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Thursday, June 29, 2017

THE NEW TRADING BATTLEFIELD

“Oh … I see you’ve discovered trading on the MT4!”

I’ve got bad news and I’ve got great news; first the bad news. Trading the stock indices today, whether futures or CFD’s makes very little difference if any, the markets have become totally dominated by central bankers and their “Plunge Protection Teams” [PPT]; perceived “fun-dur-mentals” concerning the economy, corporate earnings, etc., are so “like yesterday”, and if you base your trading off of anything other than the “whims & wishes” of central bankers, you are essentially spitting into the wind and hoping it doesn’t hit you in the face. And what are these “whims & wishes”? Simply put, keep financial asset prices, at a bare minimum, stable, and with the needed appropriate actions of the PPT, crush short sellers into dust and in the process, increase stock prices. Everything else is dust in the wind.

Yesterday was as clear an indication of central banker “intent & purpose” as you will ever see in modern day trading; 1) comments the night before from ChairSatan Yellen in Londonistan reassuring the elites of the world they have “nothing to worry about” regarding the future, meaning of course the FED has “their backs” in stocks, 2) followed immediately the next morning within about an hour before the New York market opens with a “walk back” from the ECB regarding Super Mario’s speech the day before that the “talking heads labeled “hawkish shock”, 3) sent the PPT into action at the same time as shorts scrambled to save themselves, and most importantly 4) sent a clear message to those looking at taking asset prices down a notch, that their efforts [to put it mildly] will not work and cause them severe economic harm. “I’m guessing the 7 times the PPT came into the market yesterday drove that point home quite well wouldn’t you say”?

The bad news for traders is that it’s getting damn near impossible to compete with those who have invested millions of dollars and trade in nanoseconds [billionths of a second] versus all of us who trade in milliseconds [thousandths of a second]. Simply take a look at the complete “screw job” 2 Friday’s ago when the Dow30 on my MT4 screen rallies and I am long already; market goes 59 bid, then 60 bid, then 61 bid, and finally 63 bid … I had the liquidation “close position” order box up on my screen alongside my chart and the mouse directly on the close button, with my finger on the mouse … as long as it took my eyes to see the 63 bid and my brain tells my finger to “hit” the mouse to close, what are we talking about in terms of time? It’s about 3 – 4 tenths of a second for normal hand/eye coordination; OK, well that’s 300 -400 milliseconds. Even if I take the thieving, lying, scumbag LP at their word [which I don’t and you know it], 300-400 milliseconds is a lifetime to those trading in nanoseconds [like the HAL1000 super-duper computer system the LP uses to screw people … “Dave? … We don’t have a problem, do we Dave”?]. Add to that the normal approximate 150 ± 5 or so milliseconds to submit the order and send it via my ISP and then half way around the world into the LP’s computer system, and now the advantage is clearly in the LP’s favor; he’s dealing in nanoseconds, I’m trading in hundreds of milliseconds, and good ‘ole HAL can do the “shaving” [a/k/a slippage] and fill me with whatever doesn’t get the bankers indicted. As all of you know, I get filled at 56, 7 index points of slippage on a market that went straight up … so, taking the LP at their word [trust me, I can’t get there], the real market changed before I could even see it on my screen, and so it’s “fair”, and we did our job cuz the HAL1000 says so. Without the HAL1000, it’s impossible for humans to even comprehend nanoseconds … hell, regular TV images are streamed at approximately 30-35 still frames per second, and your eyes see nothing but continuity; in reality, the process is discontinuous, but our brains can’t decipher the difference. What chance do any of us have with the nanosecond banks?

Ok, I think you get the point that in the very short term, which I will define as under a second in time, none of us retail and/or small institutional traders stand a chance against the banks making the markets via their hedging in the futures markets … hit the market execution button and close your eyes for the fill … some days you’re the pigeon, and some days the statute.

The great news? Well, first accept the theorems of my premise; 1) central banks control the stock indices and are the new paradigm in financial trading, and up & until a complete revolution in western democracies takes place … both political & financial … this is the last paradigm shift you will ever see in trading, 2) the PPT is in the Dow30 and SP500 almost every day, bidding prices off of corrections, ramping prices up quickly on spikes, and slamming VIX non-stop, and 3) the G3 [ECB, BOJ, & the FED] will not let assets prices go down significantly without their permission and approval, and even with that it’s going to be one hell of a “4 step down, 3 quick steps up” type of scenario that is impossible to stay short in and make money, even if the indices go down some. As yesterday proves in “spades”; just when the momentum seems to be shifting, ever so slightly into the “bear camp”, and people are starting to whisper out loud that maybe … just maybe … the Dow30 or the SP500 looks set to “roll over” and go down some, what happens? The coordinated G3 action, followed by the PPT 7 times yesterday, and within a handful of hours, all that talk of “lower prices” is wiped away like it never existed. Their clear message to you? Get that thought out of your trader head of “lower prices”, unless you like the Pudding Business!

Which brings me to the “great news”; it’s the version 4 volatility algorithm in the stock indices. I said this yesterday, and I will repeat it again now cuz it’s important; this doesn’t mean the trades you initiate are 100% guaranteed wins and the algo is the “Holy Grail”; only an idiot or fool would ever make such a claim, and you’d be a bigger idiot and fool if you believed it. The only certainty in life is physical death; after that, everything is a probability wave function. Having said that, though, the only market event [not LP event like I’ve experienced the last week or so, where we get literally raped by the LP … “I’m sorry HAL, did I hurt your feelings”?] that has the “potential” [not certainty] to defeat the algorithm over a series of daily trades, is a market that plummets lower, rallies ever so slightly [few points MAX], and then continues to plummet repeating the whole process over the entire day. In other words, a market that crashes and never comes back. And realize, this is “potential”, not certainty, cuz if the market gets into this mode, there is a very strong probability there is significant news on the economic and/or geo-political stage, that puts the market into this ‘selling zone”. What’s even more probable if your brain is working properly, is that more than likely if the Dow30 goes down more than 300 – 350 points, and continues to keep going down, you’ll have enough common sense to back away until the dust settles, realizing at once the market is in “tail risk” territory, and a “6 sigma” event can easily become a “10 sigma” event and steamroll you in seconds. Ok, you might miss something … granted … but on the other hand, how many days in the last years, outside of Brexit & U.S. election in 2016, has the Dow30 gone down more than 300-350 points on the day? Whatever it is [likely zero], it’s less than a handful out of the thousands of days the market has traded. OK, there’s the version 4 volatility algorithms risk profile in “living color” explained in simple English.

As I have written before, my mentor Bert bludgeoned into my head, “choose the form of your destruction!”, and in the process, choose the least likely probabilistic event that can hurt you. Probability doesn’t mean guarantee, no matter how low it is on a daily basis; you always have to be “on guard” for things that can hurt you [LP thieving is a whole other kettle of stinking fish, but it has nothing to do with the actual market].

Now, I don’t want people to misunderstand me; I’m not “hyping” my algorithm, I’m simply stating some facts about it, along with the premise [foundation] upon which it is constructed … hell, I give it away for free for cryin’ out loud, so what would be my point? When I’m finished writing it, which I’m doing now, I’ll release it for viewing online or download in PDF. I’m simply laying out the criteria for successful trading in the PAMM, and giving traders who trade their own accounts [futures and/or CFD’s] the same roadmap.

Turning to today’s market … same old bat guano, different day … once we get to within a couple hours of the New York open, the central bank bids start appearing and the indices, no matter where they are, start to ramp up in anticipation of the institutional Chipmunks who show up in the first 5 minutes of every day and do their buying … granted, everybody else wants to sell to them at inflated prices, so we get to play this game every day thanks to the idiotic rules implemented [for the children … natch] so the people who buy for the institutional funds don’t team up with the people at the brokerage houses on their institutional trading desks and front run orders, and then later get bags full of cash under the table for the profitable scam. [Note: when trading pits ruled the world, nobody but nobody was better at front running and general scamming than the CME … it was called “paper bag Monday’s”, where “coincidentally” all of the brokers on the floor who filled orders for large brokerage houses would show up carrying paper bags with their ostensible “peanut butter & jelly sandwich with an apple” lunch, but from which I could see on the elevators looked very much like cash in a bag; imagine, what a coincidence all you guys decide to brownbag it every Monday.] Of course, the dirty little secret is that it doesn’t really make any difference, cuz now they simply pay “the tax” by buying higher prices cuz everybody knows they gotta do their ‘stuff” in the first 5 minutes; all they’ve done is cut out the middleman working for the bank, which the bank loves, and that’s why the rules are there … not for the clients, but for the bank.

Ok … wow … “who wants to be long stocks today?” … it’s good to see volatility return to the stock indices. Action today is the exact reverse from yesterday. EXIT QUESTION: “Where the hell is the PPT today”? Cuz, after yesterday you would expect them to be there … funny thing happened, though, after the NY open, and that’s the DAX30 getting absolutely “monkey hammered”, down 350 points from the day’s earlier high. And when the PPT didn’t show up at 21400 to protect yesterday’s blast off from that level in the Dow30, the sharks circled and the “feeding frenzy” to the downside commenced and hasn’t let up one damn bit. Directly below, conditions at the low of the day [so far], where you can see our lovely, fair, and gracious scumbag LP in the Dow30 jacked the spread way out to between 5 and 7 Dow30 points from 2. I wanted to show you this so you know it’s true what they do.


“Oh yea, the HAL1000 says nothing to see here; HAL, notice the spread please… everything is normal … I’ve checked my systems and all is well!” Crooks and thieves at work.

This is such an instructive day, but basically version 4 algorithm rules state that after the 4th or 5th leg down in prices [absolutely no more than the 5th leg], when the market is under the New York opening bid price represented by the aqua horizontal line, you have to stop BTFD [Buy The F-ing Dip] and “let it go”; only if the market rallies back above the 4th leg low can you even think about getting long again. And what does this do? It lets you “buy the bottom” on about 98% of down days, and keeps your donkey out of trouble on those ‘tail risk” days like today, where 300+ point moves down can really ruin your day. It’s not perfect, but it’s as close as I can get to “having your cake and eating it to”. I know from experience, this rule will save your donkey big time, and today is as “instructive” as it gets; especially, since yesterday the PPT was in here jacking this stuff up 7 times in 2 ½ hours. You think they’ve killed a few traders the last 48 hours; first the shorts and today the longs?

Early on, in the market’s initial weakness, I attempted several times to get long, and efforts to hang on for the “pony ride” off the bottom led nowhere. The 4th bottom led to gains that covered small early losses, and from that point on, it’s been straight down … once the 5th bottom came and went, I simply backed away and put my hands in my pocket, and quickly realized that after yesterday’s PPT clusterfark to the upside, today was seeing that manipulation being completely unwound and the potential for real damage to the downside has a much higher probability than I wanted to see or think about if long.

As I have stated many times, and if today doesn’t drive the point home nothing ever will … nobody has a crystal ball, and nobody knows what this stuff will do … analysts don’t know, traders [for the most part] don’t know, and the “talking heads” on CNBC sure as hell don’t know … what matters is the “setup” and nothing else … coming into today after the open, there was a strong probability breaks in price could be bought, simply from any carryover from yesterday’s straight up action all day long … however, it’s a probability, not a guarantee … so when the first few breaks rally off the low and don’t hold, you have to start to become really careful about buying this stuff … the key today was when the 21402 low was taken out after it rallied all the way back up to 21450 … from there, it was straight down almost 250 points. Remember, the “setup” is all that matters! And when the market goes into “tail risk” territory, you leave it the hell alone cuz I don’t trade in “tail risk” cuz you have no idea how bad it can hurt you, all the while your gains are minimal at best swimming against the current on the wrong side of the ‘tail risk” bell curve. “Thanks, I have no desire to lose big wampum money on market risk, LP shenanigans, and reversal daily candlesticks that look now like death, by being long on a down day, that outside the “Trump Dump”, the election last November, and Brexit a year ago, we haven’t seen in about a year and a half on any market trading day”.

Whoops, just checked the “trade history” part of the MT4 cuz Turnkey has just gotten it fixed from yesterday and emailed me, and instead of making money, I lost $10 today in multiple trades added up… OK, whatever, I thought from earlier I was up, but it doesn’t matter … I tried to hang on as long as I could and not make those long fills a scalp … if I had made them a scalp, we’d be up some, but I’m not upset looking at what the market did today and coming away with basically an unchanged day.

And while it is very tempting to go back in to the market and throw some numbers around, I’m not here to trade, I’m here to make money from trading … there’s a big difference between the two. I know everything in the version 4 algo is “gold” … soon, you’ll know it to … the problem, of course, is encapsulated perfectly by the old pit joke, “what’s the problem with buying a “6 sigma” down move in the Dow30”? ANSWER: “It’s on its way to being a “12 sigma” and it has wiped you out first before it turns from the bottom”. So, when you get into “tail risk” territory, and prices are gapping lower with impunity for the umpteenth time in the day, and like the chart above shows, the LP has widened the spread to ridiculous levels cuz of greed, and you wander in and buy a ‘green M1”, you find yourself up 2 Dow30 points and 45 seconds later you’re down 50 … now what … where does it stop? … why doesn’t it stop? … and the losses mount from bad to worse to “worser-er” too fast for you to be anything other than a “deer in headlights”. Well, guess what? It ain’t happening here. Market will be there tomorrow, we’ll get our chances again then, what’s the big deal? That’s how you have to approach days like today.

EXIT QUESTIONS OF THE WEEK: “Where did the PPT disappear to today, after yesterday’s brute show of force? Why do this to the market”? ANSWER: “They had no choice … faced with large volume selling, they aren’t going to step in and soak up institutional selling, so they simply back away. It’s one day … big whoop … trust me, they’ll be back.

I have more than a few trades to put into the PAMM spreadsheet, and since it’s late in the day and tomorrow is Friday, I’ll have it all updated for tomorrow’s blog post. Wow, what a day. Onward & Upward!

Time for the beach … I need a drink, the dog says ice cream & we are soooo outta here … until tomorrow.

Have a great day everybody!

 -vegas


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