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ES and the Great POMO Rally


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ES and the Great POMO Rally

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  #1 (permalink)
 Private Banker 
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Liking the sub-forums idea. Just a quick observation of the ES and it's striking similarities to the most recent April high.

We have traded within a channel/rising wedge pattern for quite some time now. Interesting that the only significant up days happen to coincide with the Fed's POMO days. The volume during this rally is very suspect and greatly resembles the volume from April as well. The only high volume days are ones in which selling has occurred somewhere throughout the day. Could this be another classic pump and dump?

In any event, the best way to approach a market like this is to remain unbiased. Today was the first day in a while where we actually had selling on a POMO. Many traders were waiting for the usual ramp but it never came along until this afternoon when the market bounced off of it's supporting trendline. It's best to just follow your rules and the trend. The big picture will play out regardless.

Best of luck.

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 tigertrader 
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When in doubt...buy strangles. You gotta like vol at these levels. Personally, I've been buying out of the money puts. You can call it a de facto lotto ticket, or a tail risk hedge, or just plain taking a shot, but I've caught some big moves this way before, including being long bond calls when LTCM blew up and a nice summer bean rally.

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 Private Banker 
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tigertrader View Post
When in doubt...buy strangles. You gotta like vol at these levels. Personally, I've been buying out of the money puts. You can call it a de facto lotto ticket, or a tail risk hedge, or just plain taking a shot, but I've caught some big moves this way before, including being long bond calls when LTCM blew up and a nice summer bean rally.

Good call! I like it. There will be a very interesting outcome over the next few months. I guess you could say it will be exciting. Limit up in grains every few days, gold blowing though the roof, bonds rallying and stocks are tagging along? It's like a game of musical chairs... Who will be left standing?

Cheers!

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 Private Banker 
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Some further observations of today's market action including NQ and TF. It appears that ES has once again bounced off of it's supporting trendline. We could have a diamond top pattern in place. By looking at TF, it appears to be showing signs of a possible rollover by technically falling out of it's rising wedge. The NQ appears to getting tighter and tighter in it's respective wedge as well. Could next week be a sell on the news?

It's starting to get interesting...

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 Zondor 
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Thank you, PrivateBanker!

Great to see someone mentioning the POMO draft that is moving the markets. For those interested in learning more about this, there have been lots of articles on ZeroHedge.

A greatly oversimplified explanation of Permanent Open Market Operations is that the Fed buys Treasuries, flooding the Primary Dealers with money that they use to buy everything they can get their hands on.

In other words, the FED is using the PD's to pump the markets.

Repeat after me: the Plunge Protection Team does not exist......

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 Private Banker 
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Zondor View Post
Thank you, PrivateBanker!

Great to see someone mentioning the POMO draft that is moving the markets. For those interested in learning more about this, there have been lots of articles on ZeroHedge.

A greatly oversimplified explanation of Permanent Open Market Operations is that the Fed buys Treasuries, flooding the Primary Dealers with money that they use to buy everything they can get their hands on.

In other words, the FED is using the PD's to pump the markets.

Repeat after me: the Plunge Protection Team does not exist......

Thanks! I feel POMO has been painting the tape for the last few months and is trying it's absolute best to get retail investors to buy and hold stocks. I love Zerohedge and read it everyday. It's like the only real source of news out there now.

Next Wednesday could be an interesting day. In fact, there are a lot of crucial economic reports coming out next week in addition to the Fed. I started this thread mainly because I'm getting that same gut feeling I got in April. Got to trade with the trend of course but this is getting very interesting...

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 tigertrader 
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The only thing that's got me worried is that everybody and their brother is looking for the same thing we are. I would feel much better, and would be a lot less circumspect, if the sentiment was a lot more bullish. Even Bill Gross wrote a bearish article.

Below is the link to the Bill Gross article. It's not one of his best articles, but is compelling nevertheless, not because of the content of the article, but because of the implication of why he wrote the article. Gross, the penultimate establishment insider appears to be hedging himself in front of QE2 ( s/b Titanic2). While the article tells me that things may be far worse than I had imagined, it is still a glaring example of another player positioned the same way we are.

PIMCO | Investment Outlook - Run Turkey, Run

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 tigertrader 
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The PDs are the PPT or Working Group for Financial Markets, or at least their instrument thereof...always have been! The only difference between how they did it in the past compared to how they do it in the present, is the Fed is transparent with what they are doing now. They always manipulated the markets, but they executed surreptitiously when doing it in the past.

The PD's purchases have been concentrated on, but probably not limited to, index ETFs and high beta(4-6X) naz stocks. AAPL, AMZN, NFLX etc.

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 Zondor 
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The amount of outright fraud and criminal conduct that is being covered up and facilitated by the Federal Government is huge and unprecedented. This has dire implications for the future of the United States.

Who IS paying the price? Just open your eyes and look around, or in the mirror:
https://market-ticker.org/akcs-www?post=170176

A little off topic but today Karl Denninger is calling for a bank holiday as a prelude to unwinding the hangover from the trillions of dollars of bank "control fraud" strangling the economy.

Let's Talk About A Bank Holiday in [Market-Ticker]


The Inspector General of the TARP Program is not at all pleased with what he has been finding:
https://market-ticker.org/akcs-www?blog=Market-Ticker&page=7

The amount of fraud over the last few years is a hundred or more times that of the S and L crisis, yet nobody is being prosecuted. William K. Black was one of the key people in the resolution of the S and L crisis. His thoughts on the current situation are well worth following. From Wikipedia: Black is currently an Associate Professor of Economics and Law at the
University of Missouri-Kansas City School of Law. He was the Executive Director of the Institute for Fraud Prevention from 2005-2007 and previously taught at the LBJ School of Public Affairs at the University of Texas, and at Santa Clara University. Black was litigation director for the Federal Home Loan Bank Board, deputy director of the FSLIC, SVP and the General Counsel of the Federal Home Loan Bank of San Francisco. [2]

Here's what Black says should be done:
William K. Black: Foreclose on the Foreclosure Fraudsters, Part 1: Put Bank of America in Receivership
William K. Black: Foreclose on the Foreclosure Fraudsters, Part 2: Spurious Arguments Against Holding the Fraudsters Accountable
https://market-ticker.org/akcs-www?post=170581
https://market-ticker.org/akcs-www?post=170265

Note that the Tea Party, originally conceived of as a response to this outrage, has been taken over by the banksters themselves through covert funding from such operators as the Koch brothers. https://theweek.com/article/index/206405/the-billionaire-koch-brothers-tea-party-puppetmasters

The Tea Party message is now based on outright lunatic yahooism rather than any pretense of economic reform. Karl Denninger, one of the founders, has renounced what it has turned into.
https://market-ticker.org/akcs-www?post=170167


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 tigertrader 
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Seriously....William Black for President!

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 ZTR 
 
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So how do you catch the move out of a Wedge?

Have a spoken alert! This code allows personalization of the spoken message.

Look at @ Zondor Thread for more on incorporating this into NT7.

 
Code
                            
try {
 
 
 
        
//ChartControl.Bars.GetLength
        //(ChartControl.Bars.GetLength);
 
    
foreach (IDrawObject draw in DrawObjects)
     {
        if (
draw.Tag.StartsWith("The")||draw.Tag.StartsWith("TL")||draw.Tag.StartsWith("S")||draw.Tag.StartsWith("R") &&draw is ILine)
          {
           
ILine drawnLine = (ILinedraw;    
           if(  
drawnLine.DrawType==DrawType.ExtendedLine||drawnLine.DrawType==DrawType.Line||drawnLine.DrawType==DrawType.HorizontalLine||drawnLine.DrawType==DrawType.Ray )
            {
                 
LineName=draw.Tag;
                
currentYdrawnLine.StartY+(drawnLine.StartBarsAgo)/(-drawnLine.EndBarsAgo+drawnLine.StartBarsAgo+.0000001)*(drawnLine.EndY-drawnLine.StartY);
                
Values[0].Set(currentY);
            }  
    
//Price rising above the manually drawn Trend Line        
            
if((Close[0]-currentY>0&&lastprice-currentY<=0))
            {    
Alert("Alert"Priority.HighInstrumentName+": $"+Close[0]+", Rising Above Trendline "+LineNamesoundFileR1Color.BlackColor.Lime);
                
//Print("TrendLineCustom " +InstrumentName+": $"+Close[0]+", Rising Above  "+LineName);
                
if(!over)Say("Hey Z T R!"+InstrumentName+"  is a screaming buy and crossing above "+LineName+"   at   "+Close[0]);
                
over=true;
            }
 
    
//Price falling below the manually drawn Trend Line        
            
if((Close[0]-currentY<0&&lastprice-currentY>=0))
 
            {    
Alert("Alert"Priority.HighInstrumentName+": $"+Close[0]+", Falling Below Trendline "+LineNamesoundFileF1Color.RedColor.Yellow);
                
//Print("ZTR:"+  InstrumentName+",is falling below the "+LineName+"   at  "+Close[0]);    
                
if(!under)Say("Look out Below Z T R! "+InstrumentName+" is crossing BELOW the "+LineName+"   at  "+Close[0]);
                
under=true;
            }   
          }    
 
         }
        }
catch (
Exception ex){
            Print(
"Trapped exception in TrendLineAlert Custom(): " ex.Message);
                return;
            }
        } 

R.I.P. Andy Zektzer (ZTR), 1960-2010.
Please visit this thread for more information.
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 Zondor 
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IRA Analyst - Triple Down: Fannie, Freddie, and the Triumph of the Corporate State

Another great article on the crony capitalist - fascist economic policies now in fashion.


Quoting 
"...Despite examples of the success of restructuring with F and even General Motors, the invidious cowards who inhabit Washington are unwilling to restructure the largest banks and GSEs. The reluctance comes partly from what truths restructuring will reveal. As a result, these same large zombie banks and the U.S. economy will continue to shrink under the weight of bad debt, public and private. Remember that the Dodd-Frank legislation was not so much about financial reform as protecting the housing GSEs.

Because President Barack Obama and the leaders of both political parties are unwilling to address the housing crisis and the wasting effects on the largest banks, there will be no growth and no net job creation in the U.S. for the next several years. And because the Obama White House is content to ignore the crisis facing millions of American homeowners, who are deep underwater and will eventually default on their loans, the efforts by the Fed to reflate the U.S. economy and particularly consumer spending will be futile. As Alan Meltzer noted to Tom Keene on Bloomberg Radio earlier this year: "This is not a monetary problem." ..."



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 Silvester17 
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Private Banker View Post
Some further observations of today's market action including NQ and TF. It appears that ES has once again bounced off of it's supporting trendline. We could have a diamond top pattern in place. By looking at TF, it appears to be showing signs of a possible rollover by technically falling out of it's rising wedge. The NQ appears to getting tighter and tighter in it's respective wedge as well. Could next week be a sell on the news?

It's starting to get interesting...

I'm watching those wedges too. but there's the possibility of something else.

don't the following pattern almost look like twins? especially the sideways action the last few days.

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 Silvester17 
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and here's what happened. another move of 50+ points to the upside.

hard to tell at this point.

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 Private Banker 
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Zondor View Post
The amount of outright fraud and criminal conduct that is being covered up and facilitated by the Federal Government is huge and unprecedented. This has dire implications for the future of the United States.

Who IS paying the price? Just open your eyes and look around, or in the mirror:
The Truth On Unemployment: It's A Depression in [Market-Ticker]

A little off topic but today Karl Denninger is calling for a bank holiday as a prelude to unwinding the hangover from the trillions of dollars of bank "control fraud" strangling the economy.

Let's Talk About A Bank Holiday in [Market-Ticker]


The Inspector General of the TARP Program is not at all pleased with what he has been finding:
Market-Ticker - MarketTicker Forums

The amount of fraud over the last few years is a hundred or more times that of the S and L crisis, yet nobody is being prosecuted. William K. Black was one of the key people in the resolution of the S and L crisis. His thoughts on the current situation are well worth following. From Wikipedia: Black is currently an Associate Professor of Economics and Law at the
University of Missouri-Kansas City School of Law. He was the Executive Director of the Institute for Fraud Prevention from 2005-2007 and previously taught at the LBJ School of Public Affairs at the University of Texas, and at Santa Clara University. Black was litigation director for the Federal Home Loan Bank Board, deputy director of the FSLIC, SVP and the General Counsel of the Federal Home Loan Bank of San Francisco. [2]

Here's what Black says should be done:
William K. Black: Foreclose on the Foreclosure Fraudsters, Part 1: Put Bank of America in Receivership
William K. Black: Foreclose on the Foreclosure Fraudsters, Part 2: Spurious Arguments Against Holding the Fraudsters Accountable
Bill Black Lands A Knockout Punch in [Market-Ticker]
Dylan Ratigan: With Bill Black, Time To BOOM in [Market-Ticker]

Note that the Tea Party, originally conceived of as a response to this outrage, has been taken over by the banksters themselves through covert funding from such operators as the Koch brothers. The billionaire Koch brothers: Tea Party puppetmasters? - The Week

The Tea Party message is now based on outright lunatic yahooism rather than any pretense of economic reform. Karl Denninger, one of the founders, has renounced what it has turned into.
Let's Face Facts: America Doesn't Want Tea in [Market-Ticker]


Great information! I follow Denninger quite a bit. He called the last meltdown and he's spot on again as is William Black.

I don't think this recession ever ended and in fact is about to get worse because of the politician's unwillingness to do anything about this mess out of fear of being exposed for their past wrong doings. They'd rather sweep it under the rug and forget about it. I fear that this will not end well regardless of what the Fed does. If there's another bank bailout, I think we will see rage in the streets. Everyone is sick and tired of the corruption that is occurring and another bailout would be the straw that breaks the camel's back I would think.

On the flip side, at some point the market will breakout of this range bound nonsense and we could have some massive moves in the markets. Maybe even another huge down day like the flash crash. There are multiple unfilled gaps on the ES at the bottom of this rally that would love to be filled. Not sure if they ever will but I could see a retest of the lows no problem.

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 tigertrader 
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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.


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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.

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 Private Banker 
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Silvester17 View Post
I'm watching those wedges too. but there's the possibility of something else.

don't the following pattern almost look like twins? especially the sideways action the last few days.

Good point Silvester. TF looked like it fell out of it's pattern half way up and then jumped back in. I don't put as much weight on TF for big picture stuff as I do with ES. ES being the market with all the liquidity. If there's a big move there, it's most likely real. I've also observed TF diverge from the other markets from time to time. But I'm guessing we'll see next week what's next with the Fed's QE announcement.

Cheers,

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 Private Banker 
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tigertrader View Post
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.

Great prediction and spot on so far (except for the Cubs of course but the Bears are looking good).

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 ZTR 
 
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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..... Cubs will win the World Series 4-0.

If you had picked the Giants I would have been just a little more impressed. But the rest seems to be on track.

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I made these predictions on Investor Hub at the end of last year.

Looks good. How did you act on these predictions? (did you capitalize on them, and how so)

Mike

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I would say just be careful in trying to find things to validate your beliefs on how the market should act.... While optimism is high right now, and i think the chances of a pullback are high because of it, i still don't think we will have another recession. There are too many things holding it back.
There will always be fraud, and there will always be reasons for people to be bearish/bullish on the economy.

I knew someone that was shorting the market and calling tops for almost 2 years before the crash... He got wiped out. He was right about how people where using their houses as ATM machines, tapping in their home equity to buy junk, but he got run over, and he no longer trades. You don't want to end up like him.

I also think its funny how poeple use technical analysis to call the top right now, such as drawing megaphone patterns, or wedges, but someone else just recently pointed out that the famous 50MA crossed over the 200 MA to the upside, signaling to go long for a new bull market. Just shows you how everything is subjective.

I still not a fan of these chart patterns, i don't think they give you any meaningful edge at all, but thats a separate topic.

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 tigertrader 
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Looks good. How did you act on these predictions? (did you capitalize on them, and how so)

Mike

Not so much on the equity side because my es time frames are relatively short ; mostly intra-day swing trades. However, it is rare that I don't have a bond position on, whether it's a yield curve play, or an outright position, or an options position.. I did catch some nice pieces of the bond move. To be quite honest , I really don't know what treasuries are going to do, after the FOMC meeting. I'll probably be flat and trade the reaction.

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I would say just be careful in trying to find things to validate your beliefs on how the market should act.... While optimism is high right now, and i think the chances of a pullback are high because of it, i still don't think we will have another recession. There are too many things holding it back.
There will always be fraud, and there will always be reasons for people to be bearish/bullish on the economy.

I knew someone that was shorting the market and calling tops for almost 2 years before the crash... He got wiped out. He was right about how people where using their houses as ATM machines, tapping in their home equity to buy junk, but he got run over, and he no longer trades. You don't want to end up like him.

I also think its funny how poeple use technical analysis to call the top right now, such as drawing megaphone patterns, or wedges, but someone else just recently pointed out that the famous 50MA crossed over the 200 MA to the upside, signaling to go long for a new bull market. Just shows you how everything is subjective.

I still not a fan of these chart patterns, i don't think they give you any meaningful edge at all, but thats a separate topic.

I hear you Mike. My day-to-day trading is not predicated on my long term or macro perspective of the markets. My intra-day decisions are based solely on price action. If I do initiate a long term or position trade that is based on technical/fundamental analysis, it will usually be an options play and I will not risk more than 5-10% of my capital. I find it very difficult, not have an opinion about the market and it's future direction. I do have the ability to be objective when I am trading intra-day, but I also feel the need to put my money where my mouth is every now and then.

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I would say just be careful in trying to find things to validate your beliefs on how the market should act.... While optimism is high right now, and i think the chances of a pullback are high because of it, i still don't think we will have another recession. There are too many things holding it back.
There will always be fraud, and there will always be reasons for people to be bearish/bullish on the economy.

I knew someone that was shorting the market and calling tops for almost 2 years before the crash... He got wiped out. He was right about how people where using their houses as ATM machines, tapping in their home equity to buy junk, but he got run over, and he no longer trades. You don't want to end up like him.

I also think its funny how poeple use technical analysis to call the top right now, such as drawing megaphone patterns, or wedges, but someone else just recently pointed out that the famous 50MA crossed over the 200 MA to the upside, signaling to go long for a new bull market. Just shows you how everything is subjective.

I still not a fan of these chart patterns, i don't think they give you any meaningful edge at all, but thats a separate topic.

Yes, never take trades based on beliefs alone. You'll most likely be wrong. The rising wedge drawings were merely a comparison to the very similar pattern of this past April. This rally can continue on for a long time as long as Bernanke keeps propping everything up.

As for chart patterns, I never use them for my intraday trading either. You can get nailed real easily. I just like to look at the big picture to stay on the path of least resistance hence this topic of discussion.

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Banana Ben got his wish. The consequences however will at some point, be devastating for the U.S. It appears that he is in an above the law status now. When this is all said and done, he'll make "Easy Al' look like a walk in the park...

ES closed at it's highs which was also the top of it's trend line. Today's price action in RTH was a classic gap up sideways chop fest. Hopefully no one got annihilated today. I promise better days are to come.

Cheers!

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 tigertrader 
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Banana Ben got his wish. The consequences however will at some point, be devastating for the U.S. It appears that he is in an above the law status now. When this is all said and done, he'll make "Easy Al' look like a walk in the park...

ES closed at it's highs which was also the top of it's trend line. Today's price action in RTH was a classic gap up sideways chop fest. Hopefully no one got annihilated today. I promise better days are to come.

Cheers!

I shut down early and went out for margarita's...drank the entire pitcher by myself. The only one who got rich toady was my clearing house.

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 Private Banker 
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I shut down early and went out for margarita's...drank the entire pitcher by myself. The only one who got rich toady was my clearing house.

Lol! Probably not a bad idea. Cheers!

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Irish Bond Spreads are getting out of hand. Will this crash the equities markets?

The Flash In The East in [Market-Ticker]

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Wash and rinse day
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 Private Banker 
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Lol! "Welcome to the show that never ends"... What a day. I just trade my intra-day signals which had me short in the morning and bought the divergence around 11am. You know the usual, if the market sells off, count it going right back up to where it was. Big picture ES lower trend line still providing support. I guess we can thank Bernanke once again.

Cheers,

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 Private Banker 
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Market is in big trouble. Wedge broke and we're getting some good selling. POMO ineffective? We'll see...

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I posted this in the " shoot the short" thread, but seems appropriate to post here as well.



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 Private Banker 
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I posted this in the " shoot the short" thread, but seems appropriate to post here as well.



Mike

Absolutely love it!!! That was hilarious! Yet, so correct.

Cheers,

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 Private Banker 
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Just got a - 1,481 Tick print! Can't recall the last time I saw that.

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 Michael.H 
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Here's a new one


A few good men

A Few Good Robots

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 Private Banker 
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Here's a new one


A few good men

A Few Good Robots

Lol! These cartoons are classic!

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 Private Banker 
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There seems to be some good support so far at around 1175. Although this still looks very similar to last April's highs. Stay nimble

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 tigertrader 
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Unfortunately, I think the market may remain mired in it's current trading range, 1157 -1225 basis the SPX for the near future. The market just took current macroeconomic/geo-political events' best shot, withstood the blows, and came out of the beating basically unscathed and prepared for the bullish seasonality that is upon us. As bearish as I am, the market appears to have discounted all the bad news. There should now be an upward bias to the market from now through the X-mas holidays, which includes the annual Santa Claus rally.

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 Private Banker 
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Unfortunately, I think the market may remain mired in it's current trading range, 1157 -1225 basis the SPX for the near future. The market just took current macroeconomic/geo-political events' best shot, withstood the blows, and came out of the beating basically unscathed and prepared for the bullish seasonality that is upon us. As bearish as I am, the market appears to have discounted all the bad news. There should now be an upward bias to the market from now through the X-mas holidays, which includes the annual Santa Claus rally.

I think you're right on that but you never know I guess. Huge swings each day are nice for intraday trading though, this past Monday was extraordinary.

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 Private Banker 
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Looks like the Santa Claus Rally is at work again this year. In a matter of two days, we have nearly reached the top of this trading range. Renewed buying interest or just another short squeeze? There was a lot of support at the 50 DMA which also could have been an extension long from this past summer's high's.

Either way, the last two mornings have been very lucrative. Hope no one got stuck in yesterday's mid-day chop fest. Pro gap up days are usually the most difficult to trade because most of the move took place in the overnight session. Large gaps will typically have a lot of "at the open" orders which will create a continuation of the overnight move with no intent of a gap fill. If you missed this move, you were subjected to chop although there was one nice burst during the doldrums. Any pullbacks are bought right up so, if you were trying to short, you probably got annihilated. We'll see if these levels hold or maybe even a new high can print.

I'm posting these updates to give a sense of the big picture and the path of least resistance however, I recommend taking your intraday set ups, follow your own rules and as always, practice sound money management. You never know when the market will turn.

Happy Holidays!

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 tigertrader 
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Just covered my longs @1216.75...should be some pretty good resistance here! Not getting short, however... instead, I would look to get back in on a pullback, if we close above this level.

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 Private Banker 
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Just covered my longs @1216.75...should be some pretty good resistance here!

Nice! We may see a new high print today. What's weird is the NYSE Tick's are only showing a high at +796. Is this correct? This doesn't seem right, you would think we would see some +1,000's today. Maybe my data is messed up again. I'm wondering if this truly is just a short squeeze with stops getting blown out. In any event, a nice move.

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 tigertrader 
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 Private Banker 
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That's hilarious but so true. The propaganda machine is in full gear trying it's best to make the mom and pop's get back into the stock market and buy equity mutual funds.

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 Zondor 
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According to the NY Times, trading firms are hiring Chinese college graduates to trade for them, from China.

https://www.nytimes.com/2010/12/10/business/global/10daytrade.html?ref=business

"....Mr. Chan’s day trading shop is one of many that have sprung up in and around China’s major cities in recent years. Trading firms based in the United States and Canada are recruiting inexpensive workers in China and teaching them to engage in speculative trading — which means repeatedly buying and selling shares listed on the New York Stock Exchange and Nasdaq, hoping for quick profits.
By some industry estimates, as many as 10,000 people in China are doing speculative day trading of American stocks — mostly aggressive young men working the wee hours here, from 9:30 p.m. to 4 a.m., often trading tens of thousands of shares a day...."


Great, more LIQUIDITY!

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 Private Banker 
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According to the NY Times, trading firms are hiring Chinese college graduates to trade for them, from China.

https://www.nytimes.com/2010/12/10/business/global/10daytrade.html?ref=business

"....Mr. Chan’s day trading shop is one of many that have sprung up in and around China’s major cities in recent years. Trading firms based in the United States and Canada are recruiting inexpensive workers in China and teaching them to engage in speculative trading — which means repeatedly buying and selling shares listed on the New York Stock Exchange and Nasdaq, hoping for quick profits.
By some industry estimates, as many as 10,000 people in China are doing speculative day trading of American stocks — mostly aggressive young men working the wee hours here, from 9:30 p.m. to 4 a.m., often trading tens of thousands of shares a day...."


Great, more LIQUIDITY!

Lol! That is unbelievable! Also a little scary I guess. I wonder if these traders are cheaper then just setting up an automated system that follows the rules they're teaching these young traders?

Good find! Cheers!

PB

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 Zondor 
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If they can basically take guys off the street and make them into profitable traders, we should ALL be able to make money!

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Re:Lol! That is unbelievable! Also a little scary I guess. I wonder if these traders are cheaper then just setting up an automated system that follows the rules they're teaching these young traders?"

I think it is telling of the short comings of automated systems. A person brings instinct, feeling and learning intelligence to add to the trading rules and disciplines they would teach. It's hard to program 'gut' feel or tape reading skills to a machine. Clearly both options are available to Swift Trade and other firms and yet they have found combining people together with trading and risk management technology produces better results.

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 Private Banker 
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Haven't updated this thread in a while as I've essentially been avoiding intra-day trading equities lately (trading CL mainly). The tight range in equities has not been appealing to me at this time. Although we did have two nice sell off's during the last part of the day yesterday and today. This tight range of course is expected given it being the end of the year and with the holidays nearly upon us.

In any event, the ES and NQ are showing significant bearish divergences while bonds are getting absolutely obliterated taking rates higher. Will equities follow suit? They continue to look very suspect but wouldn't be surprised to see a continuation of the current melt up until the new year.

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 tigertrader 
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I believe the relatively light volume in the equity market is more the result of options expiration than a slow holiday trade, and that the possibility of price exhaustion at these levels is very possible. Monthly R2 target has been reached on the daily and a TD perfected 9 count is evident at the top of the move. We are starting to see a series of lower highs on the 144min chart as the market signals waning momentum. As you stated, the bond market is selling off and the attendant rise in rates will have severe implications on servicing the nations debt going forward. There is also reason, once again, to be concerned about the euro, due to the troubles in Spain. While the bulls are in charge for the time being, a close under 1227 would signal a potential top for the year and another cyclical leg down.

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 Private Banker 
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tigertrader View Post
I believe the relatively light volume in the equity market is more the result of options expiration than a slow holiday trade, and that the possibility of price exhaustion at these levels is very possible. Monthly R2 target has been reached on the daily and a TD perfected 9 count is evident at the top of the move. We are starting to see a series of lower highs on the 144min chart as the market signals waning momentum. As you stated, the bond market is selling off and the attendant rise in rates will have severe implications on servicing the nations debt going forward. There is also reason, once again, to be concerned about the euro, due to the troubles in Spain. While the bulls are in charge for the time being, a close under 1227 would signal a potential top for the year and another cyclical leg down.

Great analysis! I didn't look at the monthly pivot levels yet on this. Very interesting. This last surge up looks like a classic pump and dump right up to R2.

Regarding bonds, could we be seeing the first step to debt deflation? Obviously Treasuries are getting hammered but take a look at Muni's and MBS. Very concerning.

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 tigertrader 
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( MUNIS and MBS)...WOW!!!

I'm beginning to scale into some shorts between 1238.50 - 1240.75 basis ES 03-11.

Top Ten Reasons I'm Getting Short

10) VIX on lows
9) Spain/ eurozone
8) rising interest rates
7) rising energy costs
6) 25% equity rally since July 1
5) bullish sentiment at its highest level since the Nasdaq bubble / put-call ratio indicates longs are un- hedged
4) low volume on upticks
3) NYSE TRIN at its lowest since before the 1987 crash
2) Relentlessly negative NYSE TICK action / one of the lowest Cumulative TICK closes of the year
1) economy still sucks

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 Private Banker 
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tigertrader View Post
( MUNIS and MBS)...WOW!!!

I'm beginning to scale into some shorts between 1238.50 - 1240.75 basis ES 03-11.

Top Ten Reasons I'm Getting Short

10) VIX on lows
9) Spain/ eurozone
8) rising interest rates
7) rising energy costs
6) 25% equity rally since July 1
5) bullish sentiment at its highest level since the Nasdaq bubble / put-call ratio indicates longs are un- hedged
4) low volume on upticks
3) NYSE TRIN at its lowest since before the 1987 crash
2) Relentlessly negative NYSE TICK action / one of the lowest Cumulative TICK closes of the year
1) economy still sucks

Those are some great reasons and I agree with every one of them.

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tigertrader View Post
( MUNIS and MBS)...WOW!!!

I'm beginning to scale into some shorts between 1238.50 - 1240.75 basis ES 03-11.

Top Ten Reasons I'm Getting Short

10) VIX on lows
9) Spain/ eurozone
8) rising interest rates
7) rising energy costs
6) 25% equity rally since July 1
5) bullish sentiment at its highest level since the Nasdaq bubble / put-call ratio indicates longs are un- hedged
4) low volume on upticks
3) NYSE TRIN at its lowest since before the 1987 crash
2) Relentlessly negative NYSE TICK action / one of the lowest Cumulative TICK closes of the year
1) economy still sucks


Private Banker View Post
Those are some great reasons and I agree with every one of them.

Now, list all the reasons why the short will fail and it will continue bullish...

I'm just saying. First, thanks for sharing the rationale for the trade, I really appreciate this. But I think there are two really important things to remember. 1) If "everyone's" sentiment is bearish, and the market is moving bullish, there is likely to be a short squeeze coming and a continued bullish move because the bears couldn't move the market and will capitulate. 2) Always approach the trade knowing that you cannot possibly know or control the outcome, all you can do is position yourself properly with great risk management and great trade management so you have the opportunity to make money.

One thing I try to do is ask myself, once in a trade, what are the good reasons this trade will now move against me (opposite direction). Dr. Brett mentioned this in one of his books and I like the rationale, it is not second guessing so much as it is reinforcement that you've not let sentiment get in the way.

Mike

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 Private Banker 
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Big Mike View Post
Now, list all the reasons why the short will fail and it will continue bullish...

I'm just saying. First, thanks for sharing the rationale for the trade, I really appreciate this. But I think there are two really important things to remember. 1) If "everyone's" sentiment is bearish, and the market is moving bullish, there is likely to be a short squeeze coming and a continued bullish move because the bears couldn't move the market and will capitulate. 2) Always approach the trade knowing that you cannot possibly know or control the outcome, all you can do is position yourself properly with great risk management and great trade management so you have the opportunity to make money.

One thing I try to do is ask myself, once in a trade, what are the good reasons this trade will now move against me (opposite direction). Dr. Brett mentioned this in one of his books and I like the rationale, it is not second guessing so much as it is reinforcement that you've not let sentiment get in the way.

Mike

Dr. Brett's books and advice are so valuable to new and experienced traders. I greatly appreciate his work.

A short at these levels would be considered a failure if, as you stated, the bears fail to push the market back down, generally speaking. Keep in mind, the term "fail" is subjective to each individual trader. Some have tighter stop loss orders than others. Some realize profits quicker than others would prefer. Some average into their positions, for example, their goal is to establish shorts in a certain range with a specific stop level that no longer makes the short valid.

To what I've been referring to in this thread is swing trades where I'll hold a core position in the direction I "think" the market will go however, I'll utilize intra-day trades to hedge or enhance my core position via a core-satellite strategy. Example being, establish core short ES position based off of a large time frame chart interval, trade intra-day long's or short's in multiple markets to enhance total returns of portfolio based off of shorter interval chart settings. The core being a majority portfolio position with the intra-day trades being minority positions that follow smaller/shorter trends. Obviously if the core trade is rendered invalid, you would need to unwind it but you've at least participated in the intra-day opportunities that would off set any realized losses on the core.

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 MXASJ 
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Private Banker View Post
... To what I've been referring to in this thread is swing trades where I'll hold a core position in the direction I "think" the market will go however, I'll utilize intra-day trades to hedge or enhance my core position via a core-satellite strategy. Example being, establish core short ES position based off of a large time frame chart interval, trade intra-day long's or short's in multiple markets to enhance total returns of portfolio based off of shorter interval chart settings. The core being a majority portfolio position with the intra-day trades being minority positions that follow smaller/shorter trends. Obviously if the core trade is rendered invalid, you would need to unwind it but you've at least participated in the intra-day opportunities that would off set any realized losses on the core.

Interesting. Core-Satellite is pretty popular among the private bankers I know. Out of curiousity what is the average hold in your Core? And is your Core an asset class-based, mean-variance optimized portfolio or is it more a discretionary macro Core?

Thanks for sharing.

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 tigertrader 
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Big Mike View Post
Now, list all the reasons why the short will fail and it will continue bullish...

I'm just saying. First, thanks for sharing the rationale for the trade, I really appreciate this. But I think there are two really important things to remember. 1) If "everyone's" sentiment is bearish, and the market is moving bullish, there is likely to be a short squeeze coming and a continued bullish move because the bears couldn't move the market and will capitulate. 2) Always approach the trade knowing that you cannot possibly know or control the outcome, all you can do is position yourself properly with great risk management and great trade management so you have the opportunity to make money.

One thing I try to do is ask myself, once in a trade, what are the good reasons this trade will now move against me (opposite direction). Dr. Brett mentioned this in one of his books and I like the rationale, it is not second guessing so much as it is reinforcement that you've not let sentiment get in the way.

Mike

1) The current sentiment for equities is overwhelmingly bullish, if not downright frothy... I'm fading that sentiment.

2) When I enter a trade, I assume it's going to go against me and I am going to have to take some heat on the trade. When I initiate a trade, I also realize that I'm going to be wrong about the trade 25-30% of the time. The reason I'm wrong is irrelevant at the time; it's either because there are more buyers than sellers, or more sellers than buyers coming into the market and I'm the wrong way. All I'm concerned with, is how far is it going to go against me and at what price do I no longer want to be in that position.

Of course, in retrospect, I'll analyze my losers, and consider whether they are due to faulty analysis, poor trade management, poor timing, or some other factor(s), but when I enter the trade, I am always thinking positive about the trade.

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 aquarian1 
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tigertrader View Post

....
3) NYSE TRIN at its lowest since before the 1987 crash
2) Relentlessly negative NYSE TICK action / one of the lowest Cumulative TICK closes of the year

Hi Tiger,

I look at a TRIN and TICK chart on daily range.
Where would look look for 3 and 2? That is there a place to see historical TRIN - lowest since before 87 crash?

Many thanks!

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 tigertrader 
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aquarian1 View Post
Hi Tiger,

I look at a TRIN and TICK chart on daily range.
Where would look look for 3 and 2? That is there a place to see historical TRIN - lowest since before 87 crash?

Many thanks!


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 aquarian1 
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tigertrader View Post

...
The reason I'm wrong is irrelevant at the time;

...
I am always thinking positive about the trade.

I think these are very good points, Tiger.

We can get caught up too much in "reasons" - bullish sentiment or bearish sentiment etc.
I think it is sometimes more valuable to just look at the chart. For example, we've had a couple of tops recently at about the same level. It is important for the bulls to take out those tops at the third try.If they fail, then one can compute a downside target and one has a clear place to enter a stop.

So it is before the trade not after entering it that one assess the risk reward ("what can go wrong" "what can go right.")

Analysis done, one needs confidence in one's decision and courage and so visualizing a positive outcome ("thinking positive about the trade" as you said) is key.

Jesse Livermore's
"it was by sitting and waiting [in the trade] that I made big money."

(not an exact quote!)

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 Private Banker 
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MXASJ View Post
Interesting. Core-Satellite is pretty popular among the private bankers I know. Out of curiousity what is the average hold in your Core? And is your Core an asset class-based, mean-variance optimized portfolio or is it more a discretionary macro Core?

Thanks for sharing.

Hi MXASJ,

Nice to meet you. I have specific entry criteria for swing trades that are derived from a daily chart interval. The asset class of preference for a core position is large cap stocks. I'll utilize the ES as my core position typically although I have used SPY in the past. I've drifted away from stocks entirely because of the associated costs (expense ratios, commissions, etc.) and the tax implications. My core position is a trend following strategy which can last months just depending on how long the trend lasts. I do not utilize price targets but have a trailing stop that will take me out of the position. Keep in mind that this is not for the faint of heart. Swing trading involves big account equity swings.

As far as MVO or MPT, I don't include that in my short(er) term investment strategy. That would be best used for a long(er) term investment strategy where you are utilizing third party investment managers, etc. I am handling/trading my own portfolio. I do have long term, more passive investments but those are an entirely different approach which I do incorporate MPT to a degree.

My strategy is discretionary macro for sure. I don't trust an automated system to select which satellite asset class/investment I should pursue throughout the day. As I mentioned, I'm looking to simply enhance or hedge the core position which also provides income while the big picture plays out. This means that if only CL is the best option for the day, I'll trade that.

Hope this helps.

Cheers,
PB

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 aquarian1 
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I would like to thank all of you for the high quality of the posts!

I had "sworn-off" forums due to several factors:
  • Forum trolls
  • negative people
  • sound bite - no thought responses.
I am impressed with well thought out contributions here.
(You guys make it tough for me to keep my resolution of no forums! LOL )

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 Private Banker 
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aquarian1 View Post
I would like to thank all of you for the high quality of the posts!

I had "sworn-off" forums due to several factors:
  • Forum trolls
  • negative people
  • sound bite - no thought responses.
I am impressed with well thought out contributions here.
(You guys make it tough for me to keep my resolution of no forums! LOL )

Thank you! Always feel free to contribute here.

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 tigertrader 
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tigertrader View Post
( MUNIS and MBS)...WOW!!!

I'm beginning to scale into some shorts between 1238.50 - 1240.75 basis ES 03-11.

Top Ten Reasons I'm Getting Short

10) VIX on lows
9) Spain/ eurozone
8) rising interest rates
7) rising energy costs
6) 25% equity rally since July 1
5) bullish sentiment at its highest level since the Nasdaq bubble / put-call ratio indicates longs are un- hedged
4) low volume on upticks
3) NYSE TRIN at its lowest since before the 1987 crash
2) Relentlessly negative NYSE TICK action / one of the lowest Cumulative TICK closes of the year
1) economy still sucks


It's Rally Redux as Mr. Market jumps ahead during his nocturnal jaunts, only to rest, rotate, and revert, during the light of day. Having taken my shot at shorting this market, I can't help but feeling a little like Bobby Fuller, but it just goes to show ya, you can't fight the trend, you cant fight the man in the red suit and white beard (seasonality), and most importantly, you can't fight the Fed.

" It's time for the Fed "one trillion" hats- as of 2:00 pm Eastern, the Fed's Treasury holdings have surpassed $1 trillion. Add to this the well over $1 trillion in MBS and agency debt held by the Fed, and there is your perfectly quantified reason why the S&P has just hit a two year high, and why the Nasdaq bubble is alive, back, and will soon retest its 2000 highs. Basically, with the Fed the de facto purchaser of all securities with a yield of under 4%, the entire definition of a risk-free rate per the MPT has to be scrubbed. " from Zero hedge.

However, a cautionary note should be sounded for the New Year, as the banks have been taking the Fed’s POMO money and depositing the funds back with the Fed itself. With the the PDs At Rest, it could be Bull Remembered, as early as next year.

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 Private Banker 
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tigertrader View Post
It's Rally Redux as Mr. Market jumps ahead during his nocturnal jaunts, only to rest, rotate, and revert, during the light of day. Having taken my shot at shorting this market, I can't help but feeling a little like Bobby Fuller, but it just goes to show ya, you can't fight the trend, you cant fight the man in the red suit and white beard (seasonality), and most importantly, you can't fight the Fed.

" It's time for the Fed "one trillion" hats- as of 2:00 pm Eastern, the Fed's Treasury holdings have surpassed $1 trillion. Add to this the well over $1 trillion in MBS and agency debt held by the Fed, and there is your perfectly quantified reason why the S&P has just hit a two year high, and why the Nasdaq bubble is alive, back, and will soon retest its 2000 highs. Basically, with the Fed the de facto purchaser of all securities with a yield of under 4%, the entire definition of a risk-free rate per the MPT has to be scrubbed. " from Zero hedge.

However, a cautionary note should be sounded for the New Year, as the banks have been taking the Fed’s POMO money and depositing the funds back with the Fed itself. With the the PDs At Rest, it could be Bull Remembered, as early as next year.

You're right on with that. This low volume + two POMO's per day is allowing the PD's to pump this thing higher and higher. It feels like the Holiday break of 1999! It's amazing to think that this entire run up was primarily fueled by the Fed via POMO. The Fed's balance sheet now looks like a hot air balloon. It will be interesting to see if Dennis Kucinich's Bill will receive any support. If passed, it would be a game changer for the Federal Reserve. I won't hold my breath though.

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 aquarian1 
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Hi Everyone,

I'm planning to sell a gold coin (for cashflow) before month end, perhaps Wed 29th at the latest.
It's looking sleepy in the ES as we close in on Xmas with Thursday probably more cabbage - narrow range choppy trendless.

So I'm wondering if someone with wonderful foresight has an idea if we will get a Eurocrisis spike in gold before month end pushing it to 1425 area ? (1386 level at the currently)

Thanks in advance to all the sooth-sayers for their crystal ball inspired guesses!

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 aquarian1 
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tigertrader View Post
It's Rally Redux as Mr. Market jumps ahead during his nocturnal jaunts, only to rest, rotate, and revert, during the light of day. Having taken my shot at shorting this market, I can't help but feeling a little like Bobby Fuller, but it just goes to show ya, you can't fight the trend, you cant fight the man in the red suit and white beard (seasonality), and most importantly, you can't fight the Fed.
..
With the the PDs At Rest, it could be Bull Remembered, as early as next year.

After watching the cartoon video "Buy the dip" - thanks to whoever posted it, so funny so true - and connecting this with what you said;
don't fight the fed
don't fight the fat man
the reality, and unreality, of the situation is just so strong.

At another forum, there was a teenager who has made 4 pts every day on the ES for months! (hyperbole included gratis). I congratulated him, setting off a firestorm of 'watch out sonny there could be a big crash'. He responded that the Dow would have to fall to 7,800 to wipe out his profits. (THEN the firestorm really took hold). It calmed down when he explained (re-explained) that he spread bet (in the UK) and has his leverage set at 10 pounds per point - so 8 pts = 80 pounds. But the curmudgeons didn't like it - the nerve of this youngster out trading them.

He would just buy the dip. Then he placed his sell (about 10 points higher) and left it - no stop that I know of. Overnight, one day, two days -0 whatever it took to get filled. If it went down again before being filled, he'd buy another. No worries no stress off to his job at the pub to come home and find 8 crisp new 10 pound notes deposited in his account.

He's accumulated $48,000 (?) in profits. "Good old ES - gotta love it"

So the line from the cartoon, by the girl, "I've lost so much money shorting this market, I'm afraid to go long and have the market crash and wipe out what little I have left."

I have been totally convinced "this is the top" from 1147 (?). 100 points later and unbashed printing of money (oops Big Ben said not to call it that -stay away black helicopters!) I still enter the day with "This could be it - the big chance" - even though I tell myself logically I am unbiased - to once again suffer though another slow, demoralizing, relentless grind higher.

So as it inches to 1253 (about 10:15CT) I venture forth with hope once again for a medium to wide range day, knowing in my heart of hearts they'll out do themselves with another day narrower than yesterday.

Quoting 
Just for fun:
Est High= 1256.00
Est Low= 1248.50


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Hi Everyone,

I'm planning to sell a gold coin (for cashflow) before month end, perhaps Wed 29th at the latest.
It's looking sleepy in the ES as we close in on Xmas with Thursday probably more cabbage - narrow range choppy trendless.

So I'm wondering if someone with wonderful foresight has an idea if we will get a Eurocrisis spike in gold before month end pushing it to 1425 area ? (1386 level at the currently)

Thanks in advance to all the sooth-sayers for their crystal ball inspired guesses!

Hi Aquarian1,

First and foremost, I respectfully wouldn't want to recommend anything that would affect you in making a financial transaction. I don't know your financial situation. Additionally, it would be impossible to predict any news releases that may come out. But I will tell you what I'm seeing on the charts with the hope that you will be able to determine what to do on your own.

From looking at the daily chart on GC, it's really at an interesting point here. There were several bearish divergences that occurred which resulted in pull back's to the 50 day MA where it found support and the PPO is still hovering above the zero line. It's really tough to say which way it will go but I would remain bullish for now. Also, the second chart shows that the bollinger band has crossed within the keltner channel creating a squeeze. This is could and often does result in a burst in one direction and they've been to the upside lately but certainly not an indication that it would happen again.

Hope this helps,
PB

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After watching the cartoon video "Buy the dip" - thanks to whoever posted it, so funny so true - and connecting this with what you said;
don't fight the fed
don't fight the fat man
the reality, and unreality, of the situation is just so strong.

At another forum, there was a teenager who has made 4 pts every day on the ES for months! (hyperbole included gratis). I congratulated him, setting off a firestorm of 'watch out sonny there could be a big crash'. He responded that the Dow would have to fall to 7,800 to wipe out his profits. (THEN the firestorm really took hold). It calmed down when he explained (re-explained) that he spread bet (in the UK) and has his leverage set at 10 pounds per point - so 8 pts = 80 pounds. But the curmudgeons didn't like it - the nerve of this youngster out trading them.

He would just buy the dip. Then he placed his sell (about 10 points higher) and left it - no stop that I know of. Overnight, one day, two days -0 whatever it took to get filled. If it went down again before being filled, he'd buy another. No worries no stress off to his job at the pub to come home and find 8 crisp new 10 pound notes deposited in his account.

He's accumulated $48,000 (?) in profits. "Good old ES - gotta love it"

So the line from the cartoon, by the girl, "I've lost so much money shorting this market, I'm afraid to go long and have the market crash and wipe out what little I have left."

I have been totally convinced "this is the top" from 1147 (?). 100 points later and unbashed printing of money (oops Big Ben said not to call it that -stay away black helicopters!) I still enter the day with "This could be it - the big chance" - even though I tell myself logically I am unbiased - to once again suffer though another slow, demoralizing, relentless grind higher.

So as it inches to 1253 (about 10:15CT) I venture forth with hope once again for a medium to wide range day, knowing in my heart of hearts they'll out do themselves with another day narrower than yesterday.

Based on past experiences, whenever you hear of amateurs making hand over fist effortlessly like this, you know the game will be over soon. I've witnessed this so many times. Most recently it being Real Estate which has since taken a beating and IMO, hasn't finished the down trend. Stocks are right there in the mix of froth and ironically the entire move was caused by a false sense of demand just as real estate did with the help of the FRBNY providing daily liquidity to the PD's via POMO and allowing them to goose high Beta stocks giving the impression of a rally.

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 aquarian1 
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Private Banker View Post
Based on past experiences, whenever you hear of amateurs making hand over fist effortlessly like this, you know the game will be over soon. I've witnessed this so many times. Most recently it being Real Estate which has since taken a beating and IMO, hasn't finished the down trend. Stocks are right there in the mix of froth and ironically the entire move was caused by a false sense of demand just as real estate did with the help of the FRBNY providing daily liquidity to the PD's via POMO and allowing them to goose high Beta stocks giving the impression of a rally.

For sure.

However, I was more trying to highlight that no one wanted to give the kid a "well done!" It costs nothing to support and encourage others.

He is making more than 4pts on average per day and has done it for three months. I would wager that few experienced seasoned traders could make 4 pts consistently every day one one contract, for 3 months even if they traded on their sim account. He always posts his entry and target exit well in advance.

Seasoned investors always know are the mantras:
"The trend is your friend"
"Those who try to pick the top get picked off."
"Never fight the Fed."
Yet in a bear market rally like this we ignore them and try to pick a top.

Yet how many of us have sat on the sidelines "thinking this thing is going to roll over any day now" for months?
Is it our egos that are talking, an attachment to being right?

One day it will top and roll over. And he will be stay long. Maybe he will be wrong for a week, maybe two.
But with 3 months of profits - he'll have to be wrong a long time to eat up his profits. I think for a teenager to stick with just one contract when he's been winning shows good discipline for one so young.

(BTW I'm a bear too!).

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For sure.

However, I was more trying to highlight that no one wanted to give the kid a "well done!" It costs nothing to support and encourage others.

He is making more than 4pts on average per day and has done it for three months. I would wager that few experienced seasoned traders could make 4 pts consistently every day one one contract, for 3 months even if they traded on their sim account. He always posts his entry and target exit well in advance.

Seasoned investors always know are the mantras:
"The trend is your friend"
"Those who try to pick the top get picked off."
"Never fight the Fed."
Yet in a bear market rally like this we ignore them and try to pick a top.

Yet how many of us have sat on the sidelines "thinking this thing is going to roll over any day now" for months?
Is it our egos that are talking, an attachment to being right?

One day it will top and roll over. And he will be stay long. Maybe he will be wrong for a week, maybe two.
But with 3 months of profits - he'll have to be wrong a long time to eat up his profits. I think for a teenager to stick with just one contract when he's been winning shows good discipline for one so young.

(BTW I'm a bear too!).

That's pretty cool! I always like to see a young trader make his/her mark. The true test will come when we see either a choppy or downtrending market.

In addition to the multiple anecdotes I have from 1999's internet bubble, I knew a young trader that would simply go long (ES) every market open and would buy any sell off with the belief it would rally back up. This worked well for her until it didn't. Meaning, I saw a significant trend change occur one day and she bought the dip eight times over that day. At the end of the day, the market sold off all day with no retracement providing her with a loss that equated to around 10% of her account equity and erasing a large chunk of her trading profits. This was the beginning of the end for her until she stopped trading. My point here is simply, an unexperienced individual may experience beginners luck but at some point, they will either give it all back and then some or realize they need to learn more and stop trading until they know how to do it correctly.

Please update the progress of this guy as his trading moves forward. Who knows, maybe he'll be a lucky one and cash out at the right time.

BTW, I'm not a Bear investor. I'm completely unbiased in my trading and just trade the trend. I guess you could say that I'm a realist. But I must admit that I'm absolutely amazed of what the Fed has accomplished again. All they've ever done is create and pop asset bubbles. It's amazing that the general public hasn't realized this.

Cheers,
PB

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 Michael.H 
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Let me ask you a question. Based on your experience in trading the markets. Usually, when a top occurs, is it a process in which you see lower highs, and massive volume, expanded volatility and range; or is it a huge run up, and then it suddenly tanks out of nowhere without any reason or warning signs?

I also think its funny how so many people have been calling the top in this market. Every time i go on stocktwits, i hear some clown who is short and they're holding their position overnight because the market is gonna tank in their opinion. That was 4 weeks ago, and i no longer see those people on there anymore( could be they're on vacation, i don't know). They have so many reasons predicting a recession because they BELIEVE that the economy is toast, and it doesn't deserve to go higher. One of them cited exactly what you said, put/call ratio, bullish sentiment was at record highs.

But the fact remains:

- Zero interest rates( this alone creates very low odds of another recession). The FED has clearly suggested that they would err on keeping interest rates lower longer, than to risk another recession by raising it too early. There's alot of statistical data backing this proving the odds of a recession are extremely low.
- the FED openly suggesting that they will do anything they can( even POMO part III) to make sure the market stays afloat
- Most company's are much healthier and less leveraged than the last recession. Better balance sheets. Leaner. Alot have massive amounts of cash sitting in their balance sheets because they are being defensive.
- Yes, the economy sucks here (slow), yet china and other countries have GDP's of 6%+, and if you listen to any of the earning calls, you'll notice that they are well diversified, and profits are still coming in from over seas since growth is slow here. We truly live in a global economy. When something bad happens overseas, it affects us. When other countries do well overseas, it helps us.
- Unemployment has never been a predictor of a recession
- The market can remain complacent longer than you can remain solvent. Divergences mean absolutely nothing when a trend is this strong. Linda Raschke taught me that a long time ago.

Off all the reasons you suggested,( im sorry but you thinking the economy sucks is not a valid reason to go short), complacent reading in the put call ratio, and overly bullish sentiment is the only valid argument you have.

I have 6 valid reasons why we can go higher. Could this be the top, absolutely, but doesn't mean you have to bet money trying to figure that out. When the trend changes, you can get in. You won't pick the absolute high and boast about it, but you can save yourself from massive losses trying to predict it, and still make money when it heads south.

I want to note that i love when the market goes down, since I hit my targets fairly quickly( market takes the stairs up, elevator down)..... Yet i still am not picking a top.

Im not bashing on anyone here( I only bash the people on stocktwits since i know for a fact that most are on sim, so they're not losing anything but their time playing video games with the market), but you have to be unbiased, and not just say your unbiased. Those complacent readings can come down as the market goes sideways and digests its gains, and easily continue on higher.

To address the breadth issue you brought up, alot of people are saying that it fits the Hindenburg Omen, but that has a fairly low success rate. Alot of changes have been made as to what qualifies for that because of its high failure rate. So far, this doesn't qualify.
The reason you brought up are reasons to take some profits off or not initiate new longs, but not go short in this market.

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 Michael.H 
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As to my question, ill answer it myself. Here's the SPY, first picture is before the crash. Blue circles on the price show huge expansion in range, and circles on bottom show huge expansion in volume.

This is both for market top and bottom......

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 Private Banker 
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Michael.H View Post
Let me ask you a question. Based on your experience in trading the markets. Usually, when a top occurs, is it a process in which you see lower highs, and massive volume, expanded volatility and range; or is it a huge run up, and then it suddenly tanks out of nowhere without any reason or warning signs?

I also think its funny how so many people have been calling the top in this market. Every time i go on stocktwits, i hear some clown who is short and they're holding their position overnight because the market is gonna tank in their opinion. That was 4 weeks ago, and i no longer see those people on there anymore( could be they're on vacation, i don't know). They have so many reasons predicting a recession because they BELIEVE that the economy is toast, and it doesn't deserve to go higher. One of them cited exactly what you said, put/call ratio, bullish sentiment was at record highs.

But the fact remains:

- Zero interest rates( this alone creates very low odds of another recession). The FED has clearly suggested that they would err on keeping interest rates lower longer, than to risk another recession by raising it too early. There's alot of statistical data backing this.
- the FED openly suggesting that they will do anything they can( even POMO part III) to make sure the market stays afloat
- Most company's are much healthier and less leveraged than the last recession. Better balance sheets. Leaner. Alot have massive amounts of cash sitting in their balance sheets because they are being defensive.
- Yes, the economy sucks here (slow), yet china and other countries have GDP's of 6%+, and if you listen to any of the earning calls, you'll notice that they are well diversified, and profits are still coming in from over seas since growth is slow here.
- Unemployment has never been a predictor of a recession
- The market can remain complacent longer than you can remain solvent. Divergences mean absolutely nothing when a trend is this strong. Linda Raschke taught me that a long time ago.

Off all the reasons you suggested,( im sorry but you thinking the economy sucks is not a valid reason to go short), complacent reading in the put call ratio, and overly bullish sentiment is the only valid argument you have.

I have 6 valid reasons why we can go higher. Could this be the top, absolutely, but doesn't mean you have to bet money trying to figure that out. When the trend changes, you can get in. You won't pick the absolute high and boast about it, but you can save yourself from massive losses trying to predict it, and still make money when it heads south.

I want to note that i love when the market goes down, since I hit my targets fairly quickly( market takes the stairs up, elevator down)..... Yet i still am not picking a top.

Im not bashing on anyone here( I only bash the people on stocktwits since i know for a fact that most are on sim, so they're not losing anything but their time playing video games with the market), but you have to be unbiased, and not just say your unbiased. Those complacent readings can come down as the market goes sideways and digests its gains, and easily continue on higher.

To address the breadth issue you brought up, alot of people are saying that it fits the Hindenburg Omen, but that has a fairly low success rate. Alot of changes have been made as to what qualifies for that because of its high failure rate. So far, this doesn't qualify.
The reason you brought up are reasons to take some profits off, but not go short in this market.

I assume you're directing this at TigerTrader? So, I'll let him respond directly. But I agree with your description of a top. We would need to see a big unforeseen move to the down side coupled with a big increase in volume. By pointing out potential divergences, there's definitely no claim for a top in fact, one should never act upon anything without price/volume confirmation. It's simply a warning that we could see a change. I've seen people get destroyed picking tops and bottoms too many times.

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 Michael.H 
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Yea, but i wanted to point out the facts. There's no reason, either from a fundamental standpoint, nor a technical standpoint to go short.

Those are the only two things that really move the markets. If your going short, its based on a hunch, not based on what you see. I took the time on writing all that so people don't get caught up on the wrong side.

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 Michael.H 
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Here's wikipedia on the conclusion of the study...

From historical data, the probability of a move greater than 5% to the downside after a confirmed Hindenburg Omen was 77% [The Wall Street Journal 8/23/2010 article cited below states that accuracy is 25%, looking at period from 1985], and usually takes place within the next forty days. The probability of a panic sellout was 41% and the probability of a major stock market crash was 24%. Though the Omen does not have a 100% success rate, every NYSE crash since 1985 has been preceded by a Hindenburg Omen. Of the previous 25 confirmed signals only two (8%) have failed to predict at least mild (2.0% to 4.9%) declines.
Because of the specific and seemingly random nature of the Hindenburg Omen criteria, the phenomenon may be simply a case of overfitting. That is, by backtesting through a large data set with many different variables, correlations can be found that do not really have predictive significance. The Omen is at best an imperfect technical indicator that is a work in progress.

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 Private Banker 
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Michael.H View Post
Yea, but i wanted to point out the facts. There's no reason, either from a fundamental standpoint, nor a technical standpoint to go short.

Those are the only two things that really move the markets. If your going short, its based on a hunch, not based on what you see. I took the time on writing all that so people don't get caught up on the wrong side.

Michael, thank you for taking the time to write that up. I always welcome other people's opinions. You seem determined to prove your point which I can greatly appreciate. Please feel free to further contribute your insight to this thread on the markets, etc.

Cheers,
PB

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 tigertrader 
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Private Banker View Post
I assume you're directing this at TigerTrader? So, I'll let him respond directly. But I agree with your description of a top. We would need to see a big unforeseen move to the down side coupled with a big increase in volume. By pointing out potential divergences, there's definitely no claim for a top in fact, one should never act upon anything without price/volume confirmation. It's simply a warning that we could see a change. I've seen people get destroyed picking tops and bottoms too many times.


I touched upon this reasoning in another post in reference to another topic of discussion, but it is equally relevant in this thread. Steenbarger talks about" conceptual integration" and it's importance in the acquisition of expertise in any field. The longer the time-frame, the more important the role of explicit deliberation and reasoning. The shorter the time-frame, the greater the need for rapid perceptual processing based upon pattern recognition.


The fund of knowledge that I brought to bear in this situation formed the rationale for my decision. In my mind, the 10 reasons I enumerated made for a compelling argument to get short. My bear argument was not any more an example of "curve fitting" than was Michael .H's counterpart bull argument. I was well aware that I was fighting the trend, seasonality, and the machinations of the Fed.

However, when making a long term cyclical or secular play, I almost always put my core position on in the options market. Taking into consideration where the VIX is trading, I not only wanted to be short the SPX, but long volatility. Obviously, options allows me the luxury of being early when initiating the trade, and it limits my risk. I can now move down the trade duration curve and scalp or swing trade ES and ZB futures around my core position like an options trader adjusting his delta. While the various positions have a synergistic connection, the information that is being processed, and the way the trades are managed is contingent upon the time-frame of the position.

I like being in the market, not only because of the "ADD"* thing, but because it gives me a better feel for price action. There is a big difference in analyzing the market when you are flat the market compared to having a position on.

Michel.H stated,
When the trend changes, you can get in. You won't pick the absolute high and boast about it, but you can save yourself from massive losses trying to predict it, and still make money when it heads south." How many times does the market give you a head fake, appearing to make a bottom or top, only to hitch and go back in the original direction. Are the odds of picking a top any better this way, than an intuitive assessment of early price exhaustion?

Still short, basis my options position, but flat futures.


* ADD = Attention deficit disorder


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 Michael.H 
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It can give you as many head fakes as you want, at least your risk is defined. Its better than adding as price keeps making new highs so you can improve your cost basis trying to determine the top, and it keeps you on the right side of the market. You have to agree, this whole time, you would have made more money, and it would have been much easier maintaining a long position than trying to short. As far as the amount of false signals, you would have gotten one, which you could have easily managed( talking about the flash crash). Price bounced which gave you a good entry, it eventually went back down and bottomed before moving higher.
I've seen at least 3 webinars(both bill from ioamt and Alexander from trading clinic) both predicting a market crash about 2 months ago. with Alexander talking about the end of the world, saying he's heavily net short in the market because of the crisis in Ireland. You guys can Google it if you want, it should be around somewhere. Well, i hope they didn't blow up their sim accounts.

To just be clear, i agree that i think all these things that are going on could create another huge bubble, but that probably won't happen for many years to come. Many news networks were talking about how its wrong that people are using their homes as ATMS, since housing prices were being inflated. But we didn't see that crash a year later, when everyone just forgot since the market was relentless in its move higher.

Im not trying to argue with you,and i don't consider myself a bull. But your free to do what you want with your money. We have 2 opposing views and trading methodologies.... and we will leave it at that.
I wish you the best of luck in your trading.

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 aquarian1 
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Both TT and MW make solid points.

I would like to contribute that I do appreciate when people make calls ("stick they neck on the line" so to speak). It is useful and helpful when they offer the reasoning behind their opinions. It doesn't matter if we have come to the same conclusion. That is what makes a market a market.

By sharing their thoughts we can ask ourselves:
"I hadn't noticed that perhaps I should take a look."

We may examine and conclude that for us that reason is not inline with our experience/knowledge/thinking/beliefs/preconceptions. The important point is that someone has shared and we are given the opportunity to review that aspects and double check our analysis.

After watching the TA video clip (see below) I made some retracement calculations:
1576-666=910
  • 50%= 1121
  • 61.8% = 1228
  • 5/8 = 1235
  • 2/3 = 1273
----------------------------------
Normally I don't visit forums, however I had had a problem with IB forcing me to upgrade my software (once per year) and the new software would close itself down in the middle of my trading session, so I had search for someone who might have an older version though not 1 year old. In the process of that search I went to another forum and came here futures.io (formerly BMT). As it was the dog days of December I thought I would take a break and review the ES threads.

On Big Mikes intro he writes

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...
There are other sites out there but I never really felt at home with many of them, their userbase is too focused on proving someone wrong instead of trying to help.

This statement, I feel, is very true.

I always find it more useful if one's "case" is presented in a neutral non-directed format.
For some reason the internet lends itself to miscommunication. The "tone" the a reader "hears" in a writers message can easily incorrect or exaggerated in our minds.

-----------------a case of synchronicity ------------
In any case I find it interesting that in a short period of time I:
  • watched "Buy the dip" video cartoon,
  • read the thread with the teenager making 4-8 points a day for 3 months on 1 contract by "buying the dip",
  • then here at futures.io (formerly BMT) read of the POMO operations,
  • last evening watching some watching a video clips one of which was a technical analyst speaking of the 1235 key level and being breached opens the possiblity of a full retracement and 1315 as the next important resistance,
Talking Numbers ? Yahoo! Finance about 5 clips in.
-------------------------------------------------------
I now longer try to predict the longer term direction of the market, though from my many years of longer period swing trading, at another level I guess I do (old habits die hard level). (Hence my saying I was a bear PB). Of course, I'm not a bear, nor a bull. As I day trade (RTH only) I am indifferent to the overall trend or the level next month.

I am interested in:
  • "Will today have a trend?"
  • "If so, will today be an uptrending, downtrending day, or a day with an intraday trend change?"
  • "What is the likely range today?"
  • "What will direction will the first leg be in?"

(Yes I do look to see if we are at breakdown or breakout levels (on a multiday level 3 to 14 days usually), and are we approaching key S/R levels.)

-------
I wish you all a Happy Holidays and a
New year of
great health,
abundant prosperity
and joy!

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 aquarian1 
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Hi Aquarian1,

First and foremost, I respectfully wouldn't want to recommend anything that would affect you in making a financial transaction. I don't know your financial situation. Additionally, it would be impossible to predict any news releases that may come out. But I will tell you what I'm seeing on the charts with the hope that you will be able to determine what to do on your own.

From looking at the daily chart on GC, it's really at an interesting point here. There were several bearish divergences that occurred which resulted in pull back's to the 50 day MA where it found support and the PPO is still hovering above the zero line. It's really tough to say which way it will go but I would remain bullish for now. Also, the second chart shows that the bollinger band has crossed within the keltner channel creating a squeeze. This is could and often does result in a burst in one direction and they've been to the upside lately but certainly not an indication that it would happen again.

Hope this helps,
PB

Hi PB thanks for your post of charts. I ended up selling on the 29th which was a pretty good day and I received $1395USD. (Their bid ask is $73 on a coin - great business model buy from me tack on $73 and sell it a few minutes later to the next fellow!)

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 aquarian1 
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It's the weekend and time for me to post.
I have been trying to think of what I might contribute to the forum.

I have decided on posting about the relative performance of gold and the ES.
I think that lately their has been a relationship and that perhaps someone has some ideas on whether we can use gold as a predictor of the ES is current area of 1250.

On some analysis I made last weekend 1259 came out as a key level for the ES. This past week 1258.50 has been the high so that target is met.Will the ES breakout or breakdown?
I doubt it will stay in current tight range for too much longer.


Weekend Plunge Scenario
It may be that a 'crisis' in the overseas markets starts a plunge in the ES.

Let's imagine the following scenario:There is a large drop in the overnight session on a weekend (e.g. 60pts plus), then the stops will get hit and program selling programs would kick in. If it closes much lower (e.g. on a Monday) to make big headlines in the paper, then you may see mom and pop retail investor say "no way am I in for another 58% haircut", and calling their broker to get them out of all equities.

Circuit breakers would do nothing but slow it down, I think. Certainly, the Fat FED will throw a ton of money at stopping this, but the gov't credibility is even less now than before the great crash of 2007. The crash of '07 wiped out 11 years of sp500 index gains (96 to 2007) .

But the real loss to the investor is much greater. Because the SP500 drops the losers and adds new winners into its index, it overstates the reality investors face. (Enron may have been there along with WorldCom's, NorthPoint Communications, Global Crossing, JDS Uniphase, XO Communications, and Covad Communications, Nortel and deleted from the index when their fall in market cap excluded them.) Taking them out of the index doesn't put the money back into the shareholders pocket.

The average investor may not be consciously aware of the poor performance of the equity markets due the enormous hype of the mutual fund industry, brokers and financial media - which promote blindly following mantras of "Buy and hold
[or 'just fall asleep sheep'].

Guaranteed notes if averaging 4% on the 15 year period of 1996 to 2010 give a compounded return of 1.80 or $66,700 to $120,000 (or $138,665 for 5%).

I have posted graphs of gold and gold to ES at my blog:
Ian writeianatPOF's blog - Blog - Other's blog - Yahoo! Pulse

I'm not sure how often I will update it but I have put an RSS feed link button on the blog page to get updates which works from my Yahoo page. -more for fun than anything else

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 Michael.H 
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Market continues to make new highs for now.....

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I saw this today on ZH and thought it would be fitting here:

YouTube - The American Dream Film

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 Private Banker 
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Michael.H View Post
Let me ask you a question. Based on your experience in trading the markets. Usually, when a top occurs, is it a process in which you see lower highs, and massive volume, expanded volatility and range; or is it a huge run up, and then it suddenly tanks out of nowhere without any reason or warning signs?

I also think its funny how so many people have been calling the top in this market. Every time i go on stocktwits, i hear some clown who is short and they're holding their position overnight because the market is gonna tank in their opinion. That was 4 weeks ago, and i no longer see those people on there anymore( could be they're on vacation, i don't know). They have so many reasons predicting a recession because they BELIEVE that the economy is toast, and it doesn't deserve to go higher. One of them cited exactly what you said, put/call ratio, bullish sentiment was at record highs.

But the fact remains:

- Zero interest rates( this alone creates very low odds of another recession). The FED has clearly suggested that they would err on keeping interest rates lower longer, than to risk another recession by raising it too early. There's alot of statistical data backing this proving the odds of a recession are extremely low.
- the FED openly suggesting that they will do anything they can( even POMO part III) to make sure the market stays afloat
- Most company's are much healthier and less leveraged than the last recession. Better balance sheets. Leaner. Alot have massive amounts of cash sitting in their balance sheets because they are being defensive.
- Yes, the economy sucks here (slow), yet china and other countries have GDP's of 6%+, and if you listen to any of the earning calls, you'll notice that they are well diversified, and profits are still coming in from over seas since growth is slow here. We truly live in a global economy. When something bad happens overseas, it affects us. When other countries do well overseas, it helps us.
- Unemployment has never been a predictor of a recession
- The market can remain complacent longer than you can remain solvent. Divergences mean absolutely nothing when a trend is this strong. Linda Raschke taught me that a long time ago.

Off all the reasons you suggested,( im sorry but you thinking the economy sucks is not a valid reason to go short), complacent reading in the put call ratio, and overly bullish sentiment is the only valid argument you have.

I have 6 valid reasons why we can go higher. Could this be the top, absolutely, but doesn't mean you have to bet money trying to figure that out. When the trend changes, you can get in. You won't pick the absolute high and boast about it, but you can save yourself from massive losses trying to predict it, and still make money when it heads south.

I want to note that i love when the market goes down, since I hit my targets fairly quickly( market takes the stairs up, elevator down)..... Yet i still am not picking a top.

Im not bashing on anyone here( I only bash the people on stocktwits since i know for a fact that most are on sim, so they're not losing anything but their time playing video games with the market), but you have to be unbiased, and not just say your unbiased. Those complacent readings can come down as the market goes sideways and digests its gains, and easily continue on higher.

To address the breadth issue you brought up, alot of people are saying that it fits the Hindenburg Omen, but that has a fairly low success rate. Alot of changes have been made as to what qualifies for that because of its high failure rate. So far, this doesn't qualify.
The reason you brought up are reasons to take some profits off or not initiate new longs, but not go short in this market.

Finally had a chance to read this through. Very good observation here however, there's always alternatives to one's opinion on the potential catalysts of the market. For the sake of pure conversation, here are some alternatives to the 6 points made above.

- ZIRP did not fair well for Japan which included multiple government stimulus plans and large bank bailouts. Why would it be different here? Our current GDP's largest growth component is from government spending (deficit). Take that out and we are still in negative territory. How much more can the government spend? It will be interesting to see what the GOP does with the US debt ceiling.

- The Fed is and has always successfully created and popped asset bubbles. They are in it for themselves at the end of the day. We can currently see this with the devaluation of the USD. Sure the Fed can throw everything they have (our tax dollars) at keeping stocks up but the fact that stocks are still rising is just a distraction to our loss of purchasing power. Commodities are currently ripping higher and we are starting to see the effects in food, energy, etc. Which of course are not a part of core inflation which is always hilarious. A prime/extreme example of this is Zimbabwe's stock market back in 2007. Who cares if the stocks are going up when the value of the currency in which it's denominated in is losing value.

- True corporations have a large amount of cash however, they also have a large amount of leverage. The value of their real estate, equipment and other tangible assets have been losing value at an alarming pace. If corporations were to deploy the current cash they have, their leverage would increase even more. Which is why the record cash levels theory isn't true and one that is highly touted by sell-side analysts which is obviously a red flag. Additionally, changes made by the FASB have allowed corporations (mainly financial institutions) to continue to not write down certain troubled assets and hold assets in off balance sheet subsidiaries.

- Regarding China, people have been claiming it will collapse for quite some time. It hasn't happened yet but we shouldn't rule it out. But you're correct in saying it benefits the US when other countries do well economically but we also feel it when they don't (Euro crisis, etc.)

- Unemployment is merely a cause of a recession but it can make a recession worse.

- Markets can most certainly and often do continue in it's trend longer than one would expect or make sense. A short trade would only make sense if there is price and volume confirmation. The ES is continuing to skip along the 10 day MA. Definitely no short signal occurring here but the gist of the entire thread here is that this rally is highly correlated with the Fed's POMO activity.

2011 should be a very interesting year for all markets. Let's hope we can get some Vol back!

Cheers,
PB

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 Michael.H 
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Well, either way, you proved my point regardless. You can refute the arguments, but the fact remains that anyone shorting this have move up because they "think" that everything will collapse is merely trading on their belief. Even though you maybe right about all those things, what validates a short? You mentioned japan, how long did it take before the bubble burst. Is that indicative of our future? Anyones guess.

I've yet to see anyone make money based on a hunch, but i have seen people make money based on signals and patterns which have some sort of statistical outcome that could lead to potential profit.

All im trying to say is, i don't understand why people are shorting this(yet). Stock market could go higher for a few more months to even years before it tanks, and thats losses you have to endure just so you can prove your hunch right. So far, there are no fundamental or technical reason based on charts that warrant it.

You have to also understand, bubbles form when everybody throws in the towel, not when everybody expects it. I track volume alot, and today was more a short covering than initiative buying, because thats whats fueling the market right now, people on the wrong side of the market.


Side note: your leverage comment imo would only be in regards to financial institutions only. I don't really see other companies with this problem. Apple had record sales growth DURING the recession...lol Companies are doing well. Real estate however, could possibly be a drag, I agree. I see your from cali, which part? Southern, northern?

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 Private Banker 
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Michael.H View Post
Well, either way, you proved my point regardless. You can refute the arguments, but the fact remains that anyone shorting this have move up because they "think" that everything will collapse is merely trading on their belief. Even though you maybe right about all those things, what validates a short? You mentioned japan, how long did it take before the bubble burst. Is that indicative of our future? Anyones guess.

I've yet to see anyone make money based on a hunch, but i have seen people make money based on signals and patterns which have some sort of statistical outcome that could lead to potential profit.

All im trying to say is, i don't understand why people are shorting this(yet). Stock market could go higher for a few more months to even years before it tanks, and thats losses you have to endure just so you can prove your hunch right. So far, there are no fundamental or technical reason based on charts that warrant it.

You have to also understand, bubbles form when everybody throws in the towel, not when everybody expects it. I track volume alot, and today was more a short covering than initiative buying, because thats whats fueling the market right now, people on the wrong side of the market.


Side note: your leverage comment imo would only be in regards to financial institutions only. I don't really see other companies with this problem. Apple had record sales growth DURING the recession...lol Companies are doing well. Real estate however, could possibly be a drag, I agree. I see your from cali, which part? Southern, northern?

All good points here. Definitely not trying to refute anything that you have stated but just wanted to present potential alternatives. I definitely respect what you have listed here and I think we are in agreement on what signifies a change in trend that would warrant a short at these levels.

As for corporate leverage, I got that information from the Fed's current Z1 statement. I would assume that's accurate but you're right about Apple. They have been resilient and able to even get unemployed people to buy their products in these times, lol!. I think they've done everything right so far and I personally love their products although I've never felt the need for an iPad. Just looks like a big iPhone which I already have. I also plan to dump my T3500 for a Mac Pro tower some point soon.

I agree that Real Estate will continue to have head winds. I feel that many areas here, (I live in San Diego), have not been through the ringer yet. Another interesting thing to watch is commercial real estate. If you have access to Bloomberg, you can see the updated watch list where companies or property owners have somewhere along the way failed certain loan covenants and are now in some sort of work out process. The list seems to be growing more and more. Obviously a lot of these entities are hotels but it's very surprising to see who else is on there.

In any event, I'm hoping 2011 will be a little more exciting than the last in terms of volatility.

Best,
PB

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 tigertrader 
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Michael.H View Post
Well, either way, you proved my point regardless. You can refute the arguments, but the fact remains that anyone shorting this have move up because they "think" that everything will collapse is merely trading on their belief. Even though you maybe right about all those things, what validates a short? You mentioned japan, how long did it take before the bubble burst. Is that indicative of our future? Anyones guess.

I've yet to see anyone make money based on a hunch, but i have seen people make money based on signals and patterns which have some sort of statistical outcome that could lead to potential profit.

All im trying to say is, i don't understand why people are shorting this(yet). Stock market could go higher for a few more months to even years before it tanks, and thats losses you have to endure just so you can prove your hunch right. So far, there are no fundamental or technical reason based on charts that warrant it.

You have to also understand, bubbles form when everybody throws in the towel, not when everybody expects it. I track volume alot, and today was more a short covering than initiative buying, because thats whats fueling the market right now, people on the wrong side of the market.


Side note: your leverage comment imo would only be in regards to financial institutions only. I don't really see other companies with this problem. Apple had record sales growth DURING the recession...lol Companies are doing well. Real estate however, could possibly be a drag, I agree. I see your from cali, which part? Southern, northern?



There are obviously a lot of reasons to be bullish this market:

1) It’s going up!
2) Bullish seasonality across multiple time frames, especially the January effect
3) Bullish bias after mid-term elections
4) Fed’s money printing is once again making it’s way into the market

However,

If a man has a strong faith, he can indulge in the luxury of skepticism”. Friedrich Nietzsche.

Aside from the fact, the only thing keeping the market up is the Fed, is the specter of the upcoming unemployment report, the foreclosure-gate settlement, China tightening, muni defaults and EU sovereign defaults. While these factors are merely potential disruptions that have yet to make an impact, they continue to loom over the market.

Additional skepticism is warranted by weakening market internals.There is a clear weakness developing among NASDAQ stocks where there are almost 10% less of stocks in strong weekly mark-up stage than among NYSE stocks. The other clear weakness developing is among small cap stocks, which are now lagging significantly in the weekly strong mark-up stage against their mid- and large-cap counterparts. The statistics for daily stages keeps deteriorating as well, with a declining percentage of stocks in positive stages under the 5-day moving average.

Logic also suggests that institutions are attempting to keep the buying programs busy most of the day so they can unload their longs.This fact is made evident by the Effective Volume Money Flow indicator, which reflects aggressive institutional selling into strength among a majority of sectors.

Depending on your time frame and strategy a short position may make more sense than a long position, as long as there is a pre-defined risk level. With the use of options, I have exposure to changes in volatility, and time decay, which affords me additional opportunities, beyond the mere directional play in the underlying. It also allows me alternative ways to react to signals, that may cause me to increase or decrease my exposure. This position which is essentially a mean reversion play, does not preclude me from trading futures, short-term, with a momentum /trend following strategy.

I don't look at this trading philosophy as a strategy that creates more risk, because my risk is always defined. I approach this way of trading as way of creating opportunity. I'll never forget sitting at home with a herniated cervical disk, long a bunch of bond calls, wishing I could be at work trading. But, then the unimaginable happened and LTCM blew up, and so did the premium on my calls. I was in the market, my risk was defined, and it lead to a very favorable outcome. Moral of the story...I never would have caught the move, if I wasn't in already.







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 aquarian1 
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Yesterday saw a breakout to 1272.50 and then a retracement towards the close of the day.
Today started with an o/n gap of 5.75, a high of 1270 near the open and a slide to 1258.25. Now around 1260 (12:11CT) up a little from the low with FOMC minutes due soon.

I feel it must close above 1260 this week to confirm the breakout.

Monday's action 'feels' like a set-up.


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 Michael.H 
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So what happens when investor sentiment is at a all time high?

Will Too Many Bulls Really Make a Bear ? | TRADING THE ODDS

Thought you should read this....
Tigertrader, if you know what your doing, then by all means do it. m don't know what strategy's you employ, and its none of my business.
Im just trying to help the newer traders here.

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 aquarian1 
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Private Banker View Post

1.- The Fed is and has always successfully created and popped asset bubbles. They are in it for themselves at the end of the day. We can currently see this with the devaluation of the USD. Sure the Fed can throw everything they have (our tax dollars) at keeping stocks up but the fact that stocks are still rising is just a distraction to our loss of purchasing power. ..

2. ...Who cares if the stocks are going up when the value of the currency in which it's denominated in is losing value.

You make a good point. I think the stocks rising and capital not being used to create new business and new jobs shows that QE1 and QE2 has pumped money into the market. The Fed creates more liquidity and with the market is moving up (+11%? on the year and 20%? since Aug ) the new money flows to best return and the best return is paper assets not new businesses. It shows the failure of QE if QE was supposed to create jobs. It shows the success of QE if it was the "bankers trust" aka Creature of Jeykle Island =the Fed to help its friends (big banks) to big profits.

re 2. So the danger you are highlighting is that to foreign investors it is the after currency exchange return on investment, relative to other foreign markets, that they are interest concerned with?

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 aquarian1 
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I watched a video clip (second clip in) speaking of:
in the last 10 yrs Jan has been the 3rd worst month
Jan after a strong fourth quarter is usually weak
the VIX greater than 100% usually proceeds a correction.

For someone who watches the clip could you explain to me what the VIX percentage means ?

thanks!

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 Private Banker 
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aquarian1 View Post
re 2. So the danger you are highlighting is that to foreign investors it is the after currency exchange return on investment, relative to other foreign markets, that they are interest concerned with?

Thanks! My point here is referencing the loss of purchasing power whether it be domestic or foreign investors from the devaluation of the currency in which that market is denominated in plus inflation in food and energy, etc. I was particularly referencing Zimbabwe here as an extreme example. Their stock market went straight up in 2007 while their currency became more worthless than monopoly money.

Cheers,
PB

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Thanks! My point here is referencing the loss of purchasing power whether it be domestic or foreign investors from the devaluation of the currency in which that market is denominated in plus inflation in food and energy, etc. I was particularly referencing Zimbabwe here as an extreme example. Their stock market went straight up in 2007 while their currency became more worthless than monopoly money.

Cheers,
PB


IS QE2 THE ROAD TO ZIMBABWE-STYLE HYPERINFLATION? NOT LIKELY

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aquarian1 View Post
I watched a video clip (second clip in) speaking of:
in the last 10 yrs Jan has been the 3rd worst month
Jan after a strong fourth quarter is usually weak
the VIX greater than 100% usually proceeds a correction.

For someone who watches the clip could you explain to me what the VIX percentage means ?

thanks!

S&P 500 Index 20-Day Historical Volatility Hits 39-Year Low - Seeking Alpha

https://www.marketwatch.com/story/january-effect-will-be-nitro-fueled-2011-01-03

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Hi Everyone!

I had a late start this morning (too tired to get up with the 3:30am alarm) and knew the plumber would be coming by at 9am to fix the motor on the hot water radiator.

As he (say Don) fixed it we talked of stocks. Don had been investing since he left high school and started plumbing 11 yrs ago, he is 28 now. He had been in mutual funds. A couple of years ago he moved into stocks. He bought AIG at $16 and Ford at $2 in the crash.

"In the crash, I bought a whole bunch of big companies. I figured a few would survive. I now have more money than most 28 year-olds I know. I plan to retire at 40."

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 Private Banker 
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aquarian1 View Post
Hi Everyone!

I had a late start this morning (too tired to get up with the 3:30am alarm) and knew the plumber would be coming by at 9am to fix the motor on the hot water radiator.

As he (say Don) fixed it we talked of stocks. Don had been investing since he left high school and started plumbing 11 yrs ago, he is 28 now. He had been in mutual funds. A couple of years ago he moved into stocks. He bought AIG at $16 and Ford at $2 in the crash.

"In the crash, I bought a whole bunch of big companies. I figured a few would survive. I now have more money than most 28 year-olds I know. I plan to retire at 40."

That's a great story! They say great wealth is made in concentrated positions whether it be something like what the plumber did or someone that starts a company and is successful or they are bought out and receive a great windfall of cash or stock.

The trick for many though is keeping it. And what I mean by that is not just spending it all but keeping that same level of "wealth" while not losing purchasing power from inflation, etc. I like hearing stories like that though. Very cool!

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 Private Banker 
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That was an interesting article. Thanks for sharing that. I sure hope we don't end up like Zimbabwe but by me referencing that was merely an extreme situation. I do however, wonder where some of the people mentioned in that article were arriving with their information. I'm asking this out of pure curiosity and not calling anyone out on it of course.

Just an example:

"No, says Cullen Roche, because swapping dollars for bonds does not change the size of the money supply. A dollar bill and a dollar bond are essentially the same thing. One bears interest and is a little less liquid than the other, but both are obligations good for a dollar’s worth of goods or services in the economy. If the bondholders had wanted cash, they could have cashed out the bonds themselves. They don’t have any more money to spend, or any more incentive to spend it, when they’ve been cashed out by the government than when they were holding bonds."

Not sure where Cullen Roche is getting this from but the three basic ways the Fed influences the Money Supply are the following:

1. Most important to my point here, to increase money supply, the Fed buys US Treasuries and other US Gov related securities giving the seller cash and adding money to the economy. If you follow POMO, you will see they are doing precisely that and are now buying bonds that have only been in issuance for a few weeks at most. If the Fed wanted to reduce money supply, they would be selling their bond inventory taking cash out of the economy.
2. The Fed can change money supply by changing the Reserve Requirements for Banks.
3. They can lower and increase short-term interest rates.

But at the end of the day, we (the US) would really need to screw up to get in a situation like Zimbabwe's. As I mentioned before, the US debt ceiling situation will be interesting to watch.

Best,
PB

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