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Friday, April 21, 2017


“And if that doesn’t work, you can trade stock indices!”

“Oh, those nattering nabobs of negativism”! For those that don’t know, that was the money quote from our illustrious ex Vice President Spiro Agnew [I never saw a highway construction contract I didn’t like] from way back-in-the-day of the early 70’s, when confronted daily with the various allegations of illicit slush funds, construction rigging, and various other forms of “business” that is normal in New Jersey [then and now], that forced him to resign as Nixon’s VP. As ex Mayor Richard Daily of Chicago once quipped when asked by a reporter if a “business associate” got a no bid city contract for “services”, “if you can’t help your friends out, what’s the point of being mayor”? “Logic is a real killer sometimes, isn’t it”?

Which, I guess my computer is broken or something, cuz if it’s a new day, Zero Hedge [ZH] just “gots to have” at least one negative article or post [most likely multiple] on the most over-valued, pie-in-the-sky, “tulip bulb” mania, house of cards known to man, the U.S. stock market. Alas, just when you thought maybe one day per week the doom & gloom could subside, here come the cockroach bears out of the woodwork overnight with another installment of why SHTF is the best thing that could happen going forward.

Today’s lucky contestant [PTJ, come on down!], none other than Paul Tudor Jones, says the market is over valued cuz “market capitalization of the SP500 versus U.S. GDP” is too high, suggesting that means lower stock prices. “What exactly this useless piece of business school econometric modelling is supposed to mean I haven’t a clue”. Well, I got an indicator too, and it says the market will only go down substantially when most of you guys turn bullish and throw the proverbial “towel of surrender” into the ring; from where I sit, the “in vogue” call du jour is too be as negative as you can be to garner as much press as possible.

Eventually, all of you financial assclowns will be right, but forgive me for not running to my computer and hitting the sell button, when for about the 4,365th week in a row you’ve been calling for a crash, that not only hasn’t happened, but has seen indices rise substantially to boot leaving you looking somewhat stupid. NEWS FLASH: the U.S. markets will go down substantially 1) when they want to and not before, and most importantly 2) when there is an over riding “out of the blue” [black swan] structural and/or systemic risk to the U.S. economy or corporate America that threatens “business as usual” going forward. Until then? Fugetaboutit”!

So here we are, a few hours before the open, markets scared to death to move anywhere; shorts still looking skyward and asking, “Why have you forsaken me yet again”? Meanwhile, longs uttering, “Why was I so stupid to sell”? Over time nothing changes but the names.

I remember vividly the early days of stock indices trading, when the pork belly bigshots and some of the various livestock “movers & shakers” would come over to the SP500 pit after their markets closed about 12:45 or 13:00 each day; got another 2 hours or so of action, what could possibly go wrong? Well, a lot did, cuz these guys were used to “shoving” a market around and having their collective way; a little up and little down … you know, a little back and forth to scalp and make some money. They get into the SP 500 pit, and they got 23 year old kids fresh from vocational school filling orders for Squid & the boys, 100 – 500 contracts at a crack, with no end in sight if you happened to take part of that order; they were 40 bid for 200 contracts, and then a couple of cattle locals hit ‘em [feeling all smug], and 2 seconds later here he was again at 45 for 500 contracts, and now bigshot, whaddaya gonna do? Well, I will tell you; you pay 75 to get them back, add up the damages, walk out in a huff, and swear off S&P’s for the rest of your floor trading days, cuz it’s now gonna take 3 weeks to maybe a month to make back in the friendly environs of cattle what you lost in 5 minutes from that “Squirt” who shoved the SP500 so far up somebody had to make an emergency call to a dentist. “Thanks, come again”!

And so it goes, from back-in-the-day to now and well into the future; the only way to successfully trade the stock indices [Dow30, SP500, & NDX100, and maybe the Russell 2000 if you have access to it] IS TO TREAT EACH DAY AS ITS VERY OWN BULL OR BEAR MARKET, with the understanding that 80% of the time it goes up, so in most cases BTFD is appropriate no matter what the “nattering nabobs of negativism” say on ZH or elsewhere”!

Turning to today’s Dow30 market … overnight very quiet; not even the terrorists in France who shorted futures before the attacks can make a buck being short … what’s the world coming to when you shoot the place up, kill some innocents, and nobody cares?

Only thing for sure I know with certainty is that once this weekend is over, it concludes 5 ½ months of the worst trading environment I can remember; event after event, ad infinitum nauseum, from the start with U.S. elections now to the end with the French Fries, sprinkled with inaugurations, FED meetings & an interest rate hike, BOJ nonsense, ECB further nonsense, NFP reports, and other assorted distractions that made trading either total “speed of light” or … crickets. The stock indices should trade well going forward; up or down, who cares … it’s the “sitting”, waiting for events that come and go that drive me to Vitamin C therapy, and looking ahead it’s clear sailing with the usual government antics always on the horizon.

About an hour into this mess, and I can already sense the “unease” in the market of either being long or being short… memories being what they are, plenty a trader folk the last 48 hours with their own “there’s a million stories in the naked city” to tell you about the mess they dug themselves into, but not out of. God, will I be glad to get into next week.

And for what’s it worth, all the people who bid “protective” option premium [especially puts] to the ionosphere these last weeks in anything & everything cuz the French Fries are gonna cause a financial “tsunami”; congrats, you paid fire insurance on your house while it was on fire, and when the dust settles Sunday night, and all probabilistic events collapse to “0”, while the outcome goes to “1”, you’re going to take a trading loss no matter which side you bet cuz those options aren’t worth ‘butkus” anymore come the PM on Sunday. And whatever happens in France, 1) the French Fries deserve what they get, and 2) it will change nothing except the optics of the EU is still a POS meme going forward. Truth be told, France is on a collision course with the destruction of their own culture & civilization, like so many other European socialist kitty litter boxes whose “liberal & enlightened” PC Pols got their heads in the sand [not all but most, with Poland & Hungary being notable exceptions]; it’s a slow motion train wreck all for the sake of progressive vote getting patronizing an immigrant horde that wants no part of French [or any other] assimilation, and would rather kill you than look at you. “Oh, by all means, let more of them in … while they are killing your countrymen in Paris you can pat yourself on the back for being ‘tolerant & enlightened’ … useful idiots all the way down”.

If there are any surprises today, they may be on the upside later in the day … I just don’t see or feel like there is an appetite in the market for selling after what happened yesterday. We’ll see, but an hour and a half into this and the quietness of the trade will eventually panic some shorts; where that takes us I have no idea, but ideally it would be from lower levels that stall with some kind of 3 bottoms move or a triple bottom formation of some kind. So far, there have been no signals of any kind, bullish or bearish, off of the turns in this so far quiet session.

Ok, just when you got things figured out … and the market cooperates … boom! … LP shenanigans. Off of that bottom, the first legit buy signal of the day with a bullish engulfing pattern @ 15:16… but wait a sec here … as the M1 is closing the bid/offer spread on my screen goes from 2 to 5; so I go from 20555 bid – offered at 20557 to 20555 bid – 20560 offered … “umm, WTF is this”? … I may be a lot of things, but a chump who trades Dow30 with a 5 index point spread ain’t one of them … and for the next 6 minutes the spread stays at 5 … then it goes back to 2, so I’m figuring, “Ok, LP glitch, things are back to normal … but no … as soon as I’m in long, the spread goes back to 5 and stays there … now I’m pissed … so when the market peaked its head above my fill, I liquidated to get out of this … don’t want to be in this if this is the kind of crap they’re gonna start today going into the weekend. My suspicion is they know what’s coming and want ‘protection’ … F-ing scumbags is what they are, always wanting everything both ways”. First trade of the day directly below with commentary.

[click too enlarge]

So natch, as soon as I’m out of this clusterfark I’m on the phone with management ripping a few people a new one … “yes, we see what happened … yes we understand your concerns … yes, we will talk with the main LP and find out what happened … blah blah yada yada”. And nothing ever happens, nothing will ever be admitted, just like Deutsche Bank the other day, getting fined $175 million Dollars for FX price fixing, and then saying, “see, everythings Ok, you can trust us now”! It’s the same thing here; up until this little episode, the LP in the Dow30 has been perfect. Zero slippage on market fills and I got no problems. This “glitch”, though, happens right as the market is making a new low and then reversing … and if it was a pure glitch, why didn’t both the bid and offer change, why just the offer, huh? … I’ll tell you why; cuz it was no glitch … the LP sees the big bids below the market and doesn’t want to sell cuz maybe he/she can’t offset in the futures market as the market starts to rise, and so adjust the spread … who cares if some customers get hosed? [Besides us?]

And now, about an hour and twenty minutes later, the feed is as smooth as a baby’s bottom; “see, it was just a little technical IT computer network glitch, no big deal; all better now”. “Yea well, how come these so called ‘glitches’ always screw me and not you? Any professional guesses Mr. LP, cuz 100 out of 100 times I’m the one who gets the short end of the stick. And today, right at the bottom to the second on the rebound… and it’s the offer that gets ‘jacked’ 3 index points … just a glitch … yea, sure … only an explanation a regulator would believe. We’ll just see next week at highs and lows during the day what happens, and how many more “glitches” there are that are just pure accidents; I see another one and I’m gonna be all over somebody’s chili.

“Did I do something wrong? More importantly, do I still get some bacon”?

And I see the dog sitting there eyeing me suspiciously, wondering to himself if he did something to piss me off; I look at him and I’m thinkin’, “yea well, now you know how I feel 99% of the time with the Mrs.; what’d I do, what’d I say”?

“It’s simply amazing what 4 pieces of bacon, 2 slices of deli roast beef, and a piece of mild cheddar cheese [his favorite] does for your mental outlook; voila! … he’s ecstatic!
It’s 1 P.M. in New York now, my blood pressure back to normal, and things have slowed considerably here in the early afternoon in the stock indices. Prices slipping some … and whoa, WTF was that? … 50+ point slide in seconds … did a new French Fry poll just come out or is it the drop in crude oil? … and now, as we make the turn to the close, it’s the longs who appear in trouble … anybody not remember what I’ve been saying about the stock indices this entire week? Elevator up … out the window … elevator up … out the window; anybody see a pattern here besides me?

In the complete madness of the last hour [out the window -50+ Dow points in seconds, followed quickly by “elevator up” … “hey, sorry about that 50 point massacre that took your sell stop out; never mind”… now we’re back to where we started an hour ago … “what next, new highs”? … 2 opposite SDEV moves in 36 minutes; very strange. From my perspective, though, no signals at the bottom of that phantom break to get me long; best signal all day still the one the LP “gamed” with the 5 point spread BS. The good news? On this melt down and then mini-melt back up the spread didn’t widen, so hopefully this episode won’t repeat again in the future.

It’s about 90 minutes to the close, and the full gamut of stock indices “games” on full display; remember what I said before a blog or two ago about what you learned in kindergarten to third grade? Stock indices are personal; big players keep score, and somebody is always getting squeezed to the hilt. So far today a melt down & a melt up, all in 36 minutes, and nobody has a clue what happened. Some very big bets are being laid as I write, and one side is gonna be very unhappy come Sunday night.

All in all, a week I don’t want to see come back for a very long time; shortened because of Easter Monday, French Fry elections looming, and WWIII in the background constantly reminding us of the “nut jobs” in the world that claim they have nuclear weapons. Really, a week to survive and get through until next week; we can’t control the weasel in North Korea, but getting this first round of elections over in France should clear the air on the financial scene. Next week sees higher volumes and trading [when the signals appear], and markets should return to somewhat of a normal pace once Sunday night is out of the way. Having said that, though, there always is the possibility of the “black swan” rearing its ugly head Sunday night if things unfold in a way absolutely nobody expects; for example a LePen win with more than 50%+ of the vote [not predictin’, just sayin’]. If something along those lines happen, all bets are off for a “normal” day or week; and that would precipitate a melt down in financial assets the “Plunge Protection Team” would have to stop when the selling abated and they then drove bids higher.

Here at the close, a wicked day [and week] just past; you want to talk about the “Flying Wedge of Death” making a cameo, well here it was on full display today; glad to leave the day and week up any amount of money cuz it doesn’t matter the amount. What this week should have proven to you, though, is the simplicity & power of the version 3.2 algorithm; if you doubt its power, simply scroll back on the M1 and have a look. Granted, not every bottom or top [far from it] is a signal, and our patience and discipline are tested on a daily basis; when there is “chop” in the market [especially on the daily when the market isn’t really trending anywhere], signals can and do evaporate and leave the best of us frustrated.

I’ve been trading stock indices since they were born; it’s the way it’s always been and most likely always will be. Some days and weeks you wonder if the circus is hiring; other days and weeks the money pours in like a tsunami and Newbies wonder where it’s been all my life. If the trading conditions are right [and today at crunch time they weren’t, but it appears that’s fixed], and markets aren’t held hostage to political and/or geo-political events, and volatility is “normal” [which is above average], there simply is no other market or groups of markets that are better to trade and give better algorithm signals via the candles than the stock indices. It’s onward & upward for next week!

PAMM/MAM spreadsheet directly below.

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

Have a great weekend everybody!


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