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





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