A “WAITING FOR MORE DATA” FRIDAY

“Some people have all the advantages in trading technology!”

Everybody looks for that edge; HFT’s want that extra nanosecond to front run your order, hedge funds look to bribe the banks to have a “peek” at the order books, but real trading pros got the gizmo above ... TRADERPRO2017 ... to give them the edge. “Best $200 I ever spent at WalMart”!

And while not all of you can afford this “bad boy” and get the trading edge when you need it most, in the spirit of public service I feel it’s my obligation to pass on the “instructions” for use to any and all who may feel the urge to go down and pick one up; Behold!

  

“You can follow directions … right? Safety is my top priority!”

It’s Friday, and the investment world looks yet again for more data; this morning we got consumer confidence, Q1 GDP, & Chicago PMI for all the econometric porn addicts out there, who will immediately tell you what it means for stock prices and stock indices. SHORT ANSWER: “It means whatever it is you want it to mean; too weak and interest rate rises from the Fed may be delayed which is good for stocks; too hot and interest rates may go higher but that means the economy is picking up which is good for make believe GAAP earnings, which of course is good for stock prices.”

“I dunno, but anybody but me see a pattern here”?

And what I’ve told people for what seems like forever, is that while stocks in the Dow30 & SP500 have their collective “heartburn” days, in order to make a living trading this stuff, you have to “buy in” to the fact … not my opinion … that stock indices go up 80% of the time and are down to flat 20% of the time. And it’s as hard as a diamond to make consistent money from being short the indices; now, a lot of people don’t want to believe that … they think somehow my “facts” are wrong, that recent history notwithstanding [“ummm yea, like 35 years worth and counting!”], that it just can’t be. MY RESPONSE: “Fine, take the other side; we need others to fund our trades”.

And it bears repeating on this Friday, to ponder over the weekend 2 key critical facts; 1) stocks go down in a bear market [defined as greater than a 10% correction from the most recent high] only when there is an overwhelming case to be made that the underlying economic structure of the U.S. economy has turned down or there is a threat to overall corporate earnings that has no end in sight at the moment, and 2) collective human behavior is different for stocks and stock markets than it is for markets like crude oil, EURUSD, USDJPY, GOLD, or anything else on the MT4 that isn’t a stock index market; in essence people want and demand, and through their actions get, higher stock prices which begets still higher stock prices.

In no other human endeavor does this make any sense; for example, would your demand for bread at the grocery go higher if the price for a loaf went up 25 cents every week? How about clothing or shoes if the price went up a couple of bucks a week? Of course not, you’d stop buying; this does not happen with equities or the indices. PEOPLE WANT MORE! [Until at some point a bear market sets in, prices go down for a bit, an entire generation swears off stocks forever, and the process repeats endlessly over time.] And the dirty little open secret is that demand for stocks increases as prices go higher, and demand lessens as prices go down. “I’ve told you before, you cannot take other life experiences and try and “square them” with trading; 2 different dynamics in 2 different universes, and they don’t mix. Try and mix them and things will not go well for you”.

One thing that does worry me, though, is the rise of “passive investing” on the part of the public [retail & institutional] and the total proliferation of ETF’s and “indexing” as an investment strategy. To their credit, Zero hedge has had some really good articles on this trend, and the total catastrophe that awaits investors really is not understood. The main problem is one of 1) necessity, and 2) liquidity; index & ETF [exchange traded funds] managers have no choice when faced with redemptions, and if people collectively “hit the redemption button” at the same time, who’s gonna be on the other side when they have to sell billions upon billions of dollars in the SP500 stocks”? Remember, if you own an SP500 ETF, you theoretically own all the stocks [500 of ‘em] in the index; when you redeem, all those 500 stocks have to be sold. When there is billions of dollars for sale with the 320^th stock on the list, and average daily volume is in the millions, who’s going to be there to bid knowing there is an avalanche of selling going on and they are likely to get buried if they buy; “well, nobody is who”. And that dries up liquidity and makes another type of “crash” a lot more likely, with far greater consequences.

In other words, it’s 1987 all over again, where institutions thought they could hedge away their portfolio risk by selling futures; only problem is there isn’t anybody on the other side who can do a 10,000 lot, and behind that guy is another 10 institutions looking to do the same; and I’m supposed to step in front of this? “Are you F-ing nuts”? Only now it will be a lot bigger and more damaging because the sizes of the ETF’s and index funds are in the trillions. If you’re looking for potential disaster ahead, here’s a great place to start!

Before the open, not much in terms of market reaction to more dismal economic statistics; “so what else is new”? From the looks of it, they could shut Friday down and I don’t think 5 people would care right now. Market is awfully quiet as we await the start of trading; as usual this week, Pols will have their affect one way or the other with more “blah blah yada yada” as the day moves on.

Here at the open, again the SP500 a little stronger than the Dow30; yet, the HR1 on the SP500 starting to look a little over extended; needs a move down to the low 2380’s at a minimum after 6 days in a row up. If that happens, it means sub 20900 for the Dow30, which more than likely would drive a few sell stops into the weekend.

An hour into this Friday clusterfark, and off the low no signal from the M1 candlesticks. The 2 prior “hammers” I didn’t take for 2 reasons; 1) they are below the open aqua line and we have a very tight range, and 2) unless “hammers” when lower than the open get some kind of confirmation move up, they more often than not are immediate market “fake outs”, as in these 2 cases.

For all the negative news these last 3 days, both SP500 & Dow30 have taken all the shots down with a grain of salt; today, we’ve rallied off that low in the Dow30 of 20932 in pretty quick fashion back up to the 20950 -60 area. If this stuff gets higher on the day, and the SP500 happens to punch through to new highs for the day later, look out above for the melt up panic, especially if there is news on no gov’t shutdown or something else. Shorts are already hurting, and on a Friday going higher into record territory would only make it worse … a lot worse. Daily ranges are still very tight, so anything can happen; it wouldn’t take much to light the fuse on this rocket ship and it’s still very early in the trading day. Not predictin’, just sayin’.

Here at Noon in New York, “anymore trading in butter? … butter? … any more trading? … Bueller? … Bueller? … CLOSED”!! My goodness, can it get any more slow than this? … seriously … don’t expect signals to work or be effective in this, cuz there’s a reason it’s called the “volatility” algorithm. This is really a strange day and has been a very strange week; outside of the open on Sunday night and again the mystery 200 point rally 2 hours before the open on Tuesday, what has there been in terms of any movement in either the Dow30 or the SP500?

“Well, glad you asked Skippy, cuz the HR4 in the Dow 30 since the Tuesday open directly below”!

 

“Err, what happened? … did the machines break”?

That’s an awful lot of nothing for 4 days worth of trading; sure, the NDX100 screamed to “recorder-er-er” highs on Amazon & Google, but outside of that, what? And it isn’t like anything else is doing anything; how about USDJPY & gold? One look at those and it will make you cry it’s so bad; I can only wonder what the scumbag LP’s are doing to fills to make up for the lack of volume, in no small measure caused by themselves.

On the plus side, you can look at this week and say it’s positive because nobody has been able to break the indices lower in price much, after the complete insanity of “France saved the world” and up 400 points in the Dow30 on nothing. On the minus side, the last 3 days hasn’t had anything to cheer about on the upside, with even the tiniest rallies met with selling. I’m not an analyst, but it doesn’t make a lot of sense to see the NDX100 up almost 50% since February 6^th; that’s pricing in a whole lot of President Trump MAGA, and if by chance this market starts to stumble? … well … what’s that mean for the Dow30 & SP500?

Meanwhile, another hour goes by, and if trading got any lighter it would be considered closed. Looking at the Dow30 M1 over the last hour, you’d be lucky to get outside of the 2 index point spread on any trade long or short it’s so bad. This paralysis is unnerving, cuz traders everywhere, I’m sure, are feeling the same thing; “what’s the next shoe to drop, and how do I avoid getting caught in it going into the weekend”? Of course, for those Apparatchiks at the FED, this is exactly how they’d like to see every day … no movement and slam the VIX.

And while nobody thinks it’s “sexy” to just sit, losing money in chop doesn’t get anybody to clap their hands together either, especially if you’re flying blind and everything is basically a flip of a coin … this too shall pass, but it’s important to keep focused on algorithm rules and procedures, and remember that patience & discipline in trading stock indices is critical for success … otherwise, when opportunities come, where will you be?

Here a little after 2 P.M. in New York, a new low in the Dow30 after hours in a ± 20 point range yields nothing; simply a stop hunt that took out a few longs, the market now rallying a little. Like I said before, “do not buy/sell off of breaking support / resistance levels; if you do, most likely it’s a loser cuz you’re gonna get trapped”. A very small hammer near the low here [5 points, big whoop], not really a buy signal cuz it didn’t come on the low; again, we’re below the open aqua line and so far today, none of the dozens of “hammers” that have shown up have meant anything because volatility is so low; why should this one be any different? Maybe it goes somewhere, I dunno, but the range today is still so damn tight and small, there is a real possibility the market could still move 40-50 points lower here and still be considered a “normal” range day; given the fact no rally the entire day has held, why would the range for the day expand with action to the upside? Sorry, I don’t see it, and it looks like a very low probability trade at best. “And just to sum it up, the whole day with less than 90 minutes to the close can best be summarized by the fact the SP500 hasn’t seen a 4 index point range the entire day outside the open … yea, less than 4 index points … pretty pathetic, but exactly what the Central Planners love to see”.

Half hour to the close, and time to mercifully close this day out and erase it from memory; the only thing to learn from today is, “please don’t come back anytime soon”! An absolute nothing burger, with nothing to see and nothing to do; back at it on Monday.

PAMM/MAM spreadsheet directly below.

 

And here before the weekend, remember to live life like somebody left the gate open!

“Weekend! … More beach! … More roast beef! … Yessssss!”

Ok, Fang’s screamin’ at me to get my donkey in gear and let’s hit the beach! … “oh yea,  first here’s some roast beef for energy” … Ok, we’re outta here … until Monday mi amigos!

Have a great weekend everybody!

-vegas

OUR ‘TURNKEY FOREX’  PAMM/MAM  IS NOW OPEN AND OPERATIONAL; SEE “PAMM/MAM MANAGED MONEY PROGRAM” IN “DOWNLOAD LINKS” SECTION IN RIGHT HAND COLUMN FOR DETAILS [VIEW ONLINE AND/OR DOWNLOAD] AND START YOUR JOURNEY FROM WHERE YOU ARE AT TO “ESCAPE TO SUCCESS”!

 

  

  

BOMBS DROPPING EVERYWHERE

“Every day, an adventure in riding the big one down.”

I go to bed early last night cuz I was really tired; I wake up this morning and the world is on fire in more ways than one. “Can’t a guy get some sleep”?

Ok, let’s count the bombs; 1) Senate “nukes” the filibuster, 2) Chalky Soetero regime spies on political opponents, 3) no health care and/or tax bill anytime soon, 4) President Trump bombs Syria, 5) stock indices “tank”, and 6) “most important jobs number evahhhhhh is disappointing.” EXIT QUESTION: “How can the known universe survive”? [To ask the question is to answer it.]

Through it all, financial markets on a roller coaster from hell … up, down, all over the place as money chases money in one direction and then collectively changes its mind and rushes the other way … conditions and parameter metrics for trading changing so fast there is no way to keep up with it except minute to minute … investing is only speculation gone bad and decided to be held.

Turning to today’s Dow30 trade … first, when you get very heavy action overnight, regardless of where it comes from and what caused it, it tends to “rob” action later in the New York day; today is no exception even with NFP … second, this whipsaw action we have seen the last couple of days around the New York open [± 30 minutes], where the market races up only to get clobbered minutes later, and then everybody looks around and says, “WTF was that”? … third, VIX has finally awoken [good thing] which means better ranges, although I would like to see less overnight and more in New York … and fourth, notwithstanding the daily candlesticks in both the Dow30 & SP500 look “not so hot” from a bullish technical standpoint, the Dow30 for its part has spent the last 9 days [including today] mostly trading inside about a 150 point range; there for sure have been moves outside the 12600 – 12750, but they have come back into that range quickly, whether from the upside coming down or the downside coming back up.

And while the entire investment universe is looking for a crash [see Zero Hedge for proof every day] of epic proportions, I’m here to tell you that over the 35 years [this month the anniversary of stock indices trading 1982] indices have been trading, roughly 80% of the time indices prices go higher and about 20% of the time they go lower; in 1987 it was the October crash; in 1998 it was the LTCM Thai currency “bust up”; in 2003 it was the Enron & Worldcom bankruptcies; and of course in 2008 it was the housing bubble that burst along with Bear Stearns & Lehman going room temperature. In all of these events, there was a lingering “story” that kept prices moving lower; without it, “stock indices prices ain’t going significantly lower no matter what you think or how bad the world is … there simply needs to be some kind of event that shakes the foundations of stock ownership and makes people ‘uncertain’ about the future … in other words, a STORY … and right now there isn’t one. Bombing Assad isn’t going to shake people up; it’s viewed as a BTFD opportunity”.

Since the open, one trade today; ended up scalping it off of a bullish engulfing pattern. Once I was up on the trade, and it cleared some resistance and looked like it could have the opportunity to vault higher, it stalled and immediately started to come back. As I stated the other day, in the stock indices I am much more willing to hang on to winners and let them “work”, and see how far they can go into some kind of spike, but in this case the market just simply said, “I don’t think so”. Chart directly below.

 

Here we are about an hour and a half into trading for the New York day, and the Dow30 is only a handful of index points from its opening bid level; it’s been a very volatile last 48 hours, and coupled with the events that have transpired in the political & financial arenas, it’s not surprising most traders are calling it a day and a week somewhat early. If you’ve lost money on last night’s panic sell & then lost more getting long right after the open when the Dow30 made a new high for the day, you aren’t making it back today, and if you’re up money why do you want to hang around this slop on a Friday when things appear to be slowing down? Cuz the way the market “feels” right now is that it’s “drifting” and doesn’t have any firepower left to do much of anything.

Now, usually when things die down in the stock indices, shorts most often will always panic first, especially on a Friday, and so what happens is you get very quick spikes up on short covering, but there isn’t any buying behind it and prices then slowly fade away until the process repeats an hour or two later in the day. From where I’m sittin’ this looks to be the case, although anything can obviously happen given what we’ve seen over the last 48 hours.

Since the New York open, trading has been a complete “nothing burger”, with a little action up, a little action down, and a whole lot of chop. Unlike gold and the horrendous slippage that market is famous for, the Dow30 with a 2 point spread and an LP that so far has been “right on the money” with my fills, it doesn’t take much to get the Dow to move ± 2 points even when nothing is happening.

And while I’ve had better weeks for sure, it feels good to be back in the stock indices; a market [SP500 specifically] where I have been since the literal inception of its trading. Ever since online trading began back around 2001 – 2003, and MT4 trading took over from the “pits”, I’ve been searching [mostly hoping] for a brokerage house that offers CFD trading with razor thin spreads and favorable RT commissions; and literally with a few minor exceptions along the way [Assets FX a couple of times, but it only lasted a few weeks and they took it away], it has been a journey of complete frustration. We’re talking sky high spreads and commensurate commissions to match, and therefore quite “unfriendly” to trade; nobody minds having them make a buck, but paying a full index point to trade the SP500 and/or 6 Dow30 points is totally ridiculous and ruinous.

Our “net” cost at Turnkey is about 2.4 index points, which on an equivalent basis is less than the 0.25 spread in the SP500 futures, so for me this is a “no brainer” cuz they both move in the same way most days. Ultimately, it’s like trading futures with no cost and no need for their large standardized contracts; all the benefits are with us. But in addition to that, while we do have the HFT’s to deal with [as does every market now], the dealer games & slippage are for the most part not nearly as bad as in gold & USDJPY; from that vantage point we have a very definite advantage in either the Dow30 or the SP500. Right now, there is a slight advantage to trading the Dow30 over the SP500, both from a cost perspective [not much] and it’s easier getting “outside” the spread with the Dow30 than the SP500.

Notwithstanding the cruise missile “wake up” call given to Assad, Putin, & Xi, I’m not sure the NFP report would have done much to trading action today anyway; maybe a little more position squaring going into the weekend providing a hair better action since the New York open, but I have my doubts. It’s simply a Friday; traders have had a “full plate” of price action Wednesday, Thursday, and today. Next week we probably only have 2 decent days to trade before the world goes into “full metal Easter Holiday vacation mode” and takes the proverbial 5 day weekend; only Monday & Tuesday will be worth anything; traders will be thinning out starting Wednesday morning, and won’t be back until the following Tuesday. By 10 AM Wednesday, you’ll be lucky to see anything move, and Thursday will be comatose going into Friday & Monday close for anything and everything that’s traded.

I have no idea if Monday & Tuesday will yield any action of significance; of course, I’ll be here to capture it if it does, but looking back, most years Easter week is “dead”. Over the years, many traders take the entire week off for vacation because they can squeeze a whole week with 2 weekends and a Monday [that’s 12 days] and miss only 2 trading days; I did it numerous times. My point is, if it’s “dead” all we can do is wait for Easter and Easter Monday to be over and then capture the trading as it comes and action picks up from the Holiday; the Dow30 isn’t gonna sit here and do nothing going forward. Volatility is picking up steam, and the last 2 weeks look and feel promising in that regard.

The technical issues in stock indices are also much better; while small reversals from the open do happen, double and triple reversals of any significance [Dow30 points > 75 index points] are very rare, and if they do come it is because of specific breaking news; as I stated earlier, today the Dow30 LP filled my market order right at the “offer” on my screen when I bought, and when I liquidated [sold] filled my sell order right at the “bid” on my screen; so, absolutely no complaints here in that regard unlike gold where I don’t think I ever got the bid or offer on my screen.

We only got one legit algo buy signal today, and it’s the one I traded; there was another “iffy” buy signal at 14:00 which was a bottom reversal, and if I had taken that signal it would have yielded a good trade; however, in my mind at the time it was “iffy”, so I left it alone. Really, since the New York open ± 30 minutes, not a lot to do today, and the one algorithm signal I got I did exactly what I should have done; so, while I only made a few bucks on the trade [$25 … big whoop], it feels better than the “ass mauling” I got handed by gold earlier in the week, and we simply move on to next week and see what the Dow30 gives us.

As we move to the New York close, I’m pulling the plug on this thing a tad early; no volumes and no movement the big reasons, and more importantly if you get in and it reverses you got no place to hide. While it may sneak up and hit a new high and run some late day stops, trust me when I tell you Friday afternoon is no time to be initiating new positions and wondering where they are gonna go … and after the “ass mauling” I took earlier in gold, while not the least leery or “gun shy” at all in the stock indices, they are best left alone late in the day in New York. I simply do not want to get caught in something where I have no time left to do anything and am forced to liquidate in less than favorable conditions. It is what it is, but as time goes on and I trade these indices, you will see the wisdom of this approach time and again.

Updated PAMM/MAM spreadsheet will be up later tonight right here in this space.

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

Have a great weekend everybody!

-vegas

OUR ‘TURNKEY FOREX’  PAMM/MAM  IS NOW OPEN AND OPERATIONAL; SEE “PAMM/MAM MANAGED MONEY PROGRAM” IN “DOWNLOAD LINKS” SECTION IN RIGHT HAND COLUMN FOR DETAILS [VIEW ONLINE AND/OR DOWNLOAD] AND START YOUR JOURNEY FROM WHERE YOU ARE AT TO “ESCAPE TO SUCCESS”!