website header 2

website header 2

Tuesday, May 16, 2017


“A perfect metaphor of things to come!”

Art Cashin [UBS] said it best the other day when asked about the action in U.S. equities; “It’s a waste of car money & a clean shirt”. Tough to argue with his logic, cuz no matter your algorithm, opinion, or trading style, if nothing is moving [literally], there isn’t anything to do, and there is zero chance of making money.

But, there will come a day, more likely sooner rather than later, when no matter what the central planners or the SNB “want”, a tsunami of selling will appear; more than likely the first serious break will be bought aggressively, but it won’t be able to come back to the old highs, and when it “rolls over” and the boat starts to leak some water, watch how many rats start abandoning ship. You won’t be able to keep track they will bail so fast.

My biggest concern right now for these markets is the fact that almost 100% of everything is coming either overnight or in the wee hours before the open, when volume & liquidity are at their lowest; these are the times of the traditional manipulators no matter the market, and if you think about it, it is the perfect time to “jack” the market with little effort or expense if you’ve got billions; “who’s gonna stand in your way”?

But there is going to come a day, when one of these higher opens gets absolutely crushed into oblivion, and the price action will be “eye watering”; problem is there won’t be any liquidity and very little volume, and that will lead to price fluctuations that are very, very erratic. Who knows the day; certainly not me, but it is the most obvious choice for the end. The other scenario is a sell off after 2 P.M. ESDT or EST, that starts slowly and then picks up steam and goes down more than anyone could imagine. Either way, it’s one or the other.

Turning to today’s action … of course, rally overnight on what exactly? … another day, another higher open on “vapors” … as I said yesterday, “why hit a bid, when assclowns like the SNB will bid higher the next day, ensuring a better fill”? What this market needs is more bad news!

Sure, why not 50 higher on “vaporware”; and so here we sit half hour into this clusterfark, and once again outside of light sell stops and/or longs getting tired of being long, the market cannot drop “thank you very much SNB & other various asshats too numerous to mention”. … and quite frankly, all this is only going to lead to days when volatility spikes acutely and markets go “bat excrement” crazy … for instance, like last Thursday.

Well, somebody gets the case of the “shit’s too high” syndrome coursing through their veins, and the Dow30 breaks 100 points from the high of the day; first trade of the day directly below.

Now, the important thing to remember here, is that this is the “first’ break, which usually sees the weakest rally off the bottom, and the best breaks to buy are the 2nd, and if you can get it, the third break is the best. These last 2 breaks will usually see the best rallies off the bottom, and if the market cooperates, you can get a good rally off of something better than a scalp. Of course, these last couple of months haven’t seen “normal” downside action, and the 2nd & 3rd breaks aren’t there to capture; it’s been “one & done”.

Today, once again sees the first break go 50+ points off the low; and while the market goes on its merry way, and people are quick to jump on this first break, I’m here to tell you that most days the reversal off this first rally will be “wicked” on the way down and lead to horrific losses for some; you simply have to treat the first breaks as “scalps”, and save your gunpowder for the lower lows that most often come on down days. Do not buy the rally off the first break to position for higher prices [scalp OK, but not a position]; yes, it’s worked lately, the last 2 months especially, but remember EVERY method eventually works for a while before reality kicks in and leads to unwanted results. Which brings me to my 2nd point, which is don’t buy breaks [meaning new lows] after 2 P.M. EDST or EST when the market starts to stumble in the last 2 hours of trading.

Here in the late afternoon, it appears the market is drifting lower … don’t know if a new low can still be obtained … what bothers me more is that the first rally off the low came back to the 21000 level before finding stiff resistance … there are just too damn many people buying these first breaks thinking it’s the end, when most times it isn’t … I can assure you, over time this leads to disaster, but we happen to be in a time when “BTFD at all costs” is the mantra almost every trading day. Hopefully, today’s 100 point Dow30 break is the start … the first “red flag” up the pole, so to speak … of a more pronounced effort to the downside. God knows, this market needs to “shake & bake” some on the downside.

PAMM/MAMM Spreadsheet directly below.

Time for the beach … the dog and I are outta here … until tomorrow.
Have a great day everybody!

No comments:

Post a Comment