S & P Futures.... The Future?

Buy or Sell?

The chart above is of the Bernanke 500 formerly known as the S & P 500. For those not familiar with my work, I have renamed this index after it's new controller since it is no longer controlled by the 500 companies in it's index. We do have some conflicting signals here. First we have the Commercials clearly staying heavily on the sell side even as we decline. In a normal world this would be very bearish. The problem is that we don't know now where the Fed's transactions are being classified and that has led to the commercials net position not being nearly as meaningful as it used to be with this market. As I have pointed out this market stands out as the one where the COT data has gone completely off the reservation in it's predictive value in the last several years. It is my suspicion that there is incorrect recordings of the players positions whether it be intentional or an honest mistake I have no idea.

If you look at all the dishonestly that is going on in the last month with the government I don't think it is much of a stretch to lean to the non-accidental side on this one. Net net, we cannot rely on the COT data for the stock indexes anymore. The Larry Williams commercial proxy and large trader indexes are the best surrogates that are widely available to work with. Readers of the newsletter know of the proprietary tool I am using which is a little different than any of these. If we look at the proxy index it is quite bullish here and we are still in an uptrend via my bands. As a result, I am looking for a rally here that will allow me to establish a short in the Nasdaq. I say the Naz because that market has turned into a down trend via my bands now and it is much weaker than the ES at this point. I always want to sell the weak and buy the strong.

The large trader index in the chart above always looks great when you have these large swings but can be a bit choppy when we get into non-trending markets. It is really just fancy moving averages so it is not great invention anyway. If you look it pretty much just tells us what we can plainly see in the price action itself. It does show we have crossed down now into a down trend. When we see the proxy as a buy and the large trader index as a sell what do we do? For me it is pretty simple, wait for them to come in line with each other. From a larger time frame standpoint even the post election sell off has not changed this long standing up trend to be broken..... YET.

I do not suggest getting tied up in the fiscal cliff dialogue. Even if you were to be able to figure out exactly what is going to come of all of that there is no guarantee the market reaction you would pick would be correct anyway. It would just be a guess. I don't guess when trading. I would rather rely on the tools I use to make the calls and live with the fact that they are going to be wrong at times. I know over the long run they work. I am about as sure as I have been about anything I have ever predicted in life that the election results are devastating economically for the future of the whole world. However, that has nothing to do at all with how I will trade the markets. My technical tools will guide me to where I click the mouse. Even though we all know the end of the movie we do not know how long it will be and timing is everything.

It is my feeling that the tax and spend binge that will now go on completely unabated will create some huge economic swings that we can take advantage of in each direction. 

Here is the bond market and just like you would expect it seems to be the opposite picture. We have the proxy index just creeping into the sell zone. We have the seasonal still telling us to look up. I have marked where the typical selling point for this market is in January. It looks to me like we will still move up here for a bit but we may get some different feedback if we get up and test the highs. If we are to get a failure there and turn down, in January, and the proxy gets deeper into the sell zone, we could have a good selling opportunity on our hands.

There are many who think this market is a bubble and for all I know they are right. However the biggest challenge with bubbles as we have seen with real estate, stocks, and Gold, is timing them is very tough to do. There are many smart people who were a few years early in real estate and stocks, and Gold still has not popped. When manipulations of pricing are going on to the degree they are now timing bubbles is very challenging. It is easier to just wait for the trends to change and play the first pullback. That is what I am doing with both stocks and bonds. Short term trading is another matter, these are comments about bigger picture moves.

Enjoy your weekend

STOCK MARKET CRASH COMPARISONS

Stock Market crashes are not easy to predict correctly. One thing we all have learned over the years is that negative sells. If you can scare someone enough you can get them to take action, presumably to buy what you are peddling. I don't know what it is about human nature that makes us more willing to accept an argument that is negative than it is to be optimistic. Perhaps it is just the natural fear of the unknown and if that unknown is a good outcome we don't need to worry. If for some reason it is a bad one we better be ready. There are certain writers that always predict declines then eventually when one happens they run to the media telling everyone how they called it.

I have been reading a few things about comparisons to prior crashes in particular 1987. Let's take a look at that now and see just how similar our current pattern is to that.

I think the problem sometimes with analysis from people who do not trade is that they are too quick to jump to conclusions. There are no dollars lost considerations to the analysis so they tend too not look deep enough. This is not to say that every trader is always right and every analyst or blogger is always wrong.

Here are where I see similarities and where I see differences. We had significant rallies in both cases. We are at a similar time of the year albeit about a month later in the current case. That is about all the similarities I see. Here are the differences.

First, the 1987 top was after a monstrous rally featuring a several standard deviation move upward. It looks like a chart of Gold from last year. During that run ADX which is about the best measure of trend strength soared. We have not had anywhere near the readings in ADX this year, and the market is essentially a double top. Typically huge moves like what took place in 1987 are reversions to the mean that really overshoot their targets. We have not had anywhere near the blow off type of action this year.

Second, the Bond market had weakened considerably in 1987 a couple of months before the top was made. That has not happened this year. Interest rates are the main drivers of stock prices. I do think the trend is in the process of shifting to down from up and that rallies should be sold, but I do not think we are going to have a market crash. The short term trend is down now so the larger moves should be in that direction, down. I am looking for some type of decent rally where we can get a good entry price on a short position. Crash articles sell magazines but for every one you get right you get 15 wrong. One of the articles I read was written by someone who is notorious for always thinking things will go down sharply. He might be right who knows, but I don't think this person actually trades. As a result I am going with my own analysis.

What we have so far is a reaction to the election so let's not panic yet. I still do not see a lot in the way of trading opportunities for tomorrow. We exited a nice long trade in our Swing Service today in the bond market at our price target, taking advantage of the big market sell off.

Everyone can chill, we have tough times ahead I am sure but I don't think a crash is going to happen just yet. Notice I said YET, it will ultimately come from what the government is doing to try and avoid it. For now the short term trend is down with the weekly on the verge of turning down, so we have to pay attention.

Good Trading

TREASURY BOND FUTURES TRADING AT IT'S VERY BEST

ZB was bought on Wednesday's opening and exited at Thursday's open for a huge one day profit of close to $2000 per contract. Our system told us to buy the market on the opening so we did so. I had speculated that the market would decline based on the election so I was glad to see a long side trade in Bonds indicated for Wednesday. I would have taken the trade even if it had been a short but was much happier that the system matched my gut expectations. I was pretty sure we were going to decline Wednesday but did not have any idea we would crash like we did. Our system did have two losses recently which you can see that were followed by a win then this monster trade. In short term trading it does not get much better than this especially with a mechanical system. 

I am showing this trade just to indicate that you can do well short term trading you just have to have the correct approach. I have not indicated how this works and I am not going to. Would you if it worked this well? I do offer plenty of free content in here as far as technical trading goes but this one is going to remain with me. We are going to be creating several different new things over time to compliment what we already have. A website overhaul is being done within the next couple of weeks. Once that is done we are going to be able to expand into all sorts of things including videos, webinars, and some other free tools. It is hard to trade and run a business at the same time. This is especially true when you are running trading services. I am a trader not a marketing wizard or web developer. I have had to wear all of those hats for a bit now.

We will be incorporating the blog into the new web site so it will be a one stop destination which will make everything work so much better. The general design has already been selected and it is going to be a big improvement. If you are lucky you will be able to avoid my mug shot! The goal with all of that is to integrate everything into one place so we can have more contact and have it be much more organized. I am not going to become a used car salesman don't worry.

Today was one of those outlier days where we had huge ranges in just about everything from Hogs to Crude Oil to the ES. I have never been a big fan of trading days following days like this for a few reasons.

1) Most indicators are completely skewed and need time to "reset."

2) Stops are so big that money management goes out the window

3) They can often be traps

Here is an example of an extreme move in the ES and the MACD readings when it happened. I do not use the MACD so I do not know if the settings I have for it are the best ones, I just used the stock settings Genesis has for it. In a case like this I think the indicator has to completely recycle before you can use the overbought and oversold functions of it. When the values are skewed this much in one direction even a big rally will not get them to the other side. Once a full cycle of up and down takes place you can begin to use levels the way you normally do. I will cover the other two topics at a later time.

I had a request for an updated Euro mystery chart so here it is. The dates are still the same.

You can see the key date is 11/30 and you have to keep in mind one very important point about cycles. They do not necessarily say a top or bottom comes right at the peaks or troughs. What they indicate is price should go in the direction of the cycle at that time. In this case that would indicate we are headed for a tough year next year in the stock market. I have covered this as well as other things I watch when planning for stock market moves in the Newsletter each month. I did cover how I think this plays into other things that are going on right now and what it should mean. We have been a little spoiled by this cycle indicator in that it has picked almost to the day significant highs and lows. I can tell you from experience nothing will be this good at picking every single swing. If we have already made the top and go down significantly from here, I would consider this still awfully good at picking this turn.

There is nothing much new for tomorrow I am letting the dust settle for a day.

Good Trading

FUTURES TRADING - DOES THIS MATTER?

Futures trading on a day like this  is not a lead pipe cinch. I am sure readers might be expecting a big political post but I am done after tonight. There will be no more political comments in here going forward. I may mention the PPT but they are not biased to a specific party. They are used by both sides equally. 

I don't know of any consistent statistics to trade election nights and I see this as a short term mid range price action affair. I think the Naz has changed trend to down but the ES and Russell have not in terms of the big picture. That has nothing to do with short term trading for Wednesday. I do not see an edge here in either direction. Further, I don't see much in the way of high probability setups anywhere for tomorrow. I do think if the Bond market could break out on the upside from here it might get loose. 

Other than that I don't have much. We had some large ranges today which messed up some things I was looking at for Wednesday.

I have shown something that some of you might want to study on your own. When you get volatility contractions you can trade the break outs of those situations. You can see where I have marked these instances on the chart and for the most part we got moves that followed in short order. Study this on your own and see what you can find. There are patterns here that do work.

We will pick it up again tomorrow

SCORECARD

Thanks to PFG I don't have my country club membership anymore so I am left with our Scorecard of the trading services to sit down and have a beer over. One thing I am going to do once I get back the club membership is my password will be a defamatory comment about Wasendorf. I just find this works best for me. I have one going with my trading accounts now in regard to the CFTC and it does make me feel good every time I log in I have to admit. I am sure the back office guys at the brokerage houses who see those things got a kick out of it when they saw it get established. Everyone deals with things like this differently. I am kind of fiesty as readers know so I like to tell someone to piss off every once in a while when it is appropriate.

October represented the first full month in our Swing Trading Service and the third in our Bond Trading Service. The results are below.

BOND TRADING SYSTEM

SWING TRADING SYSTEM

SUMMARY

These results are exactly as advertised in my web site. The Swing trades are less accurate but make more money on average. The Bond trades are very accurate and less total dollars. This was a very high month in profit for the Bonds and not typical of what it will generally produce. However, it did happen. Those are the trades the system cranked out that were in the services for both methods. Needless to say with a combined profit of over $10,200 just trading one contract of each, we are pleased with the results.

We did have a problem with the one trade in Hogs which caused a wild opening few minutes in that trade when it was entered. Since there was no report of any type that day I am suspicious that someone shared that trade with a brokerage firm. Please do not do that you will hurt yourself as well as all of the rest of us.  If we are able to determine this happened and who did so they will be cut off from all services going forward. It specifically states right in our terms and conditions that you are not allowed to do that. I cannot understand the logic in this. Why would you want to jeopardize something that can make you this type of profit? I can't imagine being able to sell this to someone for the amount of money you can make by just taking the trades. I have never seen the Hog market act like that other than on a report day so something is amiss here.

We are going to have to change how we are doing the trades in the thinner markets due to this. If you are using the one brokerage firm that is famous for terrible fills be careful on these trades. You all seemed to get about 60 to 70 ticks of slippage which is insane. Why anyone would want to put up with that is beyond me. You are also going to get burned on exits. I know of one reader who is so thankful of some orders that have not been filled that should have been by this brokerage firm, because the trades were bad and it saved him some money. This is faulty logic. What if they were stops protecting a trade and they were not filled? In that case you would be exposed to huge losses. I can tell you that is exactly what happened to me at this firm many years ago and why I left and won't ever go back. If they become the only firm left I will move to Mars and trade with the Martians.

One thing we have learned painfully in the last year is that brokerage firms are not to be trusted and you have to stay on top of things like never before. Do not sit idly by and put up with inferior service.

Here we sit on the verge of a very important election, what to do?

NOTHING DIFFERENTLY THAN YOU NORMALLY DO

If your trading approach is to guess based on your opinions than have at it and place your bets. I don't trade on my opinions and never will. Although I may think based on having experience, I can guess better than the next guy, in reality that is not true. When we look at the Naz above it appears to be in a pullback against the downtrend and in a continuation pattern to the short side. We do not have much accumulation going on so it is not an obvious reversal spot. Whether or not there is a coming bias to either side due to the election is anyone's guess. I see nothing that tells me definitively which way the election might drive the markets. I really have no idea and don't really care. I do care a lot about the outcome of the election but not in regards to how I will trade it. I have voted and if the US collectively wants a complete conversion to socialism there is not anything I can do about it. It speaks volumes about how this country has changed that this is even close and it is very sad. I am less of a liberal target since PFG stole so much of my money so I am under the radar for a while.

PFG/VISION

The money is still not free to use so I am moving on and if and when it is ever available I will begin trading there. I am not doing a thing until I can get my equity account set up there to get the sweep protection going. There is nobody who can convince me money is safe in FCM's so I will only trade where it is swept into insured equity accounts. Those who don't have that option will never get any of my money ever again. We know Baldsler is doing nothing to help us with his new "regulations." I guess the next scandal he will just say again "we blew it" just like he did with PFG and move one without a care in the world for the victims. It would be nice to be able to start a series of exchanges unrelated to the US markets in another country and make these guys irrelevant. Aah what fun it is to dream of such great things!

Once bitten twice shy.

I am hoping for the best in the election but preparing for the worst. Either way lets hope this does not wind up in a court room again.

Good Trading

MIXED REVIEWS

I got some things right and some things wrong in my bold predictions in the last week. This is a good lesson to people not to be too much in a hurry to tell everyone how smart you are blah blah blah. Let's look at the predictions and grade them.

First I mentioned the Vix was giving us a buy signal and to wait for two things: first a close < open of the Vix itself; second a penetration of a prior day's high. There are a couple of ways of exiting a trade like this and it depends on your time frame. You can either hold it or can look for a quick short term overbought exit. I also mentioned that I was not thrilled about this signal because my second filter for it was not saying it was a go. Without the second filter this pattern is 60% winners and 40% losers. It does have an edge but not a big one.

I mentioned that the trade I was really looking for was a sell on a small bounce due to the larger picture of the trend in the Vix being down. Overall I would say that I got this about right. We are not at a sell spot quite yet another day or two is needed. Also we have had a very small bounce. The one way to exit short term trades like this is to get out MOC when the 2 day RSI is closing > 65. That condition was met Thursday so a small profit could have been made.

Second, I predicted that NFP report would be at 7.7% and it came in at 7.9% so I was dead wrong on that and my theory as to why was also dead wrong. The narrative became the gross jobs added which does not add up at all if you look at the ADP report. Perhaps making it 7.7% would have been so obvious that even the F You I Won team decided against that. It might well be that the sales job I have had to have while being hung out to dry with the PFG theft has biased me somewhat. I live in southern California and the business climate is just absolutely dreadful. It is possible I am imposing that view on the national economy in a disproportionate fashion. Maybe the national economy is better than I think it is.

The net here is that my market prediction which is what I get paid for was pretty good and my political opinion was wrong. If I had to miss one of those two I missed the correct one.

Here is a trade we have been in with the Swing Service that is working out pretty well, Natural Gas.

You can see the basic setup of a good sized short position in the COT data and where our short entry was initiated. We sat through some chop the first few days and now we have broken down some. There are the types of trades we try to catch with this service. I showed the one in the DX the other day where we sat in for a few days and wound up getting stopped out for a $70 loss so this is the fair and balanced side of the equation.This one is ahead about $2200 at the moment. That is a good trade off a 50% win rate and a more than 20 to 1 ratio. This is why I told people the Swing trades would make more money but not be as accurate as the Bond trades. That was proven out in the first month we offered both. They both made good profits for subscribers Bonds were more accurate and the Swing trades made more profit. So far so good.

Next week is going to be interesting. The polls are showing the race so close that anything can happen. I do think that regardless of who wins they are going to be facing a stock market decline at the beginning of the year. I fear if BO wins the market could fall hard sooner. I think most people have realized how bad he is for the economy. However, there are a lot of people who will vote for him for the socialism part of his agenda. What those people are not thinking through completely is what they will do when that agenda bankrupts the US and has to be discontinued like we are seeing in Greece. Be careful what you ask for you may get it.

I don't know if Romney is the savior or not but I do think it is time to give a businessman the job to see if anything changes. We gave an intern the job with BO and we saw what happened there. We might as well give the gig to someone who has actually accomplished something in life and see if it makes any difference.

The media's complicity in the Benghazi cover up may well get BO another 4 years. It is really shocking to me that these people would rather have Americans killed than lose an election. I still can't figure out why almost all of them should be for one side regardless of the side. It would make no sense to me if they were trying to manufacture a Republican win either. There is just something I don't know apparently.

I am about as sure as I can be about one thing in regards to the election. If BO wins it will be devastating for our economy. At age 53 I think it will not to able to be saved in my lifetime if he runs the debt up at the same rate he has been doing without any regard to it's long term consequences. We are seeing in NY that you cannot rely on the government to do everything for you. Bloomberg was going to use those generators that could have been used to help victims of the storm to keep the media comfortable for a marathon! He was doing it for money. It was only public outrage that forced him to reconsider. In other words left on his own to make a decision, a supposed champion of the middle class liberal, was willing to let that same middle class die to further his own agenda. If this does not wake you up I don't know what will. Perhaps the Benghazi cover up which might be the worst of it's kind in history? Big Government is not the answer.

Look at what Baldsler ( Gensler of the CFTC ) is doing with the new regulations on the segregated funds.

NOTHING AT ALL TO HELP

It has now been made abundantly clear, if you want to trade you are on your own in protecting your money. Please have your accounts at places that have equity account sweep options or in Canada. If you don't have either you are going to get burned at some point. The saying that it is only when the tide goes out that you see who is swimming nude, is going to be applicable. The next market down turn is going to generate the exposing of another one of these customer segregated fund thefts that is probably already going on.

It is interesting to read about MF Global and Corzine's strategy for using the customer money. They actually had internal proposals about illegally using the money that were discussed in meetings and reviewed. There was an executive who was fired that objected to the proposals. Just think about that for a minute. It is illegal PERIOD to use customer money yet they actually gave people the assignment of proposing how to go about using that money for company business! So managers made proposals to use the money and now Baldsler proposes as the solution to have procedures for managers having to sign off on segregated funds transactions. The very people who drafted proposals to break the law are going to be required to approve breaking the law. If this were not so dangerous it would be funny. Baldsler is either stupid or complicit you make the call.

They need to just do only one thing and one thing only. Make it impossible for them to do this. The segregated money needs to be in accounts that are not controlled by the FCM's. This way even when they plan on how to steal the money they won't be able to because they will not have access to it. The problem is they don't want to solve the problem or this is what they would do.

PFG

The storm messed things up a bit due to the back office staff of Vision being in the storm plagued areas. I think some of my accounts should be available any day now for trading. If you have money there you should be able to take it out or trade it next week.

I have seen nothing at all on the Forex accounts and cannot for the life of me understand why nothing has been decided on that yet. I think the system is just setup to enrich the attorneys and fleece the victims. Shaw Gussis is getting about a 100k a month by my calculations so what incentive to they have to hurry?

I think in the end seg holders are going to wind up between 50% and 60% of their money and the rest will not be seen ever again. The one thing that could effect that some is how the Forex money is handled. Even now the story is almost an after thought that nobody cares about. I wonder how it will be handled when the next one happens?

Next week I am looking for a sideways to up for the first couple of days then sell signals should be in play.

Good Trading

TIME TO GO OUT ON A LIMB

7.7%

Since the benchmark for the narrative is 7.8% and so much is at stake, I predict the above will be what they report tomorrow. I think the report tomorrow was determined many months ago no matter what the facts were the report will show this number or lower. After all how can you claim what you are doing is working if you don't have the numbers to back it up?

I expect a mild reaction in the market unless they have the nerve to go way over board and report 7.5% or less. That would take incredible nerve since the ADP stuff came out today and showed a downward revision of last months data. However, I have seen one thing that has been consistent, they have done what ever they felt like doing regardless of the facts or what the American public has wanted for almost 4 years now. Why stop now with the finish line so close in sight?

I have been talking about a rally in the stock indexes based on a signal in the Vix and said the trigger was first a close below the open in the Vix itself and then a penetration of a prior day's high. We have gotten both of those and the market has risen nicely. I did also say that I was not looking for a big bounce, so that means that for that portion to be correct we need to have a mild reaction to the fake number that is going to be released tomorrow. I do not expect anything big on the upside on Friday no matter how the report is released.

You can see where I have it marked on the chart at the point where the first high was taken out, which would be the long entry on this trade by the Vix rules that I use. I did say I did not think this was a great trade because my second filter did not approve it. This made it about a 60% probability to be a winner. I guess we will see tomorrow what happens.

I have to keep it brief tonight so I think we will see a day with some upside tomorrow or if down a "contained" move. I guess I am the village idiot if they present a number over 7.8% that would really be an October surprise.

GROUNDHOG DAY 

I am traveling the next two days. I will be able to get the orders for the services out but I am not sure if I will have time for a post or not. I should be able to do one Thursday afternoon/evening.

There has been some speculation about the NFP report that should come out this Friday. My view is that we just trade the way we normally do. If they play games with it which I think is a high likelihood, there is nothing we can do about it. Trying to guess how they might manipulate the number and what effect it would have on the markets is a waste of time. You are just guessing/gambling doing that. The whole reason we use technical analysis is to tune out that type of stuff.

If I had to guess I would say 7.7% since they can then say the rate has declined while BO has been in office and everything is going according to plan. If he wins how they work their way back up to what the real numbers are is anyone's guess.

I still see the stock market the same way with a slightly higher bounce being my expectation. However we do have some down side risk that is creeping in here the longer we stay down without rallying.

Good Trading 

LAME RALLY ATTEMPT

Here is the basic buy setup with the VIX I showed the other day. First it requires an up close above the Bollinger Bands. Once this happens you then wait for a close below the open which occurred on the last bar on the chart. That close below the open gives you some short term indication that the momentum has stalled. 

Due to the weather interruption we have a couple of electronic sessions that don't have corresponding VIX bars so this is an odd one. Due to the fact that I was looking for a small bounce here and a larger decline I did not expect this to generate much of a rally and we are not getting one so far. Due to a second filter I use that I mentioned but did not explain, I felt this was not a great signal. I would urge readers to do their own research with the VIX. There are a number of ways of using this to track short term moves in the stock indexes. I threw out this basic setup just to get all of you started. This particular setup is about 60% wins to losses so it does have an edge in general biases.

The one thing I like to have is also a larger picture trend in the direction of the trade in the Vix and that is not here.

We got picked off on a few Swing trades today. No matter how much I try to tell people the challenges of trading for larger wins you still have to live through some of these trades to see what I mean by this. Here is one we did in the DX that I will use as an example.

With the Dollar Index trade we got stopped out of today we had a lot of things going for us. First we had a bullish COT setup with the commercials heavily long as labeled. We then got a rally out of a false break out to the down side and got long where indicated on the chart. We moved up nicely and during this move the accumulation measures were breaking out upward. This trade looked poised to take off. In an attempt to catch what could have been a larger move which is the whole point of the Swing Trading Service. We held the stop back below the last pivot to try and allow the trade some room. Since we entered at 79.845 the stop represented a very small loss. I know people get enamored with wins and losses and we could have easily held this stop just above the entry and claimed it was a win.

This is why I stated in the web site that the win percentage is going to be a lot lower in these trades than the Bond System produces because we are going to get picked off like this often trying to catch something big. For me to lose $70 is basically a scratch anyway. I just wanted to go through the logic of a trade and what we did and why so everyone can get an idea of what we are trying to do with these.

I  am looking to short this bounce in the stock indexes in the next few days if it does in fact bounce.

PFG

You should be able to get access to your money in the next couple of days the New York storm did effect some of their back office stuff.

Good Trading

WE CREATED A TRADE TODAY IT SEEMS

We ran into something in the trading service today that is a lesson on several fronts. To protect those that are paying for this I am going to leave the exact market and entry out of the discussion. It is not necessary to make the points that need to be made.

1) Trading thin ( light volume ) markets is dangerous.

2) Your broker matters a great deal

3) When there are a lot of orders in one place shenanigans can happen

4) There are things that can be done to deal with these problems

First, trading thin markets is attractive to some people because they generally have smaller stops in terms of dollars at risk. Many people just getting started get lured into thinking they are less dangerous. They are more dangerous due to this problem. When you study charts you look at where you would have bought or sold and assume in real time you will get those same prices. In most cases that is true but there are exceptions. There is no way of knowing when doing research when or where slippage will occur. One of the aspects of having a trading service is that at times you have to have the orders a little different than is ideal because you don't want to be the market.

Our group should not be large enough to have a significant impact but there is always the possibility of a traitor. Please if you are paying for this service do not give it away or resell it to someone else. This is strictly prohibited and if we find out we will cancel your access. You have gotten such incredible value for the money you are spending I would hope that would be enough. Please be good to your fellow man, doing this type of thing is hurting others. I am suspicious that this has happened because I can't recall the last time on a regular day in this market I saw opening action like this. It appears to me that our orders created this.

Second, the broker you use matters a great deal in fast market conditions. The large majority of us got 35 ticks slippage which is manageable. There are a couple that received much worse fills and it was caused by the broker they use. If you are using a broker that holds stop orders on their servers and submits them as market orders once the price is hit, you are going to get clobbered in situations like this. Make sure the broker you use submits the orders to the exchange when you submit them and does not hold them. The firm who gave the bad fills today holds them and that is why I left them many years ago vowing never to return. They screwed me on a few fills and I felt it was very dangerous to stay with them. I have to be careful about saying things on the web so I am leaving the name of this firm out of the text. I am using TD Ameritrade and they are just great and gave me the fill with 35 ticks of slippage

If anyone has any questions about their broker call them and ask how the stops are submitted. If you get an answer that is not satisfactory leave. If you are with this one brokerage I would suggest leaving they will never get this right if they haven't after all the years since I left. In addition to this their customer service is basically Helen with in beard in the Ukraine like the Mastercard commercials.

Third, having a batch of orders in one place is asking for some trouble in these thin markets so we are going to change how we place them going forward when we trade a light volume market. This leads to the fourth topic above. We are going to be using stop limits. In that case today we would have been filled but at our price and not with the slippage. I think this fill was very suspicious in many ways but we can avoid this with stop limits so that is what we are going to do.

Here is an actual trade we just closed out in the Swing Service, Cattle. This was not a great trade by any stretch of the imagination but I wanted to show it to make a couple of points.

We got short on the break where indicated and wound up exiting today on the open. This is kind of a schizo market to begin with and we noticed we were getting into a support level. We also were confronted with the weird market condition of the weather and were not quite sure what effect that was going to have, so we wanted to get out of some of the trades to reduce our risk a little. We got a profit of a smidge over $400 per contract here so it was better than nothing.

The point to be made here is basically we got a resumption of a down trend here after a fairly big pullback against the down trend. You can also see one of our indicators was going down supporting the trade. I have always felt that when confronted with something like this storm where it is almost unprecedented it is best to reduce your risk until things get back to normal. We still have some other trades on but we are less this one and decided not to do any new ones until things return to normal.

The Buy setup in the Vix still has not been confirmed by my second filter and also no prior days high has been taken out. As a result it is nothing other than a VIX buy setup at this point with no trigger for an entry.

Here we have the setup again with a close above the upper Bollinger Band and then followed by a close in the Vix below the open. Of the last 20 of these setups 12 have been winners and 9 losers so this is nothing to set the world on fire but it is an edge. I like to buy on strength and sell on weakness so I would not go long until a prior high in the price went which has not happened yet. Due to our unique situation with just electronic trading only I would be hesitant to take a trade here. However, the setup is here and if today's high were taken out tomorrow it would represent a pretty good reversal since we are sharply down as I type this. It might be worth a shot.

PFG/Vision

Things are pretty backed up with this situation. I could not get anyone on the phone today until I went through Robbins trading. I think you will be getting called by brokers to be hit up for your business. So far I have been impressed with what they have to offer technology wise but beyond that the jury is still out. I think the money will be available to withdraw or trade within a few days so be patient.

There are no new updates that I have found on anything else. I did hear a rumor that a second distribution might be coming in 3 weeks but I highly doubt that. I think the next step is what the judge rules on Forex and have no idea when that will be.

If you are in the trading service sign up to follow my Twitter so you can get updates during the day. I have to be somewhat non-specific because anyone can read it and I can't give away the trades there but I am twitting when we are filled on things just saying filled on a new trade etc.. It is up to you.

It has been recommended to us that we do a web site redesign by a consultant so look for that coming soon. Keep in mind when viewing our web site that it was created by yours truly for free due to the shortage of money from the PFG theft. As a result it is not exactly what I would like it to be but is serviceable.

Lets look to pick it back up after the storms and wish everyone well on the East Coast.

SHORT TERM BUY BUT CHINKS IN THE ARMOR

Here is one of the things that concerns me about the bigger picture of the stock market. You can see that for quite some time the Nasdaq has been the leader being relatively stronger in price at most recent price junctures. That has led us to ever higher prices. You can especially see the divergence at the lows several months back where the ES went right back to the lows and the Naz stayed quite a bit above them. Then as the rally started and we got the first pullback notice how the Naz had gotten back to the highs before the plunge that took us to the low and the ES got nowhere near it. This told us tech was leading which is what we want for a rally and off we went.

We now have a completely different picture with the NAZ showing significant comparative weakness to the ES. The ES has just retraced back to the prior pivot high where the NAZ has gone quite a bit below that corresponding price level. This is not what we want to see for a continued strong stock market. I still think we are in bounce mode for a few days here but after that from a short term stand point I am going to be looking for sell signals.

The other things that is a problem is that the NAZ is one week away from potentially shifting it's trend to down with my bands on the weekly chart. If we have a big up week this week that would be nullified so this week is pretty important. Here is a chart of a couple of different looks at the Presidential Cycle. I have mixed views on cycles. I do like them but I often find myself drifting away from them for some reason.

There have been instances where price has drifted quite a bit away from the cycle predictions so this is not the holy grail by any stretch. However, what does concern me is they both show a decline happening at the beginning of the year. When we combine that with the Naz getting relatively weaker than the ES we are starting to see some things lining up here. The trend has not changed yet and I think the FED will keep away from a big disaster until after the election since they are trying to re-elect someone right now. After the election all bets could be off here. If Romney were to win it will be interesting to see what happens with the FED. Maybe he is different than he represents but he certainly does not seem like a guy who would be a big fan of the FED buying ES futures. There was an interesting article the other day I came across about one of the reasons for the big down day last week was that most of the traders at the FED was off for the day. I guess on some level they need traders but it seems a little weird to have the word traders and the FED together. I think their strategy is to just slowly leak various things over time so that when it comes out that they admit to buying ES futures it will not seen like a big deal. Politics is fascinating even though it is incredibly frustrating. The strategic aspect of the lies, deceptions, partial truths and word twisting are very interesting.

Here is the case for a bounce.

Last week I mentioned that we needed to see a close below the open in the VIX to indicate a buy was confirmed and we got that on Friday with the PPT save that came in right on schedule. Over time this strategy of waiting for a close outside the bollinger bands and then the price to reverse and close below the open is about 60% accurate so it is nothing to write home to mother about. However, it does give us a good bias to monitor. As a result I think we are going to bounce for a few days here. There is a second qualifier I use for this that is proprietary to me that is not confirming this trade. Trades when confirmed by this tool have been very accurate but do not occur that often unfortunately. It does not mean that because that tool does not confirm this trade it should not be done it is just an observation.

Net net I am looking for a small rally here over the next few days then a sell that should be a larger trade to the down side.

PFG

The 30% has arrived and the transition so far seems to be going relatively smoothly to Vision. IRA's are not being handled correctly thus far. It appears the trustee has no way of distinguishing between them and regular taxable accounts. Stay in touch with your custodian and just be patient. They will get everything figured out eventually. 

I cannot for the life of me understand why they can't get the Forex stuff resolved faster than this. The only explanation I can come up with is that it is not in the attorney's best interests to do it because their fees would then be less. I really wish someone with the power of a Donald Trump would get involved in restructuring the bankruptcy process. There is nobody who could ever convince me that it is appropriate for attorney's to make millions while victims get fleeced. Perhaps a Godfather type resolution would solve this problem! The crime families have got it right, they resolve conflicts and disputes pretty efficiently don't they? The point is not to take that tact but at some point how many stories of people lives being ruined have to happen before something is really done about it. We know from the CFTC proposed regs that they have absolutely no interest at all in doing anything to prevent a PFG or MF from happening again. Now we know that not only did they do nothing to help prevent it but have no interest in stopping the next one. I can promise there is a next one and if we get into a big market slide again, more than one next one will take place.

They could have one sentence that would solve 100% of the problem.

FCM's will no longer have any direct access to segregated accounts. The funds will be housed outside of their accounts and can only be drawn on by the individual account holders. They need to make it physically impossible for these people to have access to the money, not illegal, impossible.

Maybe it is just me but it seems like every time some big scandal happens a GS or JPM person is involved. I think Gensler is former GS but not completely sure on that one.

TRADING SERVICES

Here is the plan for how we are going to go forward. Things are working out very well thus far in both services as subs who are enjoying the results know. What I intend on doing is establishing accounts in our company name that will just trade these trades only. There will be one for Bonds and one for the Swing Trades. This way we will have an actual account that trades every single one of the trades in our company. This is not as easy as it sounds.

I used to have hundreds of thousands sitting around before the PFG wipe out now I don't. I have established new trading accounts that I am trading that are far less than what I am accustomed to having. As a result I don't have a bunch of extra cash just sitting around looking for something to do. I should have enough once the initial distribution is available to me to set up two accounts. However, we have to open them in the company name which takes some time due to the process. I then have to withdraw the money from Vision which is going to take time. Next I have to deposit it into the company account, wait for it to clear, then redeposit it into a new Vision account. This is likely going to take a month.

Once it is all done we plan on also setting up an Auto trade program through Robbins Trading where people can sign up and get all the trades automatically done for them. The way it works is every time a trade is entered in the main account all the followers get the same trade. There are some challenges to this in that limit orders can't be done so I am trying to figure a way to deal with that since that is how we exit at targets. In any event once that is done we will have an option for anyone who wishes to trade them but can't get in front of the computer when they need to in order to make the trades. There is a charge for it obviously.

Eventually we will bridge into webinars and daily videos and all sorts of other things that will help traders. We are just getting started and the main focus is for the services to be profitable which they are. We are riding high now but as I keep saying repeatedly, it will not always be this good. There are going to be periods where we take losses I can guarantee that. In fact our very first trading the Swing Trades did take a loss and we have other trades that have lost in both services. This is part of trading you grind it out.

GUEST POSTS

I just had a comment about what I should be doing in the last thread and it led me to a place I was intending to go all along, Guest Posts. I am going to open things up for people to make posts on things they wish to discuss and put out there. If you have something just draft it and email it to me at cj@wearefuturestraders.com. I have to approve it obviously and I will not nit pick the content I just have to make sure it is appropriate, no swear words or otherwise types of nonsense. Somebody mentioned they thought I should talk about expanded volatility so lets do it, send me the post. 

The goal here is to broaden this out some beyond what I can just do myself. Ultimately we will likely have a trading room for daily interaction but that is also a ways off. Baby steps for now.

Good Luck trading this week

BUYING DIPS IN DJIA FUTURES

It is one thing to have a buy setup and it is another thing to get long

 The above chart shows that we have a Vix buy signal in the S & P 500 yet we are free falling. What to do?

NOTHING

As tempting as it might be to try and pick a low when a market is dropping like this I have learned the hard way not to even think about trying to do that. A market setup as I have explained many times is just that. It is a circumstance that on average favors a certain outcome. That does not make it a buy at the market situation. You have to have some type of indication that the trend is turning back in your direction before you enter the trade. One simple thing you can look at is to wait for the VIX to close below it's open. I have marked the last two times we get extended like this and when the VIX closed below it's opening. You can see that was a decent way to time the entry. In spite of the fact that we are very over sold and the VIX is very over bought, we need to see some sign that the current momentum has reversed. I do not see any evidence of that at this point in any of the tools that I use.

If you are a longer term investor this could be a spot to start legging into a position and then plan on averaging down if we continue to decline. I have spent countless hours trying to find a reliable way of picking a bottom when we get a sharp decline like this and have never been able to do so. I do not bother trying any more. 

The next chart is a trade we did in the Swing Trading Service recently. It is always easy to show a great trade and this certainly was one. All of the trades have not been like this and will not be in the future. However, we determined there was some weakness coming and tried to pick the market of all of those that were so highly correlated to short. We selected Crude Oil.

 I was asked by some why we didn't short the ES. Take a look at the next chart and you can clearly see why we felt the Crude market was weaker.

We were almost at the highs of the year in the ES while we were a very long ways below comparable highs in Crude. This was a large divergence and even though the ES has fallen a lot Crude has fallen more. This trade went to it's target very quickly. Our goal in the Swing trades is to catch larger gains which typically takes a longer period of time. In this case we went there very quickly so we gladly said thank you and took our money. I alluded to this in the comments the other day. If you decide you want to go Hog wild and short across the board during situations like this it could pay off. However, if you happen to catch the trades wrong you have increased your risks exponentially since all of these markets from Gold to Crude to Stock Indexes to Grains to Currencies, are virtually the same trade.

I do not see any new shorting opportunities at this point since I am looking for a bounce. If you are short stay short and look for targets to exit. I think a bounce is going to come soon.

Good Trading

NO TEETH PART DEAUX

Here are the exact proposals of the CFTC to make commodity trading safer

The proposal would enhance the protection of customers and customer funds by:

• Amending Part 30 of the regulations to require FCMs to hold sufficient funds in secured accounts to meet their total obligations to both U.S.-domiciled and foreign-domiciled customers trading on foreign contract markets, computed under the net liquidating equity method; Why wouldn't this have always been the case?

• Prohibiting FCMs from holding any positions in a Part 30 secured account other than customers’ foreign futures and option positions and associated margin collateral; This does nothing.

• Requiring FCMs to hold sufficient proprietary funds in segregated accounts and Part 30 secured accounts to reasonably ensure that the firms are properly segregated and secured at all times, and to cover margin deficiencies in customers’ trading accounts; This is already supposed to be going on. The nice secret nobody ever tells anyone is what happens if one client has a huge margin call they can't cover. Ultimately it falls on the other traders to cover the loss if the FCM can't.

• Requiring FCMs to maintain written policies and procedures governing the maintenance of excess funds in customer segregated and Part 30 secured accounts, and requiring FCMs to obtain the pre-approval of management prior to the withdrawal of 25 percent or more of the excess funds held in segregated or secured accounts if the withdrawals were not for the benefit of the FCMs’ customers; Management is who is perpetuating the frauds. This is like asking for the foxes approval for him to let a fox loose in the hen house. This is a DISGRACE. This is asking the criminals to approve their own crime for god sakes!

• Requiring FCMs to provide the Commission and their respective designated self-regulatory organizations with daily reporting of the segregation and Part 30 secured amount computations, and semi-monthly reporting of the location of customer funds and how such funds are invested under Regulation 1.25; This could be helpful, release the balloons the whole report is not a complete waste of ink.

• Requiring FCMs and DCOs to provide the Commission and designated self-regulatory organizations, as applicable, with read-only direct electronic access to bank and custodial accounts holding customer funds; Yes this could help but it won't prevent theft if will just catch it sooner. The courts will still hold all the money for an eternity and you will wind up with pennies on the dollar like we have seen now 3 times in the last 2 years. Sentinel, MF and PFG.

• Requiring FCMs to adopt policies and procedures on supervision and risk management of customer funds; Are you kidding? They don't already have this? This is supposed to be the most sacred haven of all brokerage accounts. Do you mean to tell us there are no policies in place to protect the money?

• Requiring FCMs to provide potential customers with additional disclosures addressing firm specific risks; and Does this mean they are going to tell us in advance they will steal our money? Additional disclosures is code for off loading responsibility. What exactly are they going to get us to sign off on now?

• Enhancing the standards for the self-regulatory organizations’ examinations of member FCMs. The standards are fine they just need to be followed. All they had to do was call the bank one time.

The proposals will be open for public comment for 60 days after publication in the Federal Register.

Does anyone reading this see anything that doesn't scare them in here?

It makes you realize how little protection there actually is in all of this and how at risk your money is. The most alarming sentence in the whole draft is the one about additional disclosures. Typically a disclosure is something you are made aware of that is averse to you and you are being asked to agree to take on risk.

After decades of traders have routinely put their money into brokerage accounts assuming that the risk was from their own trading decisions. Now in our new age of stealing from our brothers the policies are going to be to warn us more thoroughly how at risk our money is?

THE WHOLE POINT OF ALL OF THESE PROBLEMS IS FOR THE REGULATORS TO MAKE OUR MONEY SAFER NOT TO MAKES US ALL AGREE TO IT BEING OUR FAULT THAT SOMEONE ELSE STEALS IT AND TO HAVE MORE LIMITED RECOURSE.

I propose that we collectively between myself and all the readers draft a letter in here over the next couple of weeks that we send to the CFTC. Let's all chip in and work together to try and make some positive suggestions for things that will actually help everyone. The above draft does very little of that. I will start the letter but please make comments so we can try to make a difference. I know some of you who have not been burned by MF or PFG probably don't worry about this. I would hope that when you read what is above that is being proposed you come to realize how much risk there is in the safety of your funds. Please contribute something.


Off to the markets we go.......

Here is a chart I show often in here the shows when the VIX gets stretched to the point where a market reaction should occur. You can see the last two times we got beyond the bands what happened and we are beyond them again now. This could be a small bounce or a big one. There is no way of knowing what type of rally this will lead to if it leads to one at all. However, this is a tool with an edge so I am looking for a bounce in the stock market in the next couple of days.

In the days we live in now where so many markets move with the stock market, I also expect many other markets to bounce along with this. It is nice to see the stock market getting this over sold at this time of the year. It should be a bullish situation for a year end rally. We won't know if this bounce is a sell or a resumption of the up trend until it begins to take place. Once it does we can watch some other things to see if they are supporting a continuation or reversal. For the time being it is a long setup for me.

Please send in your suggestions for the letter to the CFTC so we can get cracking on that.

Good Trading