Descending Wedges, not quite ready.....

The patterns I see playing out on the major ETFs and indices are not quite ready to break out. I forsee a bounce to one lower low before the bullish patterns give way. My only clue at this resolution is the extend the SPX has moved without making a counter move to relieve the buying frenzy. The SPX is around 19% extended, it has a little more room to the upside, hence the alternate top lines that define the descending wedges. A sharp move down is expected on my part before a significant recovery is on us.

Oh..... Happy Thanksgiving everyone!!!

Holiday hours

Sorry all, the impending holiday has my schedule stretched, not to mention I slept in!

I am short SPY, due to the larger uncompensated upward move by the SPX. The SPX/SPY should show relative weakness to the other indices at this time. I will continue to short, looking to capture an approximated 6-7% move down on the SPX.

Current position and tomorrows outlook.

I am currently short the DIA, approximately 15-20% of allotted capital for the trade. I am expecting, yet not speculating, a descent downward gap in the AM. Any gap over 1.25%ish on the DIA and 2%ish on the DJI to the downside, I will be closing my position.

Overall, as the ETFs and Indices stand, this is how I see things playing out.

The NASDAQ has now taken over the weakness leader position, if we should decline, the NASDAQ will lead the way short term. The SPX will have the deepest correction, but the NASDAQ's will be more direct. The SPY will be more of a slower grind. The RUT comes in third on weakness, like SPY the quick volatility will make it look more like a grinding decline. The DIA/DJI brings up the rear, it will be the laggard in weakness, the leader if more strength is on the horizon. The largest decline appears to be coming on the COMPQ, and only about 4%, this will present as 2 declines with a quick correction separating them in the Q's (watch your stops, allow for the pullback), both declining legs should be about 1.75%.

If more strength develops, and you prefer to be long, be long the DOW or the RUT. The SPX is leading the upward move, but it's ceiling is not far off.

Any gap down in the 3.5-4.0% range on the COMPQ, NDX, SPX, or RUT, stand down, clear your position and await for determination of the next intermediate move.

Have a good night!

Winace

As previously spoken.....

I had mentioned, in previous posts and comments. Atilla (xTrends)does have a handle on what is going on, but to a different extent than what hos readers believe. He uses professional techniques, in a semi-professional manner.

Note, my comments pointing out his lack of information regarding position sizing, averaging down, and so forth. Ah... Winace does not know what he speaks of..... but later, what happens? Atilla reveals a little more.

I state I no longer use TA, and post regarding is usefulness, and lack thereof. That is is a speculators tool, and I do not speculate. Again, Winace, the all mighty anti-trader, who don't know jack.....

Later, Atilla admits to the lack of technical analysis in his basis for trading and position sizing, etc. He is made to be the god, to be followed regardless of morality to his readers. Winace, of course, bucking the trend, must have no clue.

Now, an interesting development.
TK, the original, almighty trading god (pffft), bows to his trading god friend, admitting his admiration. Atilla, turns around and states the uselessness of Technical Analysis!!!!

What happens now, the "god" (general misconception of the public trader via smoke and mirrors) of technical analysis has shown his loyalty and following to the Anti-TA trader!!!

This has gotta get interesting, book sales depend on it!!!!!

Looking to short...

As of Fridays close, my short IWM position triggered exit after hours. DIA had yet to reset its current extension. I was hoping for an upward gap to add to the extension to enter a short position. This mornings gap looks to offer that opportunity. If anyone is looking to go short, the DOW looks to be offering the best opportunity to the downside. IWM, QQQQ, and SPY are all neutral. So, with DIA being extended to the upside, and the rest being neutral, if we rally, the DOW should lag, if we drop the DOW should lead. Unless we lose our pre-market gains, I will be shorting at the open and adding incrementally as we rise. Have a great morning!

Q's position closed

Have a good morning, I'm out of the Q's, closed for profit. I'll keep ya posted of further developments.

Charts

A bullish perspective.....

I have gone long the NASDAQ at the close... I will not be holding extremely long, unless we drop more before a recovery. In that case I'll keep adding.

Missed opportunities...

This morning, I increased my entry thresholds. I did this, because it allows for a larger initial entry at a more extended level. The trade is still able to be managed, but you have more overhead due to the delayed entry. The draw-back of this is missed opportunities. I increased my entry threshold by 1%. One of the ETFs came with 0.25% of trigger before compensating. That opportunity passed by, with entry thresholds I used yesterday, I would have been in the trade and harvested 8-9% profit. The whole point is, the larger the account, the quicker the entry, the less missed opportunities. Cash is power, power captures opportunity.

Markets are pretty much neutral as of this post, I am sitting and waiting.

Intra-day H&S

The right side of the head reset some indices, which means this intra-day H&S pattern should complete successfully and not fail. The SPY target would be 81.50ish. I am not playing this speculative move, just a tid-bit.

The LONG LONG LONG time frame signals...

I just spent a few minutes looking over the major indices, dating back 30 or so years. Being short now is extremely risky. The larger time frames will trump any shorter signals every time. When support does kick in, it will be no subtle event. Limit what you have at risk, to either side, cause it is going to get damn ugly, real soon (as soon as tomorrow). Good luck, and may whatever trading god you have, be with you!

Target hit, all out

The first spike tripped my out, was outside, sorry for the slow update!!!

In, long IWM, same song as yesterday......

Precautionary words.....

There are many ways and techniques to play the markets. There are many wrong ways and very few correct ways.

The technique utilized through technical analysis, the art of placing entries, with predetermined stops, as utilized by TK, is one route to go about it. The object is to let winners exceed losers, not on a % correct basis, but on a net gain basis. This will work for very gifted analysts, some of the times. It will bleed you to death slowly, and is the safest approach to speculation.

Averaging down haphazardly, using TA as entry points, is a combination of trying a professional technique (managing the trade) with a speculatory trigger of entry/exit. This is what xTrends is trying to employ. Using averaging down techniques, with proper entry and exit criteria is the only sure way to consistently pull gains from a market. Improper use of this technique will kill your account quicker than any technique that can be employed.

So, in a nutshell, if you want to speculate, try the "slope".
If you want to live on the edge, and blow out your account some day soon, try xTrends.

If you want to navigate these markets successfully, do not trade until you know you have the technique down. Improper use of continuously rolling your averages will work most of the time, but done incorrectly, one time, is catastophic.

Trendlines/Channellines

In TA, all lines are reacted to. Either they deflect and bounce prices, or accelerate movement through them. You always have to take into account the larger time frame when analyzing a chart. The charts below, are two charts of the Q's (lines were already drawn, price action was just reactionary to these lines.

The third chart is the SPX. Everything appears to point to higher prices. I guess we bounced ;-)

I do not want people getting hung up on charts and TA, but, if read and interpretted correctly, they can be some value..... some times.....

As far as market neutrality....... everything is compensated..... I am awaiting further opportunity.

Extensions

I am sizing up IWM for a long play, I'll keep you posted!

Lack of postings....

Sorry for the lack of postings all, but when nothing is going on, there is nothing to post. If you do not see a post, I am out, and the market is not allowing opportunity. One of my traders mentioned this AM, "Our money is making more in the money market account than this market is allowing for!".

My response, "Well, sometimes the money market is where you should be!"

Note, we have not lost a trade in quite some time, I'm on 20-25 successful trade in a row, but you can not force your hand, it is a good way to get it taken off. I am sure most of you see this in this current market environment.

By the way, was trying to help the new Disqus users over at xTrends, got banned for nothing. Apparently, unless your Atilla, you can not insult anyone. I typically do not cheer the markets, but watching him get his ass handed to him is quite funny. I just feel bad for those who follow him, or anyone for that matter, blindly.

There is always a flip side to a coin, turn the coin over, get a full perspective of what you are dealing with.

As of now, the markets are attempting to extend, but nothing that would produce safe rewards at this point.

SPX, Break or Bounce???

I'll go with bounce........

Same chart, more detail, at the close

Here is the chart I posted earlier, on a tighter time frame. Note where we closed. This points to either a small gap down, and run higher, or a gap up. An open of 847 or lower means we could be seeing a pretty bearish day tomorrow. Note, this information is speculative, and I am judging no trades based off this information, this is just my sheeped eye view!

State of the market....

I am using extreme caution in this market environment. The recent volatility has resulted in the magnification of one direction moves and has extremely shortened the cycle time. Most traders, using conventional analysis are going to be tore apart in this environment.

This market is for deep pocketed players and extremely cautious players who utilize their techniques (deep pocketed players), but have less capital to allot. The market action in the past week has been very encouraging to me. The markets are starting to show some signs of marked stability. The magnitude of the uni-directional moves has lessened by a large degree (hence, only 5 trades in a week (all accounts combined)). The cycle time though has not varied. These smaller magnitude moves are still occurring over very short time frames. It is the equivelent of taking one weeks data, prior to July, and compressing it into one day. It still has the capability to tear your head off, but to a lesser extent.

I will continue my cautious approach, until the market gives me defined signs of decreasing the magnitude of runs accompanied with a decrease in cycle time.

At this point, in my view, markets are neutral, I am awaiting information from the market to plan my next trade.



UPDATE: 2:16 Eastern
I am currently in no positions, 100% cash, my exit was posted this AM via Disqus.

I would be careful with the short call made by other blogs here....

I broke down......

Went long the SPY at 4:01....... Someone finally talked me into it ;-)

That's a joke some of you may not get, but, it's all good!

I am not expecting an up move for the next 14-16% move down on SPY, if it happens, I'll take my profit, I'll be adding the whole way down, follow into the gopher hole only if you know what you're doing!!!

Couple of charts.....

I'm bored....

The irony of trading...

There are two facts with the way I trade that will sound really strange.

First, the more wrong I am, the more profit I will make.

Second, the slower I act, the more profit I will make.

What ever happened to be right or exit? Or, quick and nimble?

Also, the quote for today...

"It is better to never enter the market, then to enter at the wrong time!"

Winace

Lose the battle, to win the war...

Yesterdays close was just brilliant. I mistakenly bought 10x the contracts (puts) that I was looking for (extra 0 in the order). Doing the responsible thing, knowing being over-leveraged in your initial entry is suicidal, I sold 90% immediately, and ate the spread. Sheesh. I was fully expecting a gap down, but hanging on to all of them would have been purely speculation and I would have started "hoping and praying". That is a game you do not want to play in the markets. If you find yourself crossing your fingers, hoping, or praying, you are over leveraged. Sell down.
I knew I would not be able to absorb the worst possible scenario with that initial position, so I took one for the team, sacrificing the battle to win the war.

Quote of the day

"You can not take from the market, you can only be present to graciously receive what it is offering."

Winace


I am not re-entering the SPX/SPY trade, my quote provider had some wrong data (missing) that changed up the plan a weee bit.

There is only one way to screw up an algorithmic trading device..... that is to drop data.

SPY trade

In, and now out, 10%..... sit and wait..... AGAIN!!!!


The SPX has not reset though, I am hoping for a tea-bag! Basically they run it up, do not reset the index, and then run it back down to lower lows to establish a trading range. I'll go grab me a Starbucks Iced White Mocha, and return, to scan what we got!

Have fun!

Index extensions!!!

Want to thank one of our readers, for asking about one of the indices themselves. I have been eyeing the ETFs solely this week. The ETFs are more volatile, thus reset to neutrality a little quicker. In a volatile market, it is better to play the more risk adverse play (using trade triggers on the ETFs, not the indices). But, the DJI, SPX, and RUT are extended. The NDX and COMPQ are not. The DJI and SPX are around 6% extended (allowing for 20% (ish)). The RUT is around 10%.

The RUT is a whole new ball game now though. It is the only index that has actually "crashed" through any acceptable means of extension, it fell like a brick to 35+% last major decline. Fewer issues that make up the RUT causes increased volatility, kind of similar to individual securities (not quite THAT bad, but worse than the major broad indices).

I'll be looking at positions in the SPY and DIA in the AM on a gap down. Bear in mind, I am prepared to average down all the way to 15% below the current market bottom. So, tread lightly! I'll have every entry laid out, along with position size, which I can not share (and would not). If you go in 100%, even 20-30%, at this level, and we drop 15%, you will never pull your way out. Good night!

Can you believe this clown-puncher???

Check this out:

tortilla, the blue burrito said...
I really dont want to limit your freedom of speech here because of this one troll winace (chuck) and comes with a many other handles and talks to himself to magnet others to the conversation.

Folks please do not pay attention to this imbecile. Do not talk to him.

Looks like when I put the moderation on today, he went to other public boards to bash me.

This is a legal case of which he is not even aware of I assume....He is using my name.

I would appreciate if you just ignore this person, at least here on xTrends.

Wednesday, November 12, 2008 9:53:00 PM EST

Ok, seriously, GAH-----> AKA Satch is not me, lol, he is here though.

Chuck, is not me, but I hope he emails to be invited.

All these peoples IP address's are different, but Tortilla wouldn't be able to figure that one out, hell took him 2 weeks to figure out the comments section had moderation.

Anyone that knows me, also knows I do not hide who I am, ask TK, I DID sign the email I sent to him, that is why you don't see me there any longer.

I would love to get Tortilla's address, I have this book, "Chart your way to ....something or another", would love to send it to him. I offered it up for free, believe I had no takers??? It is a good beginners book to speculating the markets via technical analysis, and Tortilla could use some help.

Tortilla feels threatened, and for good reason, exposed as an incompetent and reckless trader. He, himself, may not be reckless, but what he recommends is.

I also got a little background concerning him, here is a partial email, from an unidentified member (you can claim it if you like):

Who is this guy? Is he for real? I followed him for a while on TT but he was rude and insulting to everyone at one point. ALL his calls were wildly off the mark and he finally left TT, muttering something about "tax implications".

Is he for real? Do you know anything about him?

Regards,

The email address leads me to believe this guy is an attorney (god there are a lot in here), so, an assumed educated opinion.

I do not post anywhere but here and there (Tortilla's). I think I'll probably be done posting there, just not as much fun anymore.

Have a good night! Go harass Tortilla for me!!!

To troll, or not to troll, that is the question....

Well, end of another fine market day.

I'll sum it up in Atilla's words

"Holly Shit!"

Funny how people call me a "troll" when I go against their opinions.
I may have not made you any profit today, but hopefully I saved a few from losing it.
I believe I did do that. So, continue to save traders from their ill fates by "trolling" blogs? Ah, think I'm done with that. I did get an interesting email though, apparently someone is familiar with Atilla from TT, didn't do too well there either.

The cycle continues, we may gap up, then all hail the trading god......
Sorry, my technique is boring with no smoke and mirrors, it just makes money, consistently. I'll learn to live with that.

As of the markets close, guess what? Flat neutral....

The market never extended to the downside, although it appears it has, it has not.
So, a big move is still in the cards, and it can be in either direction. Once the market makes a commitment in direction, I'll start positioning, until then, more waiting......

Patience is key.....

Not exciting being in cash....

Sorry everyone.... just not much going on. The market can explode in either direction, which is too risky for me to have on a position. Some weeks I trade 10-12 trades, this week, so far, 0.

Being in cash IS a position, and right now, a position which is better than the majority.

But, just to kill time.... I was trying to comment to apconcen. Apparently, since traffic at xTrends appears to be WAY down, Atilla has closed the comment section.

Here is his comment:
atilla m. demiray said...
disabled the comments for a while , trolls attacking , we dont have the time to deal with imbeciles

If there is a change in my position, I will update

Wednesday, November 12, 2008 12:04:00 PM EST

The comment I was trying to address is below with my added comments (of course deleted from xTrends).

apconcen said...
WINACE...3 people and me took the bait fir his 'private' blog...total members posting...2..he says Atilla is irresponsible

Wednesday, November 12, 2008 11:48:00 AM EST

Said it here also...

Here, I'll do one better...

atilla m. demiray said...
massive

Wednesday, November 12, 2008 9:52:00 AM EST


atilla m. demiray said...
Chuk said...

"atilla m. demiray said...
massive"

Why would you go in massive at one price point? That doesn't allow you to scale in if you are wrong. Not sure I follow your logic.

Wednesday, November 12, 2008 10:46:00 AM EST

---------

It got massive well under 880

Wednesday, November 12, 2008 10:48:00 AM EST


BULLSHIT!!! At the time "massive" was posted SPY was at 88.90 (ES 889), then it drops below at 10:36ish eastern!

Come 'on, I'm shipping this guy a septic tank.......

Funny, it becomes "massive" when convenient, betcha it is "massiver" now!


Now, no beef with making market calls.... BUT..... also instruct how to manage the trade. Don't BS your readers, you'll lose credibility real quick.

Non-extended open

The broad market indices and ETFs show no particular bias at the moment. They are not extended either up or down. From this neutral state they can move violently in any direction. I am patiently waiting for the market to make its move, at that point, I will start to fade (go against) the trend.

Irresponsible!

Sorry guys, the irresponsible crap I see on these blogs really sets me off! Oh, there really are NOT many people in here, they are all just me talking to myself! (if you don't get the reference, don't worry, you are not missing much!)

Here for the purpose of a few hard core TA analysts here, i want to show you something, just to show you, yea, been there, done that.



This chart is just an example, by the way!!!!!

This was an indicator I designed myself, it laid out the entire next day in advance. It was pretty damn accurate too! It used to be in my newsletter. It took the analysis, each night after the close, of 1024 pieces of data and laid them out in a timeline. Basically, the 10 minute chart would accurately predict out 45 minutes the 15 minute chart predict out 1.5 hours, and so on. It took readings across 14 time frames of the Wilder RSI, slow stochastics and MACD. Each one would get a bullish/bearish rating and would be plotted for the 4 major ETFs and the VIX. It very accurately gave out the relative strength reading of each ETF in correlation with each other also. It gave the basic curve of the day, not absolute price levels, but valuable information nonetheless. The entire data readout had to be reciprocated due to the cyclic wave formation reading of +5 to -5.

I know this is in left field for the most of you, and don't sweat it, I don't use it any longer! Just a little history. I had similar indicators with utilization of candlestick reading and so forth. I have put in my hours, typically 20 hour days, for 3 years. When I do speak of things, it is through experience, not just BS. It is confidence, though it is misinterpreted as cockiness.

My formal education is in the medical field, although I am an engineer. I have experience in mechanical, electrical, software, and chemical engineering.

Feel free to comment in the comments section, membership has been limited, you should not get attacked, if you do, we'll vote the person off (majority rules!). I'm really a nice guy! I mean it!

Example of converging channels.

These junctures of channels all point to an up day tomorrow, barring the two shorter time framed channels hold. The wider ranged green channel is the transitioning channel. The channels all merge to form a symetrically formed inverse head and shoulders pattern. There are at least 10 other channels in this chart I can see by eye, the problem is always the same, which is stronger, which time frame will hold? Typically, the longer time frame trumps the shorter, so what's on the dailies? Weeklies? Analyzing via TA is a never ending process, if you do not get caught by "analysis paralysis", you still question your accuracy.

I chose to leave this game to speculators. Do I watch it and draw out channel lines? Sure, but only to kill time. I do not make trading decisions based upon them any longer.

Instead, I decided to go the route so few choose to go, typically they would not know where to start. I went for the "why?". Why does TA work sometimes and not others? Finding this key made all other pieces fall into place. This is why I would like to stimulate thought processes, as opposed to say "buy here" "sell here", or something similar. It is all in the art of discovery. You discover it, you learn it, you know it. Regardless of what you may hear, there is a logical reason behind the markets.

Speculators push and pull the markets in a disorganized fashion, professionals regulate the markets and take advantage of these speculators. In the end, what do you have? Perfectly organized confusion. Look through the confusion, the organization can be exploited.

TA, a small tidbit

I do not endorse the use of TA any longer, BUT, if you do, and you insist on it.

Keep a few things in mind.

Every triangle at one time looks like a H&S pattern, every bear flag looks like a double bottom when it breaks, a H&S will look like a potential double top at one point, a smaller triangle will break to make a larger triangle.

Chart patterns are ever evolving into larger patterns of a different time frame, sometimes the same time frame.

I used TA for quite some time, if you insist on using it, try using channels with parallel internal harmonic lines. This is the most useful tool for TA.

All patterns form from the intersection of channels on the same or different time frames. These channels are directly proportional to ratios required to support the markets function.

Every trendline has a parallel, try it, they are there, if they are not, they will be. Do not be afraid to use internal trendlines, the most oblique details are usually the most reliable.

Most indicators and oscillators gage these channels and become over-sold/over-bought when channels converge. The channel that overpowers the other then has to be calibrated for that indicator/oscillator. This cause the divergences you see in the indicators/oscillators.

Long entry target voided....

The markets had a pretty descent extension going, almost to a point worth entering. The decline has been compensated for and thus, the market has returned to a neutral state. It is now free for speculators/news/and other smoke and mirrors to push it in any direction, quickly and sharply. In the mean time, I am going to put on more coffee, and kick back a bit!

Looking for entry....

I have a target entry for DIA and SPY, if we continue the decline.

DIA entry will be around 85.00, SPY entry around 88.00.

I plan to cover (add to the positions) all the way down to 71.00 and 73.50.

Any significant bounce during that time will have me exiting profitably.

No trade opportunities, yet anyway.

Sorry guys, boring day in the neighborhood here.

Watching for something fun to happen between here and the close.

All upward extensions reset

All the 4 ETFs have reset their respective extensions. The market is back to neutral, waiting, once again.

Congratulations!

If your reading this, your one of a handful.

Other blog readers are coming to the realization that what I've been trying to explain to them is correct. The art of tiering in/out of a trade, proper position management, and proper trade allocation is extremely vital in trading. I am light years ahead of these blog authors on this topic. The "open door" approach to teaching these traders some skill in these areas has been shut. I came to the realization that I do not owe these people anything, and as disrespectful as they are, they can attempt treading water on their own. Anyone with an open mind to learning is welcome here. Any of you that are here now are welcome to invite in your trading friends. Just have them email me, and reference who sent them.

This mornings gap up, although somewhat sizable, is still not sufficient enough for my trades to trigger. I do not expect this mornings gap to fill for a while. It would be beneficial to see the gap up expand on the gains, at least for a few more percentage points, at that time, I'll start fading the move by going long deep ITM puts.

Talk to you in a bit!

BORING!!!

Get the cards counted to 25-30 and re-shuffle! 100% in cash now and waiting.....

It appears an intra-day symetrical triangle may be breaking to the upside, coin-flip please!

Hmmmm.... My premonition, we break the triangle upward to test NDX 1282, to turn and fall. That would be a bull trap, this is pure speculation and please view it in that context!

BLACKJACK!!! Pull up a chair!

Many people refer to the game of black-jack when reading my posts and such, weighing probabilities. Well people, got news for you. YOU ARE GAMBLING!!!

The vast majority of people refuse to admit this. They think, by admission, they are commiting to a diseased label. I hear it al the time, "I don't gamble!". You, my friend, are in denial! The quicker you admit it to yourself, the quicker we can move on.

If you are going to gamble, it is best to know the game you are playing. Weighing odds and probabilities can lean the odds extremely in your favor. If the odds are in your favor, and you approach the game with a systematic, consistant, and profitable approach that borders a 100% win ratio, is it still gambling? Is the alcoholic, that has not taken a drink in 20 years, really still an alcoholic? These questions are subjective.

Many people reference the "Martingale" system, the art of doubling (slightly more) your bet until you are correct. This system was designed more for the roulette table in casinos. The green spaces, the house wins, was the biggest downfall there. Not to mention, the system was outlawed (try walking into a casino and implementing it if you don't believe me). Ever see the movie "21"? I suggest you do, my wife thought I seen the movie previously, for I knew pretty much the entire movie. There are ways to beat the odds, you just need to first identify the game.
As I go through this analogy, bear in mind, the "art" of technical analysis, is more an art of true gambling than the approach I will show you.

Viewing the market as a deck of cards, for the purpose of technical analysis sake, you are trying to narrow your odds down by depicting whether the next card drawn is red, or black. Through analysis, you see a few cards go down, thus slightly improving your odds. An edge yes, at the end of this post, you decide who has the bigger edge.

OK, let's start on the analogy. We will start with the casino. There are two types of casinos, regulated and de-regulated. A regulated casino is the equivalant to the markets broad indices and ETFs. They are held to tighter standards, more standardized move, larger volume, mass public type behavior. De-regulated casinos are like individual securities, some shady things can go on in these places. I stick to the regulated casinos.

Next you have the table, take your pick, each ETF and index is played at its own table. The higher the volume (players), the more regulated and tightly governed the playing field. My preference are DIA, IWM, QQQQ, and SPY. I watch others, but play them seldom.

Next is the deck. Counting the deck, which there are a few ways of doing, is the blackjack players biggest advantage. They keep track of a rolling count and caluclated odds and probabilities off that information. In the market, up until July, we had it pretty easy, we were using a single deck. Volatility, real, not implied, is the equivelant to the size of the deck. We currently are playing with 4 decks combined. When playing with four decks, we need to wait for some time for the count to be established. The count, is the markets extension, or how far it moves without making a compensatory counter-move, or retrace. If every 10 cards were the equal of 1% in the markets, you can make this comparison. The way I measure market depth, or extension, is my kept secret, sorry, you'll have to find your own there. The going rate, at this moment for my secret is about 50K, the more I teach, the higher that price goes, for I really don't want anyone knowing it. So, the maximum extension, while dealing one deck, is 5.2%. This will strike some of my readers as strange, for that was about the real number back at that time. The maximum extension, is now hovering in the 21% area! Now, THAT is volatility!

To begin shaving oddes in your favor, you need to first identify the size of the deck you are playing with. This is measured by keeping track of current extension, and maximum extensions, and adding some cushion room to allot for the unexpected. Volatility, via the VIX and VXN, can give you a rough idea. Look at the VIX peek and compare to the maximum extension of 20% at that time, you'll get a ratio idea of where we would stand. The VIX and VXN are actually a lagging indicator though, tracking extensions across ETFs and indices is more accurate. We are in the process of writing software that does this automatically for us. It will do historical studies to identify the maximum amount of cards ever used at a specific table, and track MANY tables to take advantage of any "hot" tables.

The whole process begins with the count of the cards, or the beginning of the extension. With no initial card count, you can not play the table. This is what happened yesterday in the markets, the count was never accurately started! This is why I suggested steering away! Once you have an accurate count, you need to wait until odds shift significantly in your favor to play the table. Prior to July, I waited until 20 cards were dealt and and accurately counted. Today, I am waiting for 50-80 cards to be dealt and counted. So, playable opportunities are far fewer at the moment, and once entered, it may take a while for the game to play out. The more cards that are dealt, the higher the percentage of knowing the flip. The more you know, the more you increase your bet! Keeping buying power in reserve is your "ace" in the hole. This keeps you in the game, giving you patience, to receive your reward when the face card is flipped. BLACKJACK!

Have a great trading day!

One last post, couldn't resist!

I have seen this statement at two different blogs. I am going to pose a question. You figure out the answer and you'll be on to something. Here was the statement I found:

5% drops are recovered within one to four days (13 out of 14 have). Only one that didn't was Oct 16, 1987 ;-)

Interestingly, between 1960-1987, there were zero instances of 5% drops in S&P 500. Since then we've had 14. Yesterday was 6th since early September. "


XXX what about 10% down days????



That stat was for all drops 5% or more. The exception was the trading day before black monday in '87. It may take another day or two or three to completely recover what was lost last two days. It also may not recover as quickly as it has in the past. I have two long positions and will look to add on a gap down. All of them in SPY


And here is the question, think about it, figure it out!

Using historical/technical analysis to measure odds and probabilities. Why is there a significance, if there is one, between the close of one day and the open of the next?

In other words, does the market identify or distinguish from one day to another in this type of analysis???

The secret of opening and closing volume.

Ever wonder the real reason why the majority of the days volume occurs during the first and last half hour of the trading day?

Let me explain why this occurs. In the same process, I will explain the importance of gaps and the advantage to them regardless of which direction they go.

OK, just for examples sake, the Q's are declining, at 50.00 they are 3% extended to the downside. If 3% was your fade entry (going long against the decline), and you were adding to the position every 1%, at tier 4 (3rd add (initial position would be tier 1) you would have purchased the following (assuming a multiplier of 100%). I am going to use lots of 100 shares for simplicities sake.

100 shares at 50.00
100 shares at 49.50
100 shares at 49.00
100 shares at 48.50

You average cost basis, once tier 4 is purchased is 49.25.

Follow?


OK, say this decline goes into the close, your entry level (50.00 (3% extension)) is hit at the close and you buy 100 Shares. Now, the gap can work in two ways. if you gap up, take the profit off the table. If you gap down, you get a better cost average when you purchase the amount of shares you SHOULD have at that price level. Example.

You bought 100 shares at the close (50.00), the Q's then gap down 3% (using round numbers for ease of illustration). According to your trade matrix, that should put you at tier 4. At tier 4 you should have 400 shares. So you buy 300 more at the open of 48.50. Here is your cost average:

Bought 100 Shares at 50.00
Bought 300 shares at 48.50

Your cost average is 48.875.

You successfully absorbed a 3% move against your position and retained a lower cost average, presto!

Positioning for the gap, and balancing after the gap allows a lot of volume to move during those times.

Have fun! Good night!

By the way, this may be my last post for a while, seems to be a waste trying to educate people who have no appreciation for it. I have accounts and traders to manage. Good night! Prosperous trading to all!

Counter-trend trading

Sorry guys, but, the only way too consistently make coin, is going against the crowd. Take a look at the chart below. This is my last trade reproduced on the chart:



The blue highlighted area, area A, is the launch. This is where momentum is built to sustain the run up. Depending on the capital you have, the current market depth (how far the market can move without retracement), and TRUE market volatility, you can start fading the trend in this section. The market psycology here is people trying to catch early momentum. The professional money is still selling into this strength (from the previous run), new buyers are drug into the momentum. Volume starts to build (professional sellers are doing the selling discretely and boosting false strength).

The pink area is where there is true strength. People flock by the masses to join the momentum run. Professionals now increase their selling to off-set buying pressure (and average down exponentially). Any buying in this area, becomes a losing position very quickly.

Any number of things can happen here to swing momentum. If the extension is at its limits (yes there ARE rules to how far the market can go), news, CNBC, or any BS announcement or rumor can swing the market down. If buying tapered off in the pink area, the increased professional selling will swing momentum.

Once peeked, we enter the green area, this is where professionals either A. Sell a little in one big hit (to start fear) or quit selling all together. Those long in the blue area may attempt locking in profits by selling (trailing stops), or the emotional effect get anyone who bought in the pink/red area and they sell off.

Once price drops below the rolling average of those professional sellers, they start to cover incrementally until the position is down-sized to the point they are happy with. The do this buying (accumulating) quitely, for they do not want to trigger a premature rally until they have unloaded. Once the reset point is hit, the markets return to neutral, and it starts all over again. Propulsion, mania, realization, termination. Rinse and repeat. Have a great day!

The way things shall be!

Apologies for trying to save a few traders from impending doom. Yet, I am made out to be the bad guy.

People follow people who follow people that really have no clue.

Not saying to buy, or invest, or anything here at Channellines, I would just like a place where people can learn for themselves. That's it.

Comments section is wide open!

Points of interest.....

Currently, I am in no positions, 100% cash. The four main ETFs I trade show no levels of extension, either up, or down. Once they commit to a direction, I will start a fade. Until then, a few points worth noting.

The NDX and COMP are about 5% extended to the downside, if we bounce, the NASDAQ may be the place to be.

I do track many indices and ETFs, if you expect a bounce and want to play an upward move, watch these areas today:

NYA 5944
RUT 511.40
VTI 47.05

These are speculative. This would be reset points of the upward move. These individual ETFs/Indices have not reset, and a bounce will not ensue until these obligations have been met. I am NOT saying we will not plunge further, I AM saying these targets need taken out for an upward move to continue.

My personal best advice for today....

Just relax, chill out, grab a beer, Starbucks, or drink of your choice, turn on CNBC and laugh at all the idiots trying to screw you out of your money!

If anything noteworthy developes, I'll give you a heads up.

See what happens???

I posted a lovely comment over at xTrends last night, at 5:11 Eastern to be exact, unfortunately, Tortilla, (aka. The Blue Burrito) (sorry, buddy calls him this, I can't stop laughing) so kindly deleted the comment. Would it make him look bad? Hmmmm.... don't know, BUT, if he would have at least read it before deletion, maybe he wouldn't have made THIS comment today:

atilla m. demiray said...
I have no clue where this selling came from, there is no volume whatsoever

it may be futures driven.... or commercials maybe shorting big contract

Wednesday, November 5, 2008 4:32:00 PM EST


or this one:

atilla m. demiray said...
something is wrong with this move.....we should gap up big. pattern doesnt fit at all

Wednesday, November 5, 2008 4:15:00 PM EST

Here is my original post there:

By Winace.
Seen a couple comments regarding minimal 25K requirement for trading and not being flagged as a day-trader. As long as it is a cash only account, you can make as many option transactions per day as your buying power allows. Options settle overnight, if the position is closed today, the buying power is available tomorrow. If you are trading a margin account, you have limitations or you will be flagged.

I agree with Atilla's outlook here. I have been short and adding to the IWM for some time, the roll has reversed, the Q's and IWM are the most extended ETFs and were running the strongest. IWM did not run strong today, and spent a little time in the red.


A couple points to watch for bounce on the way down are Q's 32.22 and IWM 51.30. These are my current short targets. Cut the target a little short, because they are also potential reversals, and you don;t want to be the last one out the door.



Be pissed at me if you like, but.....

A. I sell nothing, snake oil included.
B. At least keep what I say in the back of your mind

Exited IWM, Q's also reset.

IWM missed reset by a couple of cents. With the rise of the extension (22+%), I was not splitting hairs. Out at a 5 digit gain (decimals not included ;-)). Nothing appears to be extended to the downside, although, I need to examine the ETF charts.

Long ass trade, sheesh, original entry (long puts) on the IWM at 50.50, exit 51.50, lost 1.00 on the trade, yet walked away with 20% profit!

ETF Stength leadership.

Many of you may remember the day when I listed ETF extensions daily. If you recall, the more extended an ETF is in comparison to other ETFs, many arbitrage plays became available. The IWM has been WAY extended to the upside, it is currently setting records for all ETFs. It topped in the 22% range today, the runner up was QQQQ with an extension that hit around 15% today. This morning, the Q's and the IWM had relatively little strength in comparison to the SPY and DIA. The SPY and DIA are neutral and not limited to the upside or downside at this time. They are also not "obligated" to any current retracement. IWM and QQQQ are limited to the upside and obligated to retrace. The percentage of the ETF price itself, from the top of the run to reset, are around 5% on the Q's and 7% on the IWM. With IWM running the weakest, the Q's were able to gain some ground on them. the 2% spread that separated the two came with 0.5% today. Typically, these numbers will close the gap, and they will all drop in unison. The drop, or correction, should be here now, actually it is a wee bit overdue. The IWM being extended as far as they are limited its upward travel today, hence its comparison weakness. This does not mean IWM will be the leader in the correction though, since the DIA and SPY are neutral, they very well could keep pace with the IWM without restriction. Hopefully some people can make some sort of sense of this. Sometime I tend to confuse myself, especially when identifying numerical sequences and such!

Presidential Candidate

If you are in the voting line later today, keep this video in mind.

Before you vote view this video!

Gap and crap.......

My thoughts..... if you want to average down your puts, do it at the open. Looks to me as if we go straight down. Keep in mind, this is purely speculative TA (which I'm not playing), but it does reinforce my outlook for the day. Good luck, with election day, everyone's gonna need it!

Hectic trading day.......

This morning started with a miscommunication with one of my trading partners. The trade matrix, which was re-calibrated to cover up to a 28% extension listed tier one with a ton of contracts. This was our existing position! He mistakenly (lack of communication on my part) doubled our position at the open! So, we spent the day back-pedaling to free up capital for potential further extension, but, the good news, we did a good number in dropping our cost average!

Till tomorrow, good night!

Leaders, not followers........

The purpose of this blog, it to attract those who think for themselves, or outside of the box. Even those that want to learn this process are welcome. The objective is to stimulate the thinking process, not blindly follow a "perceived" trading god. I would much rather have 10 leaders, than 80,000 followers contributing. You notice I do not post charts or recommendations that say "buy here", "sell here". This is why (also, these areas are not static and always on the move).

In the "professional", not "speculative", world of trading/investing and various financial markets, there are people who make gains day in and day out with very few, if any, significant losses. Do you see these people posting on blogs???

Of course, no, you don't. Are there any market makers, in major financial trading instruments, blogging in their spare time? If so, is it for the greater good of the speculators? Nope, don't think so.

I am trying to help those to help themselves. Sheep follow sheep, in the end, they get slaughtered. Bulls, bears, all speculators, will get buried, eventually. That is the way this system is designed, to provide false hope and provide misconceptions of the market and how to trade it.

You want to follow people? Feel free to try, just remember, I told you so! People who do get slaughtered do not post follow up comments, that is why you do not see them, they just get frustrated, like they were before, and search for the next "trading god of the blog world".

Here are two of the hottest "trading gods", please feel free to tell them Winace sent ya!

Xtrends

Slope of Hope

Eventually, you'll be back!

On a side note: Don't go against the grain, all my posts at Slope of Hope and xTrends are removed or not allowed, apparently someone is covering something they do NOT want you to see........ Truth maybe????

Just had to add some comments from one of my fellow traders this evening:

k. Dude, if you have ever show your face at SOS, I will be bewildered. For a person with your talent to spend time over there is absolutely beyond me. Could you see a floor trader or market maker hanging out over there? Please. After that, I have grown more contemptuous of the blog world. I suppose it grows from my initial perception of the trading world. Ten years ago, the trading world seemed like the "professionals of all professionals." That was an outsider looking in. Now, that I am here, the small time traders are vicious towards one another............all sheep. Like you said, the traders making millions ain't posting. Good entertainment, but of no real value these blogs are.
[6:13:11 PM] XXX says: And after seeing what those guys wrote, I am thinking that posting a screenshot would be more "in your face" than anything else. As far as I am concerned, screw all of them. Back to my batcave. Don't need to prove anything to anybody. I realize you want to recruit a few more trainees. I understand that, but I have fellow traders, who were once very profitable, pounding on my door wanting to know what I am doing because they are getting killed. Telling them, "sorry guys. Closed for business."

Well said.............