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Thursday, July 6, 2017


“Wait … what? Whaddaya mean you want to talk with me?”

Every trader has that moment, when discipline ebbs and the desire to do “stupid shit” comes over him/her; if you haven’t had it yet as a trader, hang around a while and believe me, it will show up. What separates us all, is how we handle staring into and talking with “the abyss”. “What happens when after getting monkey hammered, it doesn’t come back”? Cuz, here’s the “newsflash” for everyone; someday, at some point, the Dow30 & SP500 are going to go down hard early, and not come back up, as the central banks back away and let it fall. I’m not here to say it’s gonna be today, tomorrow, or next week, or whenever, just that it is going to happen. There will be, however,  one key element that will not be present when it does, and I go over that point in the version 4 algorithm manual, that I’m about 1/3 of the way through writing. I’ll leave it at that for now.

Learning how to read “the abyss” is important, but not something a whole lot of traders want to think about; you can’t go to ‘Barnes & Noble” and get the trading book, “How NOT to Lose Your Ass Trading”!, cuz it ain’t there cuz nobody will buy it. Case closed. But as I have often said before, some of my very best trading days in my life, have been days where I either broke even for the day or lost something insignificant, instead of getting obliterated; given a profitable position and a strong trend, any chimp can manage a gain.

And it is vitally important to remember the “function & purpose” of the “Plunge Protection Team” [PPT] specifically, and the central banks generally. Outside of the SNB, which uses the CNTRL-P machine to print Swiss Francs, then sell for Dollars, and then buy Apple & other tech giants, the G3 [FED, BOJ, & ECB] simply wants to stabilize prices and keep negative sentiment away from turning into a full-fledged 1929 and/or 1987 panic. That would destroy investment sentiment, consumer confidence, and put the public in a sour mood to re-elect the Pols who dish out the favors. Under any and all circumstances, the PPT isn’t there to “sop up” selling on the way down; they aren’t going to take on the multi-billion dollar hedge fund guys who want to sell [for whatever the reason or reasons]; instead, they wait until the selling has waned, having heard from the various scumbag banks they are in bed with [round up the usual suspects like JPM, Vampire Squid (GS), MS, and some others as well] that the selling is over from “fund A”. Now, they come in like a herd of bulls and bid prices higher faster than you can say, “Whoa, WTF is this”? And when it is over, “fund A” look like idiots and fools, having sold into the lows, and in addition, any retail spec account that overstayed his/her welcome at the “short party” gets carried out in a stretcher to the ICU at the trader’s hospital. And in the process, and in a very short time period, negative “sell sentiment” gets taken out back and shot in the metaphorical head.

Please understand, that while we all know the morons that run the FED sit in the faculty lounge and are totally clueless, along with the other credentialed elite who constantly fight the depression of 1929 with tools that are simply wrong, they aren’t stupid. Certainly, they can sniff out market attitudes, read investor sentiment, get a handle on institutional order flow from their bank partners in crime, and have a myriad of ways to influence markets. However, nothing will get “your mind right” if you are short the stock indices, than you getting caught in a PPT mini-melt-up, that feels like you just sat on a sharp stick … “Oh my, suddenly my tonsils hurt”! After that, all that sell sentiment goes “buh bye”!

Turning to today’s market, it would have been far better for Dow30 price levels, if yesterday’s late afternoon rally back up to 21500 had not occurred; basically, on the daily candlesticks you’re looking at a “hanging man” formation near the top, which is bearish going forward. Simply put, yesterday afternoon’s rally stole buying power into today, and with the rise in Asian & European interest rates overnight [especially 10 YR. JGB’s & Bunds], you get another waterfall on the open.

I don’t want to get into the reasons; they will be fully explained in the new version 4 algo manual, but today is/was a “classic” case of “beware” for longs, or anybody who wishes to BTFD in today’s action. In other words, coming into today, the “setup” was ripe for another waterfall, followed by short bursts up [go ahead, pick the eventual number] that then get quickly sold to another new low … OK then, which “low” do you buy, if the first, 2nd, 3rd, or 16th leg down is the eventual bottom? … No worries amigos, the manual will tell you; and for those paying attention to my earlier posts, this is used in conjunction with the “general” rule of NOT buying anything past the 4th or 5th low under the New York open as an “AUTOMATIC BUY”. Just as an aside, I just finished the statistical work, and didn’t have the rough probabilities figured out and analyzed before last Thursday’s big drop that produced a shipload of new lows on the 250 point Dow30 drop that ensued; if I had the data, that low of 21207 gave an “OK to buy again on breaks” about 10-15 minutes later around the 21260 level … subsequently, although we didn’t know it at the time, the market proceeded to go straight up the next 48 hours to 21575.

Which brings me to today; down sharply on the open, and the best rally of the day, we captured a good chunk of it and made back yesterday’s loss [less commissions] … and after that PPT inspired 11 minutes of straight up, the Dow30 has been in “sleepy time” mode ± about 15 points; from an algorithm standpoint, the “setup” was perfect for a PPT blast higher. Who knows what comes next.

About 1 ½ hours to the close, and outside of that one PPT induced blast higher, there isn’t really anything to cheer about from the long side of the Dow30; a very strong EURUSD via higher 10YR. Bund yields leading the list of headwinds the market faces today among others. The market is only about 10-20 points off the low set in the first hour on the waterfall down; as I said earlier, “what if it doesn’t come back, and instead starts to hit new lows after 2:30 P.M. and into the close? Central bank bids disappear cuz they get word from the banks selling is building up into the close, and they simply go grab an ice cream cone and leave the market alone … and if that happens and you’re long, then what”? And as we head into the last hour of trading today, it’s a great big game of “chicken” in the Dow30 & SP500; can they hold it above the low, or do we clearly go lower? I’m hoping for lower, cuz this stuff needs to correct the imbalances and at the same time increase volatility. From these levels, any increase in volatility will be a gold mine for us going forward.

Well, that escalated quickly, didn’t it? New lows, and the race to the bottom is on; $64,000 EXIT QUESTION: “When do the central banks come back and say ‘enough is enough’? Quite frankly, I don’t have a clue, but for me it isn’t nearly as important as a pickup in intraday volatility … that matters most”. Not really any big sell stops that got set off, more like a grind lower … that will change if the SP500 can’t hold 2410 and then 2406, which is the big level along with 2400. If those give way, the potential for very big trouble on the downside grows exponentially. In any event, we’ll be there! Onward & Upward!

PAMM spreadsheet updated and current directly below, after last night’s umpteenth tech support session; don’t get me wrong here, the tech people at Microsoft are pretty good, but I try and remember this stuff [sophisticated software with millions of lines of code] has a “life of its own”, and even the best sometimes can’t figure out what the hell is going on and why Windows 10 keeps screwing it up; hopefully, this is the last fix I need, cuz I enjoy using Office 365. And what I can only describe as a “great omen”, the guy last night didn’t say “no worries … it’s forever fixed! … that’s always the kiss of death”!

“Look deep into my eyes … I need vanilla soft serve from DQ … got it?”

Beach time … the dog is looking at me [above], sitting here intently burning holes in me with telepathic thoughts … and so I say, “Ok, let’s go to DQ, whaddaya say?!!!” … and of course his immediate reaction directly below … what a drama Queen! … we are sooooooooo outta here … until tomorrow.

“OMG! … It worked! … I can control him!”

Have a great day everybody!



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