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ES and the Great POMO Rally


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ES and the Great POMO Rally

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  #101 (permalink)
 Zondor 
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One of my favorite commentators:

Forecast 2011 - Gird Your Loins for Lower Living Standards - Clusterfuck Nation

It's tough to take issue with this:

..."What's left of the American economy is a web of financial rackets divorced from the production of real wealth, dependent on an elaborate computerized three-card-monte edifice of swindling. Those groans and creakings you hear are the agonies of this ediface swaying under its burden of lies, while underneath it the ground of history shifts...."


It's always good to keep up with what Charles Hugh Smith is thinking (Denninger picked up on this same topic, too)

https://www.oftwominds.com/blogjan11/why-financial-doom01-11.html

".....Here are the charts. Note how the speculative economy created the illusion of rising wealth for the bottom 90%, an illusion stripped away by the Default Economy.
In essence, the Financial Power Elites profited immensely from creating this illusory wealth which gave the bottom 90% the false sensation that their declining earnings and purchasing power were being offset by the "magic" of asset bubbles.
Then, when the bubble popped, the Financial Power Elites transferred the impaired assets to the taxpayers, a process which is still underway. The politicos of both parties are complicit; behind the simulacra of toothless "reforms," this process proceeds in myriad ways (Bank of America transferring toxic debt to Fannie/Freddie, etc.) Behind the smokescreen of conjuring a "wealth effect" to foster more consumption, the Fed's purchase of Treasuries (QE2) serves this transfer-of-debt-to-the-public process.
..."

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 Private Banker 
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Zondor View Post
One of my favorite commentators:

Forecast 2011 - Gird Your Loins for Lower Living Standards - Clusterfuck Nation

It's tough to take issue with this:

..."What's left of the American economy is a web of financial rackets divorced from the production of real wealth, dependent on an elaborate computerized three-card-monte edifice of swindling. Those groans and creakings you hear are the agonies of this ediface swaying under its burden of lies, while underneath it the ground of history shifts...."


It's always good to keep up with what Charles Hugh Smith is thinking (Denninger picked up on this same topic, too)

charles hugh smith-Why the World Is Financially Doomed in Four Charts

".....Here are the charts. Note how the speculative economy created the illusion of rising wealth for the bottom 90%, an illusion stripped away by the Default Economy.
In essence, the Financial Power Elites profited immensely from creating this illusory wealth which gave the bottom 90% the false sensation that their declining earnings and purchasing power were being offset by the "magic" of asset bubbles.
Then, when the bubble popped, the Financial Power Elites transferred the impaired assets to the taxpayers, a process which is still underway. The politicos of both parties are complicit; behind the simulacra of toothless "reforms," this process proceeds in myriad ways (Bank of America transferring toxic debt to Fannie/Freddie, etc.) Behind the smokescreen of conjuring a "wealth effect" to foster more consumption, the Fed's purchase of Treasuries (QE2) serves this transfer-of-debt-to-the-public process.
..."

Both great articles! The first one by James Howard Kuntsler was awesome. The way he put everything together was perfect and he touched on many topics that the MSM purposely avoid. The bit where he was talking about the guy in China wanting to borrow 60 million Yuan made me nearly fall out of my chair laughing!

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  #103 (permalink)
 aquarian1 
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We could see a 12-15pt correction within this uptrend tomorrow.

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  #104 (permalink)
 aquarian1 
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Zondor View Post

Then, when the bubble popped, the Financial Power Elites transferred the impaired assets to the taxpayers, a process which is still underway. The politicos of both parties are complicit; behind the simulacra of toothless "reforms," this process proceeds in myriad ways (Bank of America transferring toxic debt to Fannie/Freddie, etc.) Behind the smokescreen of conjuring a "wealth effect" to foster more consumption, the Fed's purchase of Treasuries (QE2) serves this transfer-of-debt-to-the-public process.
..."

It's hard to argue with the reality of this statement.

Where does that leave the individual?
Powerless with a meaningless (placebo) vote,
With political leaders who must know what we do yet continue to sell-out to corporate and power interest (politicians that are bought and paid for).

Write a letter?
Wave a placard?
("they" must just be laughing)

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 Private Banker 
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Happy New Year everyone! Just thought I would update the charts here live from la-la land. The ES has been happily skipping along the 10 day MA. MACD is a sleep at the wheel well above the zero line. Let's not forget the big run up today thanks to the banks continuous manipulation of their earnings statements reporting phantom income on notes that are in default and will never really receive the "interest due" as they are reporting. But I digress, from the words of Prince, "let's just party like it's 1999". But the hangover could be problematic...

Just announced today is the new POMO schedule which will goose equities for virtually every trading day this month except for January 17th. Let's forget that commodities are making new highs and our USD is getting slapped along side bonds. It's an interesting world we're living in. But remember, as painful as it may be, follow the trend. Even if you know it's being gamed...

Cheers,
PB

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 aquarian1 
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ok may be not today!

"
NEW YORK – The bleakest year in foreclosure crisis has only just begun.
Lenders are poised to take back more homes this year than any other since the U.S. housing meltdown began in 2006. About 5 million borrowers are at least two months behind on their mortgages and more will miss payments as they struggle with job losses and loans worth more than their home's value, industry analysts forecast.
"2011 is going to be the peak," said Rick Sharga, a senior vice president at foreclosure tracker RealtyTrac Inc.

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  #107 (permalink)
 Zondor 
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Dollar War in Detail | Michael Hudson

It's the USA vs everyone else, demanding that our trading partners commit financial suicide so that the banksters who own the government come out on top. Meanwhile here at home we can look forward to a 30% cut in living standards over the next few years. Great interview of Michael Hudson by Eric Janszen of iTulip.

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  #108 (permalink)
 Michael.H 
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Again, for people who are shorting this, i've included a "merged" profile of the past couple of weeks. This is a simple market profile chart... showing the volume distributions, helping you get a clearer picture of what the big money is doing....

You can clearly see the high volume bulges( high volume nodes) building in a stair-step fashion, showing price acceptance at each higher level. Its much cleaner than candle charts.

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  #109 (permalink)
 Big Mike 
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Can you post a chart with a date/time axis or price axis?

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 Michael.H 
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Thanks Zondor, i actually enjoyed reading that. And i believe he's right. We might be heading in a horrible path within the next few years when the "shit hits the fan".

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 Michael.H 
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This is the NQ

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 Private Banker 
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I think this is becoming down right scary. Ignore the stock market for a moment and take a look at what is affecting the real world. Food and energy prices are rallying like crazy which will be very problematic on just about everything we use on a daily basis.

As for stocks, there's absolutely no signal to go short here. The ES is being well supported every time it touches the 10 day MA. Wait for the market to tell you first. Furthermore, no one should ever take trade signals from a discussion forum. Follow your trading plan only. This thread is a discussion regarding the big picture and the potential outcomes of the market.

Have a great weekend!
PB

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 Zondor 
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".......Deregulation, desupervision, and de facto decriminalization (the three "des") created the criminogenic environment that drove the modern U.S. financial crises. The three "des" were essential to create the epidemics of accounting control fraud that hyper-inflated the bubble that triggered the Great Recession. "Job killing" is a combination of two factors -- increased job losses and decreased job creation. I'll focus solely on private sector jobs -- but the recession has also been devastating in terms of the loss of state and local governmental jobs...."



The Anti-Regulators Are the 'Job Killers' | CommonDreams.org

Don't you just love that phrase, criminogenic environment !

"...The federal regulators actively made the black hole more severe by preempting state efforts to protect the public from predatory and fraudulent loans. Greenspan and Bernanke are particularly culpable.... The Fed also had direct evidence of the frauds and abuses in nonprime lending because Congress mandated that the Fed hold hearings on predatory lending..."

BIPARTISAN CORRUPTION:

"..From roughly 1999 to the present, three administrations have displayed hostility to vigorous regulation and have appointed regulatory leaders largely on the basis of their opposition to vigorous regulation. When these administrations occasionally blundered and appointed, or inherited, regulatory leaders that believed in regulating, the administration attacked the regulators. In the financial regulatory sphere, recent examples include Arthur Levitt and William Donaldson (SEC), Brooksley Born (CFTC), and Sheila Bair (FDIC)..."

For anyone out there who can stand to call themselves "Republican" with a straight face:
"...Why is the new House leadership announcing its intent to give a free pass to the accounting control frauds, their political patrons, and the anti-regulators that created the criminogenic environment that hyper-inflated the financial bubble that triggered the Great Recession and caused such a loss of integrity?"

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 tomgilb 
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Here's another great economic tell-it-like-it-is site:

Market-Ticker - MarketTicker Forums

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 Private Banker 
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tomgilb View Post
Here's another great economic tell-it-like-it-is site:

Market-Ticker - MarketTicker Forums

I like Karl's commentary. He's straight to the point although he does sometimes go to great lengths with his posts. He's made some great calls in the past that have come to fruition.

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 Zondor 
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It's not that the value of everything (including stocks) is going up, it's that the value of the dollar is going down:

. Guest Post: Disinformation Fog Intensifies As Economic Turmoil Develops | zero hedge

"...China must shrink its forex and T-bill reserves in order to drive an appreciation of the Yuan able to cut off inflation concerns. Timothy Geithner claims this will be good for the U.S. Hu claims it would be bad for China. They are both liars. Ultimately, inflation will be used by China as the excuse to drop the dollar completely, which is what they have been planning to do since at least 2005. The private Federal Reserve and our government will announce victory and a “managed” devaluation of the dollar, only to have the treasury bubble snap and bury us in hyperinflation, which is what they wanted all along, for many reasons, but most importantly to allow for the birth of the IMF’s SDR as the new global currency (amply supported by the new improved Yuan)....'

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 Private Banker 
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It's not that the value of everything (including stocks) is going up, it's that the value of the dollar is going down:

. Guest Post: Disinformation Fog Intensifies As Economic Turmoil Develops | zero hedge

"...China must shrink its forex and T-bill reserves in order to drive an appreciation of the Yuan able to cut off inflation concerns. Timothy Geithner claims this will be good for the U.S. Hu claims it would be bad for China. They are both liars. Ultimately, inflation will be used by China as the excuse to drop the dollar completely, which is what they have been planning to do since at least 2005. The private Federal Reserve and our government will announce victory and a “managed” devaluation of the dollar, only to have the treasury bubble snap and bury us in hyperinflation, which is what they wanted all along, for many reasons, but most importantly to allow for the birth of the IMF’s SDR as the new global currency (amply supported by the new improved Yuan)....'

Excellent article and validates everything I've been pounding the table on. This is becoming scary in so many ways.

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  #118 (permalink)
 aquarian1 
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Potential signs of a top may be forming for the ES.
Breaking 1271 on a close puts the uptrend in danger of being broken.
Closing below 1259 paves the way for a retracement to at least the 1198 level.

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 Private Banker 
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aquarian1 View Post
Potential signs of a top may be forming for the ES.
Breaking 1271 on a close puts the uptrend in danger of being broken.
Closing below 1259 paves the way for a retracement to at least the 1198 level.

I guess I look at charts differently but a break of 1271 IMO, appears to be nothing more than a pullback. That's barely below the 10 day MA which is a major average CTA's observe. A close below the 30 day MA would get me a little more excited. But don't get me wrong, this market (equities) is as real as Santa Claus. I've scaled out of most of my long positions in anticipation for a reversal... Just waiting for the market to tell us when. Who knows, maybe we get another flash crash... Maybe no tail this time... Stay at the lows in a limit down...

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 Private Banker 
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In a shocking turn of events, equities actually sold off today. It's been so long since we've seen such a day. Most notably, TF had a very interesting day reaching psychological levels of 2007 right when the market started to melt down. This is a level where people are starting to realize they've "made their money back" and decide to get out. This could just be a long over due pullback in the ever going Fed pump of course. TF is sitting right on the 30 day MA. If we get a close below this, we could potentially see some fireworks and truly a sign of capitulation which will bleed into other equity markets. Stay nimble.

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 aquarian1 
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aquarian1 View Post
Potential signs of a top may be forming for the ES.
Breaking 1271 on a close puts the uptrend in danger of being broken.
Closing below 1259 paves the way for a retracement to at least the 1198 level.


Private Banker View Post
I guess I look at charts differently but a break of 1271 IMO, appears to be nothing more than a pullback. That's barely below the 10 day MA which is a major average CTA's observe. A close below the 30 day MA would get me a little more excited. But don't get me wrong, this market (equities) is as real as Santa Claus. I've scaled out of most of my long positions in anticipation for a reversal... Just waiting for the market to tell us when. Who knows, maybe we get another flash crash... Maybe no tail this time... Stay at the lows in a limit down...

  1. Closes 1275.75 is not yet less than 1275 and I wrote "puts the uptrend in danger of being broken."not that was broken.
  2. We need a close below 1258 (I'm changing it from1259) to confirm a break. Until a break is confirmed it is a pullback
all the best !

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 Private Banker 
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Well, we've had 2 consecutive days of selling with Friday being somewhat mixed with it opening higher and then selling off to about the 61.8% level from the globex low.

The market has a lot of areas of support to get through to really change this trend with the most significant being the 1234 - 1237 area which is the 50 day MA and a 50% retracement zone from the Nov/Dec area. Volume is definitely increasing with the selling that has taken place. This could be traders covering their positions now that we've reached areas where a lot of people have made most of their money back from the sell off in '08. Or maybe this is real and people are finally realizing this rally is nothing more than POMO's influence but it's tough to fight the Fed. The real sell off is hidden to the average investor. It's taking place in the USD. This is looking really bad.

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 Private Banker 
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The Fed released it's FOMC minutes today with not one dissent. What really blew me away in the minutes is their dismissal of commodity prices. They are under the impression that long term inflation will be rather stable or subdued. Additionally, they plan to continue to buy (monetize) $600 billion of longer term treasuries by the second quarter of this year. What they really mean is they simply cannot stop monetizing debt because they are stuck in a box...

In more important news, the ES made a new high today (1296.75 as I write) and will no doubt keep on chugging along the 10 day MA.

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 Michael.H 
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First pic is unmerged chart of the NAZ..
Second is merged with overlapping value areas, making the picture cleaner....

You can see rejection near the lows, and volume accepting higher prices. We're taking the highs out as I type this, so set your targets to take out the stops above the last swing highs... Newbies like to use stops right above a previous swing, nice place to take profits...

I want to note.. Im not a hardcore market profile guy. I just use it as a visual aid as to where volume is taking place.
Thats it.

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 Private Banker 
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Wow! What a morning! From what I see, this last little run up appears to be a pump and dump. Market appeared to have topped out 1/18-1/19, sold off to the 21 day MA got support, got goosed back up and there is some serious profit taking today. If I recall correctly, the flash crash occurred on a day when Greece was rioting. Today, we have rioting in Northern Africa. 1286 is half way back for the day which is also where the VWAP is sitting, I wonder if we'll get there...

The NQ appears to be the hardest hit so far today down nearly 2.5% at one point. It'll be interesting to see how the day ends. Meanwhile, Oil has ripped out higher. One of the biggest up moves in a while. Probably attributed to the rioting in Northern Africa as well. Either way, it was an extremely profitable day for intra-day trading.

Cheers,
PB

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 Private Banker 
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ES appears to be responding to a 50% retracement from the 1299.50 level. I would like to see how price responds at the 50 Day MA for confirmation of a true trend change. Meanwhile, commodities are tearing through the roof.

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 Private Banker 
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Well, it looks as though there is no change for now. In fact, there is an extension long that was bought up at around 1262 and is ripping higher via the Fed. Meanwhile, the USD has getting back down to the previous lows. The gaming continues...

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 Private Banker 
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This will be the last update for a while until something significant happens. I just wanted to point out what is occurring in the credit markets as equities continue it's dog and pony show.

I feel the credit markets are reflecting something severe. The current yield curve suggests that this isn't the typical economic recovery where investors are moving out of safety to risk assets and feel that something big is being priced in as rates continue to climb. It appears that once again, Bernanke has got it wrong. He didn't see the credit crisis, housing collapse or recession. Why would anyone believe that his continuous QE will work?

Cheers,
PB

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Volume is definitely increasing with the selling that has taken place. This could be traders covering their positions now that we've reached areas where a lot of people have made most of their money back from the sell off in '08. Or maybe this is real and people are finally realizing this rally is nothing more than POMO's influence but it's tough to fight the Fed.

We have NFP tomorrow morning and the ES has banged its head up against 1305.50/1306 for three days now. I have seen this pattern before and what happened last time was the ES blew thru the resistance level as soon as the NFP data was released, ran all the stops and then made its real move once the cash mkt opened an hour later. Lets see what happens tomorrow...

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 Private Banker 
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Tartimo View Post
We have NFP tomorrow morning and the ES has banged its head up against 1305.50/1306 for three days now. I have seen this pattern before and what happened last time was the ES blew thru the resistance level as soon as the NFP data was released, ran all the stops and then made its real move once the cash mkt opened an hour later. Lets see what happens tomorrow...

Based on what is occurring with the continuous POMO/QE and the threat of another round of QE after the current, I wouldn't doubt for a second the ES zombie will continue to march up along the 10 day MA blasting through 1305.50 - 60. It hit the 10 day this morning and immediately got support and bounced. I've traded the ES for a long time and am truly amazed at what is happening. But in any event, one must continue to follow the trend, at least from a swing trade perspective.

The problem with QE is there are some unforeseen side effects on Bernanke's part. Inflation in food and energy, depreciating USD and mid/long term rates climbing higher. The best part is Bernanke doesn't get it because it doesn't fit into his model. Lol!

Cheers,
PB

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 Michael.H 
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Even though i don't post that much anymore, i still watch this thread. I want to see who else is shorting this, and how bearish people are.
Very interesting.

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 Private Banker 
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Michael.H View Post
Even though i don't post that much anymore, i still watch this thread. I want to see who else is shorting this, and how bearish people are.
Very interesting.

Hopefully no one is swing short yet. There was some profit taking that occurred but no confirmation at least for my liking. There's still strength in this move via the Fed and the MACD is still well above the zero line.

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 Private Banker 
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Well, I said I would update this again when something significant happens. As we all know, the great POMO rally continues so nothing exciting there however, the bond/notes market continues to show some serious issues in the face of Bernanke. Specifically the 2's, 5's and 10's are starting to sell off at an alarming rate. I know this thread is more specific to the ES but I find it rather interesting to see what's occurring around the Fed's policy to inflate equities at all costs.

As I mentioned before regarding the ES from a swing trade perspective, long is still the trend but as always, remain nimble. The VIX hit a fresh low today of 14.86 which is becoming comical.

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 zikonc 
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Somewhat funny to read The Final Piece of the Puzzle

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 Private Banker 
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zikonc View Post
Somewhat funny to read The Final Piece of the Puzzle

The Mom indicator! Lol!

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 Private Banker 
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Zombie Equities are continuing to march along the 10 day MA with an ever shrinking range and dismal volume. Obviously there is no signal to go short as there is an endless bid beneath the market via the Fed's liquidity injections by way of the PD's. I would love to say that traditionally in times of quiet, the market is getting ready to change trend but, I feel when something is being manipulated, all traditional indicators are void. Never the less, this is truly astounding to observe.

Meanwhile, the USD continues to struggle...

Cheers,
PB

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 kbit 
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Zombie Equities are continuing to march along the 10 day MA with an ever shrinking range and dismal volume. Obviously there is no signal to go short as there is an endless bid beneath the market via the Fed's liquidity injections by way of the PD's. I would love to say that traditionally in times of quiet, the market is getting ready to change trend but, I feel when something is being manipulated, all traditional indicators are void. Never the less, this is truly astounding to observe.

Meanwhile, the USD continues to struggle...

Cheers,
PB

your exactly right...this is barely tradeable garbage lately

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 tigertrader 
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Why Isn't Wall Street in Jail? | Rolling Stone Politics

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 Private Banker 
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Great article! You know at some point, there will be another blow up. There's no way corruption can continue on forever. Banks are right back to where they left off before the crash with regards to the use of leverage. Mish put together a good piece about how banks are now looking to lend to municipalities in lieu of bond offerings. It's unbelievable...

We need to go back to the old days where banks didn't have the power that they do now. But that's another conversation entirely.

Cheers,
PB

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 Private Banker 
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elof View Post
on the weekly chart.... we did 5 waves up from 666 devil price

... then came the flash crash

.... i wonder what kind of flash crash we will get once the next 5 waves are complete

Interesting point. Regarding the flash crash day, I got a swing short signal the day before and was absolutely amazed of what went down the next day. The bid/ask spread at the bottom of the crash was something that I haven't seen in a long time.

The current state of the equities market is disastrous in that even though equities continue it's Zombie march up, the rug is being pulled out beneath USD denominated investors without much mention. Take a look at the USD, you will see that selling has resumed at the current retracement and the MACD appears to be getting rejected near the zero line. A very bearish signal in my opinion but will need to continue to make new lows. If it gets support again back down near 77, we could see a bullish divergence and see the USD spike higher. It's at a critical point right now.

But it appears that the Fed's new mandate to inflate stocks will continue on as they are providing the PD's with endless cash to bid up any pullback and squashing the daily range. At this point the market is essentially moving in a straight line. This is a truly broken market and starting to look more and more like Zimbabwe... The crazy thing is that Bernanke has painted himself into a corner. He simply can't stop the printing press or everything will come crashing down. I'm talking limit down for days.

Cheers,
PB

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 Private Banker 
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elof View Post
when you say this is a truly broken market....

do you mean to say this is a raging bull market ?

No, I've been in real bull markets when we would have huge range, huge accumulation/volume up days. This is something very suspect as the range and volume are very dismal.

By me saying the market is "broken" is a bit of an exaggeration with tongue in cheek .

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 tomgilb 
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No, I've been in real bull markets when we would have huge range, huge accumulation/volume up days. This is something very suspect as the range and volume are very dismal.

By me saying the market is "broken" is a bit of an exaggeration with tongue in cheek .

PB, I don't think you're exaggerating all that much when you say the market is broken. It is completely disconnected from economic reality. It's no longer an open market; it's a contrived market based on an IV drip of valueless paper dollars, hence the consistent incline, the small ranges, and the low volume. Dr Bernanke is the economic equivalent of Dr Kevorkian.

So, "broken" works for me.

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 Private Banker 
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tomgilb View Post
PB, I don't think you're exaggerating all that much when you say the market is broken. It is completely disconnected from economic reality. It's no longer an open market; it's a contrived market based on an IV drip of valueless paper dollars, hence the consistent incline, the small ranges, and the low volume. Dr Bernanke is the economic equivalent of Dr Kevorkian.

So, "broken" works for me.

Thank you! That's a good analogy! A lot of what I'm referring to here is obviously big picture stuff but I find it very interesting to see what's going on. To add to the big picture perspective, I've attached a few monthly charts for analysis.

I've included the ES, USD, 10 Yr. and 30 Yr. All are offering some interesting insight that is contrary to what the MSM is trying to convey to the general public. I'm no conspiracy theorist or anything, I just like to state the facts I guess.

- The ES still appears to be within a bearish divergence but if it gets up to or above the double top all bets are off obviously.

- The USD is looking to be in a precarious situation and could really head south from here. I'm seeing a small double top coupled with a bearish divergence on the MACD with the averages dropping below the zero line. This is technically danger zone.

- Both the 10 Yr. and 30 Yr. are looking to both just have had bearish divergences and could be well on there way south. Maybe even breaking par.

- I've also included multiple other commodities charts as I believe a majority of the spikes are being heavily influenced by the Fed's QE. As you will see, these spikes are going to hurt and will be remembered for years and years. It's all for the sake of inflating the stock market of course .

As always these are just big picture observations and shouldn't be construed as trade signals, etc. But I wanted to bring this forward as we are truly in interesting times.

Cheers,
PB

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 jonc 
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This is one great thread I had been following on futures.io (formerly BMT).

I'm curious, Private banker, are you waiting for the right signals to short the market?

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 Private Banker 
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elof View Post
show me a market above the monthly 20 sma

and i will show you a probable bull market.... on daily and weekly time frames

-----------------------

show me traders endlessly talking about economic conundrums .... and i will show you the bears that fuel said bull market

--------------------------------

in this BULL market.... show me price below daily 20sma ... and i will show you a chance to swing long

I'm not quite sure what your point is here as one liners are hard to understand and are not descriptive enough. Are you trying to say this is a true bull market? From looking at a pure price appreciation perspective, the market has been "bullish" since Sept 1st 2010. If you stayed long from May of last year through August thinking we were still in a "bull market", than I would have to laugh as there were some great opportunities on the short side and if your trading futures, you would have gotten annihilated. From a fundamental perspective, the market is only at these levels because of the Fed and there's clear evidence of that by their daily POMO's hence the purpose for me starting this thread and it's title.

I think it's important that you understand where I'm coming from when reading this thread. It is clear that there is some intervention taking place in the equity markets which is why I find it interesting enough to write about it. Sure other markets could be getting goosed but it's not as obvious and you don't have Bernanke admitting it outright as he has with equities. I definitely welcome other points of view, I think it's great to hear how other people are interpreting the markets. But for the benefit of everyone reading this, please try to provide a bit more description as to how you are arriving with your thoughts.

By the way, and I've said this before, I'm neither Bull nor Bear, I'm a Trend Follower. I've been doing this for a long time and have made great money doing so managing money for clients (as a Portfolio Manager) and my own money. From a trading perspective, I've been swing long since Sept. and have wound out of most of my positions which were in ES, NQ and TF on the equities side.

Out of curiosity, you proclaimed that if I were to show you a monthly chart with price below the the 20 SMA, you could show me a swing long. So I did (attached). I'm very interested and looking to learn.

Cheers,
PB

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 Private Banker 
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jonc View Post
This is one great thread I had been following on futures.io (formerly BMT).

I'm curious, Private banker, are you waiting for the right signals to short the market?

Thanks! Yes I am however, there hasn't been anything as of late. We almost had a break down on the ES on Nov. 30th but the following day got bought up off the 50 day MA. I don't expect to see anything soon but you never know.

Best,
PB

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 Private Banker 
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Well, today was an interesting day for the ES and equities in general. There was a nice gap fill in the morning followed by a retracement/run up to the 61.8% level from the high of 1343. From that point, it was a steady sell off throughout the remainder of the day with a close at the lows. As of now, the market is sitting right on it's 20 day MA. Not sure if this was an actual trend changer or simply another day of profit taking. I am seeing a nice divergence on the RSI as it has now fallen out of an overbought level as a result of today's selling.

The next few days should be interesting to watch and see where price will go. Can the Fed and PD's keep this train moving along at 2 miles per hour or have they finally lost control? I won't get excited until we see a close below the 50 day MA and see the MACD drop below the zero line. It's interesting to note that today and Jan 28th are the only days since Dec 1st 2010 that failed to attract a late afternoon ramp job.

If you're long, stay nimble but certainly no signs to go short just yet.

Cheers,
PB

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 jonc 
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PB, are there any circumstances you might go long?

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 Private Banker 
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jonc View Post
PB, are there any circumstances you might go long?

I'm still holding a small long position as I've wound out of most of it. I don't plan to add anything to it as I've made plenty on the trade and feel the risk/reward is too high at these levels. I'm happy with where I'm at but am also cautious for a break down in trend in the next few days. I'm afraid we could see a massive sell off far beyond yesterday's if this catches steam. This market is weighing down hard on the 20 day MA. We'll have to see how it goes.

This could get very interesting. I have a hunch that there's going to be huge pressure on Bernanke to pull his liquidity scam. If that happens, all bets are off. We're going way down.

Stay nimble!
PB

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 Private Banker 
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Today saw another day of steady selling before finding some support around 1297 area. There was then an attempt to bounce which brought the market back to the 61.8% area from globex high's before losing steam again. Part of that may have been fueled by Plosser's polyannish comments regarding the economy. But the market ended up fading back down and closed below it's VWAP.

Going forward, I would like to see how the market reacts to the 50 day MA still before making a change in position.

Best,
PB

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 Private Banker 
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Day 3 of selling on the ES has resulted in taking out all of February's gains so far. We haven't come into the 50 day MA yet but came close two times. At least there was an afternoon ramp up because for a while there, I was afraid the Fed may have lost control .

Still no change yet as we are above the 50 day MA and MACD is still well above the zero line. If it drops below 5, things could really start to get interesting though. I can also see if this is a breakdown, the market could chop around for a while until we see some MA's cross over and start acting as resistance. It's all too soon to tell though.

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 Silvester17 
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Private Banker View Post
Day 3 of selling on the ES has resulted in taking out all of February's gains so far. We haven't come into the 50 day MA yet but came close two times. At least there was an afternoon ramp up because for a while there, I was afraid the Fed may have lost control .

Still no change yet as we are above the 50 day MA and MACD is still well above the zero line. If it drops below 5, things could really start to get interesting though. I can also see if this is a breakdown, the market could chop around for a while until we see some MA's cross over and start acting as resistance. It's all too soon to tell though.

I think you might be right on a technical point of view. but if I look at fundamentals, the value of the market is at best just slightly overvalued. of course there are some concerns like usd, dept etc. but one factor we should not forget. the companies have a lot of cash. and if there is a breakdown, what smarter could they do than buying their own shares back? that would make the valuation even more attractive. nothing more important than shareholder value.

the selling we're seeing is not fundamental, it's simple fear imo. so the next few days will be interesting. will there be more selling or are we going to see some bargain hunters?

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 Private Banker 
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As I figured, yesterday's bounce appears to have exhausted all of the selling (at least for now). ES has now retraced half way back from it's top and is at a decision point zone. Will we see renewed selling next week or are we going to continue marching along at 1 -2 miles per hour back up along the 10 day MA?

I did add a long term trend line on the MACD just to see market reaction. If you notice that back in Nov '10, the market almost broke down and the MACD bounced off of the trendline. When looking at it now, it has completely blown through it. I'm not saying it's a change in trend entirely but just an interesting thing to watch going forward.

Next week will be interesting for sure.

Cheers,
PB

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 tigertrader 
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elof View Post
predictions based on fundamentals has nothing to do with trading.

Markets are dynamic, they are regularly changing, based upon shifts in interest rates, currencies, macro- economic conditions, commodity prices, sentiment, and institutional and retail participation. In the final analysis though, the laws of supply and demand will eventually determine what is fair value.

So, I have to disagree with you, because fundamentals do indeed have something to do with predicting what is going to happen with the markets. However predictions, in of themselves, have nothing to do with trading. A trader does not predict the market, in so much as he observes and identifies what is doing and then reacts accordingly. This means keeping an open mind to market action and being ready to switch from long to short as conditions dictate.

So one must keep an open mind to the fact that, stocks have recovered, but the economy has not. And that stocks have rallied 106%, and retail money is finally flowing back into the market.

While the market did hold last months high, the monthly R1, and the bottom of the Bollinger Bands on the ES daily, GDP was revised for the worse, and the responsibility is now on the bulls to prove they can still shrug off bad news. Today's rally does suggest that we will test the 1340 level, however this may only serve to relieve the oversold condition, shake out the shorts, and trap some new bulls in the process.

Anyone with half a brain realizes that the only reason we are trading at current levels is because of the melt-up supported by the liquidity provided by QE2. However, the last 2 weeks, banks stashed $122MM at the Fed. Total POMO Treasury purchases were consequently only $48 billion. This resulted in a net liquidity drain of $24 billion. This is a trend that has continued for 6 weeks now.

Considering that entire rally was fueled by the POMO purchases that were made possible by the Fed's creation of liquidity, what happens when that liquidity disappears or the PDs decide not to buy anymore high beta tech stocks and stock index ETFs?

BTW: I am not predicting anything...just making an observation.

http://finance.yahoo.com/tech-ticker/bob-prechter-we%27re-still-in-a-massive-bear-market-and-stocks-will-crash-to-new-lows-535963.html?tickers=^dji,^gspc,spy,^ixic,qqqq,gld

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 Big Mike 
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I agree that if we don't have QE3 and QE4, then we're in for a bad, bad ride down. We've pretty much painted ourselves into a corner where we have to do something next, more money to PD's to buy everything in sight.

So if we commit to QE3 and QE4, and try to taper it off a bit each time, I think it is still bad news because the dollar is so devalued that there will at some point be a breaking point.

But the fact remains -- as traders -- trade what you see. Yes, I see the economy is in the gutter. But I am not trading "the economy", I am trading a specific set of instruments. It does not matter "why", it only matters "what". If the S&P 500 is making new highs, you can't short "the economy is going to take a nose dive again". You should be long until the the S&P is no longer making new highs. Maybe you call it a cautious long, but you definitely don't call it a short

Mike

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 tigertrader 
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Big Mike View Post
I agree that if we don't have QE3 and QE4, then we're in for a bad, bad ride down. We've pretty much painted ourselves into a corner where we have to do something next, more money to PD's to buy everything in sight.

So if we commit to QE3 and QE4, and try to taper it off a bit each time, I think it is still bad news because the dollar is so devalued that there will at some point be a breaking point.

But the fact remains -- as traders -- trade what you see. Yes, I see the economy is in the gutter. But I am not trading "the economy", I am trading a specific set of instruments. It does not matter "why", it only matters "what". If the S&P 500 is making new highs, you can't short "the economy is going to take a nose dive again". You should be long until the the S&P is no longer making new highs. Maybe you call it a cautious long, but you definitely don't call it a short

Mike


I agree with, both your thoughts on the market and on trading methodology, but disagree with your approach, which I find can be somewhat limiting.

True we are technically still in the midst of a very strong cyclical rally, and the probability of the market trading higher after Friday's action is relatively high - let's say 70-80%.

So in the absence of any more bad news, bullish momentum intact, the odds are in favor of the trend continuing.

On the other hand, if there is more negative geo-political news, the potential move to the downside could be dramatic, while the potential move to the upside seems very limited after having already rallied over 100%.

The most probable outcome is the market goes up, but the expected value is quite negative, because the outcomes are asymmetric. The bullish outcome may have a high frequency, but the expected value is negative.


Market goes up - 70% probability +3% outcome +2.1% expected value
Market goes down - 30% probability -25% outcome -7.5% expected value
Total - -5.4% total expected value


This not to say, that in anticipation of price exhaustion in the SPX, and the potential for another collapse, I am going to trade the market solely from the short side, or load up on a short position. But to take advantage of my perceived negative expectancy, I will put on a relevant options position, as a speculative adjunct to my "normal" intraday trading methodology. If I buy premium, my risk is defined, and in a low volatility environment, my opportunity for profit has increased beyond the mere directional play of the underlying. If the trade works I stand the very real chance of making 20X-30X and if it doesn't, I lose the 1% or 2% that I risked when entering the speculative trade. Assuming a normal probability distribution, this strategy should work 20% of the time. However, It's not the frequency of the correctness that matters, but the magnitude of the correctness that matters.

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 Private Banker 
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Interesting day for equities. ES chopped around before making a gap fill followed by an afternoon ramp. Definitely no surprise by that however. It is clearly evident that the only concern by the Fed is to keep propping up the stock market. Meanwhile, the USD has broken below support and could be in big trouble now.

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 tigertrader 
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Interesting day for equities. ES chopped around before making a gap fill followed by an afternoon ramp. Definitely no surprise by that however. It is clearly evident that the only concern by the Fed is to keep propping up the stock market. Meanwhile, the USD has broken below support and could be in big trouble now.


Going into today's trade in the ES there was an 80% chance of a range day. Market opened higher between the R1 and R2 leaving us with an only 30% chance the market would test the R3. Taking this into account along with the bearish seasonality associated with the last day of the month; the sell-off made sense. Conversely, strong bullish seasonality associated with the first day of the month, meant the market would probably rally late today, or in the evening.

Of note is the continued positive correlation with treasuries, and as you noted the US Dollar Index, which is close to making new lows. ISM tomorrow, Humphrey-Hawkins bullshit fest next, Unenjoyment on Friday, and of course the ever present chance that the other sandal will drop in the Middle East/ North Africa.

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 Private Banker 
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tigertrader View Post

Going into today's trade in the ES there was an 80% chance of a range day. Market opened higher between the R1 and R2 leaving us with an only 30% chance the market would test the R3. Taking this into account along with the bearish seasonality associated with the last day of the month; the sell-off made sense. Conversely, strong bullish seasonality associated with the first day of the month, meant the market would probably rally late today, or in the evening.

Of note is the continued positive correlation with treasuries, and as you noted the US Dollar Index, which is close to making new lows. ISM tomorrow, Humphrey-Hawkins bullshit fest next, Unenjoyment on Friday, and of course the ever present chance that the other sandal will drop in the Middle East/ North Africa.

Well said! I agree with those thoughts. This should be an exciting week. "The Bernank" will be in the hot seat tomorrow and Wednesday. There was a great post on Zerohedge that summarizes the POMO thus far.

Cheers,
PB

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 tigertrader 
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1313.00 (ESH) is a critical area....must hold for the bulls to remain in control, otherwise it's lights out!

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 Private Banker 
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Well, what another interesting day. This looks like a potential reversal taking place in equities with another day of continuous selling. It appears equity investors might finally be realizing just how wrong "The Bernank" is after all.

What we are witnessing in today's markets will be discussed for years and years to come as one of the great blunders in central planning. The million dollar question is, how much longer can Bernanke take the heat? He's been proven time and time again wrong on all of his beliefs. How much more can not just the US but the world take from him? I can't wait to watch this all unfold.

Today we saw the USD make a new low of 76.765 before a small bounce. Meanwhile, precious metals and other commodities ripped way higher. All of this in the face of Bernanke's statement of subdued inflation? Come on!

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 Private Banker 
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1313.00 (ESH) is a critical area....must hold for the bulls to remain in control, otherwise it's lights out!

And indeed, it did! Crazy day all around!

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 Zondor 
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All times on this chart are Pacific. CL panel 1, YM panel 2, ZN panel 3.

At around 8AM it became apparent that oil was seriously going up, and the Dow started down.

At around 9AM oil stopped going up, Dow retraced up, and ZN began a move down.

Plenty of good trades here.

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 jonc 
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This market is amazing, it just keep going up.

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 Big Mike 
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jonc View Post
This market is amazing, it just keep going up.

Are you long?



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 Michael.H 
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Zondor View Post
All times on this chart are Pacific. CL panel 1, YM panel 2, ZN panel 3.

At around 8AM it became apparent that oil was seriously going up, and the Dow started down.

At around 9AM oil stopped going up, Dow retraced up, and ZN began a move down.

Plenty of good trades here.

Correlations come and go. Don't waste too much time on that.

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I made these predictions on Investor Hub at the end of last year. I still think my SPX prognostication will come to fruition.


tigertrader
Share Thursday, December 31, 2009 11:56:34 AM Re: LongCYRX post# 4930

Post # of 7249


End of the Year, End of the Decade

In keeping with the time honored tradition, I offer these year-end predictions, for discussion...

Looking at the 15 year chart of the SPX, one can't ignore the massive double top, with the first top formed in March 2000@1553, and the second top, formed in October 2007@1576. We are STILL firmly entrenched in a secular bear market that began with the formation of the first top in 2000, and could conceivably last for up to 5 more years. My prediction is the that the current bear market rally in the SPX will top out in 2010 around the 1250 area. The stronger the economic numbers released, the sooner the top. Conversely, the weaker the economic numbers, the later the top. Whatever the time frame, the market will take out the March 2009 lows.

Cryoport will successfully commercialize their product,and capture market share, although the road to profitability, will be an arduous one. The stock price will move higher, but will not follow the linear path, that everybody hopes for. This will be the case,of course, until the shit hits the fan again.

Dominant themes will be emerging markets, gold, and basic materials & commodities.

Dollar will rally, and then collapse. Bonds will make new lows, yield curve will steepen, and the banks will reap the benefits.

Dominant trends in VC/Private Equity will be Clean/Green Tech and Cloud Technology.

Bears will win the Super Bowl in 2010, Lovie Smith will be the next Mayor of Chicago, and the Cubs will win the World Series 4-0.

I'm still waiting to see who else is still short. I give tigertrader credit for sticking his neck out. But you have to remember, what he said was nothing but a "prediction". You won't be profitable trading that.
I hope you guys are understanding how the markets work now, and how to trade it. Stop listening to the news.

There will always be something wrong in our economy that we need to fix.
The last bull market, all they talked about was social security and how its gonna bankrupt our economy. Well, we managed to do that in 1 year, and markets are still going up. I really hope nobody was short during that whole time.

Watch volume, watch how price responds to volume. Check under the hood of the market( market leading stocks like appl, google.. etc and how they react). Watch the different sectors. yes its important, and they all matter.

When you realize that the markets are more complex and diverse than a bunch of moving averages crossing each other with oscillators, then trading is no longer impossible. Everything should be examined in context.

When the markets changes trends and goes down, i will be here telling you guys to go short, while everybody will probably buy because stocks are just too cheap....lol Can't tell you how many times i've heard that when the markets were crashing.

I've mentioned in another post that i will be reducing my time in this forum, but i still do check in once in a while, and this thread is sort of a personal hobby of mine. I like watching how people react( mostly in frustration if you read this thread, since the market is not agreeing with their personal opinions, which is why most lose money).
Keep up the posts.

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 jonc 
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Big Mike View Post
Are you long?



Mike

No Mike, not the indices

But I'm long precious metal and energy stocks.

I do intend to get in on the indices if there is a substantial correction. It seems never to come.

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 tigertrader 
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Michael.H View Post
I'm still waiting to see who else is still short. I give tigertrader credit for sticking his neck out. But you have to remember, what he said was nothing but a "prediction". You won't be profitable trading that.
I hope you guys are understanding how the markets work now, and how to trade it. Stop listening to the news.

There will always be something wrong in our economy that we need to fix.
The last bull market, all they talked about was social security and how its gonna bankrupt our economy. Well, we managed to do that in 1 year, and markets are still going up. I really hope nobody was short during that whole time.

Watch volume, watch how price responds to volume. Check under the hood of the market( market leading stocks like appl, google.. etc and how they react). Watch the different sectors. yes its important, and they all matter.

When you realize that the markets are more complex and diverse than a bunch of moving averages crossing each other with oscillators, then trading is no longer impossible. Everything should be examined in context.

When the markets changes trends and goes down, i will be here telling you guys to go short, while everybody will probably buy because stocks are just too cheap....lol Can't tell you how many times i've heard that when the markets were crashing.

I've mentioned in another post that i will be reducing my time in this forum, but i still do check in once in a while, and this thread is sort of a personal hobby of mine. I like watching how people react( mostly in frustration if you read this thread, since the market is not agreeing with their personal opinions, which is why most lose money).
Keep up the posts.

Of course, you conveniently neglected to mention that I was spot on about the market rallying from 1115 to 1250 and just about everything else in that post - very nice curve fitting. Granted that's not the point, but ironically...you are totally missing my point...see my post #163 on this thread.

BTW: I'm going to buy more puts, post unemployment volatility drain - bumping my position up to 5% of my risk capital, in spite of the fact you haven't told "us guys" it's O.K. to go short.





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 MXASJ 
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tigertrader View Post
BTW: I'm going to buy more puts, post unemployment volatility drain - bumping my position up to 5% of my risk capital, in spite of the fact you haven't told "us guys" it's O.K. to go short yet.

Tiger you are not playing delta neutral/vol, right? So the puts are independent bets or are they a hedge?

It is not a trick question. I've been buying/writing stuff as well but the distinction between directional play and hedge has become blurred. That is not necessarily a good thing for me as I've been taught not to make money on hedges.

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 tigertrader 
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MXASJ View Post
Tiger you are not playing delta neutral/vol, right? So the puts are independent bets or are they a hedge?

It is not a trick question. I've been buying/writing stuff as well but the distinction between directional play and hedge has become blurred. That is not necessarily a good thing for me as I've been taught not to make money on hedges.


Purely intended as a directional play. I've been putting on these kinds of positions in the beans and bonds for 30 years. Most of the time they don't work, for reasons you are well aware of, BUT when they do work, they work big. I like being in the market (in this manner), because it's the best way to catch tail moves. Contrary, to what a lot of traders believe, good things can happen when you are in the market.

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 Silvester17 
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tigertrader,

first thank you very much for posting. needless to say that most here can't keep up with your knowledge.

btw I really like your buying puts strategy. I'm doing this sometimes too (not saying I'm on your level). looking for low premiums, and if you're lucky and volatility increases, you can make money even if the underlying doesn't move much. and if it moves, it's like a home run. but for me it's strictly gambling, because there will be more losers. but doesn't have anything to do with my view of the market.

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 tigertrader 
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Silvester17 View Post
tigertrader,

first thank you very much for posting. needless to say that most here can't keep up with your knowledge.

btw I really like your buying puts strategy. I'm doing this sometimes too (not saying I'm on your level). looking for low premiums, and if you're lucky and volatility increases, you can make money even if the underlying doesn't move much. and if it moves, it's like a home run. but for me it's strictly gambling, because there will be more losers. but doesn't have anything to do with my view of the market.


It's not gambling it's trading, albeit it is speculative in nature. And it's probably counterintuitive to most people because they are a lot happier when they are right frequently. But being right frequently is not necessarily consistent with long term success. The percentage of winning trades in any given sample, does not determine the samples profitability, it is
the dollar change in the sample.. A few big winning trades will often have a much greater impact on the samples performance than the percentage of winners in the sample.

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tigertrader View Post
It's not gambling it's trading, albeit it is speculative in nature. And it's probably counterintuitive to most people because they are a lot happier when they are right frequently. But being right frequently is not necessarily consistent with long term success. The percentage of winning trades in any given sample, does not determine the samples profitability, it is the dollar change in the sample.. A few big winning trades will often have a much greater impact on the samples performance than the percentage of winners in the sample.

+1

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 tigertrader 
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This morning’s Employment Situation (unemployment rate dips to 8.9%) was again better than forecasted looking at the household survey, and slightly below expectations from the payrolls number (January and December revised for the better). However, after the weak shorts were driven out yesterday, and undoubtedly some new longs were trapped, ES futures made a lower high and sold off 23.25 points from the RTH - R1 @1334.5 and closed in the lower half of the days trading range. The fact that the market failed to rally on a positive number and bullish seasonality, along with CL continuing it’s climb above 100$ a barrel, indicates that ES has made the transition from a buy-the-breaks mode to a sell-the-rallies mode. This also leads me to believe that we will take out the bottom trendline of the consolidating wedge pattern early next week.

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 Private Banker 
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This was a very interesting week. The rally in equities is definitely being tested. From a big picture perspective, we've been range bound but as TigerTrader mentioned, there is some serious reversals taking place, trapping traders on both ends. I was surprised to find that the lowest extreme tick level was - 1201 and +1177. I would think if and when we see serious capitulation, we will see some really low Ticks printing. That will be interesting to watch for. I've wound out of most of my longs at this point with only a few contracts remaining anticipating the potential of a true trend change to the short side.

Like I said before, what we are seeing in today's markets are extraordinary. The USD appears to really be losing it's reserve status as it continues to crash. US Treasuries even though have slightly bounced, are still looking relatively weak and could continue to fall in turn spiking interest rates. Commodities and precious metals continue to shoot higher. Meanwhile, the MSM particularly CNBS continues to try and convince the "Joe Investor" to continue buying equities with their masterful spin doctors/talking heads that know nothing about the markets or economy.

I will say that it's nice to see some volatility returning to equities from an intra-day trading perspective. These are the times when you can make a lot of money provided you know what you're doing. But as always, stick to your trading plan for those who are still finding their bearings in trading and be careful!

Cheers,
PB

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 Michael.H 
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tigertrader View Post
Of course, you conveniently neglected to mention that I was spot on about the market rallying from 1115 to 1250 and just about everything else in that post - very nice curve fitting. Granted that's not the point, but ironically...you are totally missing my point...see my post #163 on this thread.

BTW: I'm going to buy more puts, post unemployment volatility drain - bumping my position up to 5% of my risk capital, in spite of the fact you haven't told "us guys" it's O.K. to go short.





I didn't see your post about that rally.
How far do you buy your puts? Are they vertical spreads? naked positions?

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 jonc 
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tigertrader View Post
Purely intended as a directional play. I've been putting on these kinds of positions in the beans and bonds for 30 years. Most of the time they don't work, for reasons you are well aware of, BUT when they do work, they work big. I like being in the market (in this manner), because it's the best way to catch tail moves. Contrary, to what a lot of traders believe, good things can happen when you are in the market.


tigertrader View Post
It's not gambling it's trading, albeit it is speculative in nature. And it's probably counterintuitive to most people because they are a lot happier when they are right frequently. But being right frequently is not necessarily consistent with long term success. The percentage of winning trades in any given sample, does not determine the samples profitability, it is
the dollar change in the sample.. A few big winning trades will often have a much greater impact on the samples performance than the percentage of winners in the sample.

tigertrader, based on my limited experience, I would totally agree with what you had stated. 90% of my gains over the years come from only 5% of the trades I made.

But strange enough, even though I see these results I often act to maximize my winning probability.

My question is is this the only method you use and had they work for you consistently?

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 bluemele 
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This is a great thread, thanks for sharing all of you.

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 tigertrader 
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Michael.H View Post
I didn't see your post about that rally.
How far do you buy your puts? Are they vertical spreads? naked positions?

I buy out of the money premium, far enough out (cheap enough) that I can buy size, but close enough in, that there is a high probability, it could get in the money. I am in no way a sophisticated options trader. In fact, when I was on the floor, I would walk into the bean options or bond options pit, tell a local what I was trying to accomplish, and he would tell me which strike would afford me the highest probability of success. As a way of saying thanks for the advice, I would give up the edge to him when I put my position on. Obviously, I don't have that luxury now so I make an educated guess.

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 tigertrader 
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jonc View Post
tigertrader, based on my limited experience, I would totally agree with what you had stated. 90% of my gains over the years come from only 5% of the trades I made.

But strange enough, even though I see these results I often act to maximize my winning probability.

My question is is this the only method you use and had they work for you consistently?

Absolutely not, see my post #163 in this thread. I will put on a relevant options position, as a speculative adjunct to my "normal" intraday trading methodology. It's actually part speculative exercise and part lotto ticket, which inherently means that the frequency of winning trades is not going to be high. Therefore it is not a consistent enough strategy to use as your primary source of income unless you're incredibly well capitalized. As such, I consider it a supplement to my day-trading/swing trading income.

This doesn't mean that this strategy is more risky than short term trading, because the profit and loss are proportional. A short term system will never allow you to be in the trade long enough to catch a big move. You end up with small losses, but you also end up with small gains.
When you trade for the long term, you have a more positive expectation in terms of the size of the move. If you were trading some short term pattern predictive system you would never be able to participate fully in a major move.

The guiding principle behind the methodology is therefore relevant to how you approach trading in general. It goes back to the fact that most traders feel better with a system that produces more winning trades than losers. They are more concerned with being right and how often they are right, than how much they are right and the relative size of their winners compared to their losers.

This is why I don’t believe in systems that use a fixed risk /reward strategy or fixed amount model. For example, a system that simply uses a fixed percentage of the account size as the unit size and the same fixed stop /loss unit with the same fixed entry/exit unit for every trade. This kind of system may make money, and even have a high frequency of winners, but it will not make as much money as a system that takes volatility into consideration when sizing the position, or a methodology that doesn't limit the expectancy of the system.

The implication of this line of reasoning is that traders do not place enough emphasis on trade/money management. They are far too concerned with finding the perfect indicator that will determine the perfect entry point. But in fact money management is probably the most important skill in trading, because it keeps you in the game, and optimizes your capital usage.
Money management is not only about where you place your stop in an effort to control your risk, but it also about the size of your position relative to the amount of capital you are trading, along with expectancy. At all times, given the risk you are taking, your account size, and the volatility of the market, you must be aware of the optimal number of contracts to be long or short.

A position sizing model tells you ‘how big’ of a position to take, and can help determine where to place your stop. Improperly placed stops will not only limit your risk, but will also limit your opportunity. If not placed properly, fixed price-based stops and trailing stops can seriously degrade your performance by limiting your profitability; so traders must have the patience to wait for good entries, along with taking into consideration the aforementioned factors.

Expectancy is the average amount you can expect to make (or lose) per dollar at risk. It is important to look for trades that have a positive expectation in terms of the size of the move. The key to expectancy is not only how you enter the trade, but more importantly, how you exit it. This means developing the ability to identify highly profitable opportunities and then take maximum advantage of them. How much and how often you add to a profitable trade, how long you are in the trade, and where you get out of a losing trade , is critical to increasing profitability while controlling risk.

Proper money management optimizes the use of your capital. Risking too little doesn't give the market the opportunity to allow your profitable trade to take place and grow, and risking too much will quickly blow up your account. Most traders make the mistake of taking a reactive view of risk, in which their overriding concern is avoiding losses and protecting small profits, in lieu of a more aggressive management of risk which results in a more efficient use of capital.


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 tigertrader 
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Charles Biderman On How The Fed Continues To Rig The Market And Why There Will Be A QE 3...And 4 | zero hedge

Exclusive: Bill Gross Dumps All Treasuries, Brings Total "Government Related" Holdings To Zero, Flees To Cash - No QE3? | zero hedge

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 Private Banker 
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Great articles! TRF with a duration down to 3.89! That's serious "take cover" posturing IMO. I'd be curious to see what the other taxable F.I. funds are doing. The MBS market certainly isn't spiking in anticipation of the Fed monetizing that segment either. Looking at MBB (iShares MBS ETF), it's made no attempt to close that enormous gap. The Bernank has to be feeling some serious pressure by now. Meanwhile, equities have been range bound for the most part and forming somewhat of a pennant on the daily chart.

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 tigertrader 
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ES continues to consolidate within the consolidation - the longer this goes on, the more forceful the breakout should be as momentum traders jump in and those caught on the wrong side exit. Intra-day range action to continues to be subject to sudden reversals, but the recent tendency for the ES , has been for early sell-offs, followed by late day strength.

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 tigertrader 
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Upside $TICK extremes are running +800, while downside extremes are only +600 indicating a slightly bullish distribution, however $ADD has been unable to stay in positive territory today, along with $TRIN being unable to travel below 1.00, indicating that volume is concentrated in declining stocks, and may signal an underlying weakness in the market. In addition, high-beta large cap tech stocks are under pressure.

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 tigertrader 
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Typical Range Day as the market traded equidistant fom the RTH only PP, and the VWAP lines. Both the PP and VWAP provided excellent refrence points in this range bound market, as we see a narrow value area with price repeatedly moving away from value, but unable to attract volume at higher/lower levels. This reluctance to accept higher/lower prices is followed by the market's continued return back to the PP and VWAP. There is little slope to the VWAP as volume is transacted evenly above and below the average price.

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 jonc 
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Had you guys watch the interview with Ray Dalio on cnbc recently? He thinks that the equity markets are still attractive in term of price and 2011 will be a good year.

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 tigertrader 
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Global stocks are trading weaker with the European Euro Stoxx 50 index down -0.71% and JUNE S&Ps are under pressure.Treasuries and the dollar are higher, with the dollar index at a 1-week high, while most commodities fell after Chinese and German exports unexpectedly declined. The US stock market yesterday fluctuated on both sides of unchanged and turned lower late as weakness in technology stocks offset a decline in oil prices: Dow Jones -0.01%, S&P 500 -0.14%, Nasdaq Composite -0.51%.

If the liquidity drain contiunes, the tech-stock sell-off will gain momentum, and the implication will be a downside breakout in the ES.


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 Private Banker 
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tigertrader View Post
Global stocks are trading weaker with the European Euro Stoxx 50 index down -0.71% and JUNE S&Ps are under pressure.Treasuries and the dollar are higher, with the dollar index at a 1-week high, while most commodities fell after Chinese and German exports unexpectedly declined. The US stock market yesterday fluctuated on both sides of unchanged and turned lower late as weakness in technology stocks offset a decline in oil prices: Dow Jones -0.01%, S&P 500 -0.14%, Nasdaq Composite -0.51%.

If the liquidity drain contiunes, the tech-stock sell-off will gain momentum, and the implication will be a downside breakout in the ES.


Thanks TigerTrader! That pennant formation I was mentioning looks to have broke down with price dropping below the trendline and sitting right on the 50 day moving average. This is crucial in a potential change in trend at least from a swing trade perspective. Price held here on the last retracement in Nov/Dec. We could be in for a wild next few days.

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 tigertrader 
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Private Banker View Post
Thanks TigerTrader! That pennant formation I was mentioning looks to have broke down with price dropping below the trendline and sitting right on the 50 day moving average. This is crucial in a potential change in trend at least from a swing trade perspective. Price held here on the last retracement in Nov/Dec. We could be in for a wild next few days.


Brilliant minds think alike!!! LOL

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 tigertrader 
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Chart 1 shows an up sloping $TICK and a $TRIN reading staying below 1.00 indicating a positive divergence on the break, signaling a pullback to the VWAP and possibly the bottom trendline of the wedge

Chart 2 shows the market attempting to make a new low on two separate occasions producing a positive delta divergence and a subsequent bounce from those lows back to the VWAP

Chart 3 & 4 illustrates the downside breakout from the wedge pattern

Chart 5 illustrates a downward sloping VWAP line. If today is a trend day down, then the market will continue to pullback to the VWAP and then probe lower for new value as the day moves forward however the odds are only slightly better than 50% that we will see a trend day; Charts 6&7

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  #192 (permalink)
 Private Banker 
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Chart 1 shows an up sloping $TICK and a $TRIN reading staying below 1.00 indicating a positive divergence on the break, signaling a pullback to the VWAP and possibly the bottom trendline of the wedge

Chart 2 shows the market attempting to make a new low on two separate occasions producing a positive delta divergence and a subsequent bounce from those lows back to the VWAP

Chart 3 & 4 illustrates the downside breakout from the wedge pattern

Chart 5 illustrates a downward sloping VWAP line. If today is a trend day down, then the market will continue to pullback to the VWAP and then probe lower for new value as the day moves forward however the odds are only slightly better than 50% that we will see a trend day; Charts 6&7

It'll be interesting to see if we get an attempt for at least a half gap fill. Looking pretty good so far but a long way to go. Nice divergence bounce of the lows. TICK's appear to be trending higher but can't break above 800. Highest I saw was around 763.

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It'll be interesting to see if we get an attempt for at least a half gap fill. Looking pretty good so far but a long way to go. Nice divergence bounce of the lows. TICK's appear to be trending higher but can't break above 800. Highest I saw was around 763.

1300.00-1302.00...no higher!

1298.00-1298.50 resistance
a) top of value
b) 1st SD
c) .786 fib retracement

( 1295.25 VWAP) support



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1300.00-1302.00...no higher!

Lol! I just noticed that I was looking at the march contract still. Yeah, Ticks are falling apart here. ES can't even get back to it's RTH open.

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 tigertrader 
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It'll be interesting to see if we get an attempt for at least a half gap fill. Looking pretty good so far but a long way to go. Nice divergence bounce of the lows. TICK's appear to be trending higher but can't break above 800. Highest I saw was around 763.


$TICK just made a lower high and a lower low and $TRIN is trying to go positive - market is getting weaker

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Lol! I just noticed that I was looking at the march contract still. Yeah, Ticks are falling apart here. ES can't even get back to it's RTH open.

I'm short from higher, but I'm a huge scale up seller between 1300-1302 on an add

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That was almost, too easy. They can go ahead and crush it now...all in.

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That was almost, too easy. They can go ahead and crush it now...all in.

Very nice indeed. Let's see if we can push through the lows. Tick's printed a -1253 on that move.

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 tigertrader 
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Chart 1 shows an extreme $TICK reading 900+ for 7 minutes and continued horizontal VWAP with the market probing equally higher and lower above the VWAP.

An extreme $TICK reading for an extended period of time indicates exhausted sellers and a temporary bottom - the VWAP picture suggests a trading range for the near future based on that low and the VWAP; with possible probes back above the VWAP

However, today's trading range is only 12.50 points and the 3 ADR is 18.75 /10 ADR - 17.00, so there is definitely room for a range extension late in the day.

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$TRIN near it's highs and $TICKDJ is showing weakness indicating the large caps are joining the party with the techs. DJIA is near psychological and technical support at 12,000 and a violation of this level could mean...it's time for panic in the streets.

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