COTTON PICKIN - COTTON TO DECLINE?

Here is a market that is setup about as well as something can be for a decline - COTTON

First off we are right at the time of the year where the seasonal pattern calls for a top and that is especially significant considering that we have been following the seasonal very very tightly for months now. Next, we have our good friends to fade the small speculators heavily bullish in a big long position. This is also happening with the commercials heavily short. In the world of COT analysis it does not get much better than this.

This is a very thin market so we have to be careful how we get into this trade. I do not see a daily entry setup yet, the above is a weekly chart. It is time to start looking for a short position in this market.

I do not have any divine wisdom to bestow upon stock market folks, the trend is up and that is that. We are in an area where a short term turn could be setting up. I am teaching a pattern in the Newsletter this month that is setup right now. I think readers will enjoy this one. It is a setup like the above but not related to COT data. It is a setup in the sense that it is not an immediate entry situation, it is a setup to begin looking for one from. It is not infallible, neither is anything else. I also cover a setup in the Bond Market right now.

I think what I am going to do is have featured setups in the members section of the new site, with some explanations of what they are and why they are setups.

PFG UPDATE

There is no real new news here. Offers from bad debt buyers are .40 for 4d and .10 for Forex. Now the pissing contest begins over how to divy up the remaining assets which are far less than what is needed. Nobody is going to come out well in this, it will be the biggest loss in history on a percentage basis of all of these situations. In perusing the court docket section I notice there are many duplicate claims which are being backed out. As a result the total claim amount vs what is there is going to improve some as far as distributions go. It is anybody's guess when another distribution might occur but my gut tells me no sooner than June and perhaps much longer. I have no inside information and have stopped following it for the most part except when this one idiot from a bad debt company keeps calling me forgetting he has already called 10 times.

If you are a victim like me I would suggest just forgetting about this it does us no good to worry about it. We got screwed and it is what it is. Others will befall the same fate so maybe when the next one happens and it will, we can do something to help them. I don't know what it might be but it is good to focus on something positive. The money is gone and it is not coming back other than some small next distribution that won't be much.

Good Trading

IS THE EURO DOOMED?

Over lunch today with my friend who likes to dabble in trading but is really a deal maker in everything else but trading, he asked me about the EURO. What do you think will happen to the EURO? Hmmm

My first answer was just straight from the gut and it was "I don't see how it can't go down with the house of cards that is Europe." As I thought about my initial response afterward I think I got it basically right. How in the world this whole thing can ultimately stay together with all that is going on is beyond me. That does not mean it will fall apart tomorrow, but over the long term there is going to have to be something that gives. All these countries are so upside down and they are only where they are because of the world wide central bank interventions. Without those I think we would have already seen things unravel. They can delay all they want but they can't prevent what is ultimately going to happen.

The challenge before all of the central banks now is to see if they learned from Greenspan the art of rotating bubbles? Have they figured out how to inflate one thing while another deflates like he was able to do? It does not appear they have to me. Perhaps the game has changed in that rates are already so low that lowering them further has diminishing effects. That is my feeling overall of this effect and if you look at Japan we see the model for extended periods of zero interest rates and how stagnation just sets in. I think that would be a best case scenario if we could pull off what Japan has had, it could be much much worse than that eventually.

The news today of this release of all these criminals orders by DHS is about as shocking as anything I have ever seen. Essentially they are trying to scare people to voting for more tax increases. They are letting convicted criminals free because we can't afford them just because we are spending less than we would have spent, but more than we spent last year. What business lays off all it's people during a year where they spend more than they did the prior year? 51% voted for these tactics, that they will release criminals to intimidate people who are rationally saying no more tax increases, to vote for them. The Repubs should dig their heels in for all that it is worth now IT IS ON. If they don't the rich are heading into the 70's in tax rates before this jerk is done. If he pulls that off he will leave a mess even bigger than the one he has already created as hard as that might be to believe. This guy signed the bill he is now saying will cripple the country if we don't do something to override what he signed off on? HUH?

I veered off into this dialogue because this is going on around the world. The powers that be want to pay off the majority by stealing from a minority group. It is incredible that people don't understand why this won't work. Getting back to the EURO, how can this currency remain long term when most of the members are essentially bankrupt and are being supported by basically one country, Germany?

The chart above shows a near term bearish scenario but potential short term support due to Sentiment being overly bearish at the moment. If you look at the overall chart you can see for the last few years we have been in a down trend. If we were to start to roll back down here, all bets are off. For now over the next week or so I think it is sell the rallies in the EURO, which means nothing for the big picture but it means a lot for how I am looking to trade this. In summary, I think from a large view stand point over the next 5 years, I don't see how anything good can come out of what is happening in Europe without significant pain first to wash out everything. This deleveraging has not thus far been allowed to happen either there or here in the US. It needs to happen. I am not rooting for it but I am stating what I think will ultimately have to happen.

I had an email exchange with a good client today regarding the Bond trade I showed yesterday. I want to make it clear that was a trade from the Bond Trading System and was not in the Swing Service. These two approaches are completely different as I state in the web site. At times there can be a Bond trade in both and at times they could even be opposite of one another which has happened. It needs to be understood that these services are different and have completely different parameters for the trades. I was commenting in the post on why I felt that the mechanical bond trade looked good but that had nothing to do with the signal. That system is automated and spits out trades when it spits them out. At times if they line up with something else I watch, I may at times take more contracts on the trade. It is a judgement call and I discussed that to make a point so I apologize if I created any confusion with that. I look for trades to last for more than a day in the Swing Trades, that Bond trade was entered and exited in one day. It was obviously a great trade and not all of them work out that well.

We are short the ES right now and I am not sure if we will bounce but if we do another nice sell setup for a short term trade could present itself. The spammers have been killing me with comments that I have had to moderate so I apologize if I mistakenly deleted anyone's comment. Sometimes when I check in there are just pages of spam comments and I am deleting them all. Yikes! Maybe I will let the Swedish Penis Enlarger messages through for a chuckle!

Good Trading

STOCKS FINALLY CRASH - BLIND SOW FINDS AN ACORN, READ ALL ABOUT IT!

For those that have been talking about a sell off all year they were finally rewarded today. The question is whether or not they have any money left by now? Oh they will tell you they called it you can bet on that. I can see the email blasts and blog posts right now. We did get short in the Swing Service today where indicated, so we spoke with orders not BS arcane stories that mean nothing. We had no talk about the Sequester, politics, or any of that. Also, we did not apologize for metals declining we left that to others. Further, we don't really know whether or not this is going anywhere or not, this was one day with a wild reversal. One thing you should take note of, look at all the OUTSIDE bars on this chart. This is what I would call a market change that is happening.

More than a third of the days this year in the E Mini have been outside bars, this is very unusual. For those who keep stops close this has been deadly and I think this is going to continue. We have some very irregular activity around many of our orders as well. I think there are a lot of fancy programs designed around trading short term. When you get this you also get all kinds of stops bunched up. If you combine that with people giving away signals to funds or brokers, chat rooms, and all sorts of other things, and all of the sudden you get huge bunch areas where resting stops are sitting. This is why we are going to be moving our stops back some. We got picked off in our Euro short today with an order that I thought I had back far enough but it was not. Days like this are what they are. We did ok in some other things like our booming winning trade on the long side of Bonds, one of the best we have had. I did something unusual with this one, which I will explain.

You can see where the original entry was on the opening of Sunday's night session. I had noticed coming into this trade that there was a huge amount of upward momentum that had not yet been reflected in the price, that was in one of my proprietary indicators in blue. As a result if this mechanical trade went against me my plan was to add on to it, I don't often do this and it is a complete judgement call. During the night I had someone cancel the Bond service, most likely during the middle of the dip when the trade was going against us. To me the market was speaking. If the weak hands were selling I wanted to be buying. If someone who had likely taken the trade and panicked because it was down enough to cancel, that was a buy signal in the subjective world of trading.

Of course this could have been a credit card problem with the subscriber or a coincidence you never know, but to me it was the final kicker to get aggressive on this trade. This could have really gone against me and if it had I would have taken a larger percentage loss than normal, but it was a judgement call I made that was pretty obvious. When momentum is going up that strong it is usually a good idea to buy into weakness. The mechanical entry had nothing to do with that logic at all. Just doing that one stand alone worked out very very well making about $1750 by itself.

I don't mean to pick on this person but there is a point to be made here. I have seen people come and go at the worst possible times in and out and back in and even back out again in the Bond System. This is a system that has consistently made money since it's introduction. If there has been a better one available for public consumption I would like to have someone tell me what it is. Yet people go in and out etc.. This is why most people don't make money trading. Folks this is not an easy business, it is difficult. You have to do what others do not or cannot or are not comfortable doing. Panicking in trading is going to give you immediate relief when you get out, then long term pain when you realize you have done the wrong thing. This negative feedback loop is a tough one to break.

I have made these exact mistakes in my life more than once and it is why I constantly harp on this. "Don't be that guy." This is stressful and it is even more stressful if you stay glued to a screen all day long. Today I had my live quotes turned off after I added on to the Bonds last night. I watched the ES at the open for a minute because of a new method I have been messing around with that bought the open today and was stopped out at Friday's low had I done the trade which I did not. I am watching the trades live out of sample to see how they work. It is a trend based method so it is going to lose when trends change like this appears to be doing. This year so far it has had 11 trades with 9 wins and two losses with today being the second one. I am continuing to monitor it, today was lousy but just one trade so not a big deal.

I will review a few other trades in the next few days including the Euro where we appeared to have a gangbusters trade going and got picked off today for about a $900 win instead of much much more we could have had. That is trading.

THE AUTO TRADE PROGRAM WITH ROBBINS FOR BONDS IS FINALLY TESTED AND READY TO ROLL.

I spent a couple of hours on the phone testing this today with some tech guys and it is working well so we are ready to go now on the next trade. As a wise gentleman by the name of Murphy who has a law named after him would predict, following a monster winning trade like this, the next one will probably be lousy! We will plow forward regardless. If you are interested it is ready, call Ryan at Robbins Trading.

Good Trading

TRADING WITH THE TREND

This may seem to be a very simple chart and it is by design. I want readers to notice that the big money was made trading in conjunction with the trends. I think many of us myself included look at a chart and are immediately drawn to the peaks and troughs. If we could only sell at the peaks and buy at the troughs life would be good. We then dedicate years to trying to find ways of doing this effectively. At the end of the those years we have nothing to show for our hard work.

This is not to say that you can't ever trade against a trend, but it does show that for the most part the big money is made trading in sync with it. In the Newsletter we have shown some good simple techniques for trend identification that work quite well. In general the more fancy you make things the more you run the risk of data mining the technique and condemning it to fail in real time. I have made that mistake countless times over the years. Newsletter readers, stick by those techniques, they do work.

Over the weekend people tend to find a few hours here and there to surf the web and catch up on what happened during the week, I also tend to do this. Whenever I do this I always come across in depth articles of theories on why something should go up or down. I cannot for the life of me imagine trying to trade Gold by trying to assess whether or not central banks are messing around with the values, propping or depressing it illegally. I also can't imagine creating these convoluted streams of logic as to what is going to happen with the dollar, the deficit, etcc.. If you are a trader do not read this stuff. If you are just perusing and don't care about being right or wrong but want to be able to combat the local snot nose punk at the company water cooler, have at it. On the other hand you could read a book on back fist techniques and just give him one, up to you I suppose. I think readers know which way I would go on this one.

The point is that the real driver of price is the trend. The implosion in the metals is no surprise because the trend is down and has been. The big moves happen in direction of the underlying trend. Yes we do have crashes out of the blue and it is nice to be able to catch them. However, have you ever considered how many moves you miss trying to catch big reversals? I personally have missed a ton of them by doing that and I bet you have too.

The lesson, don't do it. Trade with the trends and use stops to protect you against the big crashes. Let the wise guys like me try and do that stuff.

The new web site is getting close, now it is a matter of what I can manage time wise to put in it. I am deciding this right now. As much as I would love to do a chat room, it is a complex under taking and probably not going to happen initially. We are going to have a members section which is going to be separate from the services, that will have good new content. It will probably be $10 a month or something cheap like that to get access to that area. Within that area is where a chat and or trading room will eventually spring up. If anyone has any suggestions of what would help them the most on a daily basis please email me.

Good Trading

NATURAL GAS VERY UNNATURAL

Once again we have unusual price action in one of our trades and folks this is getting very very tiring. We seem to be having this once a week now and it is costing us. Here is what I propose to do next.

I am offering a $500 cash payment and 6 free months of either one of our trading services to anyone who can give me information on who is doing this to us. If you have someone else you know who is a subscriber to our services that you suspect please contact me. I will guarantee anonymity to you and will pay you once the person is caught. I will pursue legal action against them once they are caught, but will pay the reward once they are identified. Don't be a wise guy and turn yourself in for $500 etc.. this offer only applies to those who are not the unsub ( unknown subject for those who don't get that ).

For now we are going to have to eliminate trades in markets like this and I will trade them on my own. I cannot afford to have my trades screwed up like this by some greedy bastard who is selling us all out for whatever they might be getting from it. I won't bother asking nicely anymore for this person to stop this, it is time for more than that. I may have to send out a one page document requiring everyone's signature to continue using our services. This is a serious matter and I am not taking it lightly. This should not be a problem for anyone except the person who is acting inappropriately. It is already in the disclaimer that you are not allowed to do this, but the language is going to be stepped up and a fine added.

 I cannot for the life of me understand human nature sometimes. Why in the world would anyone do this, our services are so cheap? I try to conduct myself in a straight forward and professional manner and would never dream of doing something like this to someone else.

There are still plenty of markets for us to trade where this jerk off can't effect us so that is where we will play. We have net lost money in these small markets anyway due to this ongoing problem, so we are better off without them.

The world's favorite market is in play once again, GOLD. The apologists are everywhere right now, manipulation they cry! I won't bother even dignifying that garbage. In all fairness when you don't trade and try to be an analyst you can get caught up in stuff like this.

Here we are approaching the triple bottom that is very well defined. Basic technical analysis teaches us that the fourth test typically breaks through. From a long term perspective life is still good for Gold Bugs until a breach of this level occurs. If a breach of that level occurs trying to establish a support level would be meaningless, the trend would be decidedly down on all time frames. With support and resistance you want to use them in conjunction with the trend, if this level breaks it will be the resistance levels for shorting that will be what need to be determined.

My thoughts on this market are well documented so my long term bias is well known. However, I trade off technical tools. I have made a good amount of money on the long side of the Gold market during this spectacular historic rally off the lows over the last 10 years. I am not sure if this level will hold or not. If I had to guess I would say no based on how sharply we are approaching it. Also with the apologists starting to come out and claim the market is being manipulated down, it is starting to feel like Real Estate and Stocks when they started to come down and the bulls tried to talk them back up.

At some point in life I think you need to make things as simple as you can. The water cooler economists that are virtually everywhere, are so tied up in their underwear over all this convoluted logic with no historical basis, that they have lost sight of something very important. When the price of a commodity gets over extended by multiple standard deviations in either direction, history has shown that 100% of the time a significant reversion takes place, 100% of the time!

100% OF THE TIME

Gold at it's peak was 4 standard deviations to the upside, the same as Real Estate was at it's peak. Of course it is always possible that it could be different this time. Things in life do change and at times things do happen for the very first time. However, when betting it is a much higher probability to bet on what has typically happened, not what never has. It will be entertaining if history proves itself out again, watching how crowded the exits get. As Dr. Evil would say "it could be quite breath taking." For those with big ones and who are perma bulls, you could make the argument the commercials are starting to buy here to support this low and go long. I am obviously not in that camp.

Good Trading

THE NEW COT REPORT

FED MINUTES

I have been talking in here about the PPT and it's manipulation for quite some time and now many other sites that are more popular than mine have picked up on the theme and have been running with it. There is even a specific traders name at the Fed I am finding mentioned in a couple of places.

Today was a case in point of how things have changed with the COT data and the stock indexes. The Commercial position in the large pit contract used to be a very good tool to use to position yourself for large stock market moves, NO MAS. Since the FED officially took over control of the stock indexes either by trading them directly or indirectly through Proxies in 2009, the COT Data has been terrible as a tool for analyzing the stock indexes. What we all have to learn and re-learn over and over is that things change and we have to adapt to those changes whether we like them or not. One such change is that the dominant player is the FED and they are the new commercials for the stock indexes. When they release meeting minutes or other statements, I am looking at that as the equivalent of the COT data release. When they make a statement like they did today where they hint that there is an end to what they are doing, that is the equivalent of them lessening the long position they have as if they were commercials.

There is one difference between looking at the FED as a commercial and the commercials themselves in the COT report. The commercials are hedgers in the COT data so timing moves based on their positioning is a bit tricky as I have discussed for a long time in here. The FED is not a hedger they are a one way trader. When they are changing their positioning it should cause essentially an immediate reaction. They are not forward selling crops or hedging them. They are solely trying to drive prices only one way and in an immediate fashion. If we know when they are buying it is a no brainer to be with them. We will still take an occasional loss doing this, but not too often.

On a bar pattern basis I have no idea whether or not today's decline means a thing. It is another example of consecutive outside bars a pattern that has occurred often recently across all the markets, which tells me indecision more than definitely bet the farm. However, you just never know. This market although clearly in a strong trend is very very extended in both price and time, so a correction or more can occur at any time. Today's action by itself does not mean anything to me stand alone. I still would prefer a break and re-test for any short position I might take for a hold. My mechanical system was short going into today in the ES so that trade is going  to work out it appears.

I am going to work on this new COT idea and see what I can come up with for a tool. For now it is somewhat of a subjective idea, but clearly has a basis in fact which is always a good starting point for something.

Gold is rapidly approaching the moment of truth, if it breaks through the numbers I gave recently the Emperor having no clothes will finally become clear. I maintain as I have for the last couple of years that the whole skit with Gold is one of the biggest shams ever put over on the public right up there with real estate and Internet stocks. I don't know if this is finally the breaking point or if it will come later, but eventually it is going back down under $500 right where it started from. The head lines and stories will be very interesting when that happens. For now it is still holding the critical levels but they are not far below. It is time to really start paying attention if you have been holding this for a long time waiting for $10,000 to be hit. If you don't have an exit strategy you better get one in case this fraud finally gets exposed.

Must see TV right here.

Good Trading

ES TO THE MOON WHERE WILL WE STOP?

Forget about the Vix the VWAP and all the other garbage out there about why this has to come down and the economy is going to crash. More people have been cleaned out trying to short moves like this than any of us can count. It will become clear when a trend change is here and until that time what is the point? Just go back and look at chart patterns like this and you will get the idea.  There will obviously come a time when things change, but until that happens there is no sense in getting bled dry trying to short this move.

I saw someone mention the other day somewhere that the market was going higher on short covering, really? Who exactly and where are those people who are short. This is a bull market short covering is not driving this. You would have to be a central bank to have deep enough pockets to short this for this long and still be solvent. I have been telling Newsletter readers to stay long each month and this is why. This is a trend and we need to ride it. There are always chinks in the armor and there are a couple here, but until we get some type of price confirmation they need to be ignored.

The chink if and when one develops is going to be higher interest rates. We do not have that as of yet but stay tuned. If rates to begin to rise things will change.

TRUE TO MY WORD

I mentioned we were going to be keeping the stops back in the Swing Service going forward and here is an example of a painful trade that finally payed off by doing this. We shorted Copper where indicated on the chart and kept the stop above where indicated for several days before we finally got the payoff and a decline where we exited. I have specific exit strategies that I follow and just like with any other strategy, they are not always perfect. In this case this trade was a two day exit after break out, so we exited on the second day where indicated. Today we are down again at post time so it could be that this keeps going, so be it. I have found with the specific pattern I used on this trade that over a large sample size the best results are to exit on a 2 day breakout. Some times they keep going. We took a decent profit on this trade so what it does now does not matter. If we had been using a different pattern for entry, the exit might have been such that we would still be in. It wasn't so time to move on.

I will be back home finally later today after a week long trip and will be able to post regularly once again. The trading signals might be a little late today due to travel schedules so bear with me.

Good Trading

IS THE DOLLAR REALLY WEAK?

Here is a weekly chart of the Dollar Index. In spite of all the talk in the media about how the dollar is being devalued every day, you can see that in the index that is not true. We are at the same price level as we were in September of 2010.

If you look at what I have marked on the chart they are two sideways congestions in down trends with a sharply declining ADX. The first one showed a very nice rally we don't know yet what will happen with the current one. The next chart is another prior example I thought was similar to what we are looking at above.

Like many things I show in here this is a setup and not an entry commentary. There needs to be some type of break out from this area to confirm this potential move. We are still in a down trend so I might very well play sell signals on a daily chart from here. We were long in the DX in the trading service this past week and made a little bit of money based on a shorter term pattern that triggered. I do also see some potential sell signals for next week in this. However, in the bigger picture I am leaning more to the long side.

We are seeing a decoupling of most markets with the ES now which is exciting. If the FED just wants to make sure the ES keeps rising that is fine by me as long as they leave the rest of the markets to fend for themselves. Perhaps this means the overall the economy is getting better underneath, I am not sure. What the overall state of the economy is doing is not part of how I make trading decisions so it does not matter.

The reason Gold and Silver declined this week is because they are in down trends and have been. Why people feel they have to make an excuse or find a reason as to why they went down do not understand how markets work, that could not be more obvious. It is also why stock prices are rising, the market is in an up trend. You do not need to know more than that.

Bonds are holding the critical level they need to hold so far and appear to be headed for a potential break out back upward this coming week. This is good for everything if it happens. Low interest rates are good not bad.

Enjoy your weekend

CRUDE MELT DOWN

See I told you see....... In all seriousness I have been talking about Crude as being setup for a decline but I have been early so definitely not spot on with this call. This market has had commercial selling into what I consider resistance areas, hence I thought it was a sell. However, that does not mean run out and short the market. Translating weekly setups into daily trades is a tricky little endeavor. It is mostly what I try to do in the Swing Service and it is not easy. 

There are a couple of ways you can look at this Crude setup right here. First, it has clearly broken down on a very short term basis. Second, it is right into what could be a support area. Which is correct? The answer is the always crowd pleasing, "it depends."

If you are a very aggressive trader and try to front run what could be a big move and are willing to get stopped out a lot trying to catch a big one, you should be short right now. If you are someone who wants a confirmed trend break and then pullback, nothing has happened yet. In the latter camp sometimes you don't get the pull back and the market waterfalls in these instances. If you are in the former camp, you get a lot of stops and starts and have to be willing to keep swinging until you catch the one that really moves.

There is no magic answer to which way an individual should approach this, it depends on your personality. Personally, I tend to get fatigued having to trade a setup time and time again, getting stopped out a lot trying to catch the big one, so I tend to wait for the break and retrace. I miss moves sometimes doing this. At other times I have setups that have an edge and I wade in with trades like this early. I do think in summary the ideal  situation for this would be to wait for the price to break below the current level and bounce. I have no idea if that will happen or not.

I have a few explanations to make. First, the Silver trade we did, why it was exited where it was instead of being held because it has fallen off a cliff and we missed a gigantic move. Second, what is going on with the Bond service with the Robbins auto trade program.

The Silver trade was exited because the entry pattern has a rule that it is exited after two days if profitable and the market does not close at or near the lows on the second day. In that case the market closed up with a reversal bar the second day so we exited. It is unfortunate but rules are rules and they do not always catch everything perfectly. I put those trades in there the way I make them so when we miss something like this I miss it too. I wish it were different. We did still make money so it was not a total disaster.

The fiasco with the Bond trades at Robbins was a combination of a fault on my part and one on their side of the equation. We had a recent trade in Bonds that wound up making a small profit after it went against us quite a bit initially. While the trade was upside down I was told by a tech guy at Robbins that I might have a period of time where I could not access my account due to the back office software add they had to make in order to set up the auto trade program. Since this could have happened at any time, and Murphy's law would surely have had it happen over night leaving me no way of exiting the trade, I exited the trade at the market with the intention of not making any more trades in that account until the software program was implemented. The problem with that is that we are tracking the trades in real time to build a record in their system and this totally messed that up. I was between a rock and a hard place on this. I had a trade that no matter what I did was likely to show a result that was different than what the system rules indicated. Further, I stood to have the problem further exacerbated by potentially missing an additional trade as we worked to get this done.

The solution is we are starting from scratch now. I am waiting for the back office software to be installed and working on my computer, then we will move forward with all the live trades and the following of the system by those who want to do it through Robbins Trading. This is mostly my fault, but anyone who has ever been caught in a trade, like we all were with PFG when it went down, and could not get out for days and watched money just vaporize, would likely have done the same thing. There is nothing to worry about with their system working, it works fine. What happened here is that Vision dragged their feet responding to the tech guy from Robbins Trading, and I while this was happening not knowing when a potential non access period could happen, just exited the trade fearing the worst. There is blame to go around.

There are a few of you waiting on this so I wanted to make sure everyone fully understood what happened, When I enter a trade through Trade Navigator there has to be a back office program that works to automatically do that same trade in the follower accounts. That is the piece of software that is not installed yet. Since Vision has many options for placing trades, there are also a few options for the back office software interface. The delay has involved selecting the right one, getting Vision to set it up on their end, then get it to me. During the installation of it once this was all resolved, there was potential for a brief period for me not to be able to place an order. I should have done all this first but I simply was not aware of all the back office things that had to be set up for this to work. It will work seamlessly once it is installed but it may be another week before it gets done.

My apologies for this, it is mostly my fault, I got kind of jacked up with these guys and in the midst of all of that I exited a trade that wound up making a profit at a loss, so the track record is all messed up. When we combine that with missing the first two trades of the year which were big wins, the record was so far from what the real trades were, it is just better to start all over again in the correct fashion. It there are any questions please email me.

Good Trading

ES SELL SIGNAL

My mechanical E Mini System does have a sell signal for tomorrow. Most of the sell signals this year have been lousy and the only two losses it has had have been sells. Just looking at a chart that is kind of easy to see why they have been no good. I have no reason to believe this next one is any good either but I will take the trade if it is triggered. It does require a decline down to a certain level to trigger so it may not happen.

I am traveling tomorrow so the orders for the services are going to be out a little bit later than normal. The good news is that I don't see much if anything that will be there anyway except for one key market, and it depends on what happens tomorrow in that one. You can see on the chart above the last short term trade was a profitable long entry that was exited on today's open, which followed a losing short trade.

I want to draw attention to something and that is what I have been writing about in the Newsletter each month. I have told everyone to stay long ever since the first publication, so I have been dead on with how to keep your positions in the stock market at a time when so many people are citing all sorts of reasons as to why the market has to crash right now. However, the one condition that I have been discussing that could spell trouble for stocks is developing and getting very close. For those who get this if and when this does develop into a sell signal there will be a special bulletin that will come out warning you. I will not mention it in here at the time due to protecting the interests of those who are getting that each month. What is fair is fair.

For the time being the trend marches on in the face of all sorts of reasons why it should not be doing so according to the experts. We should get a lower short term high if and when a trend break happens, so there should be plenty of notice. For now every little minor dip gets bought and the President smack talks on a daily basis.

I have to admit I am trading crappy the last week or so just moving ahead slowly and it is frustrating. However, when I look at most of the markets with a couple of exceptions, I see a lot of choppy price action. RB has been an exception as has Cotton ( a market I don't really count ). Wheat has maintained a good trend down and that is about it. The action in the VIX tells it all, just get a load of this chart.

It is my view that when the VIX is trending this strongly you do not want to try and fade the stock market. The conventional wisdom on this would tell you to be shorting here. I have barely lived trying to do that in the past and I do not recommend it. Although the VIX measures volatility and as a result this indicates extreme complacency, we have seen this type of complacency go on for very long periods of time in this new era of Fed control. There will be a sharp break that will happen but I cannot tell you when. I would not recommend new longs here for the purpose of a long term hold, but this is also not an obvious selling spot to me yet.

Good Trading

GOLD SELLOFF

This is a chart of Silver and represents the counter punch to the gamed Gold trade I showed a couple of days ago. We went back into these markets at the point marked on the chart, 3160. The reason to have done Silver instead of Gold was that during that crazy intra-day action when the Gold trade was filled and stopped out then went back down. It was interesting that Silver which is generally not as liquid of a market as Gold, did not have the level of shenanigans. It does make we wonder just exactly what happened there with our orders. However, in spite of that when I saw the move back up was a fake and a trap, I went back into the trade and also put a trade in the service for Silver the next day if it bounced a little. It did so, I took that trade also.

We have got a little bit of a move then it reversed so we exited tonight and made more money back by a good amount than we lost in that screwy Gold trade.This is trading folks, real world, not a bullshit chart showing 7 consecutive trades the seller never made that all won. I went into a web site that won an award last year and sure enough the charts they have never show any losses. I can tell you from having checked out some of their techniques in a webinar that not only do they take losses, some of them plain do not work at all. When I asked them about it they admitted some of them don't work. Huh? However, they show charts with no losses in their web site. I personally think this should be illegal. I have losing trades all the time, so do they and more of them than I do by the looks of it.

This stuff is very frustrating to me. The last honest man has left town. The last two trades are trades I actually made in my accounts, one lost and the second won more than the first one lost. That is the real world of trading folks.

I came across something that I wanted to address, an article that "proves" Gold is manipulated down. I always read things like this just to see what the logic is, perhaps there is something I don't understand. As usual, I found nothing new. The article showed charts where it pointed out all the big intraday down legs as proof the price was manipulated down. This article ignored the big up legs on the same charts, apparently those don't mean it was manipulated upward? HUH? I can't tell you with any degree of certainty exactly what happens with Central banks and governments and their purchasing of things such as Gold. Certainly basic supply and demand would tell you that in doing so they limit supply which drives up prices. There is no acceptable explanation that would prove this causes prices to decline. Some of these guys ought to forget about their credentials and hit a ball out of the infield once. Now, if the Central Banks were to all of the sudden flood the market by selling this Gold, you could argue they were trying to force the price down. They do currency manipulations and announce when they are doing so, that is entirely different.

I just shake my head at this stuff, there is so much garbage on the Internet that is passed off as credible. Showing a chart that just has a large leg on it in either direction and saying that is proof of manipulation. This same argument holds true with the ES. As much as I and many others allege the Fed is basically driving the stock market higher, that does not mean every single rally is them intervening. Also, the S&P is a different market because there are basic ratios of volume and ticks and the Vix and several other things, which are known to be used by Funds to launch buy programs. We can look to see when a spike takes place and none of these normal buy program conditions are in place, for another source of the volume. No other market has the luxury of all those internal measures which give us these clues.

SO WHAT?

What if we do "know" that Gold is being manipulated? Would that effect how you would trade it? Would you never short Gold if you were sure it was being artificially held down thinking it should always want to rise? Would you only take shorts if you were sure it was being manipulated? How would you time your entries if you knew this? What is the manipulators decided to change their minds are they going to text you or email you a notice? I think you get the point, knowing this is worthless if you can't use it to your advantage, so who cares?

Look at the chart below, are we really to believe that all the days where the market moves down are manipulated, yet the sharper and more frequent up moves on the left side of the chart are not?

As one of the great modern day philosopher's my father would say:

THAT'S HORSE SHIT

Good Trading

GOLD PLUNGE - WHAT WILL BE THE EXCUSE NOW THE DREAMLINER?

I guess I can't help picking on people when they write dumb things, I make fun of myself when I do so I think it is ok to do so. This is why people who don't trade should not write about trading. I don't play in the NBA so I don't write about it. I don't know why people get so clouded by these frenzies that repeat like an old movie over and over and over. In recent times it was the Internet was going to revolutionize the world, therefore you did not need any revenue or earnings to be a viable company.

Then it was they are not building any more land, therefore real estate has to keep sky rocketing. In recent years it has been the world is ending and precious metals are a store of value, therefore they have to sky rocket. There is heavy demand from China for jewelry ( my personal favorite ). Central banks are buying it for fear of a collapse. I think that covers the basics.

In these scenarios once the fraud becomes exposed the apologists now come out crying foul. With the Internet bust it was that we simple people just did not understand. The world was changing and being driven by tech and it was only going to accelerate. We did not have any vision. The use of the Internet was only going to increase ( they did get that part correct - even a blind sow finds an acorn once in a while ). With real estate it was all the banks fault ( something I am beginning to believe now, but it was certainly enabled by politics ). The gal who cuts my hair bought 3 houses in Texas as "an investment" ( my favorite line in this movie ). Needless to say she puked all 3 out for significant losses. Rent to own ratios did not matter ( they made me a million dollars so I would say they do ).

Now back to the future and it being Apples fault that Gold has gone down ( this might be the best one of them all, I have gotten many laughs out of that one ). Today Gold is having a down day thus far, will it be blamed on the Boeing Dreamliner problems? It is obviously the fault of something other than the fact that it is a commodity and they tend tend to go up and down.. Yes I said that, DOWN. A commodity can decline, it does not always have to rise. Open a chart book. You can see from the chart at the top that the reason for this decline is that there has been a ton of distribution recently and accumulation was light on the bounce off the lows. Distribution then picked up on the move down. Typically when you have this type of situation the market comes down. The exception would be the stock indexes which are essentially controlled by the government now, rules don't apply to them.

This is not a massive collapse by any stretch of the imagination, just a down day thus far. I don't death stare prices intraday so I don't know what is currently happening with this. The point I am making here is that don't get tied up in the BS stories that people write. I would rather listen to an explanation from a terrible trader, than listen to the whining from a fan on the sidelines getting paid by the word and not the dollars coming from their trading. I have not yet perused the web to see what people are saying about Gold today, but I will for a chuckle if it stays down.

The mid 1500 area is still the key area for Gold in my view. If we were to go down decidedly under that on a closing basis in the coming months, it could be lights out. As long as we hold above those levels, those who are bullish can buy the dips ( not me ). I would say at this juncture from a big picture view point I am neutral on Gold. I do think we ultimately will retrace most of the huge up move, but I don't know when that will happen. I do know that it is a commodity and they do mean revert over and over and this won't be any different in the end. I will continue to read the articles from the fans for entertainment value. I suggest when trading if you are easily influenced by the writings of others, not to read much. I am kind of head strong ( news bulletin there! ), so it does not influence me one way or the other. I do like reading the other side of the story in case I have missed something. It is one thing to have an opinion but do not let it effect your trading decisions unless your approach is based on your opinions. If it is you probably should think about a career change. A fool and his money are soon parted, but if you are a fool you will be behind the opinion based trader in the food stamp line.

Good Trading

STOCK DECLINE?

I am not one to tell you to fight trends, in fact I tell people in my writings all the time not to do that. I have been there and done that. However, what I do try to do is stay on top of time periods where it appears something could be in the development stage for a reversal. I am starting to see some short term signs of trouble. 

First, the ADX has hit a level where often reversals take place. You can see the last time we were this high marked the low before this huge rally we have had. I have written more about this in my Newsletter as to how to use ADX.

Second, we do have some accumulation measures starting to diverge as marked in the bottom graph. This just by itself is somewhat noisy and not enough to bank a trade on, but it is coming at a time when we are seeing potential blow off levels in trend measures like ADX. In my mind it means more in this instance. Next you can see we are basically at a seasonal spot for a decline.

I have marked off instances where we have been in sync and when we have not with the seasonal. This is why you can't bet the farm on seasonal's alone, they waver in and out. We still have some accumulation indicators on new highs as you can see in the top graph, so it is somewhat of a mixed bag here. The trend is still clearly up, so until we get some type of price break the market still needs to be played from the long side. You always have to remember that for the most part stocks are a buy with periods here and there that can be sharp moves, where they go down. Do not look at this market as an equally balanced affair like commodities where declines always follow rallies and vice versa. There is a decided up bias in the stock market and we just want to try and avoid the big drops when we can, and buy into them. As short term traders we want to try and short them obviously, but you can piss away a lot of money trying to find sells in a market with a 100 year bias to the up side. Let's keep an eye on this while we maintain our long bias. Newsletter readers know of a couple of things to look for that are more detailed with the ADX now to see if they take place. If they do we may have something more to talk about.

AN ONGOING PROBLEM AND A SOLUTION

I am tempted to apologize except I too have been burned about what I am going to discuss here. Once again we had some very suspicious activity at the price zones where our orders were in the Swing Service with a GOLD trade. Here is the trade, what happened, and what we will do going forward.

This is the intra day chart just to show what happened. We had a sell order that was in that got filled on this huge down leg just to immediately reverse and go all the way up and make a new intra day high where we got picked off, then come all the way back down. In this instance it is what is called a search and destroy day a phrase coined by the market profile people. This is a day that takes out the prior days high, then the prior days low forming an outside bar, then goes back up and takes out the high again, then comes back down. It can go in reverse order as well and still get this label.

One of the things I have done in the service is to keep the stops close thinking that many people can't take larger losses and we have been picked off like this for the last time. I have no idea if someone is gaming our orders or not, but this is the 7th or 8th time this has happened, so here is what we are going to do. The stops are now going to be further away from the price and hence larger in dollar value. In most cases it won't be a huge amount of difference. In this case and the Aussie dollar trade, had the stops been above the pivots both trades would have been fine, so that it what is doing to happen.

I did this trade in my accounts and got burned also. This has been a learning curve doing these trades and I have tried to change them some from the way I do them to make them easier to do for those with small account balances and that has hurt the results. We are still making money but not nearly what we would have been had the stops been further back. Now they will be. 

The ES short my system had going was stopped out for a loss on Friday so now it is 6/8 for the year but has a net loss, so quite frankly it sucks so far. I will keep everyone posted on how it does. I have something new I am working on that is likely to take it's place, but first it has to be traded with real money for a bit so see how it does. It is very simple and I like simple.

For next week I don't see anything changing much but I have pointed out a couple potential problems that may be developing. I was told that Peter Brandt in his blog discussed the trader tax issue. This is something that has been kicking round in sub committees for a few years now as democrats in some pockets are trying to eliminate trading by speculators. I find it hard to believe this will ever pass due to the liquidity problems that would be created if there were no small traders. Even if it does pass it will likely only eliminate the scalpers who mostly lose money anyway. If you hold trades overnight or for a few days this will hurt your bottom line, but would likely take total costs back to what they used to be when we paid $20 to $30 round turn, so to me this is not a back breaker.

For those of you who are democrats, it is time to wake up to what your party is trying to do. You voted for this remember? They want to take away freedom so you can't complain now if you are a trader and don't like this. This is an issue they have been pushing for several years, so it is no secret.

Good Trading

AUSSIE DOLLAR A TOUGH ONE TO CATCH

I want to go through a trade I blew this week just to keep things balanced in here. I mentioned I thought the Aussie Dollar was setup for a sell recently, so I was looking for a short entry. Be careful what you ask for.

My first entry which unfortunately was in the trading service, is indicated above, a short below the low of the reversal bar. At times these types of bars can be very good sells and as a result I got sloppy with this one. I should have waited for more consolidation and did not really use the correct amount of patience. I felt some pressure to get a trade going so I forced this one. Now that we can see a few days later how nicely this fell, it is easy to say well look at how that went down so fast.

However, it is always easy looking back, trading live is another story. On the next chart I show where the initial stop was and also a spot where it could have been. Had it been in the higher spot we would still be in the trade. However, the pattern I used for entry failed when the high of the entry bar was taken out, so that is where I exit trades. I exit where the pattern I used for entry has failed. We have to have rules and I stick by them come hell or high water and in this case it was hell, as it went up past the stop then slammed downward.

I did see another possible entry for Wednesday below Tuesday's low but thought the stop was too big for this market so I passed on the trade. Net net, I had a good setup, yet lost money on the trade I did to try and take advantage of it. I can't stand when people come out and always say I told you so and never show something like this. This is real and a dumb trade I made.

I still am not seeing a great deal of setups. I do think Bonds are coiled up tightly here where they should break out in one direction or the other. I think from a weekly stand point they are setup as a buy, but that does not mean the breakout goes that way. It is the way I am looking though due to the weekly setup.

Good Trading

STOCK MARKET DECLINE COMING?

I need to post another negative title to drive traffic it appears. What a world we live in where people only come to read bad stories. I should try one day posting the title "Life is Great," I bet it would be the only day I would ever have no visitors. In all seriousness, I do have short term negative indications for tomorrow in the ES. I will say that when the market is running like this and you get these flat types of consolidations, they generally resolve to the upside. As a result I am not going balls to the wall shorting this right now. My mechanical system is still short with a stop above the market, I am not going to double down on it at this point. ( Blogger did it to me again on this paragraph won't let me left justify it )

The first thing we need is some type of lower short term high before getting too excited about the short side. We do not have any indication of a lower high yet and I am not into top picking. I think Crude Oil basically looks the same as the ES, no surprise there. Correlations are not going to POOF completely for a while as long as the FED is up to it's tricks.

In the chart above I have marked the ADX which has gotten over 50 often an early warning of some possible trouble. We also have some divergence in one of the accumulation indicators, but not anything remarkable. The problem I see with the current pattern is that we have expanding ranges. It is a megaphone type of pattern but too small of one to be a reversal pattern. It seems more likely to lead to a false break that returns back into the range of the last few days. One of my main proprietary tools is really projecting down sharply for Wednesday if Tuesday's low is taken out. However, in general this is a not a pattern I get geeked up to short.

The next chart shows Crude which in my view has a similar pattern.

In this case with Crude the ADX reached almost 60 and there is more pronounced divergence in the accumulation indicators such as the one shown. Still the fact remains were don't have anything that could be called a break of the trend yet. Will we get it? I don't know. This is a market that in my view is setup in the COT data for a decline, but I don't see a trigger yet.

I am more or less keeping the powder dry for the moment. I am still short that ES mechanical trade with no opinion on it. It is a system trade so it is what it is. I am in a couple of other things but do not have big positions anywhere. I personally do not trade these running markets like this very well so my goal is not to piss away capital trying to fade them.

Maybe I am getting back in my groove now since I felt comfortable with a couple of crass remarks tonight!

There was a comment made by the judge on the merits of the lawsuit by the Forex people in the PFG case but I am at the point where I am focusing more on making back what that punk stole and not really expecting much more back. The opinion in my view is somewhat ambiguous so I don't know what to make of it and don't care at this point. She seems to chastise the trustee for how he worded his argument while at the same time acknowledging he had some things right. Politics at it's best. Whenever I read anything about his case I just want to go kick somebody's ass and we can't do that anymore. They have taken all the fun out of things don't you think?

Good Trading