DECISION TIME

This is chart above is the emini Nasdaq index. This is displayed because it is the weakest of the three major indexes. I am about to show you a different chart than this which will give you a different perspective on this whole rally. However, for the moment we find ourselves at a critical juncture in my world. It may just look like a garden variety flag pattern and I suppose it is. However, my oscillators both displayed and those not displayed, are showing underlying strength greater than that of price. This leaves us in a tight spot. It is my feeling that whichever way we go right from here, will determine a decent sized move in either direction. I say that because the underlying strength could very well be supporting the underlying uptrend. That trend has broken on a daily chart, but not on a weekly chart. It is going to take a pretty good sized move to turn the oscillators back down tomorrow, but a small one to keep them rising.

We could very well be working ourselves into a few different scenarios now, so patience is the key. I will most likely get short again below today's low if it goes on Tuesday. I do not have a buy signal to go long on if we get a break upwards. In that scenario, I will have to wait to see if a buy signal develops on a pullback. As much as this whole rally seems awe inspiring with net change from close to close being very impressive, check out the next chart which shows just the pit session prices.

This is the SP 500 pit session but the Naz pit looks similar. I have marked the recent gaps with arrows. Just notice how many there are and how many of those days actually do not even close past the opening price. What this means is that net during the US session, many of these days actually closed lower than the open. Net net, the move is being driven by the overnight sessions gap openings. This is a very odd situation, and it has been going on for awhile now. It is significant because if you are trading stocks unless you are holding them overnight, trading stocks on the long side has actually been very difficult, they have made very little net progress other than the prior days close to the next day's opening. Most of their progress has been on overnight gaps.

There are several explanations for this. One of course is the PPT, probably the leading candidate for the Oscar. What is not known about how they operate other than by a select few, is exactly how they consummate their transactions. It is suggested by many yours truly included, that they operate at times when the volume is light so that they can get the most bang for the buck. The night sessions are such a time. I can't imagine how I would feel if I had been amongst the group of suckers that has been shorting these brief downward moves that happen during the night sessions. They must have reversed 75 of those by now I would guess.

There is another possibility that needs to be considered and I have also alluded to this in here from time to time. The large hedge funds and their complex algorithms may very well be involved in this. They are very adept at taking advantage of short term imbalances and inter market relationships. With the power of computerization now, their programs designed to do this operate at light speed. They are also automatically triggered based on a wide variety of things that may or may not be the same as what has traditionally triggered these buy and sell programs. These algorithms are also a possibility to consider in analyzing the incredibly tight inter market correlations that we have seen develop and stay in place for so long now. Maybe they saw them developing, theorized that the Fed was behind it so it was likely to continue. They then created trading algorithms to take advantage of it which have just perpetuated it. This could also be an explanation for the metals rally that has defied traditional fundamentals such as the COT data. Never has an idea with no historical basis driven something so far. However, it got wheels from somewhere and it could very well be these funds. The problem with that theory of course is that the COT data would have to be wrong for that to be the explanation.

It could also be these same players being wise to what the PPT is doing and mimicking their trades. There are a ton of possibilities to consider. For trading purposes it does not really matter. The net result is that there is a very strong bid underneath the market that supports prices on even the slightest pullbacks. It has created a tremendous amount of complacency very similar to the late 90's. As nasty as this recent break in price was, there was virtually nothing made of it at all in the media. Since the media thrives on negative energy this has struck me as particularly strange. I don't think there is any conspiracy, I just think most people are not even thinking a larger decline is even a possibility. That worries me in all honesty. However, it is not something to trade with, it is more just discussion.

What all this means is that these patterns are likely to continue and we need to assume they will until they stop, seems simple enough. That means keeping short leashes on shorts until we get a break of a major support point such as last weeks lows. If they hold we could well be off to the races again in short order. I think the way to trade this current setup is to go with the direction we break out from right from this spot.

Here is another market that now may be telling us we are going to move up in stock prices, BONDS. I had been hoping to buy a pullback here but it appears to me now that we have gone too far and my indicators are turning back down. This rally was driven by the flight to quality that always goes on when stock prices decline sharply. I did tell people in advance that this market was ready to rally and showed a projection of upward prices that has been followed almost perfectly. I do not see a similar setup at this point here.

That is all for today.

WAX ON WAX OFF.. ..RISK ON RISK OFF

The more things change the more they stay the same. Here we have 3 charts in markets that would normally be unrelated to each other in terms of intermarket influences. However, as we have seen for the last couple of years with a few minor breaks, almost all markets are trading in the same direction. Miyagi in the karate kid taught wax on wax off, this is kind of the same thing. The three charts I have are in order, Crude Oil, Gold, and Coffee. Risk has been off for awhile, but I think it is about to be back on.

We can argue here that the incredible influence the Dollar is having on everything is the explanation for all of this. I would argue it is actually something different, although my argument is related to that. It is my feeling that the artificial upward price movements engineered by the FED to ward off the deflation wave that would have otherwise happened, is what has caused all of this. Part of their plan is to deflate the dollar to make our whole we are digging with debt less of a problem. So I guess from that standpoint the common argument is similar to mine. The difference is that I think deflating the dollar is the result of what they are doing and not the primary goal. Either way in the end, it is what they are accomplishing by what they are doing. They are trying to inflate their way out of this mess, while at the same time telling us all there is no inflation. Any idiot who was born yesterday could look at these three charts and see there is inflation. All 3 of these commodities have been going sharply up. However, the report that basically measures inflation in all things that are not inflating, shows no inflation. What a coincidence.

We are really at a very important inflection point right here. You certainly could have justified getting long across the board a couple of days ago when the high of the low day in these retracements was taken out, because we are still in long term up trends in all of these markets. If you have done that you may get a major lift off again and you will once again be rewarded. When I project my oscillators for Monday, they all show the lines continuing to rise even on a down close, so that tells me that we are likely to get another up close Monday. However, that is not a precise prediction, if we start to roll over strongly, I might very well front run the oscillator movement and get short some things, it will be a game time decision. I really want to get short GOLD again.

If you are bullish, stops should be under last weeks lows pretty plain and simple. If those lows get taken out in the SP 500 or any of the above markets, or any others, we got big trouble on our hands. It might not be a bad idea to watch volume. As we have seen and I have stated this many many times, the PPT cannot stop volume. If we happen to get strong volume going on a big down day, look out. If we get light volume on a day that is moving down, look for the PPT to reverse that back up. They certainly know how critical this spot is, they are basically very short term traders with what they are doing. They are well aware of the danger of last weeks lows breaking.

It is imperative that you understand right now that almost all markets are once again the same trade. You have to take this into account when determining what to trade, how much, and when. A short in Crude is the same as a short in the Stock Indexes, which is the same as a short in Gold etc.. These correlations are so high, that if you were to be long all of them or short all of them, you need to expect the moves to go in the same direction. If you risk 2% in trades in each of those markets, you are really risking 6% in one trade.

It is my feeling from looking at the COT data, that the odds favor the next big move being down in several markets, so that is why I am leaning in that direction. The Small Specs have gotten historically heavily long in many markets, and although in recent times thanks to the PPT they have gotten away with it, historically this has been a recipe for downward price movement. The artificial market manipulations have warded that off, but they will not be able to control everything forever. As I have stated in here, there are going to be big consequences for what they have done at some point, and if last weeks low does not hold, we might be close to seeing some of them.

Here is one trade we have on in both our personal accounts and our Robbins contest account, Natural Gas.

You can see that I was within just a few ticks of being stopped out on this trade at one point. We have now started to move up some. This is a crazy market that completely trades to it's own theme song. I am glad I was not watching when this sucker dove down that one day close to where my stop was. If you don't have to watch live ticks, don't. There are alot of people calling for the industrialized countries to start using this for energy, and some of them are saying this little spurt here is proof that is starting to happen. I tend to think not, this market has been beaten to a pulp for years and has had many false starts. It is way too soon to tell if this little move so far is anything or not. I do have an exit target that is well above, and I doubt we will get there but you just never know. Plans may not always work, but you need to have them in case they do. I have my stops above where I am in now, so worst case here is a small profit, with the potential for a big one.

It looks to me like Tuesday is going to be the day to look for shorts in most places, unless we get a monster up day Monday, which could take some of them off the board. As per usual, we have to let them turn the machines on and see what happens. Must see TV coming to be sure. Speaking of TV, there was a great joke I heard last week. Barry's wife was popping off again about fat people ( she apparently gives herself a pass on this categorization excluding herself ), claiming all the out of shape people are a danger to our national security. Our armed forces are diminished by this. There was a comedian that suggested that we then have a fat army and a regular army. The fat army only fights on level fields, and the other one goes into the hills. I kind of like that idea! Could you imagine the sight of the fat army plowing across an open field heading towards an enemy? Classic! Maybe we add a new category to the COT report, fat traders and regular ones? The Fat Golf Tour and the regular one, where does it end? We could have a lot of fun with this idea, kudos to Barry's wife for getting this started.

Good Trading

FOR MY BIRTHDAY I BOUGHT A HUMIDIFIER AND A DE-HUMIDIFIER

I heard the above line on a comedy channel on satellite radio the other day and could not stop laughing. Steven Wright one of my favorite comics used this joke. It reminded me of the stock market right here. I did say yesterday that we could bounce at any time and that we were at a short term extreme. I also said that we were in a rollover danger spot. Those were the two scenarios at hand. I did not think we would get a small down or small up day. I was kind of right, we got a big day up, but the comments were really not definitive, so no pat on the back for me. Now we see that we are in bounce mode. I do not expect this bounce to get too far. If we were to mimic the 1987 scenario, that would call for a sideways to slightly up drift for a couple of weeks, then a washout. What I think will happen is another day or two maximum up, then another move down. So I guess what I am saying, is that we are not going to mimic on a short term basis, what happened in 1987. I just was referencing that because it was in a prior post before the breakdown, as to why I thought a break was coming.

It is interesting to me that most commentators are just writing this off as an anomaly caused by the earthquake. Of course they could be right, but they are not even considering the possibility this could be the beginning of something more. I find that interesting to say the least. Even though I have my view on it, I also am considering that we could just move right back up out of here again upward. When you hear comments like that you know you are listening to someone who does not actually trade their own account. As a result, I just don't give much credibility to people that tell us how to do things they themselves cannot or do not do.

Alot is being made about how we broke the 50 period moving average in the indexes. I personally have not found that to be significant one way or the other in all the years of research I have done. However, the key to any tool of the trade is how you use it. With a Caddyshack type of approach, it may well be that a 50 day break mixed with the correct batch of other things might be significant. I do not know, and this is not something I pay attention to. The way I see it in simple terms is that my momentum oscillators are in down trends and the short term price movement is up against those trends. This to me is a short on the retracement setup plain and simple. If the retracement move carries up enough to change the trends, then I will look to go long. No Caddyshack analysis for me. I am bearish because my tools are, not because I have any grand view of economics that I am submitting for a Nobel prize. I will let them give those for Barry for continuing to do nothing. One funny comment I heard about Barry yesterday was that it was nice he took a break from playing golf to fill out his March Madness brackets.

Here is the GOLD trade I entered that I got stopped out of last night for a gain of $1300 per contract. As I stated when I entered it, I did not know if that big day was the start of the big one or not. I mentioned it was just another trade. I did manage it as such. I am hoping for another short entry in the next day or two here.

This turned out to be a marginal result, but we never know that going in to a trade. You just have to take them when they come along, manage them by your rules, and let them play out. I do feel that even though I could have taken way more out of this had I exited the first day, you are never going to make big money cutting short trades that start off gangbusters really quickly. For all I knew this could have fallen hundreds of dollars, we just never know. The only reason I am showing this is that I mentioned the trade setup the day before, took the trade that next day, and now show the exit. The purpose of this blog is to show what I do, so that is what I just did here. I will not ever show all the trades I do, just some so I can accomplish a couple of things.

1) Establish credibility that I know what I am talking about.

2) Show that I actually do trade and trade profitably.

3) Develop a following for those interested in my commentary and work and the work of my firm PNJ.

4) Develop interest for potential clients in the future for different things I might get into such as PNJ Advisors or the hispanic translation of it apparently by Robbins, PNJ Adviors!

Here is the latest standings and our hispanic version of our company ( I hope you get the sarcasm in that ). I am being hard on Robbins, they just made a typo and are in the process of correcting it.

So we are up 22% not great, but let me ask you how many other advisor firms do you think are sporting that type of return not even 3 months through the year?

Look next week for the website to be launched., PNJ Advisors.com

As for today, I expect an up close in most things but not a runaway up day. This should setup some sells for next week in several places. Good trading and have a nice weekend.

THE PROBLEM WITH FADING EXTREMES

Just strictly conceptually speaking the idea of fading extremes is attractive. We can peruse any chart and see a huge spike up or down in price, then the monster reversal from that price movement. It is enticing to think about how much money you can make from timing those correctly. That is a correct view, you can. However, when you get into the actual act of doing this, it is very very difficult. Our current situation I would say qualifies as an extreme. We are already into standard deviations ( plural ) down. By mathematics this move is extremely oversold right now. We had a more extreme move to the upside over the last 2 years that was far more overbought than this is oversold. There are several measures you could have looked at that would have told you long ago to short the overall market.

So we have two moves both extremes, yet look how incredibly different they are. I would be impossible to tailor an approach to effectively fading both of these extremes. They are entirely different.  Standard deviation analysis is somewhat helpful, but then you have to decide what time frame for the deviations to use. That is similar to Fibonacci analysis. The ratios are great, but which points you view the magic .618 level between is completely subjective. Do you take it from the last pivot, the lowest pivot on the screen, the lowest pivot going back to the March 09 low? There are hundreds of magic numbers. We can be sure the market will stop at one of them, but how in the hell do you know which one?

Here in this example you see the main difference between in general how prices rise and how they fall. They tend to creep slowly higher in rallies, and plunge during declines. This is what attracts so many people to the short side of the markets. It is not being negative, it is the fact that the returns are bigger over shorter periods of time when you are right. It has been my experience learned from getting run over, that fading slow creeping upward markets is not a good idea. It is also not a good idea to buy markets that look like the current market does. The slow creepers tend to just keep creeping. The above type moves often accelerate down to a crescendo low.

There are certain tools to use to attempt to time some of these moves, and I have covered them throughout the last couple of years in here. The VIX is exploding higher now which will always be true in a situation like this. Keep in mind if you use the VIX, look at it on a relative basis and not an absolute basis. Where it is in relation to recent price levels, not where it is historically.

Currently we are in a very dangerous spot. We could very well bounce at any moment. We could also very well completely roll over for a big wipe out. The momentum is tough to reverse during a slide like this even by the PPT. It requires hundreds of billions of dollars. I suppose they have that at their disposal since they can print whatever they want. They can launch their buy programs, but when they move things up like yesterday for awhile, they often get met with big volume sell programs, which overpower them. We know behind the scenes with their beloved banker friends they are "suggesting" buying not selling here. However, if you are a fund manager at some point you do have to look out for your clients. If you suspect something larger is at hand, you are still going to exit longs regardless of what "suggestions" might come your way. We also have foreign money which the PPT cannot control.

We will be able to see if the PPT has both hands working on buys if we see the Large Trader position go up during this decline. We know "real" Large Traders trade on momentum, and sell on 20 and 40 day lows, so their positions would be going down during a decline like this. There is only one group that would fall into the Large Trader category of the COT report that would be buying during a time like this, the PPT. Let's watch that closely. I still think we have more downside here in the near term, but a bounce can happen at any time. I told you yesterday that I thought we would close down since the prior days reversal would likely be undone and it was. Score one for me there. Today I am not sure. Once again I have my trades on and my live quotes off so I have no idea what is happening overnight at all. I do think there is a risk of a sharp rollover for a couple days then a very sharp bounce and I would weigh the odds in that direction. However, an oversold bounce could come at any moment. That bounce is a sell when it comes.

The Dollar Index above has interestingly enough not exploded higher here. The correlation between stocks and the Dollar that the FED created, appears to be unwinding here. Remember in the past they generally traded in the same direction not opposite directions. We do have a nice buy setup here if we hold at these levels. That would also mean sell for other currencies. I think the Swiss is the one exception as that seems to be the flight to quality place along with Bonds right now. Watch the Dollar Index closely for buys down here.

Good Trading to everyone

LET HISTORY BE OUR GUIDE

Here is a perspective on where we are versus the 1987 scenario. Just to restate why I think this is so similar. First, we had very strong stock prices, virtually no corrections, and at the same time sharply declining Bond prices. Then we began a minor trend break. I have marked where I think we are in this cycle, in the initial downward move. There was also a great amount of optimism back in 1987 and a general complacency as we have now. Brokers during that time reflect the same type of feeling they do now. They were surprised at how far it had gone, and had given up trying to short it having gotten their butts kicked trying to do so. Wondered how far it could keep going and when it was going to end. They watched clients doing all the wrong things and still make money doing it because of how strong the market was. Also kinda like 2000 now that I think about it. Sound familiar?

Fast forward in time to today. I am not going to get into the subjective part much other than to say that the general feeling in the brokerage community is exactly the same even though publicly they are not stating it. It is heresy to publicly state "sell." They make their money on the long side. I am a believer and my historical studies tell me that the largest moves do come when the least number of the general public is looking for them. That would tell us a GOLD, OIL, and STOCK decline is coming and a DOLLAR rally is coming. Will they happen, who knows. Do not get carried away being too much of a wise guy just constantly taking the divergent view. The public is almost always right in the middle and end of moves, so timing is awfully important being contrarian. Often moves go basically until the very last skeptic fighting them capitulates including the last contrarian. Once the very last player is left to pile on, the moves reverse.

Timing that is impossible unless you have incredibly deep pockets. The Elliott Wave people have been off now on the short side for more than 2,000 Dow points, that requires incredibly deep pockets. They no doubt will come out and say I told you so if we really rollover here, but you can hardly take credit for being off by that much. Getting back to the above example, your timing did not really have to be that great to dodge the wipe out of the famous crash of 1987. No matter how you look at that chart, the trend had turned down when the crash came for all other than long term holders. Today, the trend on a daily chart is without question now down, the weekly has not broken yet. If you are a long term player and we do happen to see a rally develop over a few weeks like what happened in 1987, you can just move your stops up to below the lows it launched from. If they were to then break, the trend on all time frames would have changed. If they were to hold, then the longer term trend will have held up. Pretty simple from that larger time frame perspective.

What are the odds that we have a similar type of drop to October of 1987? On a percentage basis I think they are slim, on a points basis a lock. Prices are so much higher now that massive down day was only 500 some points, we have seen several of those in recent years. The main thing to focus on is that we have a market that was incredibly overextended on the upside. Now we are getting the reversion that is long overdue. We were able to find a very similar technical situation that served as our guide as to what tho expect, and it delivered. Whether or not we will overshoot on the downside I don't know. We have far more intervention in the futures markets now by the government than we had back then, since Bernanke is a day trader now. This influence should temper the fall. You can bet your ass the Fed's books will never get opened if a big drop occurs. You can think through why I state that on your own.

For now, we are in a sell the bounce mode until proven otherwise. I for one hope we don't see a wipe out, but the play is in the playbook now. It has been for about a year, but the game conditions were not setup in a way that it could happen. They are now. Know your style, follow your rules. As long as you do that and have decent rules, even if we go down big, you will be ok. That would mean you have stops set on longs to get you out if we really roll down here. We are short term very oversold here now, so a bounce should be imminent, however I expect today to be a down close based on the reversal yesterday. They tend to get undone the next day when we close in the middle of a large range like that.

Here is a 5 min chart of the pit session for the SP 500 yesterday. This is not an obvious PPT save to me. When we have huge gaps down like that many day traders will buy those opens. The PPT generally operates either in the night session, or during the end of the day periods where we are down and volume is light. Neither of those seemed to be in place yesterday. We will never know if the PPT was the buyer on the open, but I doubt it. Natural market forces worked yesterday...oh wait a minute, they cannot be trusted to work haven't we learned that recently? We cannot take the risk that they won't work. We are supposed to intervene and bail things out aren't we?

The last chart for today is that of the British Pound. Most of the currencies are setup for a decline here, this is one of the weaker ones where shorts should be done on any bounces.

Take you pick in the currencies they all look basically the same although the Swiss seems to be the flight to quality spot right now so maybe pass on shorts there, even though there is a nice trap pattern setup there today.

CAN YOU SAY 1987?

I know I will probably have record traffic today, so this needs to be a vintage performance by yours truly. Fortunately for me I have been on record in here saying that what is happening here is exactly what was going to happen. Recently, I posted the 1987 chart with the Bond Divergence stating this current pattern was eerily similar to that chart. I posted examples of what has typically happened when we have gotten large divergences between Bond and Stock prices. Bingo, history does repeat itself doesn't it?

I have also harped in here ad infinitum about how when the government gets involved manipulating price, we get massive reversions to the mean. I have repeatedly said the campaign by the PPT to artificially raise stock prices could not fight off volume selling and that it would only continue to be effective in light volume conditions. I said the other day that even though I was not predicting it we did have conditions that could deliver a massive decline. Just yesterday I said that on a POMO day ( yesterday was one ) if the market could not hold there we were being given a powerful message, and not a good one.

I also talked about a Bond market rally, a Gold decline, and a general commodities meltdown.

How do you like me now?

The Bad news is that there was not a great textbook sell setup with the bar patterns to get short the indexes themselves. That is no surprise we have had historical price manipulation with the futures markets by the Fed, and they have made bar patterns very choppy with their late day saves to artificially mark things up to try and kick the can to the next day. Now someone could argue that we only sold off due to the horrible devastation in Japan. That was the trigger for today without a doubt. However, there is always a trigger that is unique, that is the whole point of looking at the markets technically and not with the Kramer type of Caddyshack approach. The Caddyshack approach is trading like the day they get loose at the pool in the movie where everything you can imagine is going on at once. A jail break to the water, skin to win, poop in the pool, booze, you name it. In trading I call it Caddshack when people subjectively analyze all these numerous variables and then apply weight to them. They then randomly come up with a decision to buy or sell. That is Caddyshack.

There is no way anyone could have known such a horrible tragedy would occur, but you did not need to. If you just looked at the PE of the DOW alone, it was enough to tell you this had gone way too far and would not last. You did not need some subjective opinion of what some favorite CEO you might listen to was saying about his companies prospects. What do you expect him to say, sell his stock? These guys have also been doing record stock selling in recent months, another major red flag. However, they won't come on Kramers show and bark out how much of their stock they have cashed in.

If you just kick all that stuff to the curb, and use technical analysis, you can stay ahead of the game. Isn't it alot easier to use basic technical analysis, than having to be the genius who predicts a massive earthquake to make money?

The FED will show up without question today to try and stabilize things, and this what actually what the PPT was formed to do, intervene during times like this. It was not designed for them to be day traders of the SP 500 futures like they have become. Providing stability during times of strife is what they should be doing. If volume stays strong the amount of Billions required by them to stop it will even be beyond what they have available. I do not know how the balance of the day will play out. I have some positions on, and I will not babysit them during the day. I have my stops in and that is that. It is too easy to get carried away with yourself or have emotions get the best of you on a day like this by watching intraday.

I showed yesterday the setup for shorting GOLD. You can see below my entry exactly where I indicated it would be.

This once again plays back to what I have repeatedly said. There is not a direct correlation between times of crisis and rising GOLD prices. That is an idea by precious metals coin dealers manufactured to sell product. There is no historical basis for this claim. It sounds like it makes sense and millions of people have gone for the pitch. They have gotten away with this false claim since so many small speculators have bought into it that they have literally driven the market up by themselves. That rampant speculation by small fries is what has set this market up for a decline. I showed this setup recently in here on a weekly chart highlighting the heavy long position by the Small Speculators. I have no idea if this is the start of something big down or not. At the moment it is just a trade based on a setup market, that had a pattern in momentum and price. Even if this is the $700 fall that I think is in the future, I would never hold it that long anyway. I am a short term trader so even the trades that work great I usually only hold for a couple of weeks, sometimes three.

I am not going to go back through everything in detail I have stated here recently that is playing out the way I have told you it would. For those interested, just browse through the prior entries in the archives. As it is with trading so it is with life. I will not always be as accurate about what will play out as I have been here. However, good solid approaches to market analysis to have a way of coming in handy every now and then.

I would suggest not getting too caught up in the news today. If we happen to continue down it will be a raging story. Stick to what you know to do, honor your rules. Times like this will test you like no other to do the wrong thing, don't give in to it. Do not chase this down if you are not already short and wanted to be. The PPT is lurking and they will make their run at stopping this. It could be a very volatile day. This is just another day, treat it as such. This could very well be a decline to buy into, but it is too soon to tell.

I will turn off the live quotes and the news channels and do research then tune back in to see what happened later.

Good trading and best wishes to anyone in Japan, we all feel for you.

RUBBER MEETS THE ROAD

Here we have the Naz, the weakest of the US Stock Indexes basically at a key support point. For you Eilliot Wave counters, we have a very clear A-B-C correction with good symmetry. Today we also have a big POMO day, which have been big stock manipulation days by the Fed. We got the good down move overnight on news, but will it stick with the PPT likely to be active today? This should be very interesting to watch. We are in a logical place for a bounce, and a logical place for the government to launch futures buy programs through their stock market manipulation. If they can't hold it here on a POMO day that really tells us something, and not a good something.

Just from a short term perspective, this is a key spot. There would be no question that if we were to close below the support level marked on the chart, the short term trend will have turned down. In my view it already has, and I am looking in the next day or two to get short the stock indexes on a bounce if we get it. If that bounce continues to carry forward to the upside, I won't get short. I will just have to watch the price action to see how it plays out, but I have a tentative plan.

I put the Wave count up just because it was so obvious, or is it? I have not made a trade based on Elliott Waves since giving up on that idea 20 years ago. However, at times the symmetry in waves is very interesting. The problem is always there are always 2 alternatives in wave counts, one that indicates buy and one that indicates sell. In this case we could have a wave 1 down where A is and a wave 2 up, and we are now in wave 3 going down. The question then is are you bullish or bearish? Net net, it adds nothing to the game. It gives you a coin flip option, as the waitress in Caddyshack said, "Tanks for nuttin."

The Oscillators I use are showing down, but they always will when price moves down this much. We are getting some short term divergence in the top one. However, ADX is increasing telling us this trend has some integrity since it is increasing, so I am ignoring that divergence. That of course is a judgement call, but so is life so get used to making them. In summary, I am looking to short a bounce Wednesday, now it is time to see if it sets up for me. I still am short several stocks, so I am participating in this decline even if I don't get in the indexes.

Here is one of many markets now setup for a short entry, GOLD.

We have been diverging in the momentum oscillators for awhile now, and we appear to be having a bounce or retest that is losing steam. I am looking to short this or Silver tomorrow or Wednesday depending on the price action. Siler has been stronger by far so I am leaning to GOLD, but the short term price action seems to be shifting a little back in the direction of more weakness in SILVER. That will be a game time decision as to which one to play. I like the price to drag me into the trade instead of picking points in space and entering there. I suppose if you were really bearish, you could play ETF's here and just work your way into the trades with market entries, but that is a bit dangerous against a trend this strong in my view. I was traveling recently and talked to a dude at an airport who was really bearish on SILVER and was buying the ZSL etf, which is the inverse SILVER stock ETF. It appears he has caught this well, although for all I know he bought in a month ago and is way upside down. I doubt very seriously he caught the high. In any event, hats off to him, he is about to cash in it appears. This could fall sharply if it gets going.

The last market for today is Bonds. I have marked on the chart where we were when I posted that chart showing we should rally, and we have.

If you have not gotten long here yet, buy the next dip, we could have a nice run coming here especially with the trouble it appears stocks are in.

That is all for now

AAH THOSE EVIL SPECULATORS, OFF

WITH THEIR HEADS!

The cry rings out now, those evil speculators...... Of course liberals by and large want to eliminate trading entirely so everyone who is able to make a living for themselves doing that would be reliant upon the socialization agenda they propose. They cite situations like this as a reason why speculating is so harmful. They blame the whole run up in the price of Crude on speculators. In this case as you can see they are correct. The commercials have by far their largest net short position of all time, Large Speculators, their largest long. The Small Specs are also very bullish here.

As I stated in a post recently, this is a recipe for a false breakout, and it appears from what I can tell, that is exactly what we have gotten. Everyone remembers the huge run up to $140 in Crude, that was followed by a quick trip to $33. One of the things that was never really publicly revealed about that run up, was the mis-classification by the CFTC of large commodity funds as commercials, which allowed unlimited position sizes for Speculators. The large funds were able to pile on in an unlimited fashion, then ran for the hills just as quickly, and poof $140 to $33. So the net of that fiasco, was it was the governments fault, yet they cried out against the speculators. Maybe it was a ruse, like accusing someone else of farting when you did it, to deflect the attention away from the real culprit. Yes in that case the Speculators took advantage, but that is what most would do. They were given a rare opportunity within the law to make money, and they took advantage of it.

In this instance, I have no way of knowing if anything like that is going on, but what is obvious is that the hedgers are selling this with both hands, and the speculators are buying with both hands. If you look at how far below the old highs we are and take into account that the Large Speculators are at their largest long ever, you could conclude they don't have much buying power left. They do have the ability to pyramid, using open profits, but I would say that is about exhausted here.We should have been at new all times highs with this large of a long position with them. This tells me the steam is running out and we could have a very sharp reversal here.

Look to short the energies over the next couple of weeks on a bounce, it could be a big trade.

I would also say that almost across the board that should be the strategy, sell bounces, we have trend changes setting up here. The Stock Market is rolling over here, the Dollar is strengthening, currencies weakening, energies weakening. Opportunities are plentiful here so go get your piece.

The Robbins update on PNJ Advisors, is that we are tied for 5th at 17.6%. This is not an earth shattering performance in all honesty, but it still is on track for a good annual return, and it is a year long contest. Also keep in mind we are trading this account just the way we will trade our fund, so we are risking very small percentages on the trades. As a result many trades we do in our personal accounts have too much risk and we don't do them in the contest account. Many of the metals trades have such big stops they are beyond the risk parameters of 2% we are using in the contest account. We have personally taken those trades and done well on them, but they have not been done in the contest account unfortunately, which has lowered our return substantially.

The markets with all the manipulation by the PPT have been treacherous this year so far, anything above zero is good trading. We have had so much choppy price action, it has been very tricky. We have traded the account probably a bit too conservatively for part of this year, and missed a couple of good trades. When you trade for all to see, trust me the game changes. You always fear being a dumb ass in the eyes of people evaluating you. You pass on some trades you should not, and you manage some too closely. It is not all a bed of roses being out there for public consumption. However, it is the road we have chosen, so I will keep readers updated on how we are doing. I do feel very good about that current return, many good traders are losing money this year so far.
Anyone who can consistently make good returns in a contest account is an excellent trader.

Good Trading to everyone

WE HAVE RESOLUTION

We finally have a breakout of the range, and it is to the downside the way I was leaning. For those who might be bullish, if this were to reverse quickly and breakout to the upside, you should definitely reverse to long. I suppose if you are bullish you would not be short so maybe add to longs if that were to occur. There is an abundance of reasons for a decline, and none for an advance from here. However, that has also been the case for quite some time, so the FED has fought off all challengers to this trend so far. As I have said repeatedly, they can't stop volume selling. They launch the buy programs when activity is light and they can really move the market quickly. Heavy volume down days usually do not provide an opening for them to do this.

The oscillators I rely heavily on have not given great reads here. They show downtrends, but choppy ones, so I am not heavily short. I am trading stocks off weekly charts now, so much bigger stops hence smaller size on the trades. I like not having to babysit those trades everyday. Stock chart patterns are not as clear as futures patterns, but they get smoother on weekly charts. I am still short the evil empire Goldman Sachs also RHT and a few others.

Getting back to the indexes, certainly now if we go down a good bit then bounce, the bounce is a shorting opportunity. If it immediately reverses and this is a false break, I would not short the rally. We have seen alot of traps in the last couple of years on the short side. If this market is going to correct the amount it is long overdue to, we have plenty of time to get short on bounces. As I have said, I think at some point this year we are going to have a very big decline, I do not know if this is the beginning of it or not. I was looking more to late summer for that to take place. As always, we just have to follow the action. This is why being a long term trader is so difficult, you have to know what is going to happen a year from now, and I just have no idea about that, NONE!

Maybe this will be known as the ICAHN selloff if it gets away from us here. Today and tomorrow are important to see if we stay down and follow through. Make no mistake about it, a monster drop of 4 digits is not out of the question here. This market has been artificially driven so far for so long, that an over correction is going to happen, and it is going to be nasty when it does. I am not predicting that, I am just stating that it is something that could happen. That FLASH CRASH was not a one timer, it will happen again. Prices for assets have a funny way of finding there way to where they want to go eventually, no matter how much we try to stop it. This is why when prices get over extended in either direction, you have huge reversions. It is really prices finding their own natural equilibrium. When we enter into artificially driving them too far in either direction, the sharp moves just take us to where they would have gone all along on their own. The moves seem so much larger because we have artificially pushed them to far away from their natural point. Can you say real estate?

I had also mentioned GOLD as a sell the other day, so I hope some of my readers caught this move.

If you have not do not worry, this should be a big move down, so just short the first bounce. I have talked about this market many times, and it is beyond ludicrously extended on the upside having been driven by small speculators and not big money. When this market falls, and this may not be the big one, it will get halved quickly. I just don't know if that is tomorrow or 2 years from now. I just am 100% sure it will happen at some point. Too many of the "wrong crowd" have made too much money from this. The markets have a sinister way of cleaning out small investors time and time again. So far they are getting off on the big guys, but that will not last forever. I showed graphically the proof the other day of the small speculators driving this move. You can get back and look at that if you choose to. It is unprecedented in history.

As for other markets, if you read my commentary every day you saw where I said we are looking like we are turning down in several futures markets. You can take your pick today, virtually everything is down quite a bit. We have more coming, so pick your spots and go get em!

DON'T PASS THIS ONE OFF

Being in a position with no particular ax to grind in either direction, I found a development yesterday that is being passed off by the media as a non starter very interesting. Carl Icahn's announcement that he is returning close to 2B to his hedge fund investors because he essentially fears another market meltdown is possible. He went on further to explain that the last meltdown effected him deeply, and he was not sure he could handle watching clients lose money again. It is not often this type of high profile person makes this type of statement.

I heard a discussion on FOX about this and of course the traders pawned it off as him being a tired old man who had made his money and was just saying the hell with it all and walking away. Others had a different opinion. I can tell you this, as a trader, you live trading. I will be placing traders til my dying breath, so that angle is not too likely to me. Then this morning I heard an interview with Art Cashin, a long time floor trader, can't recall who he works for now I think UBS, but this guy is pretty dialed in to what is happening behind the scenes. The CNBC host said all the dips are being bought so everything is good? Art said no. He referenced heavy insider selling which we know is going on. I think we have record selling by corporate officers, legal insider selling that they are allowed to do with company stock. He also referenced Europe etcc..

There have been no dips to buy so I am not sure what exactly the CNBC guy was talking about. The question of course is what if anything to do with this information? It is very tempting to seek out opinions on market direction, but dangerous. We all tend to seek out those that agree with what we think, and dismiss the others. For me, I do not really factor other opinions much simply because it is my money that is on the line so I want to be responsible for it coming and going, not someone else. After all I can't bill them for my losses if I follow their lead and they are wrong. However, there are many that do not wish to manage their own money or make their own decisions. This is a very difficult business, not for the faint of heart. It is certainly understandable why someone would want to look to others for help.

I do not really have an overall opinion bullish or bearish at the moment. I see a very tight range contracting even more the last couple of days. We are at this posting working on two consecutive inside bars, although it is not known if today will be one by day's end yet. Generally those are bullish patterns when they form, but that is not an absolute. I do think from a bigger perspective, the next large move is going to be down, and by large I mean in the thousands of Dow points. If we break out higher here obviously the up trend remains intact. However, I just think stepping back away from all the hype and manipulation, this market is incredibly over extended on the upside. It is not a spot to place new longs, and it is a spot to tighten stops on existing longs. That is just my opinion. I guess that means that I think if we break out to the upside here, it won't be an explosion, it will just meander higher. If we break down I think it will be sharp just because of how overbought we are. It is certainly bullish working of an extended market by moving sideways like this if this is all the correction we get.

If I had ridden this up all the way, I would be flat here. Most sectors have more than doubled in the last 2 years and those are just incredible gains no matter how you look at them. Most people have been made whole in their 401k's. However, we know there is a Jim Tressel type story behind all of this and it is going to break at some point. There are people that know how the market is being moved higher and have tight lips. At some point that story will break, but who knows when. The problems that got us where we are today are not solved, they were shoved aside. They are going to come back at some point. I do think when you see someone like Icahn make this statement, you need to take notice. He has no vested interest in seeing things decline, he is not a short side only hedge fund trader. He along with Kevin Haggerty one of my early mentors, are of the same mindset.

If you are someone who likes bigger picture views, I would stay on top of Haggerties commentaries at Trading Markets.com. He is the best there is at the big picture even though he too underestimated how far the PPT could take this thing. This is really ironic, because I learned of the PPT from him, he knows their game better than anyone. It just goes to show how truly unique this has been.

As to how to trade what we have here, these are my thoughts today. What I put in my trading log today was that as much as I am tempted to short a break of yesterday's inside bars low, it is just not an obvious trade to me. We are eerily similar to late Novembers chart pattern, so I am going to need a bit more to get short here. On the other hand, I do not have any buy signals, so I have nothing to do in the indexes today. As much as I want to get involved, I know that marginal trades produce marginal results. I don't push them. If it is not there I move on to something else. Here is the something else.

I reviewed on a bigger picture basis recently why I felt GOLD was setup for a decline. Here on a daily chart I have projected what things would look like tomorrow if today's low were taken out. You can see the momentum oscillator starts to roll over confirming the divergence it has been building. This is a trade I am looking at. Will it happen, I have no idea. Also as I have stated many times, this oscillator is not the exact one I use, it is similar. I will have to look at the exact one I use to see how things look, but it looks basically the same right now as I go to press. I would prefer to see yesterday's high get taken out in GOLD today for a short tomorrow, so we will have to see if that happens. Also, just look at how much weaker GOLD has been than Silver. GOLD is where you should short if you are inclined to short the metals. You never want to short the strongest one. The metals hawks are talking about how we are headed to a 17 to 1 ratio of GOLD to SILVER and therefore SILVER will dramatically out perform GOLD. They may be right I have no idea, but I find it hard to believe that SILVER would soar if GOLD declines. Again, that has never happened before, will it his time? Maybe, but the different this time arguments just don't usually pan out.

To those different this time players, I have to tip my cap to them. They have been right in the metals. This rally is unprecedented in terms of how far it has gone being driven almost exclusively by small speculators.

WINDING UP

Another day and nothing has really changed. We have our triangle tightening on each side here with now the lower short term high confirmed yesterday when Friday's low was taken out. A breakout from here is the way to play, which way of course is the magic question.

You can see the purple line which is the 30 Yr Bond over layed on top of the SP 500 prices here. As I have discussed in here, in the past when this type of sharp downward move in the Bond prices has accompanied very sharp stock price increases like this, we have had some nasty declines in stocks. By that logic, this little minor consolidation is not even a wiggle. We should go down much more than this by that pattern. I don't have a definitive read with the momentum oscillator here, although it is favoring the down side. It is not one of the patterns I typically trade with it, so it is not enough for me to take a position here.

Today so far, even though I do not have it pictured above, we are working on an inside bar up at this point. This is further tightening the range here for the breakout. If you look back closely at the chart you will notice how amazingly similar the current pattern in both price and the indicator is to that of late November. If this is any indication, we are heading sharply higher again. Net net here, most of what I look at says down, yet the most similar prior confluence of all these things says sharply up. When things like this conflict I don't trade. I might be able to guess right, but I don't like the results I get from guessing. I suppose it is possible we could get a brief down move that is a false breakout down, that traps bears, then they reverse this right back up and that is the power move. That is what occurred last November.

One thing to keep in mind, whatever the reason is, we have arguably the greatest rally in history going here and the bulls won't give it up too easily. We also "know" there is something underneath this market keeping it very strong, and they are not likely to back off from their current strategy any time soon. Tune out of the noise on the news, none of it makes sense anyway and it is often accompanied by huge biases as we all have certainly learned in the last 2 years. I will show what I do here and when, and I just don't know right now what that is going to be. My gut is that I will short this soon, but that is yet to be determined.

Here is the Bond market using the new tool that projects price direction based on a number of parameters that can be plugged into the software. No matter what I plug in we get a very bullish forecast. The Red squiggly line projects price, and it shows sharply upward ( due to scaling it does not look that sharp but it is ) no matter how I look at this. This fits into the bearish scenario for stocks, since they are trading inversely nowadays.

The area for analysis is what I captured that is shown in blue. It does not matter how I capture this the results are the same. I have not gone long yet, but I am looking to the long side here. This is an amazing tool, but although a majority of the time it almost exactly predicts things, there are times it is dead wrong. As a result, I do not trade off it by itself. It does though push me to look for something solid to confirm direction.

It does also appear that we have started down in many other markets and stabilized in the DX here. It does seem to me that we are getting a very bearish sentiment developing in the DX once again, which makes me want to get bullish there in general. I do not have any buy patterns yet nowhere near it, so I wait there.

Overall now I am looking for a stock decline, Gold decline, currency decline ( DX rally ). I am not sure about the Grains here or Crude. I mentioned recently based on the COT data, the Crude breakout could be a trap. We don't know yet if that is the case or not. That is weekly data, so it is not that timely.

STRANGE BREW

As we continue forward during this very unique time in history, I present you with yet another anomaly I have never seen before. The above Gold chart shows something that is just astounding to me and something I don't think we will ever see again once it ends. This has principally led to me making an incorrect call for a major top in Gold a year ago, that was dead wrong. The arrows show about as conclusive a case as you could ever see for the fact that the Small Speculators are driving the whole Gold market rally.

You can see virtually every little move be it up or down, is accompanied by an identical move in the Small Speculator net position. I have never seen this before in any market go on for this long. As a student of the COT report, which is published by our good friends in the government, I have learned that prior to recent times, it has been an absolutely fabulous tool for predicting market swings. Until QE started of course.

If you just think about it logically, which at times can kill you in trading, it is typical for the public band wagoners to hop aboard the train right at the worst possible time. You can find one example after another historically, where the Small Specs got increasingly bullish right at a market top, and bearish right at a market low. I will show some examples of this in a moment. However, in this case, they have been "dead on balls accurate." ( One of my favorite movie lines from My Cousin Vinny )

Now on the far right of this chart we see that the net long position of the Small Specs has rocketed up to it's second highest level in history. The beginning of Feb of 2003 is the only time it was ever higher than it is now. That preceded a sharp decline, but one very short in duration. Then we launched on this record making run upward. There was a second run up in Small Spec longs that followed shortly thereafter, which led to a decline of some magnitude, but again short in duration. Below is a chart of that time period and the two examples of this.

I have a horizontal line drawn at the net level that we have right now, extended back in time for reference here. You can see the first time we exceeded it, we then had a several week decline, which ultimately led to a big rally. The second occurrence is a little more like what we have right now, with the net position being slightly lower but close enough. We had in that instance a false breakout to a new high that quickly reversed ( a trap ). The same thing then happened, with the overly bullish long position getting worked off leading to a great buying opportunity. With these prior two instances as reference, this is what I think will happen now. We are going to get another decline which will work off this excessively bullish Small Spec position. Once that has taken place, it will likely lead to another launch upward here.

What I also find interesting just to ponder as a possibility is the following. Some of the cyclical references I have for this year in stocks show a June/July significant top. If you look at the duration of the declines above they are 2 to 3 months, which would take us about into that time frame. Since we have kind of morphed away from GOLD tracking stocks now, and being a flight to quality place, it logically follows that if we get a nasty stock decline, it could lead to a GOLD rally.

In summary, I am looking for a decline here right now to last for a couple to 3 months, which will lead to another lift off further delighting the gold bugs and small specs, who will undoubtedly drive it as they have been even though it makes no sense at all. It is what it is.

Here are a few charts that show what had been the historical tendency of heavy Small Spec bullishness. As you can see it is not consistent with what we see here. However, trading is about adapting. What has historically been true just is not right now, so don't fight it by being righteous.

You can see 3 instances where what should happen did with the large increase in Small Spec longs. Of course there is a possibility that has to be considered here. There may well be a change in who is being classified where in the report. It may very well be that groups that are not truly Small Specs are being lumped into that category, which could be distorting the figures. There is no way we will ever know if that is true or not, but with all the manipulation that is going on, it certainly cannot be completely dismissed as a possibility.

On that same subject, a problem confronting the PPT is developing. Certainly John Q Public has greatly benefited by this magnificent rally they have sponsored. I seriously doubt the average Joe has any problem having watched his 401k completely recover all of it's losses. However, here is a problem they have created for themselves. We now have a very bullish climate for stock prices, I doubt many are worried about a big decline, sentiment numbers certainly bear that out. We are now starting to get some people confident enough in the recovery, that they are back in full bull mode and putting money back into the market.

I wonder how the same people that are thrilled with the PPT will feel if we get another 50% decline? It is my contention that if they then become educated about how they were suckered back in at the absolute worst time, just to see there hard earned money disappear again, they will not be too happy to learn the whole rally was a manipulation. If that were to happen, I think the public pressure on this whole scenario would be overwhelming. These guys better hope this rally they have created can run on it's own. If you watch the last week or two, you can see that at times when they have stepped away, prices have fallen quickly, forcing them back in to save them. This tells me at this moment this cannot run on it's own. Maybe that will change I have no idea. It does seem to me in the market overall right now we have natural forces wanting to drive prices one way, and unnatural ones another. It is making for very choppy wide swing type of trading.

I still maintain this a time to lighten your long exposure to stocks. This has been a historic run and with it only happening one other time in history, this % this fast, odds do not favor it continuing at this rate. I will close with an anecdotal story. I was in New Orleans last week, talking with a friend of mine. He told me he had all of his company 401k money in his company stock. He had achieved a fantastic return having seen it skyrocket in value. He asked me what I thought. I told him the first thing he should do the very next day is move it all out of the stock. I further said that is the dumbest thing you have ever done and don't be greedy. You literally got away with murder. You did the worst possible thing anyone could ever do and got away with it. I asked him if he had ever heard of Enron, he had but did not really understand what happened with many of those people.

His final comment on the subject was, " I have done so well I don't want to sell here." Of course we all know what will likely happen there, he will get wiped out. It is the greed of people combined with fear, that lead them to make these types of decisions. However, it also is an anecdotal story of an average person that is very bullish on stocks and not even considering the possibility that something could change. This is why I think a big top is close along with the things I talk about in here every day.

A TEACHABLE MOMENT

Of course I would assume my readers understand the sarcasm in today's title, enough said. This is actually a case in point of what I said yesterday about why I would not short Silver regardless of the pattern being very good. You can see that today we have gone on to make another new high here, GOLD has not.

It is very clear to me that this chart of GOLD shows a dramatically different picture. I harp on this constantly, but see so many people ignore this. You ALWAYS need to buy the strong and sell the weak. I cannot tell you how many times this idea has saved my ass, including here. There is a reason why this works, and it is pretty obvious. Stronger markets have much more buyers ready to enter in at the slightest pullback, vice versa for weak ones. This is why trading a reversal in them is so difficult. Here you can see that had you sold below the prior day's low in each of these and stopped it above that same day's high, you would have been stopped out in Silver already. With Gold you would actually still be slightly profitable as I type this.

As it is with trading, so it is with life, this does not work every single time. There will be times when a weaker market will move more than a stronger one. However, you need to tailor what you do to probabilities. If you know that by and large weaker markets decline more and stronger rally more, you cannot get too tied up in the few exceptions that take place. Nothing is 100% in life. This is about as close to that as it gets in trading.

Study this on your own, make of it what you will.

Here is my entry from my trading journal last night that might be helpful, when I was debating what to do here today.

SILVER - Sell but strongest metal, never sell the strongest
GOLD - Clearly weaker, but the pattern in the indicator is not as good, and there is no bar pattern

tough to pass on a setup in Silver this clear but follow your rules - NO TRADE WAIT

That is exactly as it appears except it is not in red print. This logic saved me thousands of dollars today, about $10,000 to be precise.

Meanwhile back at the ranch, here we have the SP 500 in the process of declining after the non farm insult your intelligence report this morning. Now that the government has once again changed how they are measuring things, this report does not make the sense it used to. Can't we go back to the days where they just modified the data to show what they wanted it to? That is better than having it be based on a bunch of BS premises, oh well. This is exactly why you should not pay attention or trade off reports. That is just a guessing game, not for me. The logic goes something like this. If you use indicators to trade they will have taken into account reports and all sorts of market influences. How they effect the market will already be in your indicator as you study patterns in it from the past to trade off going forward. As a result, you do not need to babysit reports when they come out. Just place your orders based on your rules and move on.

At this point this market is getting pinched into what technicians call a triangle or wedge. There are all sorts of takes on which way the probabilities favor the breakout to be. I have never seen anything conclusive enough for me to weigh it in either direction. As a result, I fall back to my indicators, and price action. In this case we have a higher short term low a couple of days ago, and are now working on a potential lower short term high. You could trade this in either direction in my view based on the price bars. Either breakout could be justified to be with the very short term trend as defined by highs and lows.

My technical indicators seem to be telling me the same thing, so I don't have a definite read here. The DAX is the weakest index having just broken below the prior day's low just now. That would be the place to go if you are inclined to short something right here. As to the other indexes, I don't see a trade today. I got taken out of my NAZ short yesterday for a small loss, and am waiting now to see which way to play.

I guess I am going to take my toys and leave the sandbox for today.

CATCHING UP

I apologize to those of you who diligently read my comments every day for missing a few days. My travel schedule just did not allow me a moments time to post anything at all while I was in New Orleans.

If you re-read my last post you will see where I said if you were bullish this was a buying opportunity. It does appear now that it was and those such as yours truly who were looking for a deeper pullback are going to be proven wrong for the 84,000th time in a row during this spectacular rally. I went in on the short side here, but did it on the light side just due to how insanely strong this market has been. When you have the FED officially stating their goal is to inflate stock prices with QE 2, and it is not due to run out until June, you have to realize that the odds of a really big break prior to then are probably not that good. As a result, I reasoned that even though I had a valid signal, I was going to risk only 1% on the trade.

At this point I am still short but it does appear I will get picked off today or tomorrow on the NFP report. It is somewhat of an unclear read now for me with me primary indicator. The trend in it is still down, but it appears to be turning back up now. When I project in both directions for tomorrow, it does not really give me a clear obvious direction. When in doubt the trend is up, but I am following my discipline and sticking with the trade for what is most likely a stop out loss. I have been perusing individual stocks, and just can't find many that are setup for buys by my rules, so I had nowhere to go for longs.

When I think to myself about what I am doing it is helpful to know that I am following my discipline. I am not trying to short the indexes just because I am a wise guy or some doomsayer. I am doing it because the patterns I use are there. By and large they are not working well in stocks or the indexes right now, but we are also living through a historic period. The rules have all been thrown out the door, but it will not last forever. At some point again the market will trade normally again. I strongly suggest not changing everything you are doing just to fit this. There is really only one other time in history I can find where something similar to this has happened, the late 30's. It came to an end and those who might have been trading then had they just bought every 5 minute bar that closed lower got bankrupted when things changed. It is my plan to stick to what I know, go light on the risk, and hope I get some buy signals. If I get them I will go long, pretty simple.

For now buying even a 30 minute dip just blindly is the right thing to do, but it won't always be.

Here is Crude and the explosion that we have seen. I had suggested that based on COT stuff this might be a false breakout just driven by a news event. There is nothing really here to suggest a short entry except a smidge of minor divergence. That is nowhere near enough for a trade entry. I guess if you are long stay long, no telling how far the middle east stuff could drive this. I do think if that subsides, this will come crashing down very quickly, but you can't trade off such opinions. Net net, nothing to do here for me at the moment.

Here is my next joke for my comedy career, Silver is starting to look like a SELL. Please hold your laughs for the end of my joke. This is quite a bit of divergence starting to show up here, and the other main indicator I use has more than this. I constantly harp about not selling the strong, so I won't short this. However, this is what got me to stay away from a gold long the other day, that would not have worked out so great. Gold or Copper are both weaker, so for the fools out there like me who did not get the memo that the rules had changed, we can look for possible sells here. Oops, wait, small investors determine everything now not big players, so buy, buy, buy. Once again, I am going against the herd here. I do not have entries yet, but am looking now for something potentially on the short side and in the other metals not Silver.