THINKING & TRADING DON’T MIX

“Well, here’s what I was thinkin’ …!”

There are times for thinking and there are times for trading; there isn’t a time when you are doing both; cuz if you do, over your trading career you will be the loser more times than “your thinking” made you a winner. As I have said repeatedly over the weeks/months/years, thinking must be done “outside” of the markets, not during trading time … your only job is to follow the trading model, method, or algorithm you have set up, not to question it or try and change the rules “on the fly” … attempts to do so will put you back into the Pudding Business faster than a Congressman cashes a campaign check.

You can view it in many ways; I’ve often said it’s like falling dominos a thousand deep from where you started. When the dominos start tipping over you have no way to know where “the tipping” eventually takes you; often, it takes you to a place you don’t want to be. In stock indices, especially, when the train gets rolling down the tracks, it makes you think there can never be another uptick ever again … a few short hours later and it gets you thinking there can never be a down tick ever again … back and forth your mind runs, from one panic side to the other. Don’t get me wrong here; I’m not saying don’t think … just do it when you aren’t trading … tinker with it, run hypothetical “what if” scenarios, consider and maybe even implement probability into your model, and demo it for a while if you have to … but don’t sit there, and in the heat of battle decide to 1) fade the algorithm, or 2) buck what you’ve put in place just because you “got a feeling”.

Turning to today’s market … I’ll say it again, “the DAX30 is a better trading market when its cash market is closed, than the Dow30 when its open”! … oh boy, another manipulative bullshit day in U.S. indices where paint can dry in real time … can’t hardly wait for this clusterfark to begin … of course, both the Dow30 & SP500 are higher this morning cuz … what else, STFU and buy moar you idiot! … reinforcing what I said the past couple of days, which is the SP500 will never be allowed by the central bankers to go down ever again … and while some of you think I’m being sarcastic, prove me wrong Mr. Market, cuz every single time it goes down even the slightest amount, it’s manipulated higher yet again. And if they don’t feel like letting it go lower, they won’t, and right now the FED is scared shitless over the upcoming budget battle & debt ceiling fiasco, and there are literally no options on the table that look good. “Oh, what a hell of a ride we are all in for in the next 10 weeks or so … fasten your seatbelts, cuz it’s got the potential to be eye watering in scope and intensity”.

And while the DAX30 [Germany’s Dow30] trades in a relatively free market exempt from the government manipulators [except in extreme circumstances], and therefore goes up/down like you would expect a market to do with millions of players of all stripes buying and selling, U.S. markets simply sit and don’t do Mr. Jack Squat cuz all they got is central bank bids propping stuff up with no sellers, and therefore you get no trading. The only time price moves is when they adjust their bids, and the Wall Street guys are quick to act accordingly. I’ve traded the SP500 for more years than many of you reading this have been alive, but you’d have to be an idiot to attempt to trade it now, in the era of central bank manipulation; why? Cuz it doesn’t move, and when it finally decides to move, it “lurches” to the whims of a group of Twits who haven’t a clue WTF they are doing and/or why … their bosses tell them what to do. But, here’s what I do know: “At some point, most likely real soon, reality is going to “bite”, and when it does, the carnage will be worse than you can imagine. Their manipulations have a price that is being deferred, and it will come due all at once in the form of destruction of the market”.

And if some of you newer readers and/or visitors to my website think I’m full of bat guano … fine, think what you want, it’s Ok … but my question to you is, “why at these all-time record highs in the Dow30 & SP500, is there no trading going on during the day? Over many days now, I’ve shown the M1 charts during the New York day of the SP500, and it looks like somebody trading butter spreads … in other words, why no activity during a time when there should be a ton of activity … either from people taking profits or people getting long some more … but there isn’t any of that … why? Well, I’ll tell you why, cuz traders have been killed for the last year and a half trying to sell it, and so the short sellers have been driven back to the Pudding Biz, and there are no buyers either, who want to be long any of this stuff at these levels, and except for the central banks who are propping it up, we wouldn’t be anywhere near these levels on either index; so, where’s the trading gonna come from with a dearth of sellers and no buyers? Well, there isn’t any”! And unfortunately, that’s where we are at in the central bank universe.

Here we are 2 hours from the open in New York, and the “vapors” to the upside have struck again … hard to say if it’s from the DAX30 being slightly higher, or do we simply round up the usual central bank morons shoving it higher cuz they can … I dunno … from where I’m sittin’ right now it looks and feels like new all-time “record-er-er” highs in the U.S. indices; why? … fun-dur-mentals of course [haha].

We’ll simply see what takes place after the Chipmunks get to buy the highs at the New York open … my best guesstimate is that it just sits all day with a slight “manipulative drift” up, and that nothing really happens except maybe marginal new highs in the Dow30 up to the high 21600’s; and yes, I’d be surprised if we went past 21700, as there is no reason anywhere for this to happen [which, knowing the manipulators, it’s in the cards somewhere].

Well, that escalated quickly didn’t it? Talk about manipulative openings, this one wins the top prize for the year so far; I’m reading ZH, and they say because of Micky D’s stellar earnings report the Dow has broken 21700 on the upside. “Oh yes, nothin’ says strong economy like Sheeple gorging themselves on $1 doublel cheeseburgers cuz they can’t afford anything else … right, yea I see the logic here [not]”. And then, on well timed “news” to coincide with the open, a flurry of negative political news starts to hit the wires … all of course causing prices to plummet … and presto, bammo … 45 minutes later we’re 110 points off the highs in the Dow30, while the SP500 is down about 4 ½ points. And again, I’m sittin’ here wondering why the hell the SP500 isn’t getting “monkey hammered”? It surely deserves it, but more importantly, if it starts to lurch lower, what then happens to the Dow30? SHORT ANSWER: I don’t think it would be pretty.

Now of course, after the fun and games of the open, we sit … ahhhhh, the wonders of a manipulative market that can now go “manipulative drift” higher the rest of the day. What a crock of bat guano; and really folks, I’m starting to get more than a little pissed off at how this manipulative crap gets played out almost every day in the SP500 & Dow30, to the detriment of everyone but the dealers and the LP’s. Cuz the problem is simply this: if you’re wrong on a trade, and the market starts moving lower, you have no idea … literally no idea … of where it will end … will it be 20, 40, 60, a 100 points against me, cuz the SP500 will give you no correlation and no clue what your risk is? So, where do you draw the line? And neither I nor anybody else has a clue. So I buy that midday spike up to 64 in the Dow30 and 2 minutes later it’s at 50 … Ok, now what? … is 40 safe? … how about 20? I dunno, cuz while the Dow30 is going lower the damn SP500 is being manipulated steady to higher, and I get to sit here and wonder why they are diverging … or worse, cuz if the SP500 breaks I’m toast. Throw in the scumbag LP for some extra slippage, and somebody tell me what my risk/reward going forward is in this bag of crap?

Add to this is what I have written before; when the market dies, and you’re out money cuz you got long too early, how do you make it back when the Dow30 goes into its ±7 points BS for 3 hours? Well, you don’t, cuz there is no trading this stuff … you can position yourself, but you can’t trade it … and the SP500 is much worse … fugetaboutit for that market!

And now, here a Noon time in New York, we got the worst of all worlds; an SP500 market that is sitting right on its all-time high bid price, and a Dow30 that is 50 points off the high set before the open, when the SP500 was 3 points lower. Ok, Skippy what’s the plan here cuz nothin’ is trading? It’s simply central banks upping their bids with no buying and/or selling and [as usual] muscling the SP500 market higher by sheer brute force … there aren’t any sellers cuz they are all metaphorically dead from the last 18 months of trying to pick a top in this crap … and buyers? … who besides corporations buying back their stock and central banks is even remotely interested in buying a blow off top? And so, we sit here and do nothing with the market at literally all-time record highs. And of course, all it takes is for the SP500 to go 0.1 index points off that high, and Dow30 traders panic, and it’s 10 lower in a heartbeat.

First they can’t wait to get in line to “monkey hammer” it lower, sending it down 110 points, with the 4^th low holding, and then as if somebody [umm, like the FED] sent out an email, it flips and within 60 seconds everybody is in line to buy anything/everything straight up the frickin’ wall with nary a 5 point break before the market is back up 70 … yes, please … tell me again how it’s not manipulated [haha].

Ok, now that I got that off my chest … the good news is the DAX30 … say what you want, it’s a much better “trading” market than the Dow30, and light years ahead of the SP500. Anybody still trading the SP500 needs to have a psychological evaluation done … the DAX30 still trades the way the U.S. stock indices did prior to February 2016, the date the FED became actively involved in all futures markets but especially the Dow30 & SP500. It goes up and down, and isn’t simply a “one-way street” in one panic direction or the other. Don’t get me wrong here; if you don’t trade it right, it will eat you for lunch, but the version 4 algorithm has a great handle on how to trade this market for consistent profit. And, if you want the unbridled truth, “the DAX30 market trades better [meaning up/down] WHEN IT’S CASH MARKET IS CLOSED [11:30 A.M. – 4:00 P.M. in New York, but the CFD still trades with a 0.6 index point spread], than the DOW30 TRADES WHEN IT’S OPEN”! Seriously, how screwed up is that … a sad commentary on how far down the rabbit hole U.S. markets have travelled and why U.S. markets are losing traders.

You think I’m kidding? … directly below the M1 in the DAX30 and then the SP500 … you tell me.

Is there any comparison? And you do realize, the DAX30 cash market has been closed the last 60 minutes of the DAX30 chart? What’s the SP500 excuse, except to say government manipulators are hard at work keeping the stuff propped up?

So, if they’re gonna manipulate the crap out of them, I’ll trade the DAX30 when the algorithm gives a good buy or sell signal [yes, you can both buy and sell the DAX30 for initiating a trade because it isn’t manipulated; therefore, both sides offer good trades. This isn’t something we can do in the Dow30.]. I’m not gonna sit here and be a “guinea pig” for the manipulators. If they continue with this “panic in the Dow30 / let the SP500 sleep”, they’re gonna be doing it without me, cuz I’m not giving money away just to trade so I can say “I’m trading” … trades need a reason, and when U.S. markets don’t give us one, we simply go across the pond to the “German Dow30” and trade. And right now, with heightened uncertainty in the EU regarding a host of things including the EURUSD, QE, and interest rates going forward, there is plenty of news to keep European equity markets like the DAX30 hopping.

Now it’s mid-afternoon, and the SP500 hasn’t moved ± 0.3 index points in the last hour, but the Dow30 has traded between 45 and 63; now, what sense does this make? You might as well be flying a jet aircraft somewhere at night with no instruments and hoping you don’t hit the side of a mountain or crash it into the ground, cuz if you get long and find yourself down 10 in this puppy, what do you do? “Hope is NOT a trading strategy”! As I said the other day, I’m running out of adjectives to explain this crap, cuz in no way, shape or form does anything make sense, especially the relationship of the Dow30 to the SP500 … we are in “Bizarro World”!

It’s mid-afternoon in New York, and this is a cruel joke … I’m just sittin’ here shaken my head … SP500 can’t go up and can’t go down … the Dow30 for its part acting like a schizophrenic meth addict, shooting 5-7 points on “vapors”, only to go back and forth via the LP whims in filling orders off the market with slippage.

Well, enough of the Dow30 & SP500 … both need psychiatric help. Not a great day in the DAX30 … range only about 2/3 of the expected range for the day based on 20 day MA of ranges, but a day nonetheless where the algorithm did a good job of pinpointing long trades given its “buy mode” most of the day. Again, and it’s not an unimportant point, this market “trades”, and that produces very decent risk/reward setups in its trades. One trade today, and I simply had no choice but to take a quick profit, as the market severely spiked higher … and we know what that means, as large spikes are a very big signal to liquidate. So, a profitable scalp for the day … and after that trade, the market couldn’t hold a bid, even with hitting a marginal new high some time later … whenever it went up, it simply went back down just as fast if not faster than it went up … not exactly the kind of action I want in a long position. Looking at the daily candlestick, a little “meat” on the fat part of the candlestick here in the late afternoon, but nonetheless in my mind’s eye still mostly a “doji” day in the DAX30; and anytime we make money on a “Doji” day it’s a big victory. “So, I’ll take it and treat me and the dog to some soft serve at the DQ when we go to the beach later”! Onward & Upward!

PAMM spreadsheet directly below.

Time for DQ & the beach … “the ice cream King” and I are outta here … until tomorrow.

Have a great day everybody!

-vegas

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