Sunday, November 27, 2011

Market Analysis for Week Starting Nov 28

Markets are screaming "HELP" after last weeks sell off. We have recessions fears in Europe and the US, while China will slow down and risks social unrest. Euro bonds Exploded higher while US hit record lows. US 5 year trades under 1 % at .88 basis points, the 2 year at .26 basis point and a 10 year treasury at 1.88%. Markel is trying to force a deflation spiral on the worlds economy. Despite the overwhelming evidence that Deflation doesn't work! At this point no fundamentals, Technical, math or logic seem to matter. The Market has decided to send a strong message to the EZ to stop their lunacy. Markets are becoming more and more immune to these stupid little BS roamers and small signs of hope. The clock has started to tick with each new low the markets make. Markel better be listening!


Last week I started out with 40% exposure to the market net long. I got stopped out from the word GO! Luckily the Shorts outperformed the Longs and the pain was minimal. By the end of the week I was up a bit as I reduced longs and added to shorts. Friday we got an extremely weak bounce that failed as a lot of charts were hitting support areas. This is a big tell, tell sign of just how bad things are.

Looking at the week ahead SPY gets a Neutral rating. Despite the fact we are in extreme oversold territory.  We are deep inside the Chop area where violent moves in both directions are typical. Newbie traders Should definitely be in all CASH! There is no glory in losing your hard earned money guessing. Remember Bottom Fishing is a FOOLS game!

I am entering the week with 26% of portfolio exposure Net Short. I will continue to hold short names like CPA, ALK, SLV, GLD, APKT, LULU, DBA, AMED, IT etc. While holding on to longs like AAPL, BA, WDC POT, ISRG, WFM, CMG, WCN etc. I will look to buy some SPY down around the 114 area for a bounce should wee get there and Short around the 122 area.

Sunday, November 20, 2011

Market Analysis for Week Starting Nov 21

What has changed since last week? SPY will start the week is in Oversold territory. We saw a lot of stocks bounces off profit areas, failed break outs and breakdowns from support. Generals like AMZN, CMG, and AAPL etc. are pulling back. Bonds are trying to break higher and the USD is holding up well. SPY broke short term uptrend, bounced off 200 MA and previous neckline. We formed another Chop area above a previous one which has earned a neutral rating overall long term.

Having said that, for the week ahead I am staying bullish with a tight stop below 120 area. Why? We are sitting above a previous Chop area which should act as support with a climbing 50 MA. The risk reward is perfect. If you’re going to jump out of a window it better be the basement window. Meaning if I am wrong the loss will be small.

Last week Shorts like CRM, SLV, DBA, AMED, ALK, CPA, performed well. Longs in COG & WCN Stopped me out while the rest of the longs are even or down slightly. Took some profits in ALK & closed out these positions in OIL (before pulling back hard) & CRM for nice healthy gains.

Heading into next week I have 40% of my portfolio deployed with a net long bias.

Weekly Charts


McCellan Oscillator

26wk High/Low Ratio





Follow me on Twitter for real time updates @WeeklyCharts

Sunday, November 13, 2011

Stocks, Cash, Bonds. (Bull or Bear)

This Daily Chart is a 3 month look back of relative comparison between Cash, Bond, and Stocks.
When Stocks are above Cash and Bonds, it signals Risk Appetite is on and vice versa

This is one of the great tools I use to keep me invested in the markets or out on the side lines in cash or short.

Follow me on Twitter for real time update @WeeklyCharts

EUR/USD Starting Nov 14

Chop Central!! Last week we had a nice fake out. The Edges can be played with extreme caution!

Follow me on Twitter for real time update @WeeklyCharts

MecClellan Oscillator Starting Nov 14

MecClellan Oscillator ended the week in the Overbought area. Could see a pull back this week . Although this is a nice indicator remember that "the markets can stay irrational a lot longer than we can stay solvent!" Meaning just because we are overbought it does not mean the markets must pull back!

Follow me on Twitter for real time update @WeeklyCharts

DX OIL Starting Nov 14

Dollar last week wicked out holding above support from previous CHOP area and above the buy point. As long as it holds above the .76 area the DX could push higher this week.

Oil pushed up nicely this week and stopped cold right at the Profit Area. Could see one more push to test the $100 level before bouncing back down into a consolidation area.Next Buy point will be a solid close above $102.50 level or Back down in the $90 area above the Chop zone.

Follow me on Twitter for real time update @WeeklyCharts

GLD, GDX Starting Nov 14

Gold is pushing higher. This week it bounced off the profit area. I am looking for a push higher into the profit area. Next Buy will be above  previous highs or back down 200 day SMA and trend line support area.

GDX also bounced off the Profit area last week. I expect at least one more push in the red zone. Next buy are will be above the 65 are. For now I will look to continue to play the range between 64 to 54.

Follow me on Twitter for real time update @WeeklyCharts

SPY Starting Nov 14

Neutral to bullish going into next week. Looking for 121 area to act as support. Resistance is around the 129 area. I expect further consolidation within this area. The lower Chop area should act as support. I am currently holding a position from the breakout in the 122 level. Looking to trade the neutral range inter week While holding on to my core position. Stop is a solid close back into the lower chop area.

Follow me on Twitter for real time update @WeeklyCharts

Log Chart vs Linear Chart

Why do I mostly use “Logarithmic (Log) Charts”? The standard chart type (Linear Charts), on which a given distance always represents the same absolute change in price (unlike on a logarithmic chart, where a given distance always represents the same percentage change in price). In other words, the distance from 1 to 10 is the same as the distance from 10 to 100 on a logarithmic chart, but the latter distance is ten times greater on a linear chart. Let’s compare.

Unlike day traders who mostly look at short time periods 5, 15, 30, hour charts. Log charts do them no good since time period is too short to matter.  I look at longer time periods for bigger percentage moves in my investments. Which greatly reduces my trading fee's which boosts my total yearly returns. Log Charts give me and institutions a much clearer picture of possible total percentage returns on investment. This does not mean I will not take profits intraday or in a 2 to 3 day period to reduce risk and pocket some gains.

Longer time period weekly Charts are more powerful and greatly reduce erratic intraday price action. This does not mean you cannot drill into shorter time periods to fine tune an entry or exit in a position.

Saturday, November 12, 2011


Chop is an area where there is no directional trend (Sideways). This is where most people tend to lose the most amount of money trying to guess direction of the next trend (Long or Short). Both Longs and Shorts are proven wrong. 

As people repeat their mistakes over and over again the result develops a "CHOP" area. Recognizing and avoiding this patterns as early as possible can greatly improve your overall trading. Eventually you can define and trade the range as price action pulls back into the CHOP area and sling shots to the opposite area of the range for a quick profit. Remember to always take profits on the way to reduce risk. Also remember to "SET STOPS"! "If you are going to jump out of the window... Make sure its from the basement window!!!" Meaning take a small acceptable, manageable loss.

A break in either direction is typically defined as a solid bar out of the CHOP area followed by a 2 solid bars in the direction of the movement. Some times you might get what is called an "inside day" or a "Semi Inside day"(as in example 2). Where price is consolidating or absorbing the current move before it continues to pushes in the the direction of the trend.

As long as Price  remains above the breakout point of the CHOP area the break is typically a solid move and price will continue in that direction.  The Key Word here is "TYPICALLY!" Not Always! This is why "STOPS" were invented.

"Typically" after the break out of the Chop area, that price level tends to act as a support area in the feature.

Friday, November 11, 2011

7 dirty words you can’t say while trading. Enjoy the weekend.

This originally appeared in January 2011.

Be careful how you use the following words and phrases.

Should- Phrases include: “The market should have” and “I should have”. Those phrases are often used to socialize losses. They are a strong signal something is off. They should be used to aid you in correcting your vision not make you feel better.

Must- Phrases include: “The market must…”, “I must make money”, or “I must trade”. The market does not have to do anything and neither do you. When you use the word “must” it is hardly ever from a position of strength. The market knows when you are desperate and will take full advantage of you. Keeping your expenses as low as possible will make it easier to not make those statements.

Will- Phrases include: “The market will..” and “I will make money”. Once again the market does not like to be told what to do. It is the bratty kid screaming at the tops of his lungs. The word “will” relaxes your mind, similar to “should”, people use it to be lazy instead of a dark background in an otherwise light picture. You can do everything right and still lose money. That is why trading is so effective at diminishing confidence. In most every activity, if you do everything right you are going to get the desired result. Doing the “right” things is bare minimum. Of course, over time you will get paid for doing the right things but it is never when you think it should be and hardly how much you anticipated.

Won’t- Phrases include: “The market won’t…” or “I won’t make money”. Notice a theme here? You are part of the market, you are not the market. Not getting what you expect, even if it is positive, confuses the brain. If you expect to lose and don’t it is still a bad outcome. Your brain is going through enough as it is. The market is a one way walkie talkie, you listen, it talks.

Can’t- Phrases include: “The market can’t..” or “I can’t…” or “I can’t lose anymore”. Yes the market can, go look at a chart. Go look at a Fed day or about any chart from 2008. Not only can it happen, it does happen. There are no more once in a lifetime moves in the market. There are and always have been life changing moves. No one ever said trading was easy but at least in the case of futures someone is taking your money. If you think you can’t, you probably wont. The market will take every penny you have. If can take every penny you put at risk. Fix the problem, when you run out of money it is too late.

Impossible- Phrase includes: “It is impossible to make money”. Once again someone, someone is making money. It may not end up being an efficient use of your time or capital but it is possible. You are substituting an excuse for doing work. The work that is necessary to become a better trader or adjust to current situations.

Sense- Phrase includes: “The market does not make sense”. Many fortunes are made in an illogical market. Logic is a bigger driver than risk controls for most people. It is easier to ignore your P/L when you can see or touch the catalysis. For example, it is cold buy natural gas. By the time you change your view or are forced to change, the market flips. Logic will eventually prevail, with or without you.

The motivation for this post came from George Carlin’s famous routine called “7 words you can never say on TV” and of course many, many times the market punished me for uttering those phrases.