess most folks do not have interest in the second part of that equation. The government just wants to control everything. I saw today now Barry wants to spend $52 Million to regulate Gas speculation more? When will this a.....ole ever save money on something. He just spends and spends and spends. The regulations are in place but there is one very big problem. There is one very dominant player in the middle of this mess, Goldman Sachs.

Allegedly they were involved the last go around when Oil prices flew higher housing a fund that had exemption from position limits even though it should not have. They also are rumored to be one of the proxies for the PPT. Net net they are very "inside" with the government. They also make quite a bit of money from their trading operations. As a result, I find it hard to believe that anything will really change here. They make their secret back room deals in exchange for agreeing to take the public spankings in the way of fines etc, while all along the insiders game gets more inside. Allegedly. Now even if we accept the opposite view that none of this is true, just the sheer size of the trades they make for others put them in a very strong position to be able to push prices here and there.

This is just the way the world works. Joe at the local bicycle shop probably has a favorable margin on a pump he resells making more profit than you would think. I don't really care about any of this and neither should you. If you just follow the price trends, this is just noise pure and simple. If it is pure folly it is irrelevant. As traders we can see the trend is still strongly up here on a weekly basis even if the daily chart has broken down a bit. We can see that the Small Specs have the largest net long position in history up here, and that is a looming problem for this trend. It is tough to step in front of, but if and when we get a trend break with that fundamental as a back drop, it will be time to aggressively get short here. Not yet.

I don't see much in the way of trades for tomorrow. I do have some weekly setups I like but drilling down to the daily is not giving much in the way of congruent entries. Just not much to do here other than watch the Bond trade. This is typical in that we cannot expect every trade to be great. I am glad the first one out of the gate is crappy like this one, so it does not give people false expectations. Trading is never easy and this will be no exception.

Good Trading

FIRST THINGS FIRST

The Bond trade is still going since it did not open this afternoon > 114'20. You can see the stop on the screen and the green arrow showing the entry. If the market opens tomorrow afternoon (Tuesday for Wednesdays trading day) > 114'20 the trade is exited otherwise hold the trade with the stop at 140'00. In this type of trading we don't concern ourselves with the fact that it did have a decent profit at one point today, the rules are the rules. You can't have an opinion one way or another when trading a system, you just take the trades blindly. I think I will rename this Blind Man's Bonds.

It appears to me we have some sell signals for tomorrow. The ES and the Currencies are basically the same trade, but they appear to be sells to me.

Here is the Swiss Franc. This appears to me to be a sell if Friday's low gets taken out. The trend broke there on Friday, and now has bounced. If we clear the highs of a couple days ago the setup is off. The Euro, Pound and ES are all basically the same as this. The ES ironically appears to be weaker. It would be a surprise to many if the stock market fell out of bed here so it makes me wonder if it might. The Bulls have had a stress free ride for 2 years here, maybe it is time to shake the tree a bit? We know the PPT is lurking which is the always present fly in the ointment for short selling the indexes. 

Even though we know they are out there we cannot consider that in deciding what to do. It is frustrating to watch an otherwise good trade get reversed into crap in the last hour by these guys, but there is going to come a time when markets return to their normal flow and you never know when that will start. I talk about it a lot but I never consider it in deciding when and where to short. I would say in general that I am looking more toward the end of this month to short the indexes ideally. It seems to me we are into some good support right here so shorts are going to be light for me until a bounce.

Most markets are just not quite right for me here, but I will short those currencies if we break down tomorrow.

Good Trading

BOND UPDATE

One final note on the Bond trade. If the afternoon session on Monday opens greater than Sundays opening price of 141'20 the trade is exited on that opening taking a profit. It is possible we could have a trade going in the opposite direction upon that opening, but for the purposes of monitoring these trades, they are all exited first profitable opening. Some of them might be reversed on that opening but we won't know that until the day session closes tomorrow, and the orders are generated for the next day.

Do not waste your time looking at oscillators and other things trying to figure out what is generating these trades. The odds are millions to one that you could ever figure it out.

Capiche?

UPDATE

I have added some patterns to the Bond system and as a result, there is a trade for tomorrow for us to monitor.


 Current Position:   NONE


Place the following order(s)...

To Enter Long:     BUY 1 Contract at MARKET
         (Rule:  "LM 12")

If entry is filled, cancel all other existing orders and place the following order(s)...
To Exit Long:     SELL 1 Contract at 1^20 below the Entry Price STOP
         (Rule:  "Exit Long: Stop Loss")

The System is indicating to buy the open and carry a stop loss 52 ticks below the opening price. We are going to monitor these live here for a month before I decide whether or not I will offer this as a service. For all I know it will crash and burn, but it has been pretty robust recently. The reason I feel this should work well overall is that all the patterns that are in this have worked for years and years and have stood up to the change into electronic markets. Time will tell. I am not a huge fan of trading like this any more but I also like to diversify some.

A GOOD SIGN

I am sure there are a few readers of the blog here that have subscribed to LW's new trading service. He has had a very rough start. I would wager this might be the worst stretch of trading he has ever had. He has a position in the above market which I won't reveal exactly since that would be a violation of confidentiality. This trade is not doing well at the moment and appears headed for a loss. He has had a string of them and I am quite sure many people are bailing out on him right and left, which is too bad. I am also quite sure knowing him and also knowing his track record and skill level, that he will right the ship at some point. These people that are bailing out are the same people that sold their stocks in March of 09 and never bought back in.

I admit that I have gotten concerned due to some unusual activity that I have observed in markets where these trades have been done. I think it is mostly because most of the subs are 1 lotters who are not following the rules correctly, thus causing erratic volume surges. One very encouraging sign occurred just the other day. My friend I talk about from time to time, just bailed out on the service. He is a very good indicator to fade generally in trading. He is the epitome of someone who has success in other places but is seduced by trading. What he fails to realize is that knee jerk emotional reactions are what will kill you trading. These same gut impulses can serve you well in other types of ventures. He is so emotional trading that he will never succeed. I think it is time to double down since he just bailed. It is highly likely the service will get on a roll now. For those who might be down on LW I can tell you he is a man of the utmost integrity and I am sure he feels terrible about the performance thus far. I would ask people to give him a chance, I have seen him trade live enough times with real money and make large amounts consistently over and over.

I had the trend line that is on the above chart in here the other day and you can see we went right up to it and crashed back down. This market is at the seasonal low period so if it is able to get above that down trend line and change trends, this could be off to the races. It has not done so yet, if that line holds we could just keep going down.

Here is a market that is set up for a potential sell, the YEN.

The one thing that really jumps out at me here is the huge bullish sentiment reading that is in place, the blue line where I have the arrow. This is happening during a rally in a down trend which should make this a good selling opportunity. It appears to me the Dollar is about ready to rally so most currencies then will decline, if that takes place.

It appears to me that energies and stocks are a buy right at the moment on this dip, which should set up a potential end of the month top.

Since one market is basically a proxy for another now, the Crude setup might as well be the ES setup, risk on risk off as they are saying. Let's just go with it until it changes which it will at some point, but we have had this going on now for a couple of years or more, so it is not a flash in the pan. I think as long as the FED is manipulating prices this phenomenon is going to be in effect. I think that means until the economy gets better, which is not going to be any time soon. If Barry gets another quattro I would expect the economy to be bad for at least 4 more years or more. He may have done enough damage for it to be bad even if he is gone, he is that talented. I wish someone on FOX would interview a  rich guy and ask him how many people he will hire each year per 100k Barry wants to take from him? To think that raising taxes as much as he wants to is not going to effect employment, is so ludicrous that nobody could be dumb enough to really believe that is a good idea.

If you are one of those people rooting against the rich people you are a moron. Has there ever been a great country that featured all poor people? Some people will always do better than others, trying to penalize those that are doing better is so preposterous I just can't believe anyone is dumb enough to think that is the solution. I have things that I do, and if that DB raises my taxes I will stop doing them and people that need help from people like me won't get it. Maybe it will have to be tough love to show these people. Maybe we should just step aside, let them makes us France. The DOW will go to 1500, then we can start all over again. Rich people hire poor people, poor people don't hire rich people. I have traded terribly for the last month or so, who is going to bail me out? I would not ever accept anything like that.

The wealth effect the stock market rally has brought has been helpful to the psyche of the american public, so that has been a good thing.

The next chart shows one big problem I see for stocks moving ahead.

This huge bullishness in small investors is a big problem that should lead to more of a decline than what we have seen so far. However, for the moment I think we are in buy the dip mode on a weekly basis until this really breaks. Once we bounce then it will be time to take another look at things.

There is no Bond trade for Monday, I warned you this system only trades 3 to 5 times a month.

Good Luck next week

500k, April 27th, Same Old Movie

If the Next Bar's Open is 140^02 through 140^13 then...

Place the following order(s)...

To Enter Long:     BUY 1 Contract at 140^14 STOP

         (Rule:  "CJ #03")

If entry is filled, cancel all other existing orders and place the following order(s)...

To Exit Long:     SELL 1 Contract at 138^26 STOP

         (Rule:  "Exit Long: Stop Loss")

This was the orders tab for the Bond System tomorrow. We opened at 140'14 which is why the chart says no orders on it, the opening condition for the trade was not met. This is how these types of things work. You just blindly like a drone follow the rules. Hopefully we will get a trade soon to do here.

The topic of todays post is a pot pourri of things. First the 500k. I just saw a run down on Fox of the biggest spenders in Congress on mailings. The leader was a Democrat from New York, and he spent just under 500k in mailings last year. Here is the best part. The bulk of his mailings were about how against irresponsible spending he is! You just can't write comedy any better than that. Can you imagine spending a half a million bucks telling everyone you don't spend money! I laughed for 30 minutes over that one.

The date of the award ceremony on the floor of the Merc for the Robbins contest from last year is set for April 27th. They are flying me back and putting me up and a nice hotel for this gig and it should be quite interesting. They have the press room reserved for a full day just for us, and apparently a couple of financial reporters who I am supposed to know but have never heard of are going to be doing interviews. I see myself as the Happy Gilmore of this group and will act accordingly! I do get to start trading the house account where I get a 20% cut of the profits pretty soon. What they are trying to do there is find the next star I would assume, and then market to clients to put money into trading programs. I am not sure where if anywhere this will take me but it should be fun. I had to sign a waiver on my rights to the video of the ceremony and interviews, no big deal to me. I will give a summary of the event once I get back.

It is starting to look like the same movie is coming back out again like another Titanic re-release with the stock market. We exploded today, and like many of these other deep pullbacks, this one is starting to look like it was a fake, and we are going right back up. My short term indicators are telling me not to sell a break of today's low tomorrow, and that is what has happened in the past as we just soared back up again time and time again. Maybe after tomorrow's close this will change for Monday but for now that is how it looks, higher.

As you can see we are still above the Intermediate low from a couple of months ago, and nothing bad will happen as long as that holds. What is bothersome is the high level of Small Spec longs in gray on the chart from the COT data. You can see they have not been this bullish at any point on this chart, that is bearish. My Synthetic COT indicator has drifted into the buy zone in Green above. I am not sure what to do here, but I have nothing either way for tomorrow. My gut tells me this bounce is still a sell, but my indicators are not supporting that feeling, nor are they saying buy it, so nada for me Friday.

In what is no surprise at all in the world of one trade, is that many other markets from energies to currencies, are in exactly the same state. They are rallies against short term down trends, and it is tough to tell if they are sells or we are going right back up again. I am debating how candid I want to be about this in any interviews in Chicago that take place. I will probably bite my tongue since I don't want to open up a can of worms for myself from politicians and bureaucrats.

Here is the Sugar market which is setup for a sell in my view. We have the commercials short, the small specs long and price rolling over. I think if we get one more bar up this is a sell for Monday. I mentioned RB the other day as a sell, the next chart shows the trade I did there which turned out lousy.

This trade looked like it was dynamite for a while then turned around and I took a measly couple hundred points out of it. I did not expect much out of it but thought it was worth a shot.

I wish I had more, but everything is still trading basically the same as the indexes, and the indexes are unclear for Friday. As a result, so is everything else.

Good Trading

SORRY COMPUTER PROBLEMS TODAY, THERE WAS NOT A TRADE INDICATED IN THE BOND SYSTEM TODAY SO NOTHING MISSED THERE. I SHOULD BE BACK UP IN RUNNING IN TIME FOR TOMORROW

WAX ON WAX OFF

Before I get to the post, the above chart of Bonds shows once again we have no orders for tomorrow with the mechanical system. You can see some of the green and red carrots on the chart showing the recent trades it has generated, all winners. However you can also see it does not trade that often. There is no way to trade every day and trade at a high percentage regardless of what any con man might tell you. To be accurate you have to choose your spots. I said I was going to put this at the end of the posts but tonight I got a late start so I decided to put it first.

I will update this post in the morning but wanted to put this out since we are trying to follow these live even though there is not one for Wednesday.

Since our world rises and falls together, we appear to now be in fall mode. The PPT has not saved the last couple of closes surprisingly, maybe Ben has tennis elbow from clicking that mouse at noon every day?

Here we can see the near term support I mentioned broke so short term the trend is now down. From a larger term perspective this is still a wiggle, the real more significant support points are way at the bottom with a minor one being marked on the chart. We have the highest stakes in the history of the country in this election, and the powers that be are not going to want the stock market to have any kind of decline until November is past. If it happens to that will tell us a lot about the underlying forces, if they are able to overpower the government manipulation of the stock market and send it lower. That would be a very dire sign and I don't expect to see that. If he gets 4 more years for people like me at 52, he will do so much damage that we won't recover in my working lifetime. Please if you are against him go out and vote. Please if you are for him stay at home and pass on election night! The one asterisk is that if you are a short seller maybe you should vote for him, he will crush the market eventually with all the things he is doing to ruin the US. I have never seen the markets as difficult to trade as they are now and subscribers of Larry's new service are also seeing evidence of the difficulty of this climate. If he is having trouble how does that bode for the rest of us plebes? One thing we are seeing that is alarming to me is a huge number of outside bars on the charts. I don't know what is causing this other than probably large funds having models that buy and sell above or below them. It is making trading very challenging.

We are in sell the bounce mode at the moment. If by chance we just rocket back up again out of this low point wherever it forms, it would not surprise me in the least bit. However, for the moment most of my short term tools, that quite frankly have not worked with a crap for the last month, are saying to short the bounces.

Here is one market that has been in a huge down trend that I think is setting up to be a buy. Technically we have a couple of higher highs and higher lows here, although this is not exactly a ringing endorsement for a trade. If we were to break out above this trend line I think we could have a good run up. Perhaps we will just fall back down, it would not surprise me, but I just thought I would point out one market that is not a sell the bounce for me right now.

Good Trading

SELL THE BOUNCES

We are now in sell the bounce mode in many places, the stock indexes,  energies, currencies, meats. When situations like this arise the decision to make is always, is this a dip to buy or has the dip gone enough where you sell the rallies thinking the trend has changed. There is no easy answer to that dilemma that I know of and if I knew it I would not tell everyone. It would be worth millions so I would hog it probably. I would then write about it when I was 70 etc.. 

Everyone approaches the markets and the world of trading differently, and no matter who you are and how well you have done, you are going to have periods of sub par performance. Anyone taking Larry Williams new trading service is certainly well aware of this. Here he is one of the all time great who has made millions and millions of dollars trading, yet he has had a rough stretch in his trading service he just began offering. I have made many emails on this as if I have the answer as to how he has had a bad stretch. My answer is always the same as I field questions about whether to drop the service. When you have a method that you know has an edge or a person who has had great success. you bet on that method or system more heavily when it is down. You don't wait for everything to get better then start using it again. If you do that you have missed the whole recovery period after suffering through the draw down. Please set your emotions aside.

I find it ironic that the author of the End of America video is now very bullish on stocks. He was as bearish as could be for the last two years. Now that we are nearing all time highs again he is bullish? Good grief! Nobody ever gets it right every time, but you do have to learn to bet with the odds not with your heart. Buying dips beats buying rallies in every statistical study that I have ever done or read about. This will always be the case. If you subscribe to a service, have an uncle point, but until that point comes, bet a bit more heavily after down periods to catch the reversions to the mean. This is not brain surgery.

When to comes to the decision of whether to buy the dip or sell the rally, fall back on what your trading techniques tell you to do. Mine tell me the short term trend has changed, therefore I will look for shorts on bounces. If you are a longer term person, this certainly would not designate a trend change, so your method might be telling you to buy this dip. That approach has certainly worked fantastic for the last couple of years. What I have to deal with in my approach is that when these bounces occur sometimes they just keep going, the trend gets re-established back up, and I am not on the train until the first pullback. I know the benefits and drawbacks of how I trade even if I don't always like them. I live with them.

One of the best trades I know of is when this momentum indicator rolls over then we get a bounce against a declining line. This has not happened yet, but it does appear we are beginning to roll over here. It is best to see 5 or more down periods in the blue line in a row, then a bounce to set up this trade. We have not done that yet, we just have 2 down periods thus far. Keep in mind this can decline on up bars, it is based on a longer measurement of trend and momentum. You can be sure that I will be watching this to see if it sets up the way I just described. It does appear that things have changed. The PPT did not show up today for some reason, and we actually declined during rescue hour. Watching how the market closes is generally a good barometer of the short term momentum that is going on. Weakness into the close begets weakness, strength begets strength, etc..

I do like the way Oil looks to decline after a bounce. In this chart I have marked off the look I was talking about above in the momentum indicator. This market has been weaker than the stock market, so I expect it to fall more once stocks give back some ground. I also love the fact that the media and all the "experts" hopped on the bullish band wagon a month or so ago. That had top written all over it. I even sent in a chart to Bill O'Reilly after watching Lis Wiehl embarrass herself telling us all the oil companies were buying gasoline futures. The COT report of course showed they had the largest short position on record at the time she said that.

Talk about a Pinhead! Unfortunately some people listening to that probably went out picketing oil companies the next day not knowing she was as wrong as anyone has ever been in the history of the world. I got no response of course. I wonder though if they checked into it, found out what an erroneous report that was and quietly sneaked away from it like Carl Spackler in Caddyshack at the end once he set off the dynamite. 

It does appear we are about to get some good action. 

BOND SYSTEM

No trades for tomorrow

Good Trading

GAME CHANGER PART DEUX

With the stand up comedy out of the way now that is the NFP report it makes me wonder how in the world these guys are going to get this under 8% by the fall. They have pulled every trick in the book now to artificially make this lower than we all know it really is. We know this is the F You I Won administration, so maybe they will just say "well we just decided to not count any union worker who happens to get laid off because we are buying their votes anyway and they are on our side." It would be just like them to dare us to call them out on something. The last time I checked unprecedented meant without prior precedent. If so that means never having previously occurred. It is curious how the Supreme Court in one article I read has overturned legislation based on constitutional grounds 22 times in history. I guess the new math is 22 = 0. If they apply that to the NFP stuff and say that every 22 workers out of work equals zero, they can get the number where they want it. When our imperious leader basically threatened justice Kennedy, you would have thought this man heralded as the smartest man on earth would at least have some of the facts straight. Lets face it folks, he is just plain stupid. I do suspect as many do, that Justice Kagan called him or informed him in some way that it was 5 to 4 against, so he went and did what he knows to do, threaten and be a bully. His timing of the threat certainly suggests that he was told by someone what the vote was.

However, he is smart enough to keep pushing his bet and believe me when I tell you this. If he gets 4 more years you are going to see stock prices back down to where they were in March of 09 or lower. He will continue pushing socialism and racking up more and more debt until it crushes us, that is certain. The FED keeping rates artificially low to attempt to neutralize all of his mistakes is only going to work for so long. I mentioned 1280 on the ES recently as a level to watch, and it just broke during the electronic session Friday. This market is now all of the sudden a sell the bounce situation. I really don't know if Romney is a great candidate, but for god sakes anyone is better than this guy, even Hillary.

Now that we have a short term support break at a seasonal time when prices normally dip, I think it is time to look to the down side. It could be a rough ride though because the PPT is lurking and we have to expect them to buy the ES between 12 and 12:30 every day on down days like they have been doing recently. Whether or not a big day can get away from them now or not I have no idea, but it is setting up to look that way. The way to play it might be to just have stops above the last pivots on hourly charts in case they show up with a massive buy program here and there. You will give back some of what you have made but you will also be giving a trade a chance to really run for you, and that is where the big money is made.

I have skipped a few days of posting mostly because of a comment I deleted that never got through that really pissed me off about one of my dogs. I suppose I should not have such thin skin, but anyone who thinks they are going to screw with me on that subject better be damn serious about what they are doing. They are my family. Whoever you are if you are reading, you are not welcome here ever again. I guess I can't stop you from reading but maybe it is time to password protect this site to get rid of people like you.

Having taken a few days away, I got to thinking about one of the things I have been talking about doing. I have decided to resurrect my old Bond Trading System. I went through it recently and was surprised to see that many of the signals have held up very well over the last 4 years. I eliminated all the ones that have done poorly. What I am now going to do for one month, is put all the trades from it live here the night before so we can see how it does. Assuming it performs like it has been, I will then make it available for a fee at my old web site which I will re-open. It is not indicating any trades for Monday. I will put the specific order and prices for execution and we will see what happens with it. The fee will be fairly low. I will also be taking the trades just like I used to do. I think if you have a service you have to have skin in the game. If you have subscribers paying for something you should also have a personal stake in it beyond just taking the monthly fee. Most people don't do it this way but as readers know, I am not most people.

It looks to me now that most markets are sell rallies now. The next market is somewhat of an aggressive trade but it is one I am going to do. 

This is Unleaded Gas a hot topic market if there ever was one right now. It is the strongest of the energy complex, so that is a negative. However, it has that little reversal bar right at a trend line. If that low were to be taken out Monday, this is a sell for me. It is a fairly tight stop, so it is worth a shot. It is also a triple divergence in my proprietary oscillator which is not shown, so I like to take shots at those when they come along. Heating Oil has that same reversal bar and is weaker so perhaps that is a better trade.

I will be back to posting every day again and I hope that jack ass who left that one message has found more fertile grounds somewhere else. I apologize for the edgy tone that has been present recently, the illness of my one dog is taking it's toll on me. We have lost so many in the last two years that at times this just becomes a bit overwhelming. I suppose I am making an excuse but I am human and it is what it is.

Lets try and make some money on the short side on bounces this coming week. Going forward the orders for the Bond Trading System will be at the end of the posts. It does not trade every day and at times goes several days with no trades, so be prepared for that. It is mechanical, so whatever it spits out is what will be posted.