Tuesday, October 23, 2012

10/09/12 written report


Hi Everyone,


It is quite amazing how the games are being played in this market.  The minute everyone starts looking one way, the bots are usually building a position in the other direction. The news media help the big firms convince the public that this is what is happening and you have to be in or out of this market. Usually what they are telling the viewers-is the exact opposite of what they are really doing.

The slogan of choice over the past 4 weeks, has been "forget about everything and just buy-the Fed is behind the market". I am going to be totally honest with you. That type of slogan and the amount of buy in it got from investors and air time-often marks bull market tops.  When you "forget about everything else" and buy with the belief someone or something will not let it down-that is outside the normal demand/supply chain-you are pinning a label on your head saying "I AM RECKLESS"

It goes the same for the bears as well. When you short the markets after very extended moves with the belief that "this market will never go up" you are now pinning a label on your head saying "I AM RECKLESS"  When one side become reckless, they often lose a lot of money in the market.

Now I am NOT saying that we made the bull market top. I am just pointing out that this type of thinking and attitude, has marked bull market tops. Heck, I remember the "Bernanke Put"  being harped about all throughout 2008. How you just had to buy the dips because "the Bernank won't ever let this market down". When the normal supply/demand chain gets disrupted by outside forces, when it gets back on course-which it ALWAYS will-there is usually hell to pay. The problem with trying to trade that thinking-is you have no idea when the normal supply/demand chain will come back into play. It may be next week-next month-next year-or even 5 years.

One thing I am sure of, when it does come back into play, there will be little doubt about it being back or not. The market hates uncertainty and over the next 30-90 days, there is more uncertainty out there than anyone can imagine. China-Europe-Elections-Fiscal Cliff-Will Ben be in office come January-if he isn't, will the new Fed chairman carry on this madness of a plan Ben has put in place.All of these things are UNKNOWN-which brings UNCERTAINTY into the picture.

Many were placing some very big bets that we would see the indexes scream higher into the elections.  Who am I to say they won't. But for every action there will be a reaction. For every buyer there will be a seller. The question at large-are the big boyz willing to ramp these indexes higher, now that the polls are too close to say who is in the lead?  Maybe and we will find out soon enough--my GUESS-NO THEY WILL NOT.

How confident am I with my guess? If I was that certain they wouldn't ramp it up into the elections-I would NOT have covered the 1/3 short side position we had open in the port. I am not in the market to guess. I will have a road map-if the road map is being followed, run with it. When I make a mistake (like the shorts we had open) I have to make a trading decision. Should I listen to the talking heads and get crushed on a way underwater position-or follow the patterns-timing systems and market breadth and hold for a better exit. I choose to trust the systems and we got out of 2/3 now with some minor scrapes.

The timing systems are actually looking bullish. But I will be perfectly clear-with the con job that has gone on over the last 6 weeks and the amount of bulls that are now starting to feel their blood pressure rising-SURPRISES WILL COME TO THE DOWNSIDE!! If too many believe that they aren't imagining the smell of smoke and start to run for the exits-the large institutions are ALREADY positioned for the drop-per the C.O.T reports.

Right now, the spx is about 30 points from Friday's high.  There is no reason to sound the alarm bells or  start expecting a massive drop to hit. I believe there is reason to listen for the alarm bells and if you hear them-it isn't the bells ringing in your ears. There are many reasons to be on very high alert for what looks like a small pull back-to turn into something else. All the ducks are lined up-but I am not smart enough to know if this is the one or not-so we will just trade.

With the timing systems on a buy signal and the indexes nearing some support-I wouldn't get too aggressive adding new short positions down here. Manage what you may have open and then wait for a better set up. I am not that interested in looking long at this time. G-

Open port positions: 


09/04/12 IWM short 1/3 @ 81.59


Recently closed

09/04/12 IWM short 1/3 @ 82.20 (closed 10/09/12 @ 82.57)   -.37
09/06/12 IWM short 1/3 @ 83.11 (closed 09/25/12 @ 83.69)   -.58
09/14/12 IWM short 1/3 @ 86.64 (closed 09/17/12 @ 85.80)   +.84
09/10/12 IWM short 1/3 @ 84.27 (closed 09/11/12 @ 83.92)   +.35


Full closed positions-click here


Click on charts to enlarge

60 minute timing system: Stochastics are very oversold and we have a clear bullish divergence in place. Some type of bounce is expected.    Short term view Bullish

60 Minute timing system (Time Frame-Short term)


Block Volume System:  The block volume indicator is in the oversold area. We have seen rallies try and start from these levels-but support for the indexes is still a little further down. So maybe a bounce soon-followed by another round of selling is in the cards.   Short term view Bullish

Block Volume chart  (Time Frame-Short term)


60 minute Chart   If wave C is going to match wave A 100%-the target for IWM is at 81.50-which is also support.  Technical's are very oversold right now.  

IWM 60 minute chart















  

                                  



 

  
                                  





































































































































10/17/12 written report


Hi Everyone,


I am still waiting to hear from the Doctor and I am still not sure if I will be in the office tomorrow. But I will be able to have everything ready for the live charts before I leave (If I have to leave)

The inverted head/shoulders pattern I was following with IWM is not in play anymore. The small caps, which have under-performed the other indexes since Monday's lows-played catch up today and were the best performers today. When they try and catch up after a large move has already been in place with the spx. it usually means traders that missed the upside move are chasing beta. When either side chases-they usually lose. I don't think this time will be different.

My timing systems were looking for a rally as early as Monday-per my weekend report and that is exactly what we have seen. Now they are looking for some weakness and I wouldn't be surprised if the expected drop takes some by "surprise" They key to this road map-is the dollar finding some support and start to rally. If they continue to pressure the greenback down, we will see sideways or even more upside before the next turn.

There are some fractal patterns I am watching that are looking for weakness to start as soon as tomorrow. Whether we need a bit more upside first remains to be seen-but I believe this move is running on fumes right now. The longer they push it higher on no gas-the more powerful the drop will be when we top.

Off topic-kind of--I am seeing many economist labeling a housing bottom because of the housing starts number today. Adding more supply to excess supply is hardly any reason to say "housing has bottomed" Building companies do what? They build! They already own the land and they can either just sit on it or build and try and sell homes. In no way do I see this "housing stat" a reason to believe real estate is back in an uptrend. Being a home owner myself-I HOPE I am dead wrong and real estate moves higher. But I am more of a realist and adding supply on top of supply-with demand dwindling, is NOTHING to be jumping up and down about. G-


Open port positions: 

10/17/12 IWM short 1/3 @ 83.80
10/16/12 IWM short 1/3 @ 83.21
09/04/12 IWM short 1/3 @ 81.59


Recently closed

09/04/12 IWM short 1/3 @ 82.20 (closed 10/09/12 @ 82.57)   -.37
09/06/12 IWM short 1/3 @ 83.11 (closed 09/25/12 @ 83.69)   -.58
09/14/12 IWM short 1/3 @ 86.64 (closed 09/17/12 @ 85.80)   +.84
09/10/12 IWM short 1/3 @ 84.27 (closed 09/11/12 @ 83.92)   +.35


Full closed positions-click here


Click on charts to enlarge

60 minute timing system: Stochastics have rolled over from overbought levels and there is a clear sell signal bearish divergence in place. Odds of a pull back or hard drop are increasing greatly.  Short term view Bearish-ER

60 Minute timing system (Time Frame-Short term)


Block Volume System:  The block volume indicator has rolled over and there are some bearish divergences in place. We may get another pop up again, but there is no cash build up for a sustained move higher.   Short term view Bearish-ER

Block Volume chart  (Time Frame-Short term)


60 minute Chart   Stochstics are starting to roll over and IWM is right ion the thick of resistance. I am expecting a pull back down to the 83.20 or even 82 in the coming days     

IWM 60 minute chart















  

                                  



 

  
                                  































































































































10/16/12 written report

Hi Everyone,


Well, "the this market will never go down-you have to buy bulls", that were cheering for 1500 just 11 days ago-who then switched to you have to be defensive-just 3 days ago-are back to new highs are coming again. Fundamental cheerleaders are turning technical for their reason for new highs and all is well again. Maybe they are right and we get the move they are expecting. But there are some serious "differences" I see happening now than with the other drops.

Let's start with the bearish wave counters-who with every drop of more than 30 spx points-have stamped a P2 on their charts and expected the SPX to start the decline to zero. One of the biggest differences I see NOW-they all have wave 4's on their charts with wave 5 to the 1485-1500 on deck. Why is that important? Nobody is looking down-except for the commercial traders-who have one of the largest short position seen in the last 3 years.

Many are saying the drop is finished and now it is back to business for the bulls. The problem I am seeing-that 6 trading day drop did absolutely NOTHING to relieve the extreme bullish sentiment levels I watch. I am talking not even a dent. Everyone expected a PULLBACK and that was it-before we march higher. EVERYONE expected the support levels we hit yesterday to hold-and they did. What everybody is choosing to ignore-is the sell signal that was just generated TODAY on the NYSI.  When this signal is triggered with bearish divergences-intermediate tops soon followed. You can see the chart below



Will this divergence trigger be different than the others and we just power higher? It might-but I do find it odd that both bulls and bears are expecting higher as this was triggered.  It is NOT a we turn right now signal-but it is something that you better pay very close attention too-especially with the current road map looking lower into November.

Our short term timing systems are looking lower for Wednesday and if we push higher in early trading, I will use that strength to move to a full position on the short side for our port trades. If we head lower, we will manage the open trades and look to scale out at support. G-

Open port positions: 

10/16/12 IWM short 1/3 @ 83.21
09/04/12 IWM short 1/3 @ 81.59


Recently closed

09/04/12 IWM short 1/3 @ 82.20 (closed 10/09/12 @ 82.57)   -.37
09/06/12 IWM short 1/3 @ 83.11 (closed 09/25/12 @ 83.69)   -.58
09/14/12 IWM short 1/3 @ 86.64 (closed 09/17/12 @ 85.80)   +.84
09/10/12 IWM short 1/3 @ 84.27 (closed 09/11/12 @ 83.92)   +.35


Full closed positions-click here


Click on charts to enlarge

60 minute timing system: Stochastics are now in overbought zone and trying to roll over. Hard to say if we have a bearish divergence or not-because IWM never went above the previous highs. There is definitely one with the spx.       Short term view Bearish

60 Minute timing system (Time Frame-Short term)


Block Volume System:  The block volume indicator is back in the extreme overbought zone. It started pulling back some today and it may still have a push up there-but when we see it in this area, a pull back or something bigger is usally not that far away.  Short term view Bearish

Block Volume chart  (Time Frame-Short term)


60 minute Chart   Phase 1 of the potential inverted head/shoulders may have completed today. Phase 2 would be to make the right shoulder, which would call for a drop to close today's gap or even head down to the 82.15 area. If it holds, phase 3 would be a rally to the 85 area. Let's see if it follows the pattern.  If it does follow this-we could actually see them try and form another inverted head/shoulders pattern from that level as well. The green circles would be how that would play out.     

IWM 60 minute chart