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Friday, April 28, 2017

A “WAITING FOR MORE DATA” FRIDAY

“Some people have all the advantages in trading technology!”


Everybody looks for that edge; HFT’s want that extra nanosecond to front run your order, hedge funds look to bribe the banks to have a “peek” at the order books, but real trading pros got the gizmo above ... TRADERPRO2017 ... to give them the edge. “Best $200 I ever spent at WalMart”!

And while not all of you can afford this “bad boy” and get the trading edge when you need it most, in the spirit of public service I feel it’s my obligation to pass on the “instructions” for use to any and all who may feel the urge to go down and pick one up; Behold!
  

“You can follow directions … right? Safety is my top priority!”

It’s Friday, and the investment world looks yet again for more data; this morning we got consumer confidence, Q1 GDP, & Chicago PMI for all the econometric porn addicts out there, who will immediately tell you what it means for stock prices and stock indices. SHORT ANSWER: “It means whatever it is you want it to mean; too weak and interest rate rises from the Fed may be delayed which is good for stocks; too hot and interest rates may go higher but that means the economy is picking up which is good for make believe GAAP earnings, which of course is good for stock prices.”

“I dunno, but anybody but me see a pattern here”?

And what I’ve told people for what seems like forever, is that while stocks in the Dow30 & SP500 have their collective “heartburn” days, in order to make a living trading this stuff, you have to “buy in” to the fact … not my opinion … that stock indices go up 80% of the time and are down to flat 20% of the time. And it’s as hard as a diamond to make consistent money from being short the indices; now, a lot of people don’t want to believe that … they think somehow my “facts” are wrong, that recent history notwithstanding [“ummm yea, like 35 years worth and counting!”], that it just can’t be. MY RESPONSE: “Fine, take the other side; we need others to fund our trades”.

And it bears repeating on this Friday, to ponder over the weekend 2 key critical facts; 1) stocks go down in a bear market [defined as greater than a 10% correction from the most recent high] only when there is an overwhelming case to be made that the underlying economic structure of the U.S. economy has turned down or there is a threat to overall corporate earnings that has no end in sight at the moment, and 2) collective human behavior is different for stocks and stock markets than it is for markets like crude oil, EURUSD, USDJPY, GOLD, or anything else on the MT4 that isn’t a stock index market; in essence people want and demand, and through their actions get, higher stock prices which begets still higher stock prices.

In no other human endeavor does this make any sense; for example, would your demand for bread at the grocery go higher if the price for a loaf went up 25 cents every week? How about clothing or shoes if the price went up a couple of bucks a week? Of course not, you’d stop buying; this does not happen with equities or the indices. PEOPLE WANT MORE! [Until at some point a bear market sets in, prices go down for a bit, an entire generation swears off stocks forever, and the process repeats endlessly over time.] And the dirty little open secret is that demand for stocks increases as prices go higher, and demand lessens as prices go down. “I’ve told you before, you cannot take other life experiences and try and “square them” with trading; 2 different dynamics in 2 different universes, and they don’t mix. Try and mix them and things will not go well for you”.

One thing that does worry me, though, is the rise of “passive investing” on the part of the public [retail & institutional] and the total proliferation of ETF’s and “indexing” as an investment strategy. To their credit, Zero hedge has had some really good articles on this trend, and the total catastrophe that awaits investors really is not understood. The main problem is one of 1) necessity, and 2) liquidity; index & ETF [exchange traded funds] managers have no choice when faced with redemptions, and if people collectively “hit the redemption button” at the same time, who’s gonna be on the other side when they have to sell billions upon billions of dollars in the SP500 stocks”? Remember, if you own an SP500 ETF, you theoretically own all the stocks [500 of ‘em] in the index; when you redeem, all those 500 stocks have to be sold. When there is billions of dollars for sale with the 320th stock on the list, and average daily volume is in the millions, who’s going to be there to bid knowing there is an avalanche of selling going on and they are likely to get buried if they buy; “well, nobody is who”. And that dries up liquidity and makes another type of “crash” a lot more likely, with far greater consequences.

In other words, it’s 1987 all over again, where institutions thought they could hedge away their portfolio risk by selling futures; only problem is there isn’t anybody on the other side who can do a 10,000 lot, and behind that guy is another 10 institutions looking to do the same; and I’m supposed to step in front of this? “Are you F-ing nuts”? Only now it will be a lot bigger and more damaging because the sizes of the ETF’s and index funds are in the trillions. If you’re looking for potential disaster ahead, here’s a great place to start!

Before the open, not much in terms of market reaction to more dismal economic statistics; “so what else is new”? From the looks of it, they could shut Friday down and I don’t think 5 people would care right now. Market is awfully quiet as we await the start of trading; as usual this week, Pols will have their affect one way or the other with more “blah blah yada yada” as the day moves on.

Here at the open, again the SP500 a little stronger than the Dow30; yet, the HR1 on the SP500 starting to look a little over extended; needs a move down to the low 2380’s at a minimum after 6 days in a row up. If that happens, it means sub 20900 for the Dow30, which more than likely would drive a few sell stops into the weekend.

An hour into this Friday clusterfark, and off the low no signal from the M1 candlesticks. The 2 prior “hammers” I didn’t take for 2 reasons; 1) they are below the open aqua line and we have a very tight range, and 2) unless “hammers” when lower than the open get some kind of confirmation move up, they more often than not are immediate market “fake outs”, as in these 2 cases.

For all the negative news these last 3 days, both SP500 & Dow30 have taken all the shots down with a grain of salt; today, we’ve rallied off that low in the Dow30 of 20932 in pretty quick fashion back up to the 20950 -60 area. If this stuff gets higher on the day, and the SP500 happens to punch through to new highs for the day later, look out above for the melt up panic, especially if there is news on no gov’t shutdown or something else. Shorts are already hurting, and on a Friday going higher into record territory would only make it worse … a lot worse. Daily ranges are still very tight, so anything can happen; it wouldn’t take much to light the fuse on this rocket ship and it’s still very early in the trading day. Not predictin’, just sayin’.

Here at Noon in New York, “anymore trading in butter? … butter? … any more trading? … Bueller? … Bueller? … CLOSED”!! My goodness, can it get any more slow than this? … seriously … don’t expect signals to work or be effective in this, cuz there’s a reason it’s called the “volatility” algorithm. This is really a strange day and has been a very strange week; outside of the open on Sunday night and again the mystery 200 point rally 2 hours before the open on Tuesday, what has there been in terms of any movement in either the Dow30 or the SP500?
“Well, glad you asked Skippy, cuz the HR4 in the Dow 30 since the Tuesday open directly below”!
 

“Err, what happened? … did the machines break”?

That’s an awful lot of nothing for 4 days worth of trading; sure, the NDX100 screamed to “recorder-er-er” highs on Amazon & Google, but outside of that, what? And it isn’t like anything else is doing anything; how about USDJPY & gold? One look at those and it will make you cry it’s so bad; I can only wonder what the scumbag LP’s are doing to fills to make up for the lack of volume, in no small measure caused by themselves.

On the plus side, you can look at this week and say it’s positive because nobody has been able to break the indices lower in price much, after the complete insanity of “France saved the world” and up 400 points in the Dow30 on nothing. On the minus side, the last 3 days hasn’t had anything to cheer about on the upside, with even the tiniest rallies met with selling. I’m not an analyst, but it doesn’t make a lot of sense to see the NDX100 up almost 50% since February 6th; that’s pricing in a whole lot of President Trump MAGA, and if by chance this market starts to stumble? … well … what’s that mean for the Dow30 & SP500?

Meanwhile, another hour goes by, and if trading got any lighter it would be considered closed. Looking at the Dow30 M1 over the last hour, you’d be lucky to get outside of the 2 index point spread on any trade long or short it’s so bad. This paralysis is unnerving, cuz traders everywhere, I’m sure, are feeling the same thing; “what’s the next shoe to drop, and how do I avoid getting caught in it going into the weekend”? Of course, for those Apparatchiks at the FED, this is exactly how they’d like to see every day … no movement and slam the VIX.

And while nobody thinks it’s “sexy” to just sit, losing money in chop doesn’t get anybody to clap their hands together either, especially if you’re flying blind and everything is basically a flip of a coin … this too shall pass, but it’s important to keep focused on algorithm rules and procedures, and remember that patience & discipline in trading stock indices is critical for success … otherwise, when opportunities come, where will you be?

Here a little after 2 P.M. in New York, a new low in the Dow30 after hours in a ± 20 point range yields nothing; simply a stop hunt that took out a few longs, the market now rallying a little. Like I said before, “do not buy/sell off of breaking support / resistance levels; if you do, most likely it’s a loser cuz you’re gonna get trapped”. A very small hammer near the low here [5 points, big whoop], not really a buy signal cuz it didn’t come on the low; again, we’re below the open aqua line and so far today, none of the dozens of “hammers” that have shown up have meant anything because volatility is so low; why should this one be any different? Maybe it goes somewhere, I dunno, but the range today is still so damn tight and small, there is a real possibility the market could still move 40-50 points lower here and still be considered a “normal” range day; given the fact no rally the entire day has held, why would the range for the day expand with action to the upside? Sorry, I don’t see it, and it looks like a very low probability trade at best. “And just to sum it up, the whole day with less than 90 minutes to the close can best be summarized by the fact the SP500 hasn’t seen a 4 index point range the entire day outside the open … yea, less than 4 index points … pretty pathetic, but exactly what the Central Planners love to see”.

Half hour to the close, and time to mercifully close this day out and erase it from memory; the only thing to learn from today is, “please don’t come back anytime soon”! An absolute nothing burger, with nothing to see and nothing to do; back at it on Monday.

PAMM/MAM spreadsheet directly below.
 





And here before the weekend, remember to live life like somebody left the gate open!

“Weekend! … More beach! … More roast beef! … Yessssss!”

Ok, Fang’s screamin’ at me to get my donkey in gear and let’s hit the beach! … “oh yea,  first here’s some roast beef for energy” … Ok, we’re outta here … until Monday mi amigos!

Have a great weekend everybody!
-vegas
OUR ‘TURNKEY FOREX’  PAMM/MAM  IS NOW OPEN AND OPERATIONAL; SEE “PAMM/MAM MANAGED MONEY PROGRAM” IN “DOWNLOAD LINKS” SECTION IN RIGHT HAND COLUMN FOR DETAILS [VIEW ONLINE AND/OR DOWNLOAD] AND START YOUR JOURNEY FROM WHERE YOU ARE AT TO “ESCAPE TO SUCCESS”!
 

  


  


Thursday, April 27, 2017

WHEN TRADING GETS PERSONAL


“Doing what needs to be done to solve a problem.”

What’s the definition of a long term “investment”? ANSWER:”A short term trade gone bad”.



I remember vividly, a very long time ago back when I was a “young skull full of mush” gophering for Bert [my mentor] in the brokerage house up in Madison, Wisconsin. Bert was by far the largest commodity trader at the time the brokerage house had ever seen, and some bright MBA in New York got the bright idea that what this stuffy, East coast, WASP-ish, 3 piece suit at all times brokerage house needed was more “commodity business”. And to that end, they wanted Bert to set up satellite branch offices all over Wisconsin to “bring in” farmers & the other rubes who lived out there and trade [mostly hedge crops & livestock] commodities, all the while gaining their trust so that eventually that money that sat in a savings account would find it’s way into stocks & bonds. Bert told them politely, “Stuff it, it ain’t happening”.


Ok, so they went ahead anyway, and in 6 months opened about 12-15 little commodity offices in places like Baraboo, Beloit, etc. Since Wisconsin is a big hog producing state, what they did was offer “hedging” services to farmers; especially those unfamiliar with the futures market and how they, “the big city brokerage house with all the savvy and expertise” could help these poor rubes farmers get ahead and make more money.

And Bert said to me, “Kid, this is going to be a big F-ing disaster; if anybody from New York ever calls you, you don’t know nothing, you ain’t seen nothing, and you’re not even sure what your name is. Got it”? And I’m like, “sure … whatever … it’s got nothing to do with us”. And Bert says, “What? … Are you that F-ing stupid … did I pick as my understudy the dumbest carrot from the bag? … of course it’s got shit to do with us, and if it goes “south”, somebody somewhere its gonna try and pin it on us … that’s why I’m tellin’ you don’t say an F-ing word to anybody … good or bad keep the Yap shut … and especially don’t say anything to Joe [branch manager], who is nothing more than a Class A apple polisher when it comes to the assclowns in New York”.

And what happened was, after some of these guys the brokerage house hired got some farmers to start hedging their hogs, the farmers discovered day trading; they’d sell 2 hog contracts, and 15 minutes later they’d be up $400, and they’d turn around while drinking coffee and eating some donuts in the office and say to the broker, “screw that hedge BS, buy ‘em back and I’ll pocket the moola”. And the broker would do it cuz he wanted the commission and the business. Well, what everybody discovered, and of course what Bert knew way back in the planning stages, was that all of these guys … New York, new brokers in Wisconsin, and the rubes farmers … they were about to discover “investing” just got personal; cuz when that 2 lot sell went up, Joe Bob didn’t want to take the loss, and when the loss got bigger & bigger & bigger and forced Joe Bob to get a loan from the bank to cover the losses, Joe Bob said to the brokerage house, “F you, F the bank, F the brokerage house, and F everybody else in this, cuz it wasn’t my idea anyway”.

And what had Joe Bob really upset, was as futures for hogs kept going up, cash hog prices didn’t do squat; the bank looked at this and said, “Who’s idea was this anyway”? Bottom line was that a whole lot of Joe Bob’s all over Wisconsin got introduced to what happens when SHTF. Bert knew it, saw it coming, and when it blew up and cost the brokerage house millions, both of us were as far away as Tahiti.

And while everybody and there brother will tell you “it’s not personal” when you lose on a trade, unless there is no blood in your veins, part of it is personal. Which in a sense is OK … don’t get me wrong here … nobody is going to start a trading career and never have a losing trade … that isn’t the issue … the issue is how you plan for it, how you deal with it, how you learn from it, and how you move on from it. To that end, it’s important to be able to look into the mirror and ask yourself if it was your fault, your algorithm’s fault, or the market’s fault.

I’ve said before, everything you learned in life that is valuable you learned from Kindergarten to 3rd grade; since then it’s been nothing but a validation of those things that got brought home to you in spades. Get side tracked by crap you think you learned in college, and sometimes you need to be reminded what a doofus you can be when events take a turn for the worse and you knew it all along, but did nothing about it to change it … and it got personal … and shutup already!

And what makes trading so damned hard … cuz really it’s simple … what makes it so hard is that everything else in your life works on a different dynamic, and switching back & forth between the two is difficult until you can see the problem.

Nothing brings this home better than stock indices, and it always brings a chuckle to me when I see guys … otherwise intelligent guys … over on ZH post articles with chart porn on how it’s impossible for the Dow30 or the SP500 to be where they are at cuz of these 20 charts and these 25 reasons, and that in a “sane” world everything would be 40% lower in value based on fun-der-men-tals. “Ok, whose fundamentals exactly”?

And you can almost feel during the day, that somewhere sits a guy that when the Dow30 upticks an index point, his big girl panties get tighter and tighter and, “how can it keep going up like this … OMG”! And yet it does. Which begs the question I asked yesterday in the comments section to one of these guys, “The inference of your premise is that I’m an idiot for buying stocks or stock indices; what am I supposed to do when my objective is to make money trading? Am I supposed to lose money by being wrong, but that’s OK cuz it makes you feel better? I fail to see why it matters to you what anything I do matters; I’m trading to make money, not make friends. If I want a friend, I’ll go get a puppy, OK”?

Like there is “virtue” in losing money but it’s OK, cuz it was for the “right” reason; “wait … what? Sure, let me run that by the Mrs. when she comes for the ATM card to go to the spa with her gal pals and I tell her there’s nothing there, but don’t worry, I lost it for the right reason”. And if you happen to be in the room on this hypothetical “not gonna happen” day, I suggest you slowly exit stage left ASAP so the shrapnel doesn’t hit you. And so it goes, market participants losing their collective minds and going full retard. I have always taken the attitude, learned from Bert many years ago, that losses are what you pay for valuable information; the key is to make the information worth more than you paid for it. If you examine properly, this will always be the case. 

Turning to today’s market … ECB full retard “Super Mario” presser before the open … big whoop … as he bores the entire world to death with “Yellen speak” cuz nobody has a clue what it means but sounds good. Meanwhile, plenty of short folks getting squeezed harder than a group of oranges at breakfast time; and the dirty little secret is, if the SP500 starts moving above 2401 – 2405, all hell is going to break loose from the hedge funds short option gamma in the May & June cycle; where said funds have massive 1X3 and 1X4 long short option spreads on with uncovered calls from 2425 – 2500 that the only way can be effectively neutralized is by buying futures … and then more futures as it goes ever skyward. At the same time volatility makes the uncovered shorts ever more valuable, thus making the pain when you’re wrong in this strategy more severe.

Outside of political and/or geo-political risk, I don’t see how the “hard and/or soft” economic data can get much worse, that’s going to make everybody all of a sudden turn bearish and want to dump the SP500 or the Dow30 stocks; the far greater risk is if the data starts to turn here, and along with the “oranges” from above, we could see a blow off melt up by the end of June. Not predictin’, just sayin’.

Ok, opening mess @ 13:30 out of the way … a little up, a little down … and crickets … first trade of the day not real excited about cuz it’s not low enough in price, but we did get a bullish engulfing pattern off the low … still, below the opening aqua line so treating it as a scalp up and until we get to lower levels below 20950 [if we can get there … the way the this stuff has been “bid”, I’m not so sure today, but we’ll see]; directly below the trade.
 





At some point in here, we have to start hitting the “tired longs” … we’ve made more than a few attempts to stay above 21000, and it can’t hold … looking for some political scare talk from President Trump on a possible gov’t shutdown tomorrow along with the usual Pie Holes in Congress to add their “2 cents”, and we could get some downdrafts later. The second bullish engulfing pattern @ 14:09, I skipped for 2 reasons; 1) if the high for the day is going to remain at 21015 [Turnkey], then the low below still awaits us at the 20900 – 20925 area most likely, so why get long now, and 2) market is below open aqua line and scalp is my best scenario outside of a reversal day which I don’t think likely. I’ve already had one scalp, and this second leg down should be a precursor for more down; I want something more inviting at lower levels.



The Dow30 is slightly weaker than the SP500 today; something to keep in mind going forward in the day. Although, we are slowly slipping in price, if I was short I wouldn’t be real happy with the pace the market is going, and if I’m long I don’t see the buy interest from the first 3 days of the week when France “saved the world” (snark). Market feels like there is more downside coming; question is will it be a fast “long execution” or more like a slow hanging? I’m wanting the former, especially if sell stops can shove the Dow30 into the lower SDEV line, which should make for a decent long trade.


Second leg down @14:56 got the market below 20950, but the reversal off the bottom wasn’t a signal; close but no cigar so to speak. It simply wasn’t a bullish engulfing pattern; bounce would have been an Ok scalp, but it’s a flip of a coin. Market still needs to go lower on another leg down; haven’t yet reached the “normal” range for the day in the Dow30 of at least around 100 points or so; unless the market suddenly reverses, that means further downside.

Here at Noon New York, here’s the question I have; “so, everybody gets to buy the bottom within 15 index points of the low over the last 90 minutes? Wait … what”? Exactly, lows aren’t lows if everybody can get in to them, especially if you have 90 minutes. However, having said that, the market is being jerked around by … jerks! … “yes, our old buddies in Congress who couldn’t find their collective asses with both hands if they had a Rand – NcNally road map to guide them”. Meaning any and all signals may just be “smoke”, as the rhetoric & BS come steaming and piling high over health care and the budget [gov’t shutdown] from Pie Holes looking for some TV time on cable to show the folks back home just how concerned they are about all of this don’tchaknow? “Excuse me while I puke”.

The market right now is locked into a tight range exactly because nobody … nobody … wants to do anything and then have some asshat like Chuck U. Schumer [Weasel, N.Y.] come along and say something that pulls the proverbial rug right out from underneath your feet. And you know, before we close today something “else” will happen. In my mind, if we don’t get a break to a new low this afternoon, I’d be looking for a lower opening tomorrow morning to buy into the weekend. We’ll see what happens, but I’m leery here of getting blindsided by some Pol; and still the day’s range is awfully tight.

But as is usually the case in quiet markets, especially the stock indices, the shorts are the first ones to always panic; and after sitting the last couple of hours in mind numbing chop that goes nowhere, somebody … short no doubt … absolutely couldn’t take another minute of this stuff not going down and hit the buy buttons, sending the Dow30 up 25 points or so in 9 minutes for his/her efforts. “Thanks, come again”!

Make no mistake folks … and believe me, I know … we have not seen, nor are we in what I consider anywhere near a “normal” Dow30 and/or SP500 market. And while the stock indices present discipline & patience issues, other markets on the MT4 aren’t faring any better while some are far worse. “And look, apparently we can all buy the low over a 90 minute period”!!

SP500 just hit a new high for today; this type of reversal happens less than 5% of the time of all trading days; as I said before Dow30 is weaker today, so it hasn’t hit a new high yet; it remains to be seen if this is just panic short covering on Pol “blah blah yada yada” that goes nowhere and invites the “Flying Wedge of Death” to the party, or if this means further new highs and a blast above 2400 later today and catches more shorts hurting from losses.

So what do we do now? Longs gotta be asking themselves this question, now that whoever puked their shorts in classic fashion has finished and we simply … sit here … doing nothing … ho hum … “another round of beers over here for the red eyes please”! … cuz outside of the person who stepped up to the plate and moved the market, nobody else wants to join them … and that has me skeptical of the move continuing higher yet again. Meanwhile, the apparatchiks at the Fed love this kind of action; anything that kills or maims retail spec accounts is “good” in their book. Once again today, we get nothing off the lows of the day in terms of a buy signal; zip! Granted, the range is tight [thank you Pols], but you’d think we could see something from one of the bottoms after the open that goes somewhere; not today.

And please note; the biggest rally of the day starts and exactly coincides with the HR1 [white line] momentum change from negative to positive. Chart directly below.
 




So, while we sit here waiting for something to happen, in other indices news the Russell 2000 hits a new all time cash high at the same time there are record shorts in the futures market; 72,212 short contracts to be specific … “clearly, this will end well”. Add to this the option hedge funds short call gamma in the SP500, and there simply is no shortage of gun powder to blow the lid off of everything in sight WHEN [not if] the shorts panic here between now and the end of June.



And if you’re in this mess, long or short at this point doesn’t matter, I sincerely hope you got a “Plan B”, cuz if you like flippin’ coins this market right now is for you; and if you’re wrong you got no chance of seeing any kind of movement that gets that loss back. “Double or triple up you say cuz it’s a tight range? Don’t even go there Skippy … don’t even go there”.


It’s a half hour until the close, and once again time to call it a day, with a single trade for the effort and a few pennies to the plus side; once again a pretty pathetic day action wise, with both longs and shorts not real happy with today’s outcome. It is what it is, and we simply move on to tomorrow and pick the action up again.

PAMM/MAM spreadsheet directly below.
 




Day’s officially over and “Fang” here thinks he’s gettin’ some of that smoked roast beef before we go to the beach … not so fast there Skippy.



“Whoa … whoa there Chief, I distinctly said roast beef … WTF is this”?

Now the dog’s really screamin’ at me! … Ok, here’s the roast beef… we’re outta here … until tomorrow.



Have a great day everybody!

-vegas
OUR ‘TURNKEY FOREX’  PAMM/MAM  IS NOW OPEN AND OPERATIONAL; SEE “PAMM/MAM MANAGED MONEY PROGRAM” IN “DOWNLOAD LINKS” SECTION IN RIGHT HAND COLUMN FOR DETAILS [VIEW ONLINE AND/OR DOWNLOAD] AND START YOUR JOURNEY FROM WHERE YOU ARE AT TO “ESCAPE TO SUCCESS”!
 
  


Wednesday, April 26, 2017

THE LESSONS OF HISTORY


“Main street to Wall Street!”

The lessons of financial history are so vast, interesting, and compelling it would take me 500+ pages simply to go through what I’ve seen in my own trading career; needless to say, for many the “lessons” to be learned are forgotten quickly and punted to the sidelines for another day, when in fact they should be tattooed on the inside of the eyelids so you can constantly be reminded of what “not to do”.


And as I write today’s blog, it never ceases to amaze me the “ebb & flow” of people’s emotions when it comes to investing; the “fear, hope, greed” cycle very much at play. Today, more than ever before, we find ourselves in a society where information overload has never been higher; where you can get anything … everything … in seconds downloaded to your phone, tablet, or laptop. Any company, stock chart, indices chart, company history with earnings, etc., right along with the best & brightest “talking heads” in the biz at your fingertips, and yet so many people are so totally confused. “You’re right … Ok, what’s the solution?

Trading, investing … whatever name tag you want to put on it, isn’t about “the numbers”, the facts, and/or economic statistics [never has been, never will be]; “it’s about collective human psychology. And until you can tap into this realm of thinking, the stock market [companies and/or the indices] will forever remain a mystery to you and most likely lose you money”.

To that end, and in a never ending attempt on my part to get you to READ. THINK. STUDY. ACT. PROSPER., so you can be as educated as humanly possible going forward, I’m going to be offering all of my readers today the following book I think you will enjoy: written by Charles MacKay in 1841, “Extraordinary Popular Delusions & The Madness of Crowds”. I have it in Adobe PDF, and if you’d like a copy simply email me at traderzoogold@gmail.com and I will send it to you. Even though this “financial classic” was written 176 years ago, MacKay chronicles some of the greatest “bubbles” and “mania’s” the world has ever seen prior to the modern age; and what is particularly important and makes this book relevant to all of you, is that you can read “first hand” the emotions of those going through the “bubbles” and how collective human behavior NEVER changes when it comes to investing, trading, or any other type of financial speculation; “as I’ve said many times, only the names change, not the behavior of the crowd”.

And I’m betting that most of you didn’t know that the origins and founding of that great American city known as “New Orleans, Louisiana” were predicated on a stock scam by a guy named “John Law” [from France of all places]. It’s all in the book, right along with the “tulip mania” in Holland, and makes for fascinating reading.
 





And after you read the book, you too can be as “savvy” as Homer Simpson, and make the rest of the world look like chumps.


Here in the early A.M., stocks seem to want to stay slightly higher into the open in a couple of hours; the big news today being President Trump’s tax cut plan, which more than likely will end up being “buy the rumor, sell the fact” and could precipitate a short sell off in the indices. Bloomberg’s Mark Cudmore put out a note via ZH calling Trump’s tax cut plan a “fait accompli” for new “recorder-er” highs in the next couple of days in the indices [SP500 & Dow30], which I guess means “buy with both hands” for the easy money, but anytime Bloomberg comes out with an “idea”, I’d check my back pocket to see if my wallet is still there.

On the other hand, I haven’t seen Gartman pile into stocks yet, so there’s more than likely a strong statistical probability we haven’t seen the highs yet either; it’s a very tough choice, fade Gartman or fade Bloomberg? But I seem to remember last year at this time Gartman uttered his famous, “Crude oil will NEVER, EVER again in my lifetime trade above $44 per barrel”! Of course, since he spit this out it’s been onward & upward ever since, and while nobody is perfect he’s been uncanny in his wrong opinions about stocks as well.

The most likely scenario I see today is our old buddy, “speed of light … crickets” trading, hopefully with a sell off sprinkled into the mix followed by a slow rise [maybe fast, who knows] into the close that sees the Dow30 touch 21,200 before backing off some. Like so many other days, it all depends on the “tone” of President Trump’s tax plan, AND what he says unscripted to reporters. If it’s bold, confident, savvy, and “can do”, I’d say the Bloomberg guy is right. On the other hand, throw in some off the wall comments on other stuff like tariffs, or Syria, or whatever that takes away from the spirit of “MAGA”, given the fact we sit where we sit in the indices, some selling may come quick and fast. So, Pols doing what Pols do, which is “blah blah yada yada”, and the stock tree gets shaken yet again.

One thing I can say for certain; 1) stock indices go up 80% of the time, and 2) you have to wait for the corrections to buy, and can’t buy/sell the technical support/resistance areas so popular among traders. That’s a losing proposition that is slightly less than a 50/50 shot.

Forty minutes after the open in New York, what with the institutional shenanigans out of the way from the opening mutual fund, ETF, and hedge fund crowd orders, and I sense a real reluctance on traders part to stay long anything, given the news flow. Problem is, though, who’s gonna be first to “pull the trigger” and sell? … cuz if you’re wrong, you’ll be buyin’ ‘em back at much higher prices should the various Pols light up the scoreboard with “MAGA”. Cutting through all the crap, though, the weak longs need to be “shaken out” of the SP500 & Dow30, and a few light stops run on the downside … after that, if we can get it in the first part of the day, then there’s a decent chance of an afternoon rally to a new high. Simply put: it’s a crowded “long” trade at the moment that needs very much to be “uncrowded” a little.

And suddenly @ 15:44 server time [Turnkey], after a sudden jaunt to a new high, the market “discovers” the downside and is reacquainted with gravity; it’s about time, now how about some more serious carnage on the downside? Market still hanging about a dozen points above the NY open, and what we need to see is a move below 21000, and a new low, to get the long liquidation rolling into some sell stops. Again, which brave short seller is gonna be the first to lead the party down, cuz the last ones are dead and gone?

How quickly it starts on the breakouts, and then how quickly it fades the other direction; that tells me there is no interest at these levels to buy or sell, and that leaves the action up to those in the market with longs and shorts to battle it out; your guess is as good as mine. And we sit and wait for the “big” tax cut plan; “Ok, wow me, but it ain’t me you have to worry about cuz this is only going to be hot air if Congress won’t pass it; so the $64,000 question is what parts if any will Congress pass, and when will traders wake up to this fact [if ever]”?

Well, that escalated quickly now didn’t it? Nothing like down 50 Dow30 points in 3 minutes on the SP500 failure to break 2400 for like the 9th time today; still, this stuff needs to go lower. All we are is back to the open for cryin’ out loud. Pols are talkin’, and that’s all you need to know really.

Ok, so now what? [In the infamous words of Richie Breslow over at Bloomberg] Market can’t rally, market can’t break … the range for today is a trading disgrace … firms with access to order flow picking all stripes of traders off at the highs and lows taking the other side as we see yet again the “Flying Wedge of Death” make its way onto the battlefield and obliterate more than few indices traders; “how many times do you buy near the high and/or sell near the low looking for that magical breakout that isn’t coming today”? My guess is more than a few, and when you give up it will scream somewhere.

Here an hour and a half before the close, it’s been a complete “yo-yo” the entire session, with no real rallies, no real breaks, and zero signals of significance cuz nothing is going anywhere; we’re where we were at 20 minutes after the open … since then it’s been “a little song, a little dance, a little seltzer down your pants”. And from where I sit, what’s going to really piss off a lot of traders who’ve been short all day and the Dow30 hasn’t gone down much at all, is if they come in tomorrow morning and it’s sitting at 20960 [or something like that] and breaks down immediately on the New York open; and in one fell swoop [about 10 minutes worth] there’s your break.

Half hour before the close, and I’m throwing the proverbial “I give up” towel into the ring with no trades today; another totally worthless day I could have better spent cleaning out kitty litter boxes; for a market that’s up 700 points in the last 6 days, the vast majority of which came on a Holiday Monday and this past Sunday night open, the action this week [last 3 days] has been very, very poor in New York. Small ranges, worthless signals because there are no rallies or breaks that mean anything, and conflicting economic & political news that make it even worse; in essence, we sit around and wait so we can sit around and wait for the next most important event in the world which turns out to be mush, and then rinse / repeat until you go nuts. And as we’ve seen from ZH, plenty of people are losing it.

And going forward into tomorrow, if we don’t get some kind of trading break in New York at some point during the day, my fear is that the end of this is going to be really, really messy. I’m not looking for some massive slide down, but some “normal” profit taking is to be expected, and my hope is we get it early tomorrow morning. Tomorrow’s another day … just like yesterday, if it moves we can capture some profits … when it doesn’t, there isn’t anything I can do; it has to go somewhere and give us a signal.

PAMM/MAM spreadsheet directly below.
 




Time for the beach, dog’s screamin’ at me! … I’m outta here … until tomorrow.


Have a great day everybody!
-vegas
OUR ‘TURNKEY FOREX’  PAMM/MAM  IS NOW OPEN AND OPERATIONAL; SEE “PAMM/MAM MANAGED MONEY PROGRAM” IN “DOWNLOAD LINKS” SECTION IN RIGHT HAND COLUMN FOR DETAILS [VIEW ONLINE AND/OR DOWNLOAD] AND START YOUR JOURNEY FROM WHERE YOU ARE AT TO “ESCAPE TO SUCCESS”!
  



Tuesday, April 25, 2017

THE WOLVES NEXT DOOR

“Beware the wolves in sheep clothing!”


Some days, it’s almost more than I can handle; and I knew getting up today and reading the financial press, that I was going to find more than just a little complaining about 1) the French Fry elections and what they mean [which is nothing, cuz nothing will change with France’s Obama], and 2) the distinct lack of trading action, not only in the stock indices, but every market on the MT4.



And sure enough, while I haven’t even got the coffee made yet, here’s our old buddy Richie Breslow over on Zero Hedge [ZH] via his gig at Bloomberg, bitching, moaning, and complaining about “price discovery”. As I said, some days …




Let me boil this down for you: “hey, I got expenses … wife/mistress/girlfriend/boyfriend/whatever … and they got expenses … we need to make money down here, and those a-holes over at the Fed with their near maniacal penchant for wanting to kill volatility … hell, yesterday ‘they’ killed the VIX, sending it to a 10 handle … we got to have some movement OK? … it doesn’t matter up or down … how the hell am I supposed to afford summer school for Buffy in Geneva, Switzerland in a couple of months if the Dow30 is stuck in a 20 point range all frickin’ day”?

To which my response is the following: “Why should you be exempt from what the rest of the country is experiencing in everyday, normal life? Tell Buffy to get up off her privileged teenage ass and mow lawns this summer and save the money; show her that getting up at 6 A.M. and working until it’s dark is what a lot of people do. You and your Libtard buds down on the trading floor and/or in the hallowed halls of Bloomberg, where everybody makes 6 figures cuz it’s basically minimum wage for the wannabes, can take solace in the fact you most likely voted for the nutjobs that have decimated 1) the ‘baby boomers’ retirement savings, and 2) the entire middle class of the country between both coasts. So while you bitch & moan, you’re not some ‘island’ somewhere where your actions had nothing to do with the outcomes you now don’t like. Ma & Pa used to trade stocks, but they don’t anymore cuz “the Street” & government screwed them over; while all your buddies at the TBTF banks got bailed out, got their bonus on time, and then got free money from the FED from QE to play futures, and all the while Obama made sure the middle class got the shaft and picked up the bill … and now listening to you complain about ‘price discovery’, like you’re some innocent bystander that just suddenly noticed it, well … excuse me while I puke”.

And what Richie and his ilk are now discovering is what real traders, not those that sit behind a desk at Bloomberg and wax eloquent, have known for a long while; namely, in a world that has gone 24/5, how the hell do you have any idea where action is gonna come from so you can be there to capture it? Anybody that has attempted to trade anything in the FX arena [including XAUUSD] can tell you it’s damn near impossible to consistently be in the trading session [Asian, European, or U.S.] where the day’s action is gonna be; in essence it’s become a random crap shoot. And the dirty little secret is what the manipulators in the precious metals and FX pairs have known for years; namely, pick the point in time where action & liquidity are lowest, and then come in like a “bull in a china shop” and wreck havoc in the direction you want; find out from the dealer banks [who you take care of very well] where the large stops are and then clean out whatever stops have accumulated from the retail Sheeple crowd along with any/all institutions playing as well. Go to another bank and place the corresponding opposite order to buy/sell to be on the other side of the stops; when you’re finished now come in immediately and bring the market back to where it was 10 minutes ago before you started. EASY PEEZEE.

You get up in the morning [wherever morning is] and you look at a chart and more than likely your first reaction is, “WTF was that 3 hours ago”? And from there it’s … crickets! And the beauty now is, Ritchie and his brethren have now finally discovered “speed of light … crickets” trading; “oh, won’t the days/weeks/months ahead of us be a hoot, cuz this isn’t the last of the complaining or the wails of anguish & gnashing of teeth as the Hamptons crowd discovers what a drop in revenue means”.

Make absolutely no mistake, trading conditions over the last few years especially, have taken a turn for the worse; not just in stock indices, but everything that is traded. Central banks around the world hold trillions of dollars of every asset class imaginable, all for the sake of completely managing volatility and desiring preferred outcomes for their policy objectives. Ten years ago, before the financial crisis [“you know, the one the Fed said wasn’t a problem and was completely under control, all the while the Bush administration stood there like a deer in headlights? Yea, that one”.], when both the Dow30 & the SP500 were HALF THE LEVEL THEY ARE BOTH AT NOW, daily ranges, intraday volatility, and both big down as well as up days were the norm and not the exception, there was a “trading flow” to the market; today that’s gone, and you can place the blame squarely at the feet of the most worthless, counter productive, globalist, screw the middle class, wealth stealing & currency debasing Federal Reserve System. “You think “The Wizard of Oz’ is about Dorothy & Toto? Guess again; while there are many interpretations, the book as well as the movie were meant for adult audiences and wasn’t meant to be a children’s story as many would have you believe today. The evils of the ‘Fed’ very much at play here”.

Turning to today’s trading … already we see it … another mini melt up on nothing, in thin conditions, and before anybody gets to their screens … this is the “stealth” rally I was referring to yesterday, the “preferred” way the elites at the FED and around Wall Street want to see asset prices increase in value … “so much preferable to that hand-to-hand combat style of those … icky! … floor trader types who still infest the world and bring nothing but unwanted volatility to the party … can’t we just all agree it’s better that markets are ‘planned’ by us so that prices can rise easily and painlessly over time and everybody can be happy”?

And the sad thing is, there’s more than a few Chuckleheads that would shake their head in agreement to everything I said in the last paragraph; where all of life, not just markets, can be “smoothed over” by the friendly hands of a liberal & progressive, all knowing, all caring government that will control and run your entire life without any pain whatsoever. “Government as religion; what could possibly go wrong”?

Well, an hour before the New York open and it’s “mission accomplished” for the planners, as “somebody” shoved the Dow30 up 100 points on “nothing”; “oh wait, round up the usual suspects of 1) President Trump’s tax plan, 2) health care back on the table, and 3) no gov’t shutdown [why exactly would that be bad?].” So essentially, we’re up 370 points on the opens of the last 2 days on what exactly? Which of course begs the question Richie Breslow asked this morning on ZH, “So, now what”? [“Psst! It’s CAT & MICKY D’s earnings don’tchaknow”?]

And the only answer I got that makes any sense is, “we won’t see a top until Gartman goes long S&P’s with one of his standard ‘the sky’s the limit’ to the upside recommendations … and then 10 minutes later the market rolls over and heads for wherever his sell stop is placed”. Look for a post on ZH coming soon.

Little over a half hour into this melt up, and I’m really not likin’ what I’m seein’ here; and the reason I don’t have a “thrill up my leg”, is cuz I know how, in a heart beat, how this is gonna end, and it ain’t gonna be pretty. First trade of the day, and I’m stretching the definition of a “signal” here simply because it’s a bullish engulfing pattern off of a correction for about 19 minutes that went totally nowhere in price.
  



And while I’m in this thing at a disadvantageous level, the SP500 keeps rallying while the Dow30 stalls a few points above my entry; when the SP500 stalls, I liquidate, meaning of course it’s now time for the Dow30 to punch up immediately 10 points in another bat of the eyelids. “Meh, it is what it is”. And what becomes immediately apparent is that the Dow30 in approximately 36 hours of trading since it opened Sunday night, has taken out 35 DAYS of price action ON THE DOWN SIDE since the March 1 all time high. “Sure, by all means, buy the rally up; and if you’re lookin’ for me to tell you where the top is in this stuff, fugetaboutit”! You wait, somebody somewhere will come along and say that new bear markets are 4 M1 candles in a row down.



And surveying the financial trading horizon, here at mid morning in New York, I can’t help but notice that maybe … just maybe … some of this indices bullishness is a direct result of some serious, long term EURJPY short unwinds taking place; add to that the rotation into the Dax30, and it starts to make perfect sense when viewed through the rose colored glasses of Europe’s elite financial managers, that they can get a “double play” being in European stocks. “I think they’re nuts, but what do I know … I’m just a trader … they’re ‘financial managers’ (snark snark)”!



And here we are at that point, where if the indices were still trading in a physical “pit”, you’d start to see the cries of “this shit ain’t ever going down … ever! … EVER! … again! And guys who normally trade 1 or 2 contracts now find themselves long 5 or 7 contracts, up a couple of ticks and feeling all smug about there ‘soon to be’ new found riches, if it can only go up a few dozen more ticks don’tchaknow”. Yup, seen this “train wreck” before … nothing is gonna be any different this time around, nor will it be in the future “X” days/weeks/months/years into the future as well … “I trade the past, and these types of emotions are part of the trading condition … learn it, love it, live it … you’ll know when it ends”.

I have written lately of Sokyu Honma & Gann; directly below one of their favorite chart patterns to get short; I have no idea if the Dow30 holds the top or not today on the M1. What I do know is both men loved this “triple top” formation with a thrust down [bearish engulfing pattern] making up the third leg and the start of the down move. Of course, this candle formation has more power the longer the time frame, and would be a powerful top if seen on the daily or weekly candle chart.
  

 [Update: It didn’t hold.]
Here’s another reason for the mini melt ups the last 2 days; short option gamma exposure that was rumored to have been behind the February melt up; cuz when you’re short a shipload of calls to capture that premium, and the market ain’t cooperating by staying even or down, your only option [pun intended] is to buy futures for protection. And as we all know by now, that can get quite ugly the closer we get to May or June expiration. Just another in a long list of reasons why you might want to rethink that “I make my living by mostly being short stock indices” meme [when they go up 80% of the time].


Ok, here at midday [Noon in New York], and from the open in New York, it’s a familiar theme at play; namely, bounce somewhere and then … die! For the last 2 hours the Dow30 has fluctuated by about 20 points top to bottom. Again, signals don’t mean a whole lot in chop; it’s simply a flip of a coin.


Here in the Chicago Noon hour, things have really slowed down; trade flow totally absent, and I’m wondering if anybody is looking to take profits into the P.M. from being long, or if they’re just going to let things ride? I’m not sure with another leg up [if it were to come] that I’d want to stay long overnight; I’m not sayin’ look for a any kind of sizable correction, just that I wouldn’t want to have a sell stop below the market get hit off on a move down. At this point, though, market is getting support from earnings, the sizable unwind in EURJPY, and constant rumors of hedge funds stuck yet again short gamma; this stuff really does need some mild profit taking to appear, but exactly who that is that goes “first”, is a mystery to me going into the close.

Here at 12:13 Chicago time [17:13 Turnkey server time], the market makes a new high, powering into some buy stops; from a bullish standpoint, this is one of the worse things that can happen, as now there is approximately a 90% probability the market sees no new high after 1 P.M. Chicago time. Of course, the way this stuff has acted the last 48 hours, the other 10% might certainly be in play with a moon launch later. Market seems to be in a “feeding frenzy” at the moment.

About an hour to the close, and it feels like maybe … maybe … this stuff might be running on empty a little. That’s not to say things can’t change quickly, but I don’t see any buying bursts, and at some point longs have got to start unwinding some … more than likely overnight into the morning … most bullish thing that can happen going forward are lower openings that go higher the rest of the day.

Take away the minutes ± from the opening of New York trading, and these last 2 days have some of the worst trading action you will ever see in stock indices; just more of the same I’ve been writing about for months, which is “speed of light … crickets” and not a damn thing in between. Tomorrow sees more “fun & games”, and I’ll be here to capture some it … that is, if it moves.

PAMM/MAM spreadsheet directly below.




Time for the beach! … I’m outta here … until tomorrow.



Have a great day everybody!

-vegas

OUR ‘TURNKEY FOREX’  PAMM/MAM  IS NOW OPEN AND OPERATIONAL; SEE “PAMM/MAM MANAGED MONEY PROGRAM” IN “DOWNLOAD LINKS” SECTION IN RIGHT HAND COLUMN FOR DETAILS [VIEW ONLINE AND/OR DOWNLOAD] AND START YOUR JOURNEY FROM WHERE YOU ARE AT TO “ESCAPE TO SUCCESS”!