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Thursday, April 6, 2017


“The 800 lb. gorilla NOT at the Xi / Trump lovefest.”

Today, politics & “play nice in the sandbox” are the 2 top priorities for markets, particularly U.S. equity markets, as Xi & Trump get together for a Mar-a-Lago summit in Florida; certainly, Vlad is eating popcorn and awaiting the results. Yesterday afternoon saw the largest intraday declines in the DOW30 since January 2016, as the hopes for anything on healthcare and/or taxes this year pretty much got nixed by head RINO Ryan. Add on top of this cupcake the Senate going “nuclear” on the Gorsuch nomination today to the Supreme Court and Fed Pie Holes “worried” that stock valuations are “high”, and you have all the frosting you need for a mini meltdown of about 200 Dow30 points in about 1 ½ hours into the close.

In the version 3.1 volatility algorithm, all 3 U.S. indices have a 0.13 deviation in the “envelopes” indicator parameter on the MT4; in addition I place an aqua line at the New York open for stocks at 13:30 Turnkey server time [9:30 New York time]; usual buy/sell signals apply from ± 15 index points from the aqua line, although I would be very careful about selling the Dow30 when there is no news that makes selling a “story” for the day; more on this in later blog posts.

Minutes after the open, and not liking what I’m seeing, which is the infamous “Flying Wedge of Death” appear; chart directly below.

Looks you got some people anticipating the Trump / Xi meeting outcome, and maybe some other political stuff in the mix as well. In typical fashion, on days when politics & markets merge, early longs as well as shorts get burned in short order. Too bad we didn’t get a buy signal off the lower SDEV line hit [bullish engulfing pattern, hammer formation, or simple reversal making new low for M1 and closing minute higher; that rally was “rip your face off” if you were short.

About an hour and a half into trading, and you can clearly see a marked slowdown in activity across the trading spectrum as markets go flat and choppy … due in part because both sides got hurt in early action, and also because the focus is now turning towards the Trump / Xi summit today and for any news which will inevitably break … I’d be very surprised if any and all news isn’t “shouted from the rooftops” by the talking heads as very bullish for stocks and we end up with an afternoon rally … optics at things like this are extremely important for the ChiComs, and even if they both hate each others guts and there are heated differences, Xi isn’t gonna do anything today to upset the proverbial “applecart” from “everything is F-ing awesome Baby”!

While we sit and wait things for things to “clarify” themselves in the Dow30, be aware that in the stock indices buying/selling support and resistance breakouts is asking for a losing trade; again, you have to buy on corrections down in up markets and sell on rallies in down markets and use the “spikes” to liquidate. It’s the only way you get good fills.

And since I will now be trading the Dow 30 Index, for those of you “dying” to know how it’s calculated, here’s the formula: DJ = Ʃ of the 30 stocks [weighted by price] / 0.14602128057775 [the current divisor]. If the sum of the 30 stocks in the Dow 30 changes ± $1 in price, the effect on the Dow 30 = ± 6.848 index points. So as you can see, it doesn’t take much to move this thing among 30 stocks where the average can easily go 50+ points in a matter of minutes; at $1 per 1 lot in terms of price change, I can pick the risk profile I want while trading while at the same time [hopefully] “position scale” winners.

And once again, here at about 1:20 PM New York time, you get to see what usually happens to anyone that buys the upside breakout; in this case above 20727, where it scoots up to 36 and then immediately goes back to 26. If I was long, this is the spike I’d be liquidating on as it’s going up, cuz if you don’t you aren’t going to like your fill. The LP in the Dow30 is “light years” better than the gold LP, but give any of them the opportunity and they will most definitely screw you whenever they can; they are in business to make money, not hand out favors or goodies.

At about the 16:44 server time there was a bullish engulfing pattern, but it didn’t come off of any kind of rally correction, it came after hours of chop from right after the open; there were other signals down here much earlier that went nowhere. The key is statistical significance, and coming off of chop isn’t it.

It’s about 2 PM New York time, and whatever news is going to come of this summit more than likely breaks this evening or tomorrow morning after NFP. Not really a good day to start trading the Dow30, but it is what it is, and if Asia moves tonight on news I’ll consider trading it, but other than that I’ll sit and wait for the NFP at 8:30 tomorrow and take my cues from that event going into the Dow30 trading day. No trading today cuz outside of the open, where we had the move off the short term bottom with no algorithm signal, there wasn’t anything to do. That will change tomorrow I’m sure.

PAMM/MAM spreadsheet will be up later tonight, or after tomorrow’s trading and the end of the week; I’m still working on the stock indices format I want to use.

Beach beckons … I’m outta here … until tomorrow.

Have a great day everybody!

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