Quick look at the dollar

If we'll look at daily chart and take Nov 2009 low to Dec 2009 high as first clear up leg and we apply Fibonacci extensions of this leg to mid 2010 Jan low – it is noticeable how specific level were serving as resistance (100% held it till mid April 2010) – so called "ab-cd" (Thanks Fujisan)

Right now it is at 262% and volume, although not huge, but significant enough to indicate at least some distribution.

The very same chart with different interval applied – 3 days on daily – will show interesting fact – prior candle was TDSequential countdown Sell 13 and current candle in progress (will be completed tomorrow for 3 days interval)  is forming tight doji. 

Given the level of short interest in EURO I'd be very cautious right now – that dollar spike/unprecedented EURO collapse has exceeded all reasonable "risk shifting" from USA to UE and back and still is nothing more than Chimera - things HERE are NOT better than in EU – we just getting brainwashed easier.

Reading the Tea Leaves

Mutual Fund Mondays seem like a thing of the past already, don't they? After sacrificing my NBA team to the Celtics last night in order to help you all stay profitable today, we had yet another sell-off into the close. I picked a bad time to be a Lakers fan, but I'll take a hit for the team, no problem. :-)

The most notable close today, imo, was watching the RUT close under the 200 for the very first time, as this is the risk appetite trade, and it looks like someone has lost their lunch for now.

We start all over again tomorrow, and with that.. here are some charts below to help us plan for the next move. (Many thanks to JoeyN and Osi.)  We have not had a true capitulation style fall yet, but be aware it could be right around the corner lurking. Have a plan at the ready - no knee-jerk reactions.  Obviously a test of the 1040 area will be interesting to watch, and if that doesn't hold we have several targets between 1020-1013, via DeMark, EW and traditional TA views. Do we get there? Only Madame Ruby knows for sure. Keep in mind that next week is OPEX, and the following week is the Fed meeting, followed by the next G-20 sham-wow.  Also: a shameful plug for our own Scrillhound’s blog for those who are interested in Gann.  He’s doing a wonderful job, and has some incredible lessons and charts over there if you’re interested.

 

Joey’s Chart on Copper

Osi’s Charts

 

 

Madame Ruby says, “trade well tomorrow TTWrs.”

Expect the Unexpected

“A thing long expected takes the form of the unexpected when at last it comes” – Mark Twain

We now have two weekends in a row that we can say, “well done.” But we don’t rest on our laurels as traders- we know the work is never “done.” It only takes one blink of the eye and everything can become “un-done,” so we plan for the unexpected and look under every nook and cranny while we plan for the next trading days ahead of us. It’s this type of planning that puts you one step ahead of the pack and perhaps increases your odds for successful trades. One advantage to blogging is you are forced to live with the charts, and I don’t just mean the SPX or the Qs- I mean you live with as many aspects technically that you can keep your eyes on. I noticed one prominent technical analyst, whom I deeply respect, posted some of the international charts up on Friday, and I was thinking to myself, “what took you so long?” Those are the moving parts that create the “unexpected,” and you don’t need to read or listen to the news to see what will most likely unfold if you know where to look first. We’re detectives- that’s really all this is. And the bulk of the detective work should happen when the market isn’t open. Live with your charts. All the smaller moves during the day can be anticipated, and the machine runs far better with the speed of the tape. This should unfold into a VERY busy month based on our various cycle studies and so forth, so make sure to get your rest, and particularly on nights when you know the next day’s tape could be wild. Most of all: know your plan Stan, and make sure it includes an exit strategy right off the bat, otherwise you might as well walk over to your nearest wall plug and stick a fork in it, because the unexpected we’ll probably witness might shock you anyway.

I have a collection of DeMark charts from our own extraordinary posters this weekend- it’s a virtual dueling DeMarkians fest! I’ll post a few of my own simple Simons down in the posting section during the weekend. We are traders who don’t rely on just one thing- we throw everything we can at this tape, and then some- and it’s working! I do urge all of us not to become too haughty or elevated with our egos as successes comes our way- a bloated ego can be the ultimate demise of an otherwise fine trader. Let’s also remember there is a difference between conviction and ego guided contrarianism. The tape is the ultimate decision maker, not us. There are no hard and fast rules at this casino we call the market. We’ll remember that in our days ahead, and be better traders AND human beings for it. One last thing: use caution toward over-trading if you’re struggling while we navigate what lies ahead. Over-trading has little to do with the number of trades you make, and everything to do with the size you’re trading with. Size does matter, especially in a volatile situation, and can play games with your personal fear factor tolerance.

On to the charts, and many thanks to everyone in this group, and especially those who take time out of their own busy trading to post a chart or help a trading buddy during the day. You guys are my trading heroes, and yes.. I proudly put you up on pedestals, just don’t fall off and break your noggins, deal?

If you have any questions about these DM charts, the guys are here to help you as time allows.

Chart by Wallfly

Chart by Osikani

Chart by DDT

Trivia question for the weekend: How many trading days from the pivot highs before the crashes in 1929 and 1987? How many days from the pivot high in April until 6/3/10?

Have a fantastic weekend TTWrs! Chillax a little…

Addition to post: I almost forgot to post Osso's Friday Rule, as GG wanted clarification, so here goes: "Lower lows in at least some Index....maybe all of them...but Lower lows are sure......even after a big green candle." - Osso

Few Psycho Charts for tonight

Close tomorrow (or any following day) above 110.76 will place wave B on daily map of SPY

/ES – channel in play points to some continued upward move for now, higher high tomorrow (I'll be very carefully watching SPY "B wave print" – if selling will start from 110.76 – they will attempt to close it below and B will be postponed till next week, as you know only closing value matters.


DDT here – I dedicate this short post to our dear friends: missing  in action Douala And Isaiah64v4 – if you are OK, please let us know, we are all worrying sick about you.

SPY 30min chart update

Posted previously in DISQUS section, here is 30 min SPY chart – wave C is "locked" today, but there is some more upside move – the question is – will that upside be exhausted in the opening session of will it be extended into "propaganda" jobs report on Friday? Stay tuned

 

Oh – watch where your tax dollars go – the lesson to learn – this is how entire system works – because sucker taxpaying flag waving Joe is born every second.

 

Take few sips of good whisky – things like that will make you sick to your stomach (not whisky you dummy!)

 

 

 

DDT here – 11PM – added one crazy chart DDT style – that yellow trendline worked on 5/12 – might do it again

 

Timeframes!…

[move your mouse from left to right on the image below]

 

[ SOURCE http://wvs.topleftpixel.com/archives/photos_landscape/060828_1662.shtml ]

 

 

Sometimes asking "Edison Questions" help tired mind to avoid seeking rational explanation to irrational substance such as stock market

In attempt to pinpoint market's location at this very moment I was changing intervals and finally it downed on me after looking at my favorite TOS layout (6 charts – one of them is 4 hours – great trading guide if you ask me…no?)

 

Below, without further due is (SPY) 4 hours D-Wave chart – would you agree that is simply amazing!

Everything in this wave is on extremes, a little lower and it is gone…watching here – we are in B…just like on daily

 

And below is my currently favorite 30min chart

If there were only one book to read

“Boys, the stock market must be studied, not casually either, but deeply, thoroughly. It's my conclusion that most people pay more care and attention to the purchase of an appliance for their house. or when buying a car, than they do to the purchase of stocks. The stock market, with its allure of easy money and fast action, induces people into foolishness and the careless handling of their hard— earned money, like no other entity
“See, the purchase of a stock is simple, easily done by placing your purchase order with a broker, and later a phone call to sell completes the trade. If you profit from this transaction it appears to be easy money with seemingly no work. You didn't have to get to work by nine and labor for eight hours a day. It was simply a paper transaction. requiring no labor. It appears to be an easy way to get rich. Simply buy the stock at ten dollars and sell it later for more than ten dollars. The more you trade. the more you make, that's how it appears. That's ignorance, and ignorance is dangerous.
“There's also fear to deal with, which you will find out when you grow up. Fear and violence lie buried just beneath the stir- face of all normal human life. Fear, like violence, can appear in a single heartbeat, a fast breath and the blink of an eye, the grab of a hand. the noise of a gun. when it appears, natural survival tactics come alive, normal reasoning is distorted. Reasonable people act unreasonably when they are afraid. And people become afraid when they start to lose money, their judgment becomes impaired."

“The unsuccessful investor is best friends with hope, and hope skips along life's path hand in hand with greed when it comes to the stock market. Once a stock trade is entered, hope springs to life. It is human nature to be positive, to hope for the best. Hope is an important survival technique. But hope, like its stock market cousins ignorance, greed, and fear, distorts reason. See, boys, the stock market only deals in facts, in reality, in reason, and the stock market is never wrong. Traders are wrong. Like the spinning of a roulette wheel, the little black ball tells the final outcome, not greed. fear, or hope. The result is objective and final, with no appeal."

Jesse Livermore: World's Greatest Stock Trader
By Richard Smitten

Memorial Day Weekend at DDT’s

After a good trading week like we just experienced, it's almost bittersweet to do a comment cleaner, but this is a long weekend and I'm sure we'll all file in here at one point or another before the bell on Tuesday- so time to freshen up our cave a little, and share some ideas. It's been awhile since we've shared individual trades, so if you have something up your greedy little sleeves, please do share with the class, as we're always open to opportunities out there beyond the chronic SPX-speak.

I have only briefly scanned the charts in the aftermath, and have a few of interest going into next week. We just finished up week five of this correction, which is one week longer than any other pullback we've seen since the March lows. Is this a change of trend? I suppose we each have our own qualifiers for that, but no doubt about it, this is not your father's Buick, nor does it have the same feel as the February pullback did, imo. Personally, I want to see a death cross and watch those EMAs or SMAs all line up in bearish order before I put up my feet for the summer, sip mint juleps and work on my tan - but that's just me. You might say, "but K, you keep showing us chart after chart that is signaling a trend change is here," but truth be told, all we really have right now is fringe evidence, not the full Monty type of clues that will allow us to let go of our paranoia mode- and that goes for all of us whether we tend to like to trade long, short or both. Our job is to just continue to monitor all of the moving pieces, and this is sometimes where impatience can do harm. I know I'm a broken record, but this is where our group shines, in my opinion, as we all have things we watch individually and bring them to the table as a well-coordinated team. All hands on deck, traders. We need everybody's contributions right now, more than ever. I don't pretend to know everything there is about trading, (I hope I never do or there won't be anything left to learn and that's half the fun,) and I know none of you do either, so let's continue to teach each other, mentor each other and most of all watch each others backs. This is the reward of trading that goes well beyond ROI if you allow it to be.

 

Lastly, take a minute.. just sixty seconds this weekend, to remember someone who is not with us anymore. This holiday is about remembering the soldiers we’ve lost in the U.S., but we have traders here from all over the world, and perhaps for you, it's someone in your life who was just a hero,  or someone you looked up to and inspired you to be more than you thought you could be. Be grateful for them, as most of us have made that promise we'd never forget them- well here's your chance to live that promise.  Enjoy this long weekend and see you all Monday night.

 

 

For our precious ones…

 

 

P.S.- for cycle watchers-  your weekend homework assignment… research Puetz Crash Window.  See if you can connect the dots up ahead for something we might all keep an eye on.  ;-)

How to find the best option for your price and time strategy? (Guest post by chaugner)

Tonight's post is a complement of

•  

chaugner  (looking good, huh???)

and too keep an eye on future misdeeds visit blog

 

 

 

 

 

 

Before I start, let me ask two simple questions.

“How often have you bought a put contract just to see it loose 50% of its value even though you are still at the same price you bought it a week earlier?”

“How often have you bought a call at what you thought was the bottom just to see it down in your account while the market has rallied the next day?”

 

We have all been there trust me. When I first started with options it was not pretty, I had some lucky ones but when time, price and volatility are against you – boy can you end up with a bad trade. I clearly remember that one trade that forced me to read up on options because I obviously was missing something. I did a straddle (buying put and call on same expiration and same strike price) on AA just before earnings thinking of a big move, nothing happened overnight and price stayed exactly the same at the open – thinking to myself “oh well, no money on this trade” it turned 9:30 and all of the sudden both positions were down 50%. I am sure many had similar experiences so it is extremely important to understand what option traders call the “greeks”. The Greeks are often overlooked by many traders that tend to just buy straight “naked” puts or calls. As part of this post we will be focusing on trying to get a better understanding on those Greeks and also do an exercise to find the best option for a specific market outlook you have. As I am covering many different areas you will need some basic knowledge of options first.

• What is a naked option, put or call?
• What is a spread?
• In the money option
• At the Money option
• Out of the money option
• Bearish Put Spread

So before you continue, read up on those above points above in case you do not know what they mean. To make it easier the focus of this post will be on bearish put spreads (debit put spread). There are many other option strategies out there for different market outlooks so let’s keep it simple in this first exercise for us here. When it comes to options, especially longer term ones (lets say 2-3 months out) I use two mechanisms to try to find the best option package for me:

• TradeStation OptionStation Search
• ThinkOrSwim Trade Analysis

Please sign up for demo accounts for both of those platforms if you do not have access. So for now let’s use the exercise of trying to find the best put spread for SPX at 880 in August with an increase of volatility of 30%. The beginner’s way for this is generally finding an option with the expiration close to the date you are looking for. In this case a beginner would usually buy a “SPY August 88 PUT” (out of the money) or a “SPY August 107 Put” (at the money assuming that SPY is trading at 107). So let’s go to trade station first and use their wizard based option search. Entry window for Tradestation OptionStation Search. I am using SPY here with 10 expiration dates out and 10 strike prices from current price. Current Price is SPX close @ 1074.03. Tradestation offers you many options either by selecting the strategy directly or doing it based on market outlooks. We are selecting debit put spread. We are assuming we want to close this position out in Aug 17th (because we believe we will have reached SPX 880 by that day). I just picked this date randomly, make your plan and put in whatever date you want here. We are assuming SPY to be 15% below current price (you have other options but lets keep it simple). We are risking $5K on this trade. We are assuming VIX is 30% higher compared to today. There are two other screens after this, just select next until you get to your final window. Lets take the top position that tradestation came up with here. It’s telling us the following:

• Buy 63 SPY Aug 101 Puts @ 4.14
• Sell 63 SPY Aug 98 Puts @ 3.35

(Keep in mind we are buying a total of 126 option contracts here). So now that we have the position, let’s switch to ThinkOrSwim where the real fun starts. Most people here use TOS so I assume you know how to put in your positions for analysis. After you put in your positions on the analyze tab (or go to add simulated trades) you should see a standard graph. Before we continue go to the top right section (red rectangle) and change it to the values that I put there. “+4 @ Day Step” and put something higher then 15 on the step. This will give us more visibility of where the position will be on different time scales. I also have a green rectangle around the Greeks (Delta, Gamma, Theta, Vega) – again we talk about this later. Your TOS should looks like this now: Now that your position is in the platform and you have your time slices properly mapped, you can drag the red-dotted line to different price points. So as an exercise lets take a look at our position when SPY is 108, double click on the graph around the 108 SPY price point. At this price point you can see your PL in the price slice window for today, but you can also see how much you would be down if we were to reach this price on different time scales (white rectangle left bottom). Next exercise is moving the red dotted line to 88 on SPY. Again the price slice window shows your PL and the bottom left side would show you how much you would be up if SPY 88 will be reached in different time windows. Final exercise, uncheck your spy short put position (left bottom) and change the quantity on the Long Put to 12 because that is how many naked puts you could buy with a $5K at risk (remember we only want to risk $5k on this trade so we assume that those 12 puts will go to zero). Now the graph here is drastically different, and heavily weighted against you. Take the example of SPY 100. If you had a spread you would be in the money on this position at any time until expiration, however, on the straight put you can see that if time works against you – not so nice. You may have heard this before in relation to options “you are racing against the clock”. This is a perfect example to show how time will affect your “naked” option. Ok, what next? Well first, play around with the following and see how the graph changes. After each change go back to your red-dotted line and move them to price slices where the trade went against you, slightly for you, and when you have reached your price target.

• Quantities (add more long puts, add more short puts)
• Option Cost (change price on your long put to something smaller, meaning you were able to buy them lets say at $3.00 each instead of $4.14)
• Change Strike Prices – maybe a 105 put on the long side
• Expiration Dates – change expiration dates to move them closer, or further out
• Change the time step (at the top where it currently says 21)
• Remove the short put and just use the long put with quantity of 12 and move left and right on the price via the red dotted line

Every option change you make, make sure to change the quantities to match the risk profile we are using. In this case $5000. For example changing the strike price will increase/decrease the cost of the option so you have to adjust the quantity accordingly. Cool stuff right? Now before you continue, go read up on the greeks, Delta, Gamma, Theta, Vega, just some casual 10 minute reading via google (focus on the delta and theta for now). After this go back to TOS and see how the greeks change based on the above changes I had asked you to do. Now go back and read that same information on the greeks again (oh yeah I am not making fun here). This is just an intro and if you guys and girls like it, I can go into a lot more details to be able to figure out how to get positioned, scale in and out and how to change your portfolio outlook on a dime by adding positions to your current holdings. As I am going into a lot of detail here it may also be helpful to do a “beginners guide” here first in case some of this is a bit over your head (don’t be afraid to ask, its your money, trust me, the more you know when it comes to options the better). The beauty with options is the usage of greeks. You have to make them work for you, not against you. If you can make the greeks work for you, you can create amazing option strategies that allow you to manage any type of outlook you may have. We may be bearish long term, but what if something where to happen on the short term that may change your outlook to short term bullish? Yes you can close out positions but sometimes you can add to your existing positions to change your portfolio behavior. Heard of delta-neutral, delta-negative or delta-positive before? Yeap its those same greeks and we can make some amazing short term changes to those core holdings to squeeze every last penny out of this market without exposing your hard earned cash to more risk. One final exercise to take just to show you one more way of how greeks affect your positions. Create 2 new positions:

• 10 x SPY JUNE 107 PUTS @ 2.00 (something you may have purchased a few days ago)
• 10 x SPY JUNE 107 CALL @ 2.50 (something you may have purchased today)

Lets take a look at that graph. The only thing missing from this TOS platform here is an option to give your money directly to the Market makers and forget about trading. That is what this graph is telling you. Until next time and be careful out there !!!

 

 

[Posted by DavidDT on behalf of chaugner ]

Here comes the Bear...

[This is a prop when well deserved to Brandt from Trade-guild.net who was spot on lately with his proprietary 3c indicator

Credits where credit is due – hat off buddy! DavidDT]

Here comes the Bear...

Again 3C had some excellent insight into the market. Last night at Wolf on Wall Street I posted the following,


"I would continue to hold the longs. I WOULD NOT ADD to them. Remember, this is a correction, not a bull market move. Smart money is selling into it and soon you too should be selling in pieces, taking some profits off the table. Do not get greedy and hold too long. We should see the reversal in 3C, but I do not know if they did the same as we did and set up a larger core short position, if they did, then the change in the uptrend could come very quickly."
And it did! Today at 2:07 we closed all longs at an additional profit. I also posted 9 and went short 6 stocks. There will be more posted as they arise, but the 6 form a core position that gives us a wide array of bearish market exposure. 
3C also had a great call this am at 10:50-see the post below-we got a nice correction from there. Then another post below around 2:08, a tiny bit earlier at Wolf on Wall Street, that we were taking profits and established shorts from there.
The charts below, which were posted at Wolf on Wall Street depict very clearly the reason for both 3C calls today, the a.m. and p.m. call.


It looks like we are now dealing with a Broadening top, the next break below important support should not be a shakeout as the last ones were, I think it will be the real deal and it won't be pretty, nor will it be a correction. Our downside target is significant and these bear moves are fast and far reaching. 
If you want the analysis, ideas, and insight into how the market really works, not from a book, but from real evidence for you to see for yourself, check out becoming a member of Wolf on Wall Street. Get insight like the post above from last night at WOWS when it really mattered and could be of use to you. 
One of the greatest values on Wolf on Wall Street is understanding what is happening with the market and what it is most likely to do and what you can do in a multitude of possibilities. As I alluded to many times, Technical Analysis is no longer what it used to be, you need to understand how the market really works.
For instance, how much time do you spend analyzing the market as compared to analyzing stocks? Do you know that the greatest gravitational pull on any stock you choose will be the market's direction and trend? And in second place is the Industry Group. the actual stock has the least to do with a successful trade, yet most people spend most of their time analyzing stocks. This is the kind of insight you will gain at Wolf on Wall Street. Interested? Click this link to get started.

Brandt
Trade-Guild.net

[disclaimer: Trading to Win has long standing relationship with Trade Guild]