TURNING JAPANESE

Here we have the EWJ which is the ETF for Japan. This market appears to have made a bottom. Both the trend oscillators are confirming at least that a near term low is in so dips here should be bought. There has been alot of talk about China and Japan as the next great economic powers. It certainly appears with that blockhead/communist that we have at the helm, that it won't be us.

Of the places I am considering moving due to where I see things going here, the far east is not one of them. I cannot stand cigarette smoke, so there is nothing for me over there even if the economy over there out performs ours. For the moment, it appears buying the dips there is the play. We may also be moving into that situation here with the US stock market on a short term basis. I still think the weekly is in a downtrend, but we are not up to where I would be looking for shorts, and my indicators on the daily charts are nowhere near sell signals right now.

BH if you are reading today, the short position I mentioned to you is not close to being put on now.

The above sp500 chart shows a definite change in upward momentum telling us to look to buy dips. For those still bearish, you can see one item on this chart that supports that case. We have the top oscillator having exceeded the peak of the prior top, yet price is way below the same level corresponding to that peak. This generally indicates buying exhaustion, so there should be a retracement in reaction to that exhaustion. It is how things look once that retracement happens that will determine whether I get long on a dip or not. It is too early to tell right now if a dip is a definitive buy or not. My wish list would be for a small dip and another leg up into the weekly resistance, which would setup a sell for a larger move down.

Will it happen? Who knows, but I know what I will do if it does. Have a plan and be prepared to execute it accordingly. I am sorry for the shorter posts lately. Having to use this old editor with Blogger until they fix the problem makes doing this very time consuming. I just do not have endless time in the mornings to do this. Once they get it fixed, whenever that is, I will get back into more charts. Having to load them, then rearrange the HTML code just to get them close to the right location just sucks, and takes too much time.

THINGS HAVE CHANGED

I was of the opinion that there would be a bounce, and boy has there ever been. I had thought it would be a selling opportunity, but it does not appear to be now. This has been a moonshot, and gapped higher tonight as I post this. From a weekly perspective we are still in a downtrend, but from a daily perspective we no longer are. I have labeled a 5 point Megaphone pattern. This was originally written about by Edwards and Magee and has more recently been plagiarized by a few people claiming it as their own. Of course they are misrepresenting the truth, something very common in today's world.

Often you will see these at key turning points. I was aware of this when we were at the lows, but I just did not have any other buy signals, and these signals are notoriously inaccurate. They are not near good enough just to trade on their own. It is really more for observation than anything else. One so called owner of this concept, by himself of course, claims these are 70% accurate. They are nowhere near that, but they are a tool that if you personally can figure out how to know when they will work and will not, you have something valuable to trade with. I have never been able to figure out how to consistently trade them, so I don't trade them at all.

It does appear to me that if we move up another 20 points or so in this, we should meet some good resistance and a possible weekly sell spot might be something to look for.

I got stopped out in my short trade in Heating Oil today. When we get these explosive stock moves, virtually everything on the board except the dollar goes straight with it. As much as it pains me to say this, until proven otherwise you probably should filter all trades no matter what market except for the softs and meats, with what you think stocks will do. Shorting anything during stock rallies for the last year has been impossible to do profitably. I have never seen anything like this but it is what it is. I did short the DX today which of course will often trade opposite of stocks on a day like this. This also did not used to be the case. Again, it is what it is, deal with it.

As much as it may be tempting to short this moonshot if you are bearish, this has squeeze written all over it and I would not recommend it until we see it show signs of stalling. Remember, trade what is not what you think should be.

ENERGIES LOW ON ENERGY?

There was a question in another post about Crude Oil and my reply involved Heating Oil, so here is how that chart looks. We see the longer term trend indicator still in a down position but getting close to breaking upward. The shorter term indicator has far outraced price as indicated by the red arrows on the chart. This could be a situation where the market has punched itself out on this bounce and we resume a downward move. However, it does appear to me that if we rally through this area here, most of what I watch will have turned upward, and the trend will then be up. I have orders in to short this market below Friday's low as indicated by the red arrow on the chart. This is heating oil, but crude oil trades along side of it, and they do move together. I selected Heating Oil simply because of another filter I use that I do not discuss in here that tells me if we turn down the probability is a little better there than in Crude. After today I do not know if this sell setup will still be here, so it needs to trigger today. The energy markets appear to be back in sync with equities so unless we get a stock market decline today, this trade will not likely be filled.

A reader asked me a question about how to manage his current Crude Oil short. My answer may have come across a little mixed. The point I always try to make with anyone is that you have to have your exit strategy determined before entering any trade. I know exactly where my stop loss is for the above trade, it will be above Friday's high if my short order is elected. The minute I get filled, I will place the stop. If the trade moves in my favor, I will move it down according to an exact plan until it is either hit or my profit objective is reached. That part of trading should be very simple. If you get yourself into deciding these things after you are already in, emotion will get the best of you, and you will make poor decisions.

Since the reader entered at the market ( not what I do ) vs on weakness ( how I enter ), it is hard for me to tell him or her how to get out, because they are in a trade I would not be in. However, if you have an area where you think if price gets there you are wrong, then that is where your stop should be.

I am very short on time this morning, I will make up for my lack of content tomorrow. I went to Lake Havasu at the end of last week which is why I did not post anything for 2 days, chillin in 117 degrees!

BREAKING UP THE PERFECT GAME

On the way to setting up the perfect short entry, things got messed up yesterday. That very sharp short covering rally turned the very short term indicators I like to use for timing, up too sharply for a near term short entry. As a result, I think we are going to go up for a longer period, perhaps a week or two. We may not do that since I think things are pretty bearish overall, but that is what is going to be required now for my entry patterns to give me a way in here. We could just rollover here and I would miss the trade, I don't get em all unfortunately. What I do is get most of them that have my patterns. I know the odds are good that when my patterns are there, the markets will move in the direction I am looking. If they are not I look to another market. I am not married to only trading the stock indexes, I make most of my money elsewhere in all honesty. This is just because there are alot of other markets so there just wind up being more opportunities collectively from them, when comparing them to just one stock market.

I like to have all of these lined up to do a trade or at least 2 of the three, so this is not looking good now but you never know what will unfold going forward. If we were to roll down today by the end these could come back into line.

Here is Gold which continues to crater, rallies are shorting opportunities here. Once again, I am not sure if this is "it" or just another pullback. This is certainly not the accleration that I think will be there once the exits get crowded. However, we are steadily moving down and this market appears to finally be moving on it's own fundamentals instead of speculation. I think we will have to take out a major pivot point to get $100 down day acceleration type of move that I think is in the future here at some point. Until then I guess if you are a gold bug you buy the dips. There is just not a trade for me right here at this point so I am looking elsewhere at the moment.

I am also still looking to short the British Pound as per my post yesterday, and also possibly the energies and a couple other currencies.

Good Trading to everyone today

POUND FOR YOUR THOUGHTS?

Above is a chart of the British Pound trade, part of the Barry is an idiot trade the world seems to be making. They are running out of the Dollar and into the currencies of the countries that seem interested in getting a handle on government spending. For those Dollar bears, you elected the right man it appears. Just when it was on a very nice comeback run this talk show host made it clear to the world he is clueless and they should run for the hills from the dollar and into currencies of countries trying to get a handle on this situation. It is not too late though. The Dollar has now fallen right into weekly support areas, and the Pound above seems to be setup for a short entry.

The first subgraph here, which tracks longer term momentum does show it being very strong in an upward direction here. The shorter term trend indicators are telling us the opposite story. If this reversal bar we currently have going holds today, I will likely be trying to short this market tomorrow if my last filter confirms it. I cannot run that until after the close, so I do not know if it will make the cut yet.

Here is the US Dollar which is in my buy zone right here and is also accompanied by a nice uptrend in momentum. It Barry's ineptitude powerful enough to thwart this setup here as a buy? It very well could be, we need to hold right here in my opinion for this uptrend to stay intact. Billions betting against his competence could well be enough to reverse this trend. If he could just keep his mouth shut for a week we might be okay, but that hardly seems likely.

Looking at all of this together, if the Dollar were to hold here, it should trigger some sell signals in other currencies like the Pound above.

HERE IS MY PLAN GOING FORWARD

Since I have stated that I think we are on the verge of a big breakdown in the stock market, I am just going to trade primarily from the short side until October or something changes dramatically.

Here is a chart of the VIX which appears to be telling us that Volatility is a buy which generally means stocks are a sell. However, it does appear to me we need a day or possibly two more for this to setup correctly. The stock market is extremely oversold as well which means a bounce is required for short entries. As a result I will wait at least until the end of the day tomorrow to look for longs here in the VIX and shorts in stocks. If we go down again, then I will miss it.





The same picture is brewing for GOLD. We have broken the daily uptrend and now are in a sell the bounce mode as long as the bounce does not go too far.

You can see the downtrends in the trend oscillators here with now a small reaction against them beginning. If I am right in my view on stocks, this market is also likely to drop substantially due to the big deflation wave that is about to hit. For now it is still in the weekly uptrend, so if it were to hold here the bigger picture trend remains intact. A nice little inflection point we have here.

The last market to talk about here is Sugar. This market is setup on a short term basis for a short entry. I am not posting a chart due to what a pain it is with this editor. I have to upload them, then switch to HTML mode and cut and paste the image code to the location in the blog I want which is why the spacing gets messed up. Too much brain damage for me today. Blogger with the old editor puts all the images in front of everything else at the top forcing you to have to relocate all of them. I suggest anyone looking at Sugar to look for sell entries tomorrow.

In what I will call a weekly dumbass award, I nominate the poor mans Barack Obama, Michael Steele. Is it a requisite that you be a numbnut to be the head of a political party? Not sure who I would want on my spelling bee team between he and Barry?

Good trading to everyone this week

BETTER LATE THAN NEVER

I have not been able to get the new editor to load and of course Blogger has nobody you can call, so I guess it is back to the old one which does not work nearly as well. I guess for free this is still an awfully nice tool to have. My apologies for the erratic spacing, this editor is very difficult to work with. Above is the SP 500 chart which has completely broken down. There is nothing good to say about this at all except that we are so oversold that a bounce could happen at any time. My guess at this point now when I take into account this breakdown and all the other things that are going on, is that the lows of 2008 are probably going to get taken out by the time this whole mess is over. I have no idea how long it will take, but the bigger picture trend has now switched to down.

With an absolute idiot at the helm, this ship I am afraid is going to sink. The deleveraging that began that was kicked down the road by the PPT I think is going to reassert itself now in a massive deflationary wave. This is not a change in posture by me, readers know that I have maintained for quite some time, that we are in deflationary period. It is one of the main big picture reasons as to why I say GOLD is in a bubble inflated by small speculators. In a deflationary environment hard assets should not be appreciating other than be driven by speculation.

The cycles do call for an October buy spot but I fear now that it likely only to be a rally in a downtrend and not a major buying point. The doctoring of todays non farm payrolls report was once again an insult to anyone who is paying attention at all. The ADP report kind of makes what was reported Friday impossible. However, Barry as per usual just says F you I won and I can do whatever I want including lie to you about virtually everything including the unemployement data. I would suggest extreme caution now if you are a long term bull for stocks, I think you will have a much better spot than where we are now, much better, so do not get roped into buying this dip as a long term play yet.

You have to watch the reaction to the news more than the news itself, and today told it all. They doctored that report to make it much better than what it really should have been, and the market after a small bounce just continued lower. The exits are about to get pretty crowded. I am amazed that the PPT was able to maneuver prices up this high, it was a PICASSO. The biggest problem that I see out there going forward is the lack of bullets the PPT now has to fire if we get a big rollover here. Can they keep buying futures and lose hundreds of millions again like they did during 07-08? I doubt it. The public is turning up the heat on all the spending and where the tax dollars are going. I just don't think the stonewall approach Barry and his henchmen take is going to work forever. At some point after nicely protesting, the protests are going to turn nasty like what is happening in other parts of the world.

If you examine history and the original Tea Party, that did not happen until all the peaceful objections to the King were ignored. This recent justice department fiasco where we now know that black people can do things to whites and not vice versa is the icing on this cake. Which ever side of the political fence you sit on this is a very dangerous precedent. People will not allow themselves to be treated unfairly forever. You can bet on this, come election day if they try to rig the elections by blocking good honest citizens from voting, violence will break out. I personally would be the first in line to throw down with these guys if they tried to block me, would not flinch.

I fear more than ever than things are about to become really dicey in this country, but boy do I hope I am wrong. I just feels to me like we have reached the tipping point. The markets are going with this if I am right. One of the most troubling developments in my mind is the strength of the Pound and Euro now versus the dollar. These were two places that supposedly had more debt problems than we do here in the states. The markets are telling us that there is becoming a loss of confidence in the United States. It is no coincidence these uptrends accelerated after that retard argued with other foreign leaders against austerity measures. It was almost as if the powers that be in the rest of the world realized at that moment that he is an idiot and it is time to bet against us. You can look back in my prior posts to see where I said I thought a rally in the EURO was coming. The commercials had historic long positions and the small speculators short ones. Now we seem to have some political forces behind the move as were as the numeric basis. This bodes poorly for our markets here in my view.

GOLD

We had that huge down day in GOLD just the second day after I said I thought this could fall sharply at any moment. On the surface this looks ominous, but there is one interesting development with the POIV indicator. Notice how the purple line has a large amount of bullish divergence. This is very unusual for this to diverge this much, and is potentially a saving grace for the bulls. This has to be watched closely now because this is rarely wrong when you see it this prominent. It can be worked off quickly on a big down day so this is not a run out and buy the dip moment. The Pattern Maps are forecasting lower based on the last 10 days or so of bar action. If we happen to bounce up for a few days another shorting opportunity could present itself if the POIV "catches up" to price on the downside. If it does not we might move sideways to up.

This is all for today, working with this editor makes doing this take forever and I am out of time.

FORE!

MY APOLOGIES FOR THE PROBLEMS I AM HAVING WITH BLOGGER RIGHT NOW. I CANNOT GET THE NEW POST EDITOR TO LOAD AND THE OLD ONE SUCKS. I WILL TRY TO FIGURE IT OUT THIS WEEKEND.

BRIEFLY READ MY COMMENTS ON GOLD FROM THE OTHER DAY. IT IS TOO SOON TO TELL IF THIS IS THE BEGINNING OF SOMETHING BIG OR NOT, BUT THIS IS WHAT IT WILL LOOK LIKE WHENEVER THIS BUBBLE DOES FINALLY BURST.

SPEAK OF THE DEVIL

I mentioned that GOLD was setup fundamentally for a decline and that I would show the trades I made if and when they came up. There is an entry setup for today, where I have orders in where indicated on the chart above. As I type this these orders are not filled, but we are very close to the entry price.

You can see how the trend oscillators have been diverging during this move up over the last month, both short term and longer term. We had a huge outside day reversal bar on Monday where a short entry could have been done. One of the filters I use that will not be disclosed here did not confirm that entry, so I passed on it. There is really not much else to say. At this point I do not know if this trade is any good at all, if it is, there is a chance it could turn into a big one. There is just no way of knowing that at this point. Certainly based on fundamentals I have described there is a potential for this market to fall sharply at any moment, but that does not mean it will.

This is one of the last bubbles that has been inflated, and as we have all seen in recent years, these bubbles can continue on for much longer than most of us can predict properly. I just know that I want to be short when it pops be it today, next month, or next year. I will not blindly short it just based on what I think the near term fundamental picture is, but I will take all sell signals that meet my rules.

Lets take a quick look at the stock market after yesterdays wipeout, things do not look very good. With Fridays non farm payrolls report coming up, which we know if it is reported even within a country mile of the truth, will be a bad number. There is alot of risk to the downside now after yesterday, although technically we are still holding in general the lows of this decline. We are right at the bottom, so custers last stand is right here, right now.

We can see the two main trend indicators confirming down. The third longer term Momentum indicator is getting into a flat lining sell condition, which is not good. Flat lining sell conditions are often indicative of long term trends developing. There are also no bullish divergences in the accumulation/distribution indicators ( green and purple lines ). In summary, there is now nothing saying to look to buy this market. This also comes at a time when the seasonals are pointing down and Larry Williams forecast road map is also pointing downward for a few months. This looks dicey, so I expect to see more downside action here.

The recent comments I made about looking for something down but not big were wrong. That is right I said it and admitted it. I do not know why market prognosticators never admit when they are wrong. Even the very best traders have losing trades. I was reading some commentary yesterday by one such prognosticator who I greatly respect. He had mentioned a position trade he had put on when the SP 500 got over 1100. It had been based on the market getting above the longer term moving averages again. You can see from the above chart that he basically bought the high of the retracement. It was a bad trade, so what get over it. Bad trades happen, I had a boatload of them this month. His commentary yesterday said it was exited without taking a loss, are you f....ing kidding me? Just the term position trade implies it is something you are going to hold for awhile, often months. You do not micromanage a position trade like that, you put it on and walk away.

The only way that could have been exited for no loss would have been based on a 5 minute or less intraday chart. It is just a lie quite frankly. When you put a position trade on you have to push back from the table and let it have some room to move. If you watched one through a 5 minute chart you would never be able to hold it. I must be the only guy on the web who actually admits when he makes a blunder. I will never read his commentary again, he has taken away years of credibility with that in my eyes. Maybe someone reading this blog can give me a better answer, but here is why I think people do this. They are always trying to sell something, in this case a trading service. Investors are so fickle, that there is always a fear that even one loss will cost you clients. This is actually true it will. However, do you really want to be such a whore for what you are selling that you check your integrity at the door on the way? Do you really want a bunch of clients who think you never lose? What will happen is that they will all leave immediately when the real results start rolling in. Why would anyone want that turnover? Go Figure.

Not me, never have, never will do that. I have losses, I guess I am the only one who trades who loses money from time to time.

ONLY ONE WAY THIS CAN END

As I was watching the news channels last night after having been roped in once again by my wife who always has them on in the great room that I have to walk through to move around the house, this is what I saw. Our fearless leader arguing with other leaders against spending restraint. It is absolutely shocking to me that we are now the most liberal country in the world philisophically. Germany of all the possible countries, is scolding us for irresponsible spending! Obviously, the "recovery" is a fraud and has been from the get go. I just cannot imagine the answer to financial problems being to spend more. I call this guy an embecile, and I think he is. However, what if he is not actually stupid? If he is intelligent and is ruining our country by design, it is certainly a more dire scenario. Maybe it is just an incompetent staff which he clearly has? Biden might be fun to have a beer with, but hard to believe he is first in line to become president. He is more suited to Caddyshack IV as a crazy uncle. I keep leaning toward a Tr- Lateral Commission type of theory here, that someone or a group is pulling his strings. The most shocking thing to me is how few people see the emperor has no clothes.

I admit that I am a conservative, but I hope to GOD that if there was ever a Conservative president that was this incompetent, I would be equally outraged. I hope we will never know. If we ever have another leader like this, we will not survive financially, if we survive him. It did hit me last night after listening to him that there is only one way to go in the financial markets and that is down. I do not trade based on opinions as readers know. Sometimes I wish I did, most of the time I am glad I don't. I did mention the other day that the markets just felt heavy and I think that is just a reflection of all that is going on. There is virtually no good news out there and the PPT cannot keep this thing aloft forever. They have done a magnificent job engineering this rally which has helped the public psyche. Can you imagine how everyone would be feeling if the Dow was a 6,000 instead of 10,000?

My trades coming into this week have not worked out well. I tightened the stops in the EURO and SUGAR based on my comments over the weekend, and both were hit. The sum of those trades was basically a wash, one win, one loss. The COPPER trade with the big open equity was exited today after giving back about 70% of the money. Still a profit, but very disappointing. No way COPPER can hold up in the face of a selloff like this in the DOW.

I shorted Crude Oil and the Canadian Dollar last night. I was looking for a way to get short something that could benefit by a downdraft since I did not have sell signals in the indexes. They were both setup correctly and on my watch list this week already.

I debated which of the energies to short and selected this due to the relative weakness in the POIV indicator in purple. I felt that fundamentally based on the COT data that Unleaded Gas was the weakest but the daily setup seemed a bit better here. It is basically the same trade either way. Notice how much lower the peak was there with price being almost at an equal high. I am not watching markets intraday anymore much other than an occasional peek in case orders get filled and I need to place exit stops. I would imagine since I heard the DOW was down a good clip that this market is probably declining also. The day is not over, so you never know what will happen. I guess all we know for sure is that the government will approve more spending today, everthing else is unknown.

Next is the Canadian Dollar, pretty much the same picture, a little bit more of an existing downtrend coming into today than was Crude, which is an uptrend and is more of a reversal trade.

Are these trades any good? Who knows. I am trying to make a transition towards less babysitting of things, holding trades longer.This has been ugly so far as I knew it would be. Changing trading styles is never seamless, and it certainly has not been this month.

I think the conclusion is obvious, it is George W. Bush's fault that I had a lousy month.

DEJA VU

Here we are again in an eerily similar situation to where we were in November of last year. We have had another leg up driven completely by small speculators with the big boys once again selling with both hands. I know there is a tremendous marketing and media push to put your money into GOLD, but I urge caution. The last decline admittedly although very sharp held support and we rallied again. Mark my words, one of these times that is not going to happen, and this is going to waterfall. There are so many reasons not to go long right here anecdotally, but I will stick just to the numbers. I still don't hink Mad Max is going to give you much in barter for Gold, maybe for water, but that's just me.

We have as per the above graph, once again a record long position by the small individual investors. This is accompanied by the same with the Large Specs. Large Specs can expand through the use of pyramiding which is how they trade anyway, their buying capacity. As open profits rise, it gives them more margin available to buy more. This is why at peaks we often see them at their max positions. As a result, they can creep along for a bit once they reach this level. This is what we saw in November, they reached their peak in late September and nothing really happened for a month and a half. I think this could happen again due to the dollars strength. Since it has rallied alongside of GOLD, the valuation of GOLD vs the DOLLAR has not

gotten to the same extreme it did back in November yet.

What you can see is that we are again also at a similar level to where we were in late September. This will not be the perfect storm until valuation gets up there. HOWEVER!!!!!!!!!!!!! It may not get there. Markets can turn for a variety of reasons, and we rarely always get the perfect setup. We are close enough now to begin to look for sell signals. In the following chart you can see that today we might hit the 13 count in the Demark Sequential, still the best top and bottom timing tool I have ever come across. Notice how we topped one day after the 13 count last time.

Even though we do not have the valuation, we have the Demark Sequential staring us in the face. I know for GOLD bugs whether the Dodgers win with a walk off home run, or your dog pees on your couch, anything is a reason to buy gold with both hands. My posts are never going to influence them one way or another and I could care less. Those people are the ones that at some point are going to be trapped and wish they had not been so greedy. I do not know when that will happen, only that it will. I simply am pointing out a near term shorting opportunity. Whether or not it turns into a major top or not there is no way of knowing. It provides an opportunity to make money and that is all I care about.

I will post the short trades in do in this market when I do them or within a day or two depending on whether I get sidetracked or not at the time.

HERE IS WHAT I AM DOING NOW

The following are the 4 current trades I have on and a little commentary on each. I will also cover a couple of possible trades for this coming week.

Here is the Copper trade I am long. I mentioned in here recently this market was a bullish setup and we have risen nicely. At this point I am trailing stops and hoping to get into 315 or even the 325 area as a profit target. In the mean time I will just trail a stop and see what happens.

Here again is the weekly chart and why I was bullish on this market. We had strong commercial buying while open interest was declining. At the same time the Small Speculators had gotten to a pretty big net short position. We also had a seasonal up bias at the same time. This told me to look to the daily charts for a long entry. I had to wait a week or two but it came along.

Next up, SUGAR.

The one problem this trade has is one of my trend indicators has not come along for the ride yet after 5 days in this trade. I do not like that so I may not stay in this much longer. At the very least my stop is going to be close on Monday here. Sometimes I front run these indicators but they generally catch up after a couple of days when my front running was correct. This has not happened here yet. I need to give this some thought this weekend as to how I will proceed next week.

The EURO

Here I went long just two days ago. I really had a bearish setup in the DX but played here because I thought it would move more. Neither one has really moved much although both have gone in the direction I thought so far. Another market I need to study more this weekend. This market had a very bullish setup fundamentally due to record commercial longs. You don't see something like this too often with the COT report.

If you look a couple weeks back here you can see the record commercial longs in red and small speculator shorts in green. This told us all the insiders were betting on higher prices and the individual investors betting on a decline. This movie ends the same way every time no matter how many times you watch it.

The cattle trade I posted yesterday so I am not going to repost that. In the equity markets I did say that I did not expect a major selloff. We certainly had a good one, more than I thought, but not what I would consider a major selloff. In general I had been looking to buy a dip, but we have declined a bit more than I would like, so I think selling a rally is likely to be my next trade there. I might try to play individual stock longs this week just due to how oversold we are, but they will have short leashes on them if I do it.

Bonds I had been looking to short but they too moved a bit more than what I wanted negating the setup. They do appear to be making a triple divergence here in a negative fashion, so I will be watching closely here for an entry setup. The short setups in the metals ( Gold and Silver ) are gone for the moment, so I do not see a trade there this coming week. Natural Gas appears to be setting up a short if we move up another day or two, and I am also watching Crude for a short.

PLAY IT AGAIN SAM

 Here is a trade I got back into yesterday, Live Cattle. I posted the chart previously where my trailing stop was hit and I exited with a small profit. The bullish setup was still in place, so I took another long entry yesterday where indicated on the chart. You have to be prepared to get right back into a trade if you either exit it in error, or if you get stopped out and the original setup is still in place. This is not an easy thing for some people to do, and it is too easy for others. What does that mean?

Some people just want everything to always be perfect, and therefore when a trailing stop gets hit, things are less than ideal. They are not prepared to recover quickly mentally and go back into the same opportunity. The markets don't care if we are in or out, they do their own thing. It is up to us to get in sync with what they are doing. My favorite quotes are from people that say they were actually right, when prices went the opposite way they predicated and the markets were wrong. This happened alot in housing in recent years, and also in the stock market last year. If prices move the opposite of what you predict it is you that are wrong plain and simple.

There are also others that fly back in without thinking eager to "get back in the action." This is also not advisable because it often is based on emotion and not legitimate market action. For me it is an individual preference to not be too impulsive. I am not dying to "get my money back" after I take a loss. I think that is very dangerous and has led to the demise of many. The best place to be here is just even keeled and if the trade setups are still legitimate, you play them as they come along. At times that might mean getting stopped out and re-entering the same day. If that is what the market dictates that is what you need to do. Here my re-entry was one day removed. Perhaps my stop was in the wrong place trailing my original trade, but the logic behind the stop being where it was I layed out in detail in a prior post. It was sound and by my rules so sometimes this happens. I will never be perfect, that is something I can be certain of.

As for the market as a whole, it just feels very heavy to me here, although we are now into a very short term oversold condition. I do not have definitive buy or sell signals in the indexes at this juncture.

On a separate note if anyone out there has a good connection to a media person or a reporter, please email me at mktwzrd1@gmail.com. It is time to get the story out about how I treated my dog with cancer and what has happened. This could be a landmark case, and I need to get this out there. It could save countless lives both animal and people. The medical community knows what I did, but they are not going to want this story to get out because it will cost the pharma companies billions in lost profits. They do not want to cure cancer, they want to "manage" it. There is no profit in curing it, just a one time revenue stream but no annuity flows. Also, I used all natural substances which are not patentable.

MAJORITY RULES

Why is it the proper play to fade bullish sentiment? The simple reason is that when you have a situation like what we have above in Live Cattle at the recent top, everyone ought there who could buy had already done so. Where was the buying going to come from to propel this further upward? Prices fall due to a lack of buying, not from aggressive selling. The aggressive selling during mass panics can accelerate the moves, but it does not start them. Here is one very current example of what happens when the majority of people agree on something, Barry got elected. We all can see now how that worked out, the single biggest disaster in the history of the world.

Another example that is taking place in my life, is the miracle recovery of my one dog from cancer due to my supplements I gave him. The consensus in the veterinary community and I have had some of the top vets in the country involved in this, was the was nothing else that could be done. He was terminal. In fact had I been a doctor, he would not be here now because I would have been trapped in the paradigm of what the vast majority feels is the proper treatment of this disease. I would have not given him what saved him, it would not even have been considered. Now the "majority" want to know how in the world I pulled this off! They want to do Xrays blah blah blah. I have told them no. There will be a time if this continues where the world can benefit from this as it appears to be a landmark case. Until then I will let the "majority" shake their heads in disbelief. It is already proven that what I did is a quality of life improver with no side effects. How far beyond that it is still is yet to be determined. It certainly appears to be a possible cure but I think it is too soon to tell. One thing I am not going to do is let this dumbkopfs put him through a bunch of tests stessing him out. The facts speak for themselves.

This reminds me of all the experts paraded out everyday, none of whom predicted the stock or real estate crashes. Now they are predict a recovery. Hmm...... gives you something to think about doesn't it?

It is always cute to be a wise ass at parties and have contrarian views on things, but you better be prepared for what will follow. I will never forget back in 2006 telling everyone wherever I went the housing market was going to crash and it is the reason why I sold my Newport Coast Mc Mansion and cashed in. I went back often to parties in the old hood, and will never forget my one neighbor telling me I was nuts and that he was making 35% a year in retail real estate. Of course I told him it would not last, and obviously he has been wiped out by now I am sure. He was piling alot of money into that. I think his scenario specifically was a ponzi scheme of some type due to it's "guarantee" of returns. However, it does not change a thing, the basic concept is we want to fade the herds at extremes. Of course in this prior example that was a local realtor running that cute little, "they are not making more land" skit at me. I was not a professional and therefore knew not what I spoke of. Oh really? She is no longer in the Real Estate business today.

We do not want to fade the herd in the middle

That is the $64,000 question, how do we know when we are in the middle? Although we can never know for sure, the best way to view sentiment is comparing it to prior activity in it. For example just because we have a bullish stance by a large majority, we do not just go out right away and sell. It is important to compare it to what happened the last time sentiment reached current levels. Also, we want to make sure we are not comparing it to such a short prior history that it is just a wiggle in the data. Generally I use 6 month and 3 year lookbacks. This gives me enough of a time element that I am not getting trapped looking at what just might be an acceleration in the very near term in consensus. Short term changes will often accelerate trends, so you do not want to jump in front of too many of those.

In the above case, that bullishness did not represent a historic high, but it did represent a several month high, and the market was also in a weekly downtrend, so it was a nice combination of trend and fundamentals. I suggest you research this and find your own patterns, I have given you the basic premise here. The above example in real estate is also an example of the power of a trend. We did have excessive bullishness at historic levels for a long time before things came crashing down. However, be assured of one thing, when everyone is that bullish on anything it will ultimately build a bubble that will be followed by a crash. It is just a matter of time. Gold Bulls are the next victim, the question is just when not if. It could be a year, 2 years, I have no idea. I do know though that when that crash happens it will be talked about for decades, and you will want to fade that sentiment.

SOMETIMES YOU JUST GOTTA SAY WHAT THE ............!

Here we have Gold, a market I shorted this morning. You can see we have a triple divergence in the Trend Oscillator. I think Larry Williams students are familiar with what this is. We also have a very clear trendline that was broken when todays outside day was formed. I went short at that point. This market is clearly in a strong uptrend, of that there is no question. We do have some fundamental things in the COT report saying a turn could be coming downward, but not enough to just run out and sell. Maybe this is just another pullback in an uptrend, but I want to be positioned in case it is more. Just another trade basically, as per the title of today's post.

Here is one thing I know for sure, my opinion is not worth jack! This is not a trade based on an opinion, it is based on a triple divergence, that is occuring at a time when we also have commerical selling and small speculator buying. As a result, it is a trade to do.

I sure wish there was a Barry Index that I could short. I am sure there would be a sell pattern in any indicator tracking this blockhead. Now he has his top general essentially telling us what we already know, he is an imbecile. He is also suing a state that he is at the same time blackmailing basically. I would bet the farm on the shortside of the Barry Index. However, one thing I have just recently become convinced of is this. This country will survive his one term and eventually get back on it's feet. He is ruining the world and trying to pick up the pace before November. However, if my dog can beat bone cancer, we can beat whatever terrible things he puts in place, as long as we get him out after one term. I did not think this before, and if he does get a second term, at age 50 I will not live to see all the bad things he is doing get fixed.

Message, vote for Repubs in November just to try and nuetralize this idiot.

Next is the Cattle trade that I had great hopes for that poofed yesterday.

You can see where I entered, and where I got stopped out here. This was a gain of 50 points, so basically a lousy trade. It is still bullish by the trend oscillator, so I might buy again tommorrow if we close down today. It is too soon to tell on that. I had moved up my stop more aggressively after the big gap up day's high was exceeded the next day. When that happens, the low of that gap day should not be breached the next day if the market is really strong. I had my stop there with the logic being that if it were taken that day, the strength of this market was in question. It was taken, so that is that as they say. We still have uptrends in the oscillators and a very bullish COT picture here, so I am looking for another long entry to setup.

Frank to address your question on open interest, I am not sure why we have a difference. As far as I can tell what I posted there in that Copper trade was correct. It does not matter, that is not material to the setup in my view anyway. Genesis has some issues going in at the moment so maybe my data is wrong.

YOU JUST NEVER KNOW

Here is an example of a typical trade in any market. This is the Live Cattle trade I mentioned a couple of days ago, a trade I assumed was going to get stopped out for a scratch yesterday. Low and behold even though we had closed right on the low Friday, and it seemingly was a lock that low would get taken out where my stop was resting, we had a huge up day yesterday right from the get go. My stop was never threatened and it "was" looking good. Alas as you can see now we have a reversal bar down working now for today. I have moved up my stop now to where indicated and once again have the expectation that this will get hit. Again, you just never now what will happen. Here we had something that seemed destined to be a scratch, then to be a big win, now destined to be a marginal profit it appears.

This is what makes trading so challenging, yet so exciting at the same time. The future is for the most part unpredictable, so we just try and capture moves that we can predict. I am not watching intraday price action much nowadays just because it adds so much stress to trading. Watching thousands come and go is not an easy thing to do day in day out. Also my change in my trading style that I have explained opens me up to alot more of this type of thing so I have to accept the good with the bad and deal with it. However, that does not mean I have to ride the roller coaster up and down with every 5 minute bar. One of the things I always tell myself is to "get out of my own way." By this I mean that I need to let my trading techniques determine my fate, not my emotions.

Why spend weeks, months, or years researching and developing things just to override them on an emotional whim in the heat of the moment? I have done that at times, but not too often, and wish I had never done it. At times it has served me quite well, others times not so well. It is correct to use discretion to make decisions, but that discretion should not be emotional. This is especially true when you find yourself in the middle of a lousy month like I am having right now. It is even more likely that your emotions will override good thinking in a situation like this. I have to accept that I am going to have a loss this month at this point, so why get hung up in it? It is time to be ultra disciplined and set the stage for the next big up leg in my account balance. That begins with good discipline and not "poor me I lost money this month" etc..

At one point yesterday when the Copper trade was moving big in my direction, I was actually almost back to even this month, but that benchmark means nothing. It is arbitrary and in my mind only. The market does not know or care where my profits or losses are. I could have arbitrarily taken profits in both trades and made myself almost whole. However, I had embarked on a plan to go for longer trades and larger wins, so I could not just take the money on the table emotionally just because it "got me back to even." That might be a way to avoid losing, but it is not a way to win big. There is a big difference between those two things.

In the stock indexes yesterday we had that big reversal after the gap up opening in the pit session. This was certainly no surprise. However, I don't think we are at a point that we are going to reverse back down other than for a day or two. I think a dip here is a buy at the moment. I think if we get sell signals for a hold it will be from a higher price level. Just my two cents, which is more than I have made this month!

DO YOUR OWN RESEARCH

Here is a market that is setup very nicely, and one in which I took a position last night on the long side. Frequent readers know I have railed on the COT report recently as to it's ineffectiveness. However, at the same time I have mentioned there are certain circumstances where it can be very helpful still. This is one of those. Look at the very sharp open interest decline, you do not often see this. That is the blue line on the middle graph here. In general lower levels of open interest are bullish and higher levels are bearish, but there are 48 asterisks to that comment, which I will not get into here. You can see though that Open Interest was at a low at the price low on the chart, and a high level at the high. We have now spiked way below the level of Open Interest that was present at the low, yet price is substantially higher. This is very bullish.

Also, if you look at the red line which represents commercial buying, you can see a sharp increase taking place. This means that a very high percentage of Open Interest is commercial long positions, this is also very bullish. The third part of this is the green line, which it Small Speculator activity. This level is not at an extreme, which would have been ideal, but it is at a level that indicates low buying interest relative to where it has been in the last 6 months. This is also bullish.

Next, if we look at the seasonal graph at the very bottom, you see a tendency for a price rally for about the next month. If you put all of this together, we do have a market that is fundamentally setup to rally. This does not mean you just run out and buy, but what it does mean is that you definitely need to take any long setups that come along, and hold them for larger than normal targets. When you have the wind at your back, and then you get short term price structure to support it, you really have the best of both worlds. It is setups like this, and the potential for larger than normal gains, that I have been changing my trading style somewhat to attempt to capture.

The problem with day trading, and also very short term trading ( just a couple of days hold time ), is that you have to do so many good trades to ever get anywhere. The pressure is on day in day out, month in month out to make a ton of accurate decisions. To give a baseball analogy, you have to hit .300 every year to get consistent money. Although there are exceptions, there are very few day traders that make huge money. What there is alot of is representations of people as to how much they make. You rarely see proof via account statements of those claims.

The really big money trading is made in capturing large moves, not wiggles. It was my decision that in order to go from making in the hundreds of thousands a year to millions, I had to catch larger moves. I am willing to experience some short term pain to get this done. I from time to time get to see account statements of top traders that I know, and the one thing that jumps out at me when I see them, is the large credits that show up. Often I see 50k, 90k, 60k wins, then losses of 8k, 15k, 6k etc.. This has made me realize that when people look at my statements in contrast they see a higher win percentage, but more like 22k, 15k on the wins. That has to change for me to get where I want to get.

We are being blessed with quite a bit of volatility right now, which for traders presents the opportunity of a lifetime. It is not time to pull back the reins, it is time to move forward and grab the money that is available. As traders we dream of price moves like what we get now, so go get some of it!