Crunch Time

Here is a 5 min intraday chart setting up a prime PPT appearance opportunity. We know they are doing everything they can to hold this up until they get all the socialist programs passed if at all possible. There are several reasons why at the very least a correction would have under normal circumstances, already happened.

Interestingly enough, I do have a potential short term sell signal finally today if yesterdays low gets taken out. This chart shows us basically two ticks away from doing so. This time zone of 11:35 as I type this is prime time for these guys. Let's see what they do.

It has been easy for them to support this due to the light volume in that they have not had to commit alot of money in their buy programs to accomplish these end of the day lifts they have been performing. It more or less is proof that they are the buyers. However, at some point I think they are going to let one of these sell attempts through then try and support it after it drops a little.

They are under the spotlight right here so let's see what they do!

ARE WE HEADING FOR TROUBLE?

I know these charts are hard to see with all the lines on them. Most of you won't know what all the lines are anyway. Just focus on where the two red arrows are and the olive green line heading down in the second graph.

The first red arrow indicates an extreme overvalued reading with stocks vs bonds. Big declines have occurred in the past when this condition has been present.

Second, the red arrow in the third graph indicates an overly bullish reading between small traders and advisors, also a bearish condition.

Third, the olive line in the second graph shows commercial selling beginning to come into the market place. Also a bearish sign when in a downtrend.

The short term trend is still up, but I am looking every day for my short term indicators to give me a sell signal. It will be all in on the short side when one shows up, and I am hoping for that this week. I am looking for a sharp decline here to start any day now.

ES Weekly Chart

Here is a chart of the E Mini SP 500 Index. A couple of posts ago I displayed a 5 point Megaphone type of pattern which is a reversal pattern. It required a close below the prior days low for entry on the short side. This has not happened yet. It does appear to be smooth sailing here as the bottom graph shows the Commercials occupying a comfortable long position and the trend being up.

One of my mentors Larry Williams has called for a top to be made here in the next couple of weeks. His market turn calls are beyond incredible so I have to take a look to see what could support that. There are two things that jump out here as being supportive of a decline. First, the middle graph shows stocks valued vs bonds, and it shows stocks extremely over valued. Second, the bottom graph shows in Green a sentiment measure, which is reading a very bullish number. Both of these things generally lead to declines in the market. However, that does not mean you just run out and sell when you see these readings.

What might be the best thing to look at to time this is the ADX indicator. It is a measure of trend, and generally when it gets to a very extreme level it indicates the end of a trend. It is approaching that level but is not there yet. Also, the Vix is indicating a turn is imminent.

When all of these things are put together, it tells me we have to look for a decline to begin within the next two weeks. It is frustrating sometimes not getting the highs and lows right all the time. This is impossible and a fruitless excercise. All we can do is put the odds in our favor and make the trades on the side of the probabilities. There is more market manipulation than at any time in history by the PPT so that is making short side opportunities harder to time. We just have to accept this for what it is because it is not going away any time soon.

Can I frame this?

This move yesterday late by the PPT was an all time classic. They do not want this rally to stop until they get all their spending back doored behind the american public. The sell signal that is out there now could be a nasty one and they know it. I posted that pattern yesterday showing one possible way of playing it. However, a false breakout to new highs that reverses is a well known pattern in all circles. When we combine that with the economic reports which for the most part are quite dismal other than the ones they are manipulating, and we have a potential for a nice move down if it were to get started.

Will it happen, who knows. What is clear though on a day like yesterday where alot of markets were teetering on breaking, was the end of the day save by the PPT buying futures to stop it. It is really difficult to predict when they will show up, but generally it is during periods where there are big picture reasons why a large down move would not be good politically.

Keep in mind as much as I think Barry the Intern is the worst thing that has ever happened to the world, this is not exclusive to him. The PPT has been operating for a while prior to his arrival.

Just sit back and observe the beauty of it on a day like yesterday this 5 min chart of the SP 500 should be framed.

Here is a pattern taught by Kevin Haggerty although he stole it from someone else and gave it his own name. He calls it the RST, but it is basically a megaphone pattern. Just to keep myself out of any trouble, I will not explain the rules other than just to display this here.



It is an expanding pattern of pivot points that resembles a megaphone, and it is a reversal pattern. There is another modified version of this called a Wolfe Wave. I did have that sell signal based on the Vix that showed up a few days ago that so far is terrible. Although it is just designed to identify a zone not a enter at the market when it shows up. However, the best ones do move price within a day or two which that clearly has not done, so it has to be labeled a losing signal.



Generally these megaphone patterns work best when they have symmetry like this has, legs of similar lengths in price and time. Also some oscillator divergence of some sort should accompany it and there is some of that here. It should work pretty quickly on a close below the prior bars low if it is valid. This is the first day it is valid, so look for a close below the low of a previous day for an entry here.



The cycles now are calling for further upward movement for a couple of weeks or so. I have blown the short term buy that I put on down at the low of this swing, exiting way too soon. I have not shorted this move yet fortunately as I use these signals to alert me to look for something not just to blindly jump in. It saves me from getting run over when they are early or wrong.

Mission Accomplished

As you can see from the chart, there is now an exit signal displayed coming into today. As I had stated, this signal was a short term signal that works over a few days period of time. I exited most of my stock trades on the close yesterday with a couple left to exit today at the close.

It does appear a potential short term sell signal will generate at the end of today, but we need a strong close for that to happen. Bigger picture there is a mixed bag here. Some of the indices are showing commercial buying and some are not. It is certainly possible we could have an upmove here. However, the trend remains down overall so I am just looking to sell strength when it shows up into that downward trend.

Keep in mind that there is a general bias to the upside above the 200 day moving average and to the downside below it for individual stocks. As a result try to trade in that direction in general. This is true basically because many fund managers really watch that average so it almost becomes a self fullfilling prophecy for it to work.

The 200 day has no edge in futures trading at all, it is a stock market phenomena.

We have a short term buy signal here as displayed for the Stock Market with the green arrow on todays bar. You can see from just looking at some of these signals that they generally give us a move over the next 2 to 5 days after triggering.



I think this sets up a bounce here that will set up a great sell setup in many markets mid month or so. Bigger picture I think this next down move could be significant but we will just have to see how it sets up after this bounce. This particular signal without getting into too complex of an explanation is based on the VIX.



I do also expect Bonds to decline as this rally occurs, setting up a bigger picture buy in that market. Many of the commodity markets have been absolutely obliterated in the last week, Energies and Grains in particular and Metals. This confirms the resumption of their downtrends, so rallies in all of them are selling opportunities.

After a day like yesterday it is usually important to not get so tied up in one day and to view things in a higher time frame. I know these charts are hard to see detail in, so just focus on the bigger picture. As nice as this rally from the March lows which I did call has been, it is still a rally in a longer term downward trend.





The red arrows indicate a proprietary combination of several things that tell me when to short the market. I also have them for buys but as you can see none of them show up on the chart which speaks loudly just by itself. You can see that on the way down they worked well, were a bit early on the way up. This is typical, they are not designed to pick exact spots, they are alerts to look for entries. We have been flashing these for awhile now, so once we find ourselves in July and in a known seasonal down period, have sell signals in a long term downtrend, that means we need to be looking to short individual stocks and the indices. This is what I have been doing and will continue to do until this picture changes.





If we combine this with what appears to be a top in commodities and currencies, and low in bonds, everything speaks in the same direction, lower prices for stocks. I posted about a month ago that it was time to get out of stocks, and we did rise a bit more from there. That was a general comment and not a day trading comment. It was made based on what is displayed here. It would be better to have the bottom pane more bullish which is actually a bearish signal. Fading sentiment is what we want to do, not go with it. The shift toward the emini's with commercials is underway and that weekly chart shows a more bullish reading with sentiment, which is bearish for stock prices. The preponderence of the evidence suggests down. It is possible that if during this decline the sentiment gets really negative it would support a test of the low and another leg up. That is something I will be watching as we move lower.



Big picture I think 2012 is when the ultimate low will be made and it will represent one of the greatest buying opportunities of all time. Between now and then we will have good swings both ways but I expect the big picture trend to remain down. If things develop in a way to change this view I will post something here to indicate my change in posture.





One of the very interesting developments is the very tight link between stocks and virtually everything else that is traded. You can watch intraday and when the dow rises literally everything on the board rises, and vice versa for declines. I have never seen anything like this and what it tells me is that the only thing that has really improved in the economic picture is that we have had a stock rally. As a result, when that appears to falter, everthing else that has been artificially lifted by it also falters.





Intermarket relationships tend to come and go making it impossible to model a trading approach after them, but I find this particular link very interesting. I just think it foretells of trouble not prosperity. There is really no fundamental reason for this link to be this tight.

What the Buck!

Here is a market that has confounded me this year so far. You can see the green arrows on the screen of the weekly chart of the Dollar Index. These are proprietary combinations of factors that dictate buying a pullback in an uptrend, some have been good, some have not.

There is very good reason to believe that we have another big leg up in this market coming by historical cyclical analysis. However, we are still in a shorter term downtrend. There is alot of jawboning about economic reasons as to why the dollar should decline. There are many that make sense conceptually, however I do not trade off such things. They are way to hard to quantify risk with and often can take years to play out. Also, I am of the belief that we have entered a long term deflation cycle that started last year and should continue for some time, so the inflation skit does not mesh with that view. I think the inflationary things the government is doing will just slow the rate of deflation, which behind closed doors is their real goal.

If we look at this chart we do see the commercials in the second pane green line at the top, being heavy buyers on these dips. This is bullish. In a perfect world my small fries with sentiment would be more bearish. You can see rallies have occurred when the readings on the bottom pane have been low. It might well be that we need to blow out these recent lows to get that sentiment more bearish to form this low, I am not sure. I am looking for buy patterns to get long here and have just not seen any yet.

I said in my last post that I thought the bond market has a ways to run and as you can see it is doing so. Pullbacks are a buy in this market now likely through October. I had stated that we needed a higher low to confirm the trend change and as you can see we have gotten that now, so the trend is up, buy the dips. Do not get tied up in this bullshit from the gold bugs about how interest rates have to sky rocket based on all the money we are printing, blah , blah, blah. I would bet I make more money on one good trade than these clowns do in a year. Although they do charge a 30% commission, so I guess they are not that dumb. They can snooker the public better than most people.

Regardless of any fundamental analysis we might do the price action needs to confirm that or it is all bunk. The trend is up now so until it breaks back down, buy the dips and tune out the noise.

Also most currencies look like they are topping here which means the dollar is likely to have an upleg here which would be consistent with the long term cycles.

After finishing my last post I scrolled and saw than in the first week of June I did mention that long setup in Bonds. Here is the trade I made just exited this morning. I do think that this market has a long ways to run on the upside. This trade was exited simply because it hit a profit target objective and was against the trend.

We still do not have a higher low or retest point yet which would confirm a trend change. All we have so far is a sharp counter-trend move. When you trade aggressively against the trend like this you need to take profits sooner to stay alive. I am looking for a dip now that forms a higher low than the one on this chart, and will look for a buy spot if that happens.

I mentioned in my last post that a minor sell signal showed up for the SP 500 and was worth taking. Displayed over to the left is the result of that trade. I used a smidge of discretion exiting as it technically fell 1 point shy of where my limit order to take profits was, then started to bounce. No time to be greedy when something like that happens, so I just quickly went to the market to exit. It may not look like much on that chart, but that trade made quite a bit of money.

However, the bigger portion of the last post was on the dollar and it's potential long setup. That was also triggerred and the dollar has moved up somewhat, but not as quickly as I thought it would with the stock drop that occurred. There is some international jaw boning about world reserve currency etc.. Maybe that is why the dollar which appeared to be going gangbusters, has stalled. I have no idea, I do not trade on that kind of nonsense anyway. However, it does appear that we have a major top at hand in many commodity markets, probably for the rest of the year. As a result, I expect the dollar to continue to move up overall.

I heard an intersting comment about all the money the government is printing now and how inflationary it is. The comment basically said it is the velocity of the money that causes inflation, not just the supply of it. If it is being horded, it will not be inflationary. I think in general that is what is happening and why we are still in a deflationary environment that should continue for awhile.

I have also been bullish on bonds and made a nice longside trade there that I just exited today. I am not sure if I ever posted anything on bonds here or not, but traded some emails with some readers of this telling them I was bullish. I continue to be and will be hoping for a pullback to enter on the long side again. Also hoping to sell a rally in stocks if we are lucky enough to get it, this could waterfall here.

Well right on cue, a minor sell signal showed up for stocks, and we got a bounce here in the Dollar. I had stated previously that there was not a sell signal in sight for stocks, then all of the sudden it showed up quickly. Is this a really strong sell signal ? No. However, we are in an area where it is worth taking.

This bounce in the dollar is a good enough bounce, when tied into the larger picture cycles and major support, to signal a buy now here if we move back down as indicated by the line on the chart. All this means is that we need to form a higher short term low now, then we can buy a break out above it.



Will it happen? you never know. If for some reason we get a sharp stock decline this could just shoot right up out of here without a pause, but odds favor somewhat of a retest of the low, which will be our buying spot. If the cycle is ready to kick in again, this market could really move up quickly from here. If these lows do not hold, you can probably kiss the dollar goodbye for awhile. This makes it worth a shot on the long side due to the possible big move that could happen, good risk/reward ratio.

Here we have Bonds, a market that is setup to make a low. We have the seasonal low time period at hand, commercial buying, and very negative sentiment.

This does not mean just run out and go long this market, but what it does tell us is that we need to be looking for signs of a trend change to get long here. Seasonals are simply a guideline for us to look for something, they are far from a holy grail for trading. However, this is one of the most consistent seasonal patterns that exists in the futures markets.

There is no question that there is more government manipulation of markets going on now than what we have seen in the past, but there is always this type of thing going on somewhere. One thing we have certainly had proven to us without a shadow of a doubt, is in alot of industries the last honest man has left town quite some time ago. We cannot believe virtually anything that comes out of a CEO or Senators mouth nowadays. Just accept this, it is what it is. This should not preclude us from making money trading.

Here is the battered US Dollar Index. This is a market that I have been wrong about. I have mentioned the long term bullish cycle that kicked in last year and seemed to support price right on almost the exact day it should have to be valid. After that prices did rise nicely for quite awhile. However, we have gotten into quite a steep downtrend here. The commercials have been buying, but not an a super aggressive rate, and not enough to support the price yet.

We are now in a zone where if the long term up cycle is going to be valid, the price needs to be supported somewhere in the area of where we are right now. Since alot of the dollar strength has come from stock market weakness and a flight to quality situation, it is doubtful that this market will find support unless we have a stock market decline.

I have stated in here that we are due for a stock decline, and I still feel that way, however, there are no immediate sell signals apparent. So, until that changes, I do not expect much to change here. There are alot of people who focus on economics who say this move is caused by all of the deficit spending, the fallacy with that is that none of it has been done yet, it has just been approved. Be that as it may, you cannot trade based on large macro-economic views due to how inefficiently those views translate into daily market bias. Even when you are right, timing a view of the next several years into daily activity is impossible.

HUH?

I read an article in the San Diego Union Tribune yesterday about what a good thing it is that the VIX is dropping way down. This person went further to say that is what the rally needs to continue.

When I was younger this type of thing would have sent me through the roof. I really don't like it when stupid people are consulted as experts. It is possible that this person just may have never studied the VIX or did not have any understanding of what it really tells us. However, he is supposed to be an expert isn't he so shouldn't he know of what he speaks?

I am not an expert on the VIX, but what I am is somebody who has studied in detail how to use it to trade the SP 500. A shift to a relatively low reading is a warning sign of an impending decline. Conversely, a sharp spike up is the opposite, an indication of a coming rally.

This is the final piece we need to start looking aggressively for sell signals. This tells us there is complacency in the markets, and that there is a lack of an overall worry of a decline. There are alot of lines on this chart which are moving averages of the VIX and then moving averages plus or minus 15% of themselves. You can see where the RED arrow is yesterday that when we close below the line that is 15% less than the 10 day moving average, it is a sell signal for the stock market. This generally is good for the next couple of days. In this case I would like to see the RSI of VIX get under 5, that would be a greenlight special to short this sucker.

Oh wait, I am wrong, the expert says I should commit more money to the market right at a point where all the pros are shorting it......... At the very least do not add exposure to the market here and take some off the table if you have made some money since March.

Here is a chart of the Naz, I have left prices out due to having to block that part of the window so as not the reveal exactly what this oscillator is. It is what it is, this is free and I am not in the practice of giving up my secrets. The point is that this oscillator is now warning of a top at hand finally.

Often oscillators give many false top signals in trend moves up like this, and this one is no different. However, if we couple that with the seasonal tendency for a top here and the commercials activity leaning to the short side, this has to be taken into account. One of my mentors has called for a 5/29 top date, I have no idea if that will be correct or not, but if you read my prior posts I had a may and june date as possible places for a cycle top. So now that we are in that zone of time and these other items are lining up, I do think it is time to start taking sell signals in the indexes.

We are experiencing tremendous rallies across the board in almost every market in the futures, some of which are on the border of breaking weekly down trends. However, there are seasonal tendencies for peaks in alot of them in the next month so it is time to be on the lookout for a resumption of some of these longer term down trends.

The Market I love to Hate, GOLD

I hate it of course because of the collective fraud going on to rope suckers into moving their money into it due to the impending end of the United States and the dollar.

Notice how well this market has followed the seasonal pattern recently, rallied right on schedule from the low, and peaked similarly on schedule. This pattern calls for a slow drift down for a few more months. Rarely will the seasonal be this spot on do we cannot rely on it solely for trading decisions, but it can give us a bias of what to look for at certain times and that is how I use them.

Most of my short term indicators are still indicating a down trend so I am looking to short rallies, although I did buy it the day after the recent low with a short term technique I use for counter trend trading, but have exited that trade at this point. In the metals, Copper is by far the strongest up trend now, so longs should be done there not in Gold. You always want to buy the strong and sell the weak in a complex. Too many people have this notion of the weak will catch up, this does not happen.

As a result bearish folks should short gold and bullish should buy copper.

Here is the daily chart of the SP 500, what I call a running market. I did post last week that I thought it was time to get out. From a big picture standpoint I still believe that, however when we get into these running markets where as you can see the pullbacks are very small and do not form any wave type of look, it is very difficult to time an entry in the opposite direction. The reason for this is virtually every oscillator will diverge for awhile before these come to an end.



This last week did not show much change in the commercials activity, and there is not such an overwhelming amount that this can be turned on a dime. However, when the commercials are net short at the time of they year when the seasonal high is here, we need to look for a decline. I have not shorted this yet and doubt I will today the way things look. It is more likely that I will short this after we get a drop and then rally against it which could take some time.



I posted the chart completely plain to demonstrate one thing. If this was all you looked at without dates or indicators and were to place a bet on where the price would be in a week, I bet most would say higher. That is the point, don't get cute picking tops. We are in an area where one should occur but that is no lock that it will. If we were to blow through this area in the face of a commercial short position, that in reality would be a buy signal and indicate my call for this to be a top is wrong.

Time to be out Sports Fans

We have seen renewed commercial selling in this past weeks cot report and now you see the red arrow on the screen above last week. This is a mechanical sell signal based on COT data. Entry is another matter, but this tells us we now want to short this market. I know in my last post I said I expected this rally to last into May but part of being a trader is to adapt to what takes place on a daily basis.

I have continuously maintained that we had not seen the lows yet and I am still of that belief, so this is an opportunity for those who had not switched to cash in the retirement accounts to do so now. I have no idea if this is the exact high of the bounce, just that we are in a zone where fundamentals say the next big move should be down.

I have so many stocks setup for short trades that I am having a hard time paring the list down for the best candidates, and literally none on the long side. This acts as further confirmation of where we are.

Well all we need is at Weekend at Barry's to get a day like this. It is absolutely mind boggling how every time he opens his mouth the market tanks, never seen anything like it.



However, if you look at the chart it does not look like much of a big deal does it? So far as ugly as today was, I think it is a pullback in an uptrend. I certainly hope it is more because some of my short positions I mentioned in my last post were made very healthy by today. Hope cannot be part of your plan as a trader or investor. It is time to watch now how the market reacts on the bounce from this. There are certain proprietary things which I will not reveal here in this free forum, that I will watch on the bounce to see if they indicate it is likely to fail or if it is a continuation long entry possibility.



Nobody ever knows that for sure, trading is at best a good guesstimate of what might happen next, you deal the cards and play the hand. Obviously there are certain things to watch like the commercials to get an idea of what the major players are doing. So far there is nothing there that indicates the low for this whole move is in, which is my big picture view. Also there is not an obvious sell signal on a short term basis to re-enter index shorts for the big move back down. So short term trend is still up and long term trend is still down. I would not recommend anything other than short term trades on the long side, this upward move could end at any time now even though I still expect it to carry into May. It is a traders market not an investors.

My shorts are in individual stocks and some currencies at this point, not in the SP 500 itself. I will be watching my secret stuff now to see if a short entry is appropriate on the bounce, but I think it is likely I will be buying this dip

Not much has changed except one thing. The chart looks the same as it did last week, price rallying, commercials selling. We have reached the over valued zone however, so we may be nearing a short term peak.



We have what I call a running market now where we have very small retracements, too small to enter longs, and the price just keeps creeping along. The PPT showed up in a blatant fashion the last hour of the Tea Party day. There was no way in the world the new administration wanted a down close on that day, and they clearly manipulated the futures during the last hour.



What to do? In all honesty I have lost some money trying to short a few things this week. This bull move is lifting virtually every thing in the world except the soft commodities, and a couple of currencies, so shorting what is a pullback against a long term down trend has not been profitable this week. However, over the long haul, that is the way to play things.



Be careful shorting the stock market until we see some sign of the institutions slowing down on their push here. I will post something when I see that happen. The good news is that this is a great opportunity for those who got hurt last year to be able to now begin moving back into cash having recovered some of their lost money. Hard to say numerically how far this could go, but time wise another month or so is what I am thinking.

As everyone begins to celebrate the rally, and declares the low is behind us, it is time to look at fundamentals.

The commercials are selling this rally in a weekly downtrend, the perfect scenario for a large move down. We are a little early on the seasonal, and the short term trend is strongly upward. As a result we could continue up for a bit, but when the music does stop here and we begin to drop, it will be important to see if the commercials begin aggressively buying the dip. If they do, the suits are correct, if we see scale down selling, the drop could be breathtaking.

When I take in everything I study, alot of which I do not place here for free due to it's proprietary nature, I have seen nothing that tells me we will not make lows under 6500, possibly quite a bit lower than that. However, the trend is up for now, so I am mostly looking to buy the dips and short extensions upward as we are entering an overbought zone. In other words, play both sides for now until the downtrend re-establishes itself. I think we will have an upward bias for about another month or so, but I will dial in dates tighter as we approach the sell zone.

My comment about a 2 day pullback was pretty good, although it was mostly a guess.

The rally sails onward here helped by the PPT pressuring the change of the mark to market rule. I am not sure that is a long term fix, but in the short run it is going to help.

I would caution people not to get suckered by all the hoopla that is starting to accompany this rally, unless something changes dramatically with what the commercials are doing, this is going to end badly, perhaps shockingly so. However, for now the trend is up and other than short term trades, longs are the choice. Some of my shorter term things are indicating a possible short term short trade early next week but time will tell when we get there if conditions are right for it.

Our nice little rally is hitting a bump in the road. No surprise as you can see we are up into resistance, the red line, and the seasonal has a minor down tendency for a couple of weeks here. What to do?



I exited my long on Friday, taking profits. I had hoped to get a little more out of that trade than I did. I have several things that are showing potential tops, but the first one shows 4/11 then 5/22 and 6/12. With all that it mind I think this pullback will be a buying opportunity, but not for a couple of days. The seasonal gives us a general idea, but as you can see, it has already been off a little so just becomes a visual crutch. I have found that in general seasonals get followed but at times can stray. As a result it is just one thing to consider, but cannot be the sole criteria used.

The one fly in the ointment which could trump all of this is that the government is doing everything they can to foster a continuing anti business climate. If they continue to do this all bets are going to be off on the downside. I still think we will see new lows, but they rally prior to that I thought would carry further than we have gone so far. It is possible that all of the pro-union anti business planning and out of control spending could cut the rally off short. We have to watch this pullback closely to see.

Here is the cash SP 500. I have gotten several emails about how far will we go? My answer is more about time than price. The two dates that keep coming up are 5/22 and 6/12. I have no idea if these dates are any good, they do not have as much going for them as what I posted when I called this low previously. However, there is a seasonal tendency for highs to be made in that zone so maybe they will be decent targets time wise. As for price, that would be a guess. My short term targets are about 20 SP500 points away in the 838 area but that is more for an exit of a trade than a call for the high.

We are very short term overbought now after today so a decline would not be a surprise at all. I am looking for sell signals as we move up but am currently on the long side of the market.

As we approach May I will give more current posts about when the short term top might occur, for now it is play the long side until we see something that represents a short term reversal, which could come any time but I think the major top will be in May.

It is time to expose these morons that are telling everyone that Gold has always been a place to go with their money during a financial crisis. It is one thing to just be ignorant, maybe some of these people are, but I suspect many are just lying to try and make money off of this farse. Above, in a terrible graphic display, I have two charts with the Dow Jones average on top and Gold cash underneath. I just can't get this formatted better so this will have to do.

The periods marked with vertical lines are 1974, 1980, 1982, 1987, 2000, 9/11/2001, and July of 2008 when the current crises became pretty well known. As you can see during the first five periods the price of Gold declined. The 2001 period marked the first rise, and the current one is flat so the jury is still out on that one.

This comes as no surprise to someone who trades with real money and is not a paper champion spouting off all this advice to people with no real idea what they are talking about. I cannot afford to as Roger Clemens would say "misremember" relationships like this.

There is a very close relationship between the price of Gold and inflation, so that is where you need to go to base your investment decisions on gold. We have not always had inflation during prior crisis periods which is why there is no relationship here. I implore you to do your own research before investing money into Gold. One of the strangest things I have ever seen is going on with Gold. When it drops 20% it does not seem to count as a drop whereas a 20% drop in stocks prices does count as a 20% loss. How people use this logic is beyond me, if you buy gold at 1000 and it drops to 900 I hate to tell you but you have lost 10%, it does count.

I am not running for election and could care less who I offend with this. If you are offended, you must be one of these people lying to the public to try and make money, I want to offend you.

They don't make day's like yesterday more than once every several hundred years. This is an intraday chart of 30 Yr Bonds. The large spike represents from high to low about 8 full points, 4 times what was for years the daily trading limit. This occurred in about 15 minutes thanks to the PPT. For those who do not believe in the PPT you should have your head examined after a move like this.

This is going to support this rally for a bit, but bigger picture most of us know this is a very bad development. Bonds have historically been very supportive of stock prices so this move to drive down long term rates should provide support for a time. However, once this steam runs out look out below, a sharp drop is going to occur. Time cycles suggest May but there is no way of knowing for sure. I suggest for those who have not gone to cash to consider doing so in May specifically if prices are higher than today. In my view we are going to take out the years lows again, so we have a nice opportunity to correct a mistake for those who did not go to cash from way above in the 13000 range like some of us did.

There will be a fantastic buying opportunity to buy stocks when this is all over, but it is not here yet.

BARRY... BARRY



Here is an example of what has to be one of the darndest things I have ever seen in my 23 yr trading career, the Barack Short Sale Trade.



Here are the rules, wait for him to speak publicly on any topic during the morning hours of trading, and short the SP 500 immediately at the market. Use a 10 point stop, which has never been hit yet doing this, then trail down or stop to take profits. Posted here is todays trade, it is amazing to me how negative he is for the stock market. Regardless of your political leanings, this is a trade that just has to be done. Alternatively, you can look for short entries in other methods you use once he starts talking, but it is does not need to be that complicated.



For a trading system to be viable it has to be based on fundamentals, in other words, it has to make conceptual sense to expect a good repeating of the results out of sample. In this case, his policies are obviously negative for capitalism, and the market speaks loudly endorsing that. So you have a fundamental, that also winds up being supported by price action, which is what you need to have a technique like this work.



The only danger I see in this is that eventually everyone will figure this out and then it may stop working, but until then, it has never yet had a loss. I have tracked 12 of these so far, with 12 wins and no losses.

Missed it by that much! "Maxwell Smart"

Well I called for the 13th or the end of this week or close to it, and it appears it was Tuesday so I was off by a few days. However, in this business calls do not get much better than that if this upward move continues. Will it?

Although I base most of my trading on looking at relationships that have proven themselves over time as predictive, sometimes you have to use good judgement. I had posted previously that many of the other things I would normally require to make a call for a major upmove were missing, I thought this bounce would occur. I do think it will continue, to shake the tree a bit. The world is short except for some buy and hopers still out there. It has been remarkably easy to make big money on the short side, so a squeeze is likely.

After just one day nobody really knows if it will stick or not, but with the seasonal supporting it, I think it will for awhile. For the record, I am not long this market at this point, I am waiting for a sharp continued move to short, or a more sustained move that pulls back and gives me a buy entry. Too early to tell which will occur at this point.

However, for the buy and hopers, a nice move up could give you a chance to switch to cash in your accounts and get back some of your losses before the next move down which could be significant once it starts.

I thought it would make sense to do a report card on how I have done here recently. As a trader there is no bs your results are measured in dollars and cents, there is no try, make money or lose it.



Here are my recent market calls and then a review of how good or bad they were:



Bonds - I posted selling time on the exact day of the retracement high the market fell from 135 to 123 a $12,000 a contract move, A for that class.



Natural Gas - I stated it was set up for a sell but thought it would drift a bit higher first. It drifted higher for 3 more days then tanked. This was a tad over $9,000 per contract to the low, A as well here.



Gold - I posted that this was good for $100 on the short side on the day the market made a high of 1007.7, the recent low is 900.4, over $10,000 per contract, another A+.



Dollar - I posted that I thought we had a short sale setup that might look marginal after the fact, this was a lousy call as the market has basically chopped around and gone nowhere, up slightly. I also said that if we break out to new highs the market could really take off, jury still out on that one. Overall I would rate this as a D.



Stocks - I have said that I thought we would have a bounce in March, then the next day fine tuned that to March 13th being the low. Obviously we do not know if that is any good or not yet. If I am right here the low should either occur at the end of this week or close to it.



Report Card shows 3 A or A +'s if the plus is allowed, one D and one incomplete. Hard to be better than that overall, if you can win 3 out of 4 times and get moves that large, you can make more money than you can imagine. Let's hope my views continue to be this good!

My last post that covered Gold could not have been better. I called for itleast $100 down on the day of the high and we have dropped $107 as of yesterdays low. Now what?



I have drawn a horizontal line where I feel there is support in this market, and it is in the 870 area. I do think we will bounce from there. If we don't the huge fraud of this market might finally be revealed. Regardless of what you might read, there is no correlation AT ALL between dropping stock prices and gold prices. Some of the biggest stock drops in history have been followed by huge price drops in GOLD.



I will say this though, it is a cute little fairy tale that has gotten some legs from, I know this will be hard to believe, the people who benefit the most from having it rise! It is the coin dealers and others selling GOLD that are perpetuating this fraud. It is no different from the Real Estate people who kept hyping Real Estate as it rose into the strosphere. Buy now or be priced out forever, etc..



Go ahead and buy it for whatever reasons you might have, just make sure it is not because you think the stock market will continue to decline. If you don't believe me just pull up a chart with the SP 500 at the top and the Continous Gold chart below, and look at all of the extreme decline periods. 9/11 is the only recent period where Gold happened to rise when stocks went down. There is not a consistent relationship here so do not be hoodwinked by these crooks. The best recent line I heard was there is no reason not to pay a $200 premium from the spot price when buying gold coins because we are going top $3000 anyway! I would like to walk in the studio of that dude's radio show and ........ for that discussion he had. Joe Batalia should be called Joe I will Tell you a Tale...ia. Seriously folks is anyone really that stupid that they would pay a premium of that amount on anything in the world right at this point?



Oh wait, I know, IT IS DIFFERENT THIS TIME!

Traveling for a few days so no posts until late in the week. I have revised my call for the March rally to start mid month. I do not expect a big bounce as I stated before, but if we get weakness into that time period, approx the 14th, I will be looking to buy for a short term rally. I expect that rally to be followed by a huge downmove if we even get a rally. When I scroll the S&P 500 I find only one stock that could possibly be a pullback buy, so that tells me that every sector across the board is very weak.

As some of you know that I trade emails with, I have been saying that I think we will get a bounce at the beginning of March. Here you can see the seasonal pattern that has been pretty reliable in recent years.



It is accompanied by a huge amount of divergence in the Pro Go oscillator, which is one of the best accumulation/distribution indicators out there. Ideally we would be undervalued and sentiment would be bearish, neither of those two conditions exist. In fact sentiment is actually pretty bullish the way I measure it, which is bearish for the market. As a result this is far from a perfect setup.



One of my mentors Larry Williams has called for a sharp rally to start about now due to a valuation model that he has that measure bond yields against stock yields. I do not use that but it is a nice tool. When I take all of this into account what I come up with is that I think we will get a rally here possibly into May which if we do could set up a tremendous shorting opportunity. For those of you that have not bailed out of retirement equity positions, this could provide a chance to switch into cash in those accounts.

I will post at some point in the future, where I think we are going bigger picture, which is much lower. However, there is plenty of time for that for now I think we are close to a decent bounce.

Golden Opportunity?

Here is a gold chart of the cash market without prices on it. Sometimes it is nice to take the clutter out and just look at the price to see what it is saying.

As indicated by the line below on the COT data, you can see commercials are selling this rally. That by itself it is not necessarily bearish and can in fact be bullish. However, what we see here is a selling action right at prior highs. When I couple this with a friend telling me the other day that her 9 and 11 year old daughters asked her if she was buying gold, and why not when she said no, I have to conclude this is a top in price. Also, noted famous traders Glenn Beck and Sean Hannity are hawking it on their radio shows. It makes me wonder who else is left to buy?

Tops are made when the market runs out of buyers not when heavy sellers show up. We also have the seasonal tendency for a top right here. At the very least this is a shorting opportunity for a fall of $100 or more. After that whether the buy on the dip is the right play will not be known until it happens and we see how the commercials act on the dip.

Here again we have the US Dollar Index. I have shown up at studios of radio shows and thrown pies in the faces of the hosts at this point for their gloom and doom views of the dollar. I knew when it was under 80 and I was calling for a big move up I was right when I listened to virtually every single other person being bearish.

The short term trading opportunity to short never fully developed properly from my earlier post. Now we are up against last years highs, which is going to provide some short term resistance. I may even short it up here for a short term trade. However, big picture if we take those highs out we could see a moonshot to the upside. This will likely coincide with the stock market taking out last years lows which will further trigger the flight to quality into the dollar which we have seen repeatedly for the last year.

As frustrating as all the things the government is doing is to me with all the bailouts, it is providing great trading opportunities. It is now obvious to me that we just have to bet against the US in virtually everything economically for awhile, so all rallies except the dollar need to be shorted. I am very worried about where all of this nonsense is going to lead us, but I might as well make money from it.

Today provided a wonderful example of Americas finest the PPT at work. We were once again on the verge of a major rollover of the market. We had a gap down open, then rally to partially fill that gap only to fall to new lows. This is about as bearish a situation as you can have intraday.



By "coincidence" this was happening while all the negative feedback about this fiasco called a stimulus/porkulus package is being kicked around. However, the calvary came magically to the rescue once again. If it was not so blatant it would almost be funny. Magically this 5 minute chart demonstrates how in the last 50 minutes a late day save happened driven by some "mysterious" buy program.



This is how the us government manipulates markets and it is never more clear than on a day like this. That is not to say late day rallies cannot occur, but this is not how they look when they are not unduly influenced from the outside. This looks more like a pork belly chart after a government report than it does a normal stock rally at days end.

Enjoy this viewing and feel good about the fact that for a day, your tax dollars were used wisely and had a positive return unlike the returns we are getting over the last year, with their calamatous buying program all the way down which has lost untold millions.

Here we have the US Dollar Index Daily chart with the classic triangle pattern being displayed. The textbooks tell you to play the longside breakout here, and that may be correct. However, if you notice the last time we consolidated at this level we broke to the downside about two months ago, I think if we break below the lower line this is a good low risk short sale opportunity. In trading there are never any guarantees and many trades look silly after the fact when they don't work, this could be one of those. However, I like the fact that the pivots are lower during the last two weeks and that the one oscillator is leading downward as supporting this entry.



I have been bullish on the dollar for awhile and bigger picture think it will rise, but if we break down from here on a short term basis I will be short this market. A break upward just would further confirm the uptrend. I am expecting a bit of a bounce in stocks here this week so this should move opposite of that, which would be down.

Here we have natural Gas, I can't wait for my next bill to come so I can once again argue with the Gas company about how high the price they charge is relative to the spot price which is plummeting.

This is just a basic retracement in a trend setup. It is the simplest way to trade, just wait for trend to establish and enter trades on pullbacks. Based on a few things I watch, I think this pullback is going a bit further so I am not going to short yet, but this market is definitely on my radar. Commercials also have heavy shorts on a relative basis which supports this from a fundamental standpoint.

Same Ol Same Ol





The votes have been cast and the results are in, Obama's PPT is carrying on the same plan to try and stop the drop as W's team did. If you look at the panel at the bottom, the dark black line is the heavy buying of the Large Speculators in the E Mini S&P 500. Keep in mind that this group is generally the accelerator of trends, momentum scale up buyers and scale down sellers. This is the opposite pattern of what is normal as there is huge buying into a significant downtrend, and enormous losses for those doing it.





If you keep in mind the above normal activity what this tells us is that "someone" very large with virtually unlimited buying resources is attempting to stop this downward move in prices. There is only one entity on earth with this type of buying power that can afford to lose this much money and keep buying, our good old friends the US Government. These trades are done through large investment houses like Sachs etc and what better time to do it than now. They have a better scenario for tight lips than ever before due to putting money directly into them. Who the hell would spill the beans in that situation? Nobody!



This does not bother me in the least as I know it exists and if you know how to spot it, you can use it to reinforce your evaluation of the trend. This is a confirmation of the downtrend in this market. Maybe they can pull it off and hold this market here, but I do not believe so. If these levels at the lows do break it is likely we have a large move down coming. I have seen several forecasts from better traders than me calling for choppy action until the fall, which should feature a big drop. I have no idea if they can hold it up this long, but I would be surprised. The latest reports have shown a small amount of commercial buying in the indices, but not enough to warrant a trend change. I am short this market from a few days back and will continue to short bounces when they occur, taking profits along the way.

GOOD AS GOLD

Gold and Silver continue to climb and at this moment there is no strong reason to be shorting Gold, Silver is weaker and is a tad different.

Notice on this chart that one momentum oscillator is diverging and one is not. This is typical in trend moves, oscillators constantly telling you to fade the trend. They are merely tools and need to be used selectively. The 930 - 937 area is a significant resistance zone that if cleared could have this market really off and running.

I have to admit I am rooting against this market due to the ridiculous stream of people telling you on the radio that you have to put your money into GOLD. They cannot find a single world event that in their opinion will lead to anything other than a rapid rise in GOLD. It is no small coincidence that these same people happen to sell gold coins. However, they have been right recently.

British Pound

This chart image is fuzzy, sorry. It is a Daily chart of the Pound. You can see we are in a downtrend with a little bounce happening. A rally up to the 1.4500 area should represent a good short sale opportunity here. I have some propietary indicators not shown, that are lagging this bounce showing underlying weakness not reflected in the price. As a result this market appears due for another drop if we rally another 300 points or so first.

BONDS

My post on bonds was very timely as you can see what happened after my "Sellin Time" comments on this market. We are following the seasonal pattern to a T right now. We are into Weekly support at this point so it would not be a surprise to see a rally here. Some oscillators are diverging at this low so this is a possible long entry area. Bigger picture I think we go down but a bounce should happen in this area give or take a smidge.

GOLD

Instead of me bragging about how great I am as in the last post, in this market although I have traded it profitably, my views of where it was going have been lousy. The red S followed by the dotted line down show the last trade I made which was a short with a nice profitable exit which is the bottom line. However, I have been expecting lower prices in this market and we have not gotten them.

The Weekly chart still shows lower highs so until that is broken we are in a downtrend, but a very choppy one that is hard to trade. There is not alot of commercial selling going on yet so that is one bearish factor that is not in place. If we look at the whole metals sector however, there is an overall bearish position by the commercials.

Ideally for me here I want a push up that serves up a false breakout that reverses down to get short or I will just sit and wait for this to clear up somewhat. There are always opportunities elsewhere. I want to shoot fish in a barrel not in the ocean, and this market is just sloppy right now.

Strong Dollar



Indicated on the chart to the left was my call for a rally in this market, I happened to get the low exactly which I was not trying to do, just lucky. However, I know there is a longer term upcycle in this market that should last several years, and we were in an uptrend that had a pullback, so it was not really that lucky.



This is where actually being a trader vs an economist or some big picture theorist trying to sell you Gold coins on the radio comes in handy. I cannot afford to have some macro economic view that may or may not be correct, I need to be able to determine when and where the moves are going to occur, so I can position real money in the markets and benefit from it. This is a prime example of watching what is actually happening and getting past being hung up on what should happen. The fact of the matter is that the Yen and the dollar have become the flight to quality vehicles in this stock market wipeout, so why would anyone believe that stocks and the dollar will decline together? That is not what is happening, they are moving inversely from one another. Until that changes don't make investment decisions based on a dollar decline if you also think stocks will decline, they are moving in opposite directions.

Today we are having a huge breakout to the upside in this market not shown on this chart, further extending this rally.

SELLIN' TIME



This is a follow up to the post I had on 30 Yr Bonds. We have gotten this rally up I had indicated I thought would take place. If you notice the oscillator at the bottom is severely lagging this price action, a bearish indication. However, even without that we have had the bounce that has set up this short opportunity. It also coincides almost perfectly with the seasonal pattern. As a result it is time to look for whatever entry patterns you might use to get into this trade.



I will not disclose all of my proprietary entry patterns in this venue, but I will say that I have not shorted this yet, but will be looking depending on how today closes, for a short entry tomorrow. I do not believe in just entering on strength when looking to sell so most of my entries require some short term move in the direction I am looking to enter, but the patterns vary depending on the situation. The stock market crash that is happening right now is supporting this market for the time being but if we got one day of stable stock prices that could quickly change.

How do you like me now?

Obviously my post on the Stock Market was pretty timely. I did say to wait for a break which came the next day indicated by the yellow line at the top and confirmed by almost any oscillator one could have looked at.

I have maintained all along that we are nowhere near done on this decline overall and there is certainly nothing here that indicates anything different to me. I hate having that position because it is the common view unfortunately, but it is what I study tells me.

I see no reason to buy this index or stocks at this juncture even though we are now clearly short term oversold.

WHAT THE BUCK?

Here is a weekly chart of the US Dollar Index. It is clear the uptrend that we have been in and also equally clear why I have been bullish on this market. Notice the blue line indicating the commercials buying the market during the recent pullback in price. This is exactly what we want to see the go long a market.

There are alot of geniuses out there citing one reason after another as to why the dollar is going to take a mighty fall. They may be right, but for trading purposes all that hyperbole is worthless. It comes down to having a way of knowing what your signals are and tuning out the noise. This was a buy signal at the recent low, and I was outspoken about this in many forums including the piggington blog where I post occasionally. This chart shows why. At times I may trade short term against these types of setups, but big picture, these are what you want for large moves in the markets.

First off, Joshua thanks for the nice comments!

Today I have a daily chart of 30 Year Bonds displayed. The historic upward move is clear to see, just for some perspective, 112 to 142 is $30k per futures contract in a market where in the past a good trade was $2k per contract or thereabouts.

We have had a sharp break down from an odd flat ledge at the top. If we couple this with the strong seasonal bearish tendency in January, we should be looking for a rally as indicated by the arrow to setup a shorting opportunity. I do not know if we will get it but I think we will. As far as translating this into actual borrowing rates, that is a waste of time. There has never been the degree of disconnect between Mortgage rates and the underlying longer term bond yields than there is right now. There is so much gamemanship going on with banks pricing in outrageous margins on loans, which I suppose they justify with an anticipated increased default rate. Mortgages should be 4% right now or less based on the underlying.

Following up on yesterdays commentary, the rally has continued. One of the things I have learned the hard way over the years is not to fight trends. The short term trend is decidedly up so even though there are reasons to look for a short sale, until we get some type of breakdown I am staying out of the way of this.

Some of the shorter term timing things I use have already failed to pick this top and we are working on 7 consecutive up days in the SP 500 pit contract. Contrary to popular belief that does not indicate a good short sale entry. We are having extended bounces in most markets right here, energy, grains, currencies, softs, metals. I think most of these are shorting opportunities the challenge is timing them properly.

I have been away for a long time working on several different things. With all that is happening I thought it might be a good time to resurrect this blog.

As we head into 2009 this is how things look in the S&P 500 Index. The most important thing to note is how the commercials in the bottom graph have been on the short side of this market for quite some time. This has been typical during long bear markets in this Index. There is no reason to look for big rallies as long as this condition exists. If I had displayed the other indexes, they are much more bearish with the commercials than this chart shows with the SP 500. What this means is that rallies are shorting opportunities. January has had a recent tendency to have early upward moves which started Friday. The Vix is indicating low relative levels now which is bearish, so this rally on a short term basis could rollover at any time. I would suggest using whatever short term timing techniques you use individually to time shorting this market, it is time to be looking.

I will post some things on other markets soon. I am looking to short Gold on rallies this month, it is not setup quite right yet. Also, although a short term sell is setting up in the Dollar, longer term I am bullish on the Dollar going forward.