Saturday, July 31, 2010

Muddy Waters

While looking over a multitude of charts just now, I come away with one thought in mind- it's about as clear as mud. Unlike my view and conviction back near the top in April, when we had more than enough clues a near-term top was approaching via international charts, indicator charts, LIBOR and the like, but the current view is mixed technically from what I can see.

As you all know, I am constantly watching breadth during the intra-day action, and the noticeable and constant rise of new highs v. new lows on the NYSE has been giving me a glaring bullish stare, but much like I noticed back in April, the NDX is balanced at best right now, but I see no clear advantage as a clue via NDX NH/NLs just yet either. The bears have been chatting about various cycle markers for the past two weeks, but all we've seen so far are interim dumps and pumps over and over again. Will these cycle markers hit or is this just another Don Quixote moment in the trading cycle? I have no answer for that.

What I do see is mixed evidence in favor on the side of the bulls VST right now, and in light of the July bounce, but I keep it in the back of my mind that complacency on their part could also be their undoing, and could come swiftly when least expected. That's not a way to trade though, and if the only thing you do is wait to short, you could be waiting a long time while money is being made and the tape creeps higher. Basically, there is no clear-cut path here other than very short-term ups and downs if you can scalp and stay as safe as possible. Are you afraid you'll miss the trade of the century/Black Swan/moment-in-history? That's the wrong tree to bark up as a trader, and will leave you frustrated and angry, rather than productive in your trading. How do I know this? Because I battle at the skirmish line of bias on a daily basis personally, and have to constantly work on bringing myself back to center. My own best trades last week were based on what I saw unfolding on the charts, not what I wanted to happen, or worse... expected to happen based on my bias. I've observed EW, DM, Gann, pattern trades and then some- all scrambling to re-adjust their counts and projections for the past month because that's exactly all this is- projections and guesses, and often without a good look at anything but a single chart in front of them. Fifteen minutes turns into 3 days, an ABC turns into an extension or a truncation, 180 degrees turns into 250 degrees, three white soldiers turns into a hanging man doji... and the beat goes on. By the way, this includes me- I am guilty as charged. But, bottom line, these are the only tools we have and we're not much of a match against liquidity pumping, surprise rug pulling and other various hat tricks. Some would say this is the sign of a near-term top. I say bunk- we are specks in a big sea of crooks. I trade for the cold, hard cash not brownie points for getting lucky with a technical projection days in advance. When the ducks all line up neatly, this job is a little easier, but we don't have those circumstances currently and it's a tough tape to trade for both sides.

So where are we? We still have no higher low/higher high in place on any of the indices medium term, so an early victory dance from the bulls is premature. They hit July with positive divergence, but eventually the music stops and negative divergence can come like crack addict in an unlocked Best Buy. We have a ST higher low, but multiple lower lows/lower highs are still intact. Unless and until that's negated, the MT trend remains down, with expectations of head-fakes until this trend is negated on multiple time frames. TRAN is the only signal I see with a perfect double top, if that's a double top that will hold. See how clear this really is? About as clear as mud. The absolute key will be to stay bias neutral and objective with the charts in front of us, and jump on opportunities as they present.

Sorry for the long-winded text, but there's so little time during the trading week and I wanted to share my thoughts, and stay a little more quiet during the weekdays to focus on my own trading book, as I’m juggling more positions than I normally do.

Enjoy the charts from Wallfly and Osi if you missed them on the previous post. Thanks to both of them for their hard work. Best to you all as the trading week begins on Sunday night. :-)

spx_laundry_8_1 tran_8_1 silver_gold_ratio_8_1
crb_daily_8_1 usd_1_8_1 usd_2_8_1
gdow_8_1 ssec_8_1 libor_8_1
nysi_8_1 bpnya_8_1 bpndx_8_1

indu_8_1 spx_8_1
wallfy 8 1 osi 8 1

Yeah, that’s right, I used pink on the video surround, so sue me.

Thursday, July 29, 2010

The Waiting

<--------- This is going to be somebody tomorrow, but knowing who it's going to be is what we wait for until that bell rings at 9:30 AM. No need to remind you we have GDP announced tomorrow at 8:30 AM, followed by Chicago PMI at 9:45 and Consumer Sentiment at 9:55.

Before I put up some charts I’d just like to thank everybody for a really good week in TTW. Without being too confident, we’ve had our traders do pretty darn good so far, and hopefully we’ll all navigate well into the weekend. Stay alert, whatever you do, and if you happen to catch something please post so we can all stay on task together. I know there are probably some lurkers out there who hang with us every day, please feel free to jump in whenever you’re ready- we won’t bite. (mostly) :-) GG even has his rabies shots up to date.

For you regulars: no changing your avatars for awhile or I’ll send you to avatar jail. We don’t take this offense lightly around these parts. Let’s see what the bears have in their favor because no use stating the obvious- the bulls have the Fed, the HFTs and all the money and liars handbook :-) The bears might just have Cato hiding in the closet. For those tracking the astro stuff- at 9:31 AM tomorrow morning is Mars oppose Uranus. The Mars aspects were apparently a favorite of W.D. Gann for trigger points, so just a little background why it might be good to watch that calendar I shared about a week ago. We have several more Mars events coming up over the weekend and into next week. Just remember though, dead cat bounces can come quickly and out of nowhere, so be on your toes. Also keep in mind this Cardinal Climax is a process, not an event. Everything leading up to it and after is also important.

spy_eod_7_29 iwm_eod_7_29
qs_1_eod_7_29 qs_2_eod_7_29
nysi_eod_1_7_29 nyad_eod_7_29
gann_eod_7_30 Gann wheel, date only. We could see an interesting alignment happen tomorrow. wallfly 7 29 Wallfly’s DeMark Chart
(thank you as always, Wall. :-) )

Last but definitely not least - NYMO


Have fun trading tomorrow. See you then!

Wednesday, July 28, 2010

Quick look at the dollar

Was going through the daily charts, looked at SLV, GLD, USO etc (I wonder if there is such symbol) and everywhere I look I see A-B-Cs on daily, low reward, messy trades.  But Dollar (I know I know – I shall not use dumb Commodity based ETF for charting/analysis – but I am in the poor man's mode…someone called me "cheap"???

So, UUP is in one humongous ABC as well and it looks like it is quite ready to start wB corrective UP – coupled with completed Countdown 13 buy Daily and RSI sitting flat on 40 I might be tempted to start looking for few long /DX contracts.



ANd here is a chart of daily /6E (EURO FX futures) – although it is not 1:1 relation, but 58% weight of EUR in Dollar index is good enough for comparing and the point is – those who traded that bounce (June 6th) off the bottom of the channel and off TDRL of TDST of Countdown Buy – have made a lot of moolah.



Tuesday, July 27, 2010

Time for pullback?

Here is 30minutes SPY chart, it has provided good entry points (long and short ) since June 18th top. UP  Wave looks incomplete, but if it terminates – here and now is a time based on down wave that started on June18th with w1 low July 1st (Special K. did her best to bring that possibility to our stubborn attention). Looking at RSI – it hanging onto 60 level unable to move higher – not bullish in my books.


Next up is an hourly chart – we spent entire day consolidating, but unable to move above TD Risk Level.  We did talk about 112 level as a first possible turn point – it might just be it for now.


Daily is close to TDST around 113, retraced 50% of down move from June top, that ongoing sell setup does not look too strong – are we going to see 950+sh area on this leg down?  If I only knew…


Monday, July 26, 2010

Moving Average Monday

Another day of the bears looking for lift-off to no avail.

I'm going to be pressed for time most of this week, so if my posts are brief, you'll know why, and please bear with me. No, not literally- be careful here how you're trading this puppy. If you’re shorting, you’re going against the IT trend, so remember that. The daily charts are still looking bullish, the weekly charts look bullish and although there's some hope for shorts in the monthly charts, take a gander at the July candle. SPX ended the day sporting the three white solider candle pattern, as did the RUT and INDU. As all candle patterns go, it has to prove itself in the next several sessions. In brief- the longs have it all goin’ on right now.. for now. The flip side? We have some divergence on the intra-day charts, AAPL and GS both put in less than stellar performances today and NYMO is pushing the limits up here. Cycle-wise, today hit a Fib Time series possible CIT and today was also 90 degrees from the April 26th high for you Ganniacs.

Tomorrow’s economic calendar includes: Red book at 8:55, Case-Shiller at 9:00, followed by Consumer Confidence at 10:00.

Earnings include- PM: AKS, BP, CMI, DD, OXY, PCX, VLO, X and WU. Post bell includes: AET, CBG, LVS and NSC. One third of the S&P 500 reports earnings this week, so be on your toes.

DDT posted this DeMark chart yesterday, in case any of you missed it. He also said this:

“Now - wave C is "LOCKED" - it does not mean it can not be extended - I will be looking at hourly counts, but I am speculating - Monday close/Tuesday might be intermediate high”

ddt dm

Zig also presents his SPX chart showing divergence

zig rsi divergence

And the NYMO

But don’t be fooled. This can pull back and not make any difference to the IT trend by just pulling back enough to slow down the momentum before it gathers up steam again. IOW, don’t hang your short hats on anything just yet. ;-)nymo_7_26

Sunday, July 25, 2010

Weekly Sector Report | 06/23/10 (by Leisa)

The fatted and slumbering bears were rudely awakened last week.  The broad market was up 3.7% and the bulls reclaimed some hotly contested moving averages.  I've presented for you a chart book with weekly, daily charts for the 24 major sectors. You can find that HERE.  Additionally, I have all 148 Sector sorted by performance (and also alphabetically, so that you can find sectors more easily).

Let's take a look at the weekly performance chart (click to enlarge).

Health Care was the only negative sector.  Now let's turn to the Total Stock Market Index--Note that I look at this index rather than the S&P or the DOW because it is just that--the TOTAL index.  I like the bird's eye view (click to enlarge):

I mentioned last week that we were within a feral cat's whisker of these lines crossing on the weekly chart.  They have not crossed, and there was some upward progress. HOWEVER, the 13 week EMA is still pointing down, and the 34 week EMA is flat and has been pentrated.

The market continues to digest news daily, and its mood swings have run quite a gamut--dealing thwacks to bulls and bears alike.  To my eye, I'm seeing some constructive charts from our most recent swoon.  Nevertheless, whether you are a bull or a bear, vigilance rather than complacency must be embraced.

I wish you good trading next week.  Keep your wits about you and remember the difference between bias and conviction generally is defined by dollars and time. Always make sure you have a clear idea on how much you wish to pay and how long you want to wait.

Update: This week will be my LAST Weekly Sector Report. Why? FINVIZ offers a very easy and comprehensive view of the Sectors. I was looking at it this morning, and my simple conclusion was that my report was NO added value. Accordingly, I invite you to spend some time exploring FINVIZ's offerings. Start here.

Friday, July 23, 2010

Weekend at DDT's # 875,000

"Smile, breathe, and go slowly" Thich Nhat Hanh

First of all, a big thanks to RandomWalker and Leisa this week for their fantastic posts. We really appreciate your wonderful contributions.

We finish up this week with the NYSE only down on the year –3.06%, when only a few weeks ago it was bordering on a number that defines a new bear market. But.. the coin can flip at any moment for longs or shorts as we saw several times this past week in a big, big way. Expect more of the same going forward and make sure to have a several plans in place before you hit that trigger.

One chart to share for now, and you’ll see the overbought/oversold zones highlighted.


It’s been a long week, or at least it sure felt that way, but it’s time to take care of your mind, body and soul, and am-scray! You’re supposed to be relaxing not reading a trading blog! ;-) Have a good weekend everybody, and see you on Sunday night.

Thursday, July 22, 2010

The Emotions of Risk

One book that I frequently recommend is Justin Mamis' The Nature of Risk: Stock Market Survival and the Meaning of Life (1). I believe this book to be foundational to new traders because it discusses, what else?, the nature of risk in the market. What I love about Mamis' book is the unique way that he writes about market risk, and the way that he juxtaposes two seemingly opposing ideas, that are not in opposition at all. From that juxtaposition he illuminates. (Read on for an example). I wanted to do a brief post on some of his concepts from Chapter 6, The Emotions of Risk. I think that some will find some resonance. I particularly wanted to share some of these concepts that might engage your brain into thinking about risk differently. Mamis posits:

"Under pressure, emotions determine our action." (p. 72)

Because risk is typically defined as a peril, fear is one of the primary emotions. "Fear is long-term, an underlying pervasive emotion, like the underlying primary trend of a bear market. It doesn't go away until it changes." (p.73) Mamis makes a simple, yet powerful, statement about the pervasive fear needed for stocks to go up. Yes, you read go up. For there to be buyers, there must be sellers. And it is the fear of the sellers that creates the proverbial wall of worry to provide supply for those who have a different perception of current market risk. He also notes that the operative portion of fear is anxiety. Anxiety is what paralyzes and prevents you from taking action. It is this anxiety that "gets in the way of taking a risk."

The flip side of fear is the emotion of greed. The operative emotion of greed is envy. Mamis notes that ". . . whereas anxiety paralyzes, envy cause one to act. . . " It is difficult to see the spectacular trades/success of others, and not feel a small bite from that evil twin of jealousy, envy. Envy can cause very risk behavior which is simply, "the risk of 'denial of risk'." Both greed and anxiety often lead to doing the wrong thing. Inertia can be one of those 'wrong things': failing to buy when one should buy; failing to sell when one should sell.

These emotions and their operative manifestations into our action (or inaction) govern all market participants. The impetus for buyers/sellers is reversed in bear/bull markets. Regardless of the market participant regalia you dress in each day, it is best to understand both your own and others' motivations and perceptions of the current risk environment. Mamis' book came along for me when I was feeling 'inertia'--that inertia having been brought about by the overwhelming need to have more information, more certainty, more sense of direction. Granted, there is nothing wrong in standing aside when there is great murkiness...but my inertia was spanning a time when there was some market direction, AND my emotional state prevented my seeing that. Providence must have set this book into my hands, because it helped me come to terms with that inertia.

As market participants, we have to balance the two opposing points off view of being free enough to take risk and while not falling into the trap of 'the risk of 'denial of risk.' I'm not going to leave you with that concept in a void. How does one find the right action in that balance?
We need, we crave, the trust and belief from others, but when information is insufficient we need trust and believe in ourselves. We need the discipline to accept whatever is available, and the experience to understand all the ifs, ands, and buts, and yet still take the risk: we need to be able to make the decision. (p. 79).

As with most things, the right-rootedness of these important concepts is discipline. My distillation is that we need discipline first to ensure that our trading/investing capital lasts long enough to give us the experience that we need to build mastery. Without experience, we cannot build mastery. It is mastery that produces intuition and insight, and those ultimately support our confidence. Mamis notes:
Discipline means choosing what to do unencumbered by the fear of making a mistake. Confidence means trusting our intuition and that what we 'see' is what we "know." (p. 80)

He closes his chapter with a question that I hope that all of you embrace as your own mantra for coming to terms with this concept of risk:

How do we create within ourselves the heroic condition of confidence wherein risk is not a danger but life? (p. 80)

I also implore (v. suggest) you to get this book. I promise you that it will make you think of and about risk in a way that you may not have considered previously. I particularly recommend it for any who are feeling inertia and feeling compelled to have more information, more certainty, more (this, that, the other) before forging ahead and making a decision.

(1) Mamis, Justin The Nature of Risk: Stock Market Survival & the Meaning of Life. Flint Hill, VA: Fraser Publishing, 1999

Wednesday, July 21, 2010

KST (Guest post by Randomwalker)

All traders, even the most short-term, should know what the primary trend is for the instrument they are trading, as well as the main market indices, states Martin Pring. This is because the primary trend has a great determination on the outcome of overbought and oversold conditions, whether waves are impulsive or corrective, range breakouts, congestions, and so on. The primary trend is revealed through both Dow theory, and the LT KST (Know Sure Thing), a momentum indicator based on multiple weighted and smoothed ROC’s developed by Martin Pring. Know sure thing is not a certainty, it’s just his way of making fun of market mavens who introduce indicators they ‘guarantee to work 100%, all times’ because we all know there is ‘No sure thing’. As he constantly reminds: “there’s no such thing as a Holy Grail.”

The other KST’s are the Short and intermediate; when all three are in ‘commonality’, or moving in the same direction, that is almost always when the biggest moves occur – when they are in conflict, or giving different signals, rangebound , sideways and lesser moves are usually the rule. An example is the move off the April 2009 low, which was due to a panic. The s-t and intermediate were so oversold that the it bounced right up to the July high, running against the primary trend the entire time which was still DOWNWARD. It then turned over, while the LT was still flat, causing the H&S. At that time the LT KST then turned up in a strong primary uptrend, causing the pattern to wash out. Thus it was easy to see (in hindsight for me LOL)the low probability of the pattern.

The other way to use the three KSTs is through the Special K, (which Martin kindly named after Keirsten J) which combines the three into one indicator, simplifying the picture somewhat, but my preference is still for the three stack

If you go to, you can receive a FREE pdf explaining the KSTs, precise formulas for them, complimentary videos on the Special K, free calculation of the Special K for any NA symbol, info on Martin’s other proprietary indicators,subscription button for and demo of TIGER pattern recognition service and be sure to check out and subscribe to his amazing youtube channel. It’s a chance to learn from a member of the trading hall of fame, in the business for almost 40 years , who wrote some of the standard texts on TA, and actively manages money. He uses these indicators among others to do that successfully, but that is a whole different subject, team, and website.


Major Points:

1)ST much smoother than dialy MACD (tend to track each other)

2) Help avoid whipsaws

3) Based on four-year business cycle, LT KST USUALLY runs for about one year (11-14 months)

3)The LT ‘oversees’ the others, it is the primary. But, because of its construction, the LT is always about 4 weeks behind the other two, so it will tend to quite often ‘bend’ or break one way or the other rather abruptly as the last month’s data is filled it always has to be considered in conjunction with the action of the other two.

4) Best used in conjunction with other excellent FREE research from Martin, posted to his youtube channel. Highly reccomend subscribing.:)

5)Use only as a guideline, even the strongest trend can change quickly.. you might visualize the LT KST as ‘price pressure’, a guiding force in the direction of the primary trend.

6) Martin’s book The Definitive Guide to Momentum Indicators is the authoritative word on the subject IMO

Hope this is helpful/entertaining/edifying J

Tuesday, July 20, 2010

Looney Bin

I could cut the anxiousness in the posts today with a knife, it felt so thick. I rarely venture into the world of making long term directional predictions, and for a very good reason. This market is highly manipulated and we know that like the back of our hands. But here's what I do know- we remain in a downtrend. I don't care what the various EW bullish counts are out there, I don’t care what rumors are floated to let some big money out the door today trying to front-run the Fed, unless and until we take out the June 21st pivot high, we are making lower lows and lower highs and the charts still have bearish order on the EMAs and SMAs on the longer terms. If we reach the June 21st pivot high, then we need to stand back and reassess, but even that level won’t be a pure signal it’s time to go long. Before we make predictions of new bull rallies, or election rallies or whatever kind of rallies are being floated out there, let’s take a deep breath, pull it together and keep our eyes on the longer time frame charts, not the daily squiggles and bounces. They’re meant to fool the most. Was this not the exact thing we experienced throughout 2009 in reverse? What little I understand about EW, I do know wave 2s are meant to freak out the shorts, and that’s something else to keep in mind too. If your positions are too large and you’re melting down, back them off and trade a little safer during this time. Do not let your emotions guide you, control them and trade your charts. I think I warned a few weeks ago to expect the unexpected for a long while, and at least that’s one prediction I nailed. ;-) We will not go down in a straight line, and I venture to guess we won’t go up in a straight line either. This is backing and filling and backing and filling, since the April top. Do not try to trade for a crash or a mega ramp.

In terms of the time factor alone, take a minute to look at the time ratio between the 2007/2009 slide, the resulting dead cat months long bounce, and then look at the time we've been in this move down. That's all I'm going to say about it. While it's "possible," it's not probable, in my opinion, at least at this juncture. Spend some time with your longer term charts tonight and absorb the larger picture in front of us.

spx_bullish_count spx_three_wave_bear
spx_60_eod_7_19 vxx_eod_7_19

Zig’s T for Tomorrow

zig t wed

Finally, for you free-thinkers, here is an interesting piece published by the Royal Bank of Scotland concerning investing with moon cycles, just recently published. Enjoy! I’ll add more charts in the regular posting section later as the night goes on.

Monday, July 19, 2010

Cat-egorically Normal

I think in our heart of hearts we knew there would be some retrace today, and that's exactly what took place after Friday's little mini massacre. Are the bears in trouble here? I'd say negative to that when taking a look at the daily charts. But.. every chart needed a breather, and that could be over or have a little more upside to relieve the very short term oversold conditions. We'll see. AAPL started the day off very weak, but tomorrow they report earnings after the bell, so anything goes since they tend to sandbag.  Both TRAN and the RUT lagged today, so consider that the risk trade was still peeling some layers back today even on this relief mini-rally. 

Earnings of interest tomorrow: before the bell- GS, BK, JNJ, BTU, PEP, UNH, WHR.  Post session includes: AAPL, BSX, GILD, JNPR, STX, VMW and YHOO. 



Good trading tomorrow TTWrs!